THE YEAR IN TRADE: 

OPERATION OF THE TRADE 

AGREEMENTS PROGRAM 

46th REPORT 

1994 

40111.■■ 

1111111111 

11111W-"MI Tip 

UNITED STATES 

INTERNATIONAL 

TRADE COMMISSION 

USITC PUBLICATION 2894 

JULY 1995 

Prepared in Conformity With 

Section 163(b) of the 

Trade Act of 1974 
U.S. International Trade Commission 

COMMISSIONERS 

Peter S. Watson, Chairman 

Janet A. Nuzum, Vice Chairman 

David B. Rohr 

Don E. Newquist 

Carol T. Crawford 

Lynn M. Bragg 

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 

Peter Morici, 

Director, Office of Economics 

Acting Chief, Trade Reports Division 

Chief, Major Trading Nations Branch 

Kim S. Frankena 

Project Leader 

Joanne Guth 

Assistant Project Leaders 

Janet Whisler 

Stephen Wanser 

Paul R. Gibson James Stamps 

William Greene Christopher Taylor 

Thomas Jennings Edward C. Wilson 

Magdolna Kornis Michael S. Youssef 

Office of the General Counsel 

William W. Gearhart 

Office of Tariff Affairs and Trade Agreements 

Terry O'Brien 

Office of Unfair Import Investigations 

Jeffrey Whieldon 

Office of Industries 

Jackie Jones 

John Pierre-Benoist 

Mary Elizabeth Sweet 

With the assistance of 

Dean Moore, Information Specialist 

Supporting assistance was provided by: 

Paula Wells, Secretarial services 

Clifford Brown, Helen Troupos, Editorial services 

Keven Blake, Cover design 

Pamela Dyson, Joyce Bookman, and Paulette Henderson, Designers 

CONTENTS 

Page 

Introduction 

Purpose and organization of the report xiii 

Summary of 1994 trade agreements activities xiii 

The international economic environment and world trade in 1994 xviii 

United States xx 

Canada xxiii 

European Union xxiii 

Japan xxiv 

Mexico xxiv 

China xxiv 

Taiwan xxv 

Korea xxv 

Chapter 1. Uruguay Round Implementation and Ongoing Negotiations 

Introduction 1 

Marrakesh Ministerial Conference 1 

Uruguay Round Agreements Act 2 

Introduction 2 

Overview of the implementing bill 2 

Selected subjects of the URAA 3 

Changes to U.S. antidumping and countervailing duty laws 3 

Antidumping law 4 

Countervailing duty law 5 

Changes to section 337 7 

Changes to section 201 7 

Sovereignty and the WTO dispute settlement review commission 8 

Paying for the Uruguay Round 9 

Establishing the WTO 9 

Implementation conference 9 

Quad countries and acceptance of the WTO 10 

Status of URA ratification 10 

Choosing a WTO Director-General 11 

Services negotiations 12 

Framework agreement and services annexes 12 

Movement of natural persons 13 

Financial services 13 

Scheduled conclusion for financial services talk 13 

Controversy over 'conditional' MFN approach 14 

Alternative financial commitments 14 

Maritime transport services 14 

Telecommunications 15 

Professional services 15 

Regular GATT activities in 1994 16 

GATT council 16 

Trade policy review mechanism 16 

Dispute settlement panels 16 

U.S. tobacco measures 16 

EU common import regime for bananas 16 
CONTENTS-Continued 

Page 

Chapter 1. Uruguay Round Implementation and Ongoing 

Negotiations-Continued 

U.S. tuna product import restrictions 16 

U.S. gasoline standards 17 

U.S. automobile taxes 17 

Polish car import restrictions 17 

U.S. footwear imports 17 

GATT committees 18 

Tariff concessions 18 

Trade and development 18 

Balance of payments 18 

Trade and environment 18 

Regional trade arrangements—article XXIV 18 

Accessions and observers—articles XXVI/XXXIII 19 

Tokyo Round codes committees 19 

Introduction 19 

Antidumping practices 22 

Subsidies and countervailing measures 26 

Customs valuation 26 

Import licensing 26 

Technical bathers to trade 26 

Government procurement 26 

Trade in civil aircraft 26 

International Dairy Arrangement 27 

Arrangement Regarding Bovine Meat 27 

Chapter 2. Regional Trade Activities 

Asia-Pacific Economic Cooperation 35 

Overview 35 

Working group and committee activity 36 

Trade and finance Ministers' meetings 36 

Annual Ministerial meeting 37 

APEC leaders' meeting 37 

Future issues and directions 38 

Summit of the Americas 39 

Introduction 39 

Pre-summit developments 39 

The summit 41 

The North American Free-Trade Agreement 41 

Overview 41 

Implementation of NAFTA commitments 43 

Rules of origin 43 

Customs administration 43 

Marking rules 44 

Agriculture 44 

Technical standards 45 

Services 46 

Government procurement 46 

vi 
CONTENTS-Continued 

Page 

Chapter 2. Regional Trade Activities -Continued 

Dispute settlement 47 

"Deepening" NAFTA 47 

Status of supplemental agreements to NAFTA 48 

Agreements on environmental cooperation 48 

The North American Agreement on Labor Cooperation 49 

NAFTA's impact on the Federal-State relationship 50 

Transportation cooperation 50 

NAFTA expansion 50 

NAFTA's impact on third countries 51 

Prospects for 1995 52 

Chapter 3. Other Trade Agreement Activities 

Organization for Economic Cooperation and Development 61 

Introduction 61 

Shipbuilding agreement reached 61 

Elimination of subsidies 62 

Injurious pricing discipline 62 

Domestic and export credits 62 

Dispute settlement for export credits 62 

Responsive measures to the U.S. Jones Act 26 

Review and withdrawal terms 63 

Mexico accedes to the OECD 63 

Bribery recommendation reached 63 

United Nations conference on trade and development 63 

Jute 63 

Natural rubber 65 

Tropical timber 65 

Wheat 65 

Bilateral investment treaty program 66 

Chapter 4. U.S. Relations with Major Trading Partners 

Canada 71 

Wheat 71 

Lumber 73 

ITA determination 73 

USITC determination 74 

Extraordinary challenge 74 

European Union 75 

Bananas 75 

Enlargement and U.S. compensation 76 

Other 77 

Japan 78 

U.S.-Japan framework agreement 78 

Sectoral discussions 80 

Flat glass 80 

Insurance 81 

Telecommunications 83 

Medical equipment 84 

vii 
CONTENTS-Continued 

Page 

Chapter 4. U.S. Relations with Major Trading Partners-Continued 

Mexico 85 

The peso crisis 85 

Assistance to Mexico 86 

Mexico's first year under NAFTA 87 

Economic performance and policies 87 

Foreign trade 88 

Foreign investment 91 

Implications of the peso crisis 92 

Recession 92 

Foreign investment and privatization 93 

Trade and current account deficit 93 

Other 93 

China 94 

GATT/WTO application 94 

Enforcement of intellectual property rights 96 

MFN status and human rights 97 

Other bilateral developments 98 

New textile agreement 98 

Agreement lifting export sanctions on satellites 99 

Market access agreement 99 

Taiwan 99 

GATT/WTO application 100 

Protection of intellectual property rights 100 

Wildlife trade sanctions 101 

Republic of Korea 102 

Dialogue for economic cooperation 102 

Korea's "new economy" 103 

IPR protection 103 

Foreign investment notification and approval process 104 

Liberalization of restricted sectors 104 

Financial liberalization 104 

Beef and pork 105 

Automobile market access 106 

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

Import relief laws 119 

Safeguard actions 119 

Market disruption 119 

Adjustment assistance 119 

Assistance to workers 120 

NAFTA-related assistance to workers 120 

Assistance to firms and industries 121 

Laws against unfair trade practices 121 

Antidumping investigations 121 

Countervailing-duty investigations 124 

Reviews of outstanding antidumping and countervailing-duty orders 125 

Section 337 investigations 125 

Other import administration laws and programs 125 

viii 
CONTENTS-Continued 

Page 

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

Tariff preference programs 126 

Generalized system of preferences 126 

Caribbean basin economic recovery act 128 

Andean trade preference act 128 

National security import restrictions 129 

Agricultural adjustment act 130 

Meat import act of 1979 131 

U.S. trade programs affecting textile and apparel imports 131 

The multifiber arrangement 131 

U.S. trade in 1994 133 

New rules of origin for textiles and apparel 135 

Figures 

A. Selected trade events, 1994 15 

B. U.S. merchandise trade with the world, by product sectors, 1994 21 

C. U.S. merchandise exports, imports, and trade balance with major trading partners, 1994 22 

4-1. U.S. trade with Mexico: exports, imports, and trade balance, 1990-94 89 

4-2. U.S. trade with Mexico, by product sectors, 1994 90 

5-1. U.S. imports of textiles and apparel covered by the MFA, by major suppliers, 1989 and 1994 134 

Tables 

1. Comparative economic indicators of the United States and major trading partners, 1993-94 xix 

1-1. Countries that have ratified the URA, as of Jan. 1, 1995 11 

1-2. Contracting Parties to the General Agreement on Tariffs and Trade (GATT) and their accession 

dates, as of Dec. 31, 1994 20 

1-3. Countries that maintain a de facto application to the General Agreement following independence 

and dates of independence, as of Dec. 31, 1994 22 

1-4. Signatories to the Tokyo Round agreements, as of Dec. 31, 1994 23 

3-1. Summary of international commodity agreements, 1994 64 

3-2. U.S. bilateral investment treaties, as of Mar. 1, 1995 67 

4-1. Annual foreign investment in Mexico, 1989-1994 92 

5-1. Summary of activity on sec. 301 investigations during 1994 122 

5-2. U.S. imports for consumption from GSP beneficiaries and the world, 1994 126 

5-3. U.S. imports for consumption under the GSP from leading beneficiaries, and total, 1994 127 

5-4. U.S. imports for consumption from CBERA countries, 1992-94 128 

5-5. U.S. imports for consumption from Andean countries, 1992-94 129 

5-6. Countries with which the United States has textile and apparel quotas, as of March 1995: 

U.S. general imports under the Multifiber Arrangement in 1994 132 

Appendix 

Statistical tables 

A-1. U.S. merchandise trade with Canada, by SITC Nos. (revision 3), 1992-94 142 

A-2. Leading exports to Canada, by Schedule B number, 1992-94 143 

A-3. Leading imports from Canada, by HTS number, 1992-94 144 

A-4. U.S. merchandise trade with the European Union, by SITC Nos. (revision 3), 1992-94 145 

A-5. Leading exports to the European Union, by Schedule B number, 1992-94 146 

A-6. Leading imports from the European Union, by HTS number, 1992-94 147 

ix 
CONTENTS-Continued 

Page 

Appendix-Continued 

Statistical tables-Continued 

A-7. U.S. merchandise trade with Japan, by SITC Nos. (revision 3), 1992-94 148 

A-8. Leading exports to Japan, by Schedule B number, 1992-94 149 

A-9. Leading imports from Japan, by HTS number, 1992-94 150 

A-10. U.S. merchandise trade with Mexico, by SITC Nos. (revision 3), 1992-94 151 

A-11. Leading exports to Mexico, by Schedule B number, 1992-94 152 

A-12. Leading imports from Mexico, by HTS number, 1992-94 153 

A-13. U.S. merchandise trade with China, by SITC Nos. (revision 3), 1992-94 154 

A-14. Leading exports to China, by Schedule B number, 1992-94 155 

A-15. Leading imports from China, by HTS number, 1992-94 156 

A-16. U.S. merchandise trade with Taiwan, by SITC Nos. (revision 3), 1992-94 157 

A-17. Leading exports to Taiwan, by Schedule B number, 1992-94 158 

A-18. Leading imports from Taiwan, by HTS number, 1992-94 159 

A-19. U.S. merchandise trade with Korea, by SITC Nos. (revision 3), 1992-94 160 

A-20. Leading exports to Korea, by Schedule B number, 1992-94 161 

A-21. Leading imports from Korea, by HTS number, 1992-94 162 

A-22. Antidumping actions reported by signatories to the GATT Committee on Antidumping 

Practices during 1994 163 

A-23. Countervailing duty actions reported by signatories to the GATT Committee on Subsidies and 

Countervailing Measures during 1994 174 

A-24. Antidumping cases active in 1994, filed under authority of title VII of the Tariff Act of 1930, 

by final outcomes and by USITC investigation number 175 

A-25. Antidumping orders and findings in effect as of Dec. 31, 1994 178 

A-26. Countervailing cases active in 1994, filed under authority of sec. 303 or title VII of the 

Tariff Act of 1930, by final outcomes and by USITC investigation number 184 

A-27. Countervailing-duty orders and findings in effect as of Dec. 31, 1994 185 

A-28. Sec. 337 investigations completed by the U.S. International Trade Commission during 

1994 and those pending on Dec. 31, 1994 188 

A-29. Outstanding sec. 337 exclusion orders as of Dec. 31, 1994 191 

A-30. U.S. imports for consumption of leading GSP-duty-free imports, 1994 193 

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

under the Harmonized Tariff Schedule (HTS), 1994 194 

A-32. U.S. imports for consumption of leading imports under CBERA, 1993-94 195 

A-33. U.S. imports for consumption under CBERA, by country, 1990-94 196 

A-34. U.S. imports for consumption under ATPA, by country, 1993-94 197 

A-35. U.S. imports for consumption of leading imports under ATPA, 1994 198 

Index 199 
List of Frequently Used Abbreviations 

and Acronyms 

ACP African, Caribbean, and Pacific 

AD Antidumping 

APEC Asia-Pacific Economic Cooperation 

ASEAN Association of Southeast Asian Nations 

ATPA Andean Trade Preference Act 

BIT Bilateral Investment Treaty 

CBERA Caribbean Basin Economic Recovery Act 

CFTA United States-Canada Free-Trade Agreement 

CVD Countervailing Duty 

EU European Union 

FTA Free-Trade Agreement 

GATS General Agreement on Trade in Services 

GATT General Agreement on Tariffs and Trade 

GDP Gross Domestic Product 

GSP Generalized System of Preferences 

HTS Harmonized Tariff Schedule 

IMF International Monetary Fund 

IPR Intellectual Property Rights 

ITA International Trade Administration 

MFA Multifiber Arrangement 

MFN Most Favored Nation 

NAFTA North American Free-Trade Agreement 

OECD Organization for Economic Cooperation and Development 

S AA Statement of Administrative Action 

SDRs Special Drawing Rights 

SITC Standard Industrial Trade Classification 

TAA Trade Adjustment Assistance 

TRIMs Trade-Related Investment Measures 

TRIPs Trade-Related Aspects of Intellectual Property Rights 

UNCTAD United Nations Conference on Trade and Development 

URA Uruguay Round Agreements 

URAA Uruguay Round Agreements Act 

USITC U.S. International Trade Commission 

USTR United States Trade Representative 

WTO World Trade Organization 

xi 

INTRODUCTION 

Purpose and 

Organization of the Report 

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 to be used as a general reference by 

government officials and others with an interest in U.S. 

trade relations. This report is the 46th issue in a series 

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

of 1974 and its predecessor legislation. 1The 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 activities of the General Agreement on 

Tariffs and Trade (GATT), including the Uruguay 

Round of trade negotiations and the creation of 

GATT's successor organization, the World Trade 

Organization (WTO). Chapter 2 discusses 

developments in regional fora, including Asia-Pacific 

Economic Cooperation (APEC), the Summit of the 

Americas, and the North American Free-Trade 

Agreement (NAFTA). Chapter 3 covers multilateral 

activities outside the GATT, and chapter 4 describes 

bilateral relations between the United States and its 

major trading partners—Canada, the European Union 

(EU), Japan, Mexico, China, Taiwan, and Korea. 

Chapter 5 discusses the administration of U.S. trade 

laws, regulations, and programs. The report covers the 

1994 calendar year, and, although occasionally, early 

1995 events. The sections below summarize major 

trade activities during the year and describe the 

international economic environment within which U.S. 

trade policy was conducted, including economic 

conditions in the United States and its major trading 

partners. 

Summary of 1994 

Trade Agreements 

Activities 

The year 1994 was marked by the passage of U.S. 

legislation implementing the historic Uruguay Round 

Agreements (URA), the entry into force of NAFTA, 

and announcements of two important regional trade 

initiatives, one in the Western Hemisphere and the 

other in the Asia-Pacific region. Other subregional 

economic integration arrangements not involving the 

United States were also active, including the European 

Economic Area Agreement and Mercosur in Latin 

America. The United States and its major trading 

partners continued to disagree over a variety of issues, 

including agriculture, intellectual property rights, and 

market access. In response to improving political 

relations, the United States ended its trade embargo 

against Vietnam and joined other nations when the 

United Nations imposed and later lifted a 

comprehensive trade embargo against Haiti. The 

Coordinating Committee on Multilateral Export 

Controls, a remnant of the Cold War, was also 

abolished. Major trade events during the year are listed 

in figure A, at the end of this section. 

The URA provided for significant reductions in 

tariffs and nontariff barriers to trade in goods. More 

newsworthy, however, was the extension of world trade 

rules to traditional areas not previously fully 

disciplined, such as agriculture and textiles, as well as 

to areas not previously covered, including services, 

investment, and intellectual property rights. In 

addition, the URA created the WTO, the successor 

organization to the GATT Secretariat, to oversee the 

agreements. After participants in the Uruguay Round 

of trade negotiations signed the resulting agreements 

on April 15, attention shifted to securing passage of 

national measures to implement them. Debate over the 

U.S. implementing legislation focused on such issues 

as the renewal of fast-track legislation, the impact of 

the agreements on U.S. sovereignty, and funding for 

revenues lost from tariff cuts. Although these debates 

initially raised doubts about timely Congressional 

passage, the implementing bill was signed into law on 

December 8, 1994. As of yearend, 81 countries had 
ratified the URA, ensuring the entry into force of the 

WTO on January 1, 1995. 

Several noteworthy opportunities for expanded 

regional trade were achieved in 1994. On January 1, 

NAFTA entered into force. The agreement between the 

United States, Canada, and Mexico provides for phased 

elimination of tariff and of most nontariff barriers to 

trade in both industrial and agricultural products, 

protection of intellectual property rights, and the 

reduction of impediments to investment and services 

trade. Trade between the three NAFTA partners 

increased during NAFTA's first year; trade between the 

United States and Mexico alone rose 24 percent, 

resulting in a near balance in bilateral trade. This 

contrasts with Mexico's large trade deficit with Europe 

and Asia, which contributed to its peso crisis and 

ultimately overshadowed positive trade results of 

NAFTA during its first year. On the policy side, 1994 

was characterized by the emergence of numerous 

technical issues related to start-up operations, including 

implementation of NAFTA commitments and the 

establishment of NAFTA-related institutions and 

working groups. Late in the year, the United States, 

Canada, and Mexico formally invited Chile to join 

NAFTA and agreed to begin negotiations to that end in 

early 1995. 

In addition, at a historic summit of western 

hemispheric leaders, hosted by the United States in 

Miami in December, participants called for the creation 

of a free-trade area of the Americas by 2005. Latin 

American nations have been particularly active 

negotiating and establishing subregional 

market-opening and trade-creating agreements, such as 

the Group of Three, the Southern Common Market 

(Mercosur), and the Association of Caribbean States, 

which could act as "building blocks" for expanding 

trade in the Hemisphere. In another area of the world, 

members of APEC set a long-term goal of achieving 

free and open trade and investment in the Asia-Pacific 

region by the year 2020. 

As in previous years, the bilateral trade agenda 

covered a large variety of topics. New concerns 

emerged and old ones continued, but a number of 

disputes were resolved. Particularly noteworthy were 

four sectoral agreements reached with Japan under the 

Framework Agreement, committing Japan to open its 

markets in insurance, flat glass, and, in the area of 

government procurement, telecommunication 

equipment and services, and medical equipment and 

services. Other accomplishments included a new 

agreement controlling U.S. imports of Chinese textiles 

and apparel, an agreement with Canada that sharply 

reduced wheat shipments to the U.S. market for a 

period of 1 year, and an interim accord granting 

compensation to the United States for withdrawal of 

previously negotiated trade concessions when three 

new countries joined the EU. Additional developments 

reducing trade frictions included a temporary 

resolution to the longstanding U.S.-Canadian lumber 

dispute, President Clinton's decision to delink the issue 

of China's human rights record from the annual 

renewal of its most-favored-nation status, and the 

completion of a series of talks between the United 

States and Korea designed to strengthen bilateral 

economic cooperation. The main focus of the talks 

with Korea was the means to improve Korea's climate 

for foreign investment. 

Other areas of disagreement were not resolved. The 

level of protection of intellectual property rights (IPR) 

was an issue with Taiwan, Korea, and particularly 

China; in June, the United States Trade Representative 

(USTR) initiated a so-called Special 301 investigation 

with regard to practices in China Agricultural issues 

also remained in the forefront. In October USTR 

launched a section 301 investigation to determine 

whether the EU's banana import regime discriminated 

against U.S. banana marketing and distribution 

companies and whether a new Framework Agreement 

between the EU and four Latin American countries 

would compound any such discrimination. USTR also 

initiated a section 301 investigation on Korea's market 

access practices regarding the importation of U.S. beef 

and pork. Other unresolved issues involved efforts to 

open Japan's market to U.S. automobiles and auto parts 

and to open Korea's market to imported automobiles. 

Market access issues also remained a major sticking 

point in negotiations to conclude both China's and 

Taiwan's accession to the GATT in time to become 

founding members of the WTO on January 1, 1995. 

Other noteworthy achievements during 1994 were 

the negotiation of a number of bilateral investment 

treaties (BITs) based on a new prototype treaty and the 

conclusion of a major plurilateral shipbuilding 

agreement. After nearly 5 years of negotiations, seven 

members of the Organization for Economic 

Cooperation and Development (OECD) reached an 

agreement that eliminates subsidies and other 

trade-distorting practices in the shipbuilding sector. 

The agreement enters into effect on January 1, 1996, 

and will cover 80 percent of world shipbuilding. 

Some of the highlights related to the administration 

of U.S. trade laws, regulations, and programs in 1994 

are listed below: 

• At yearend, there were no import relief 

measures in effect under safeguard 

laws—sections 201 and 406 of the Trade 

xiv 
Act of 1974. Commerce completed two 

investigations under section 232 of the 

Trade Expansion Act of 1962 (national 

security), and the USITC completed one 

investigation (wheat) and suspended 

another (peanut butter and paste) under 

section 22 of the Agricultural Adjustment 

Act. The level of investigative activity 

remained about average during 1994 under 

antidumping and countervailing duty laws 

and section 337 of the Tariff Act of 1930. 

• Under the new NAFTA-related trade 

adjustment assistance program, 

preliminary data covering fiscal year 1994 

(Jan.-Sept. 1994) indicate that 10,345 

workers were certified eligible to receive 

benefits. 

• Duty-free imports under tariff preference 

programs (Generalized System of 

Preferences, Caribbean Basin Economic 

Recovery Act, and Andean Trade 

Preference Act) reached 3.2 percent of total 

U.S. imports in 1994. 

• The U.S. legislation implementing the 

URA made changes effective January 1, 

1995, to a number of laws and programs, 

including antidumping and countervailing 

duty laws, section 337 of the Tariff Act of 

1930, and section 201 of the Trade Act of 

1974. Changes also affected the 

Agricultural Adjustment Act, the Meat 

Import Act of 1979, and the Multifiber 

Arrangement. 

• This legislation also established specific 

principles applicable to rules of origin for 

U.S. imports of textiles and apparel. The 

legislation requires that the rules be 

changed to be based on the country of 

assembly rather than on the country of 

cutting. 

Figure A 

Selected Trade Events, 1994 

JANUARY 

Jan. 1 NAFTA enters into force, starting the gradual phaseout of tariff and other trade barriers 

between Mexico, the United States, and Canada. 

European Economic Area (EEA) enters into force, linking the EU and five members of 

the European Free Trade Association in the world's largest free-trade area. 

Jan. 17 U.S. and China reach an agreement to cut back growth of China's textile and apparel 

exports to the United States and to place restrictions on Chinese silk exports for the first 

time. China agrees to U.S. demands for provisions to fight textile fraud in the revised 

agreement. 

Jan. 18 Japan's Prime Minister Morihiro Hosokawa announces an action plan to open Japan's 

construction market to more foreign bidders. 

Jan. 24 Clinton administration announces trade initiative focusing on big emerging markets. 

Jan. 28 A binational trade panel decision under the United States-Canada Free-Trade 

Agreement (CFTA) finds that the USITC failed to demonstrate that subsidized Canadian 

softwood lumber exports are injuring U.S. producers. 

FEBRUARY 

Feb. 3 President Clinton lifts the U.S. trade embargo against Vietnam. 

Feb. 25 USTR Michael Kantor terminates a 9-month-long "Special 301" investigation into 

Brazil's intellectual property regime. 

MARCH 

Mar. 3 

Mar. 12 

Mar. 14 

President Clinton signs an Executive Order reinstituting the trade provision known as 

Super 301. 

The United States and Japan reach a formal agreement regarding cellular phone 

service. 

The United States and Russia reach an agreement that will allow specified quantities of 

Russian uranium to enter the United States provided they are matched with purchases 

of newly mined U.S. products. 

xv 
Figure A-Continued 

Selected Trade Events, 1994 

MARCH—Continued 

Mar. 23 

Mar. 29 

Mar. 31 

USTR Michael Kantor announces that the United States and other countries have 

agreed to form a permanent trade and environment committee within the new World 

Trade Organization (WTO). 

Japan announces that it is discontinuing its 13-year-old voluntary export restraint on 

automobiles to the United States on March 31, the end of its fiscal year 1993. 

Shipments had fallen well short of restraint levels. 

The United States and its Western allies formally terminate the Coordinating Committee 

on Multilateral Export Controls (COCOM). 

APRIL 

Apr. 1 

Apr. 6 

Apr. 11 

Apr. 13 

Apr. 15 

Apr. 22 

MAY 

May 4 

May 12 

May 21 

May 26 

JUNE 

June 7-8 

June 30 

JULY 

July 1 

July 9 

Hungary becomes the first former communist bloc nation to apply for EU membership. 

The United States formally launches an extraordinary challenge to the CFTA binational 

panel ruling on softwood lumber. 

United States announces that it will ban the importation of certain wildlife products from 

Taiwan. The sanctions were imposed in response to a finding that Taiwan had not taken 

sufficient measures to stop illegal trade in products of endangered species. 

The United States and the EU reach an agreement to further open their respective 

public utility procurement markets, except for telecommunications. 

The United States and more than 100 other countries sign a historic agreement to 

reduce tariff and nontariff barriers to world trade in goods and services and to establish 

the WTO to supersede the GATT in 1995, capping 8 years of negotiations under the 

GATT Uruguay Round. 

Mexico's financial system officially opens to foreign competition. 

European Parliament ratifies EU membership for Austria, Sweden, Finland, and 

Norway, paving the way for accession on January 1, 1995. 

Mexico, Colombia, and Venezuela (the so-called Group of Three) conclude negotiations 

on a free-trade pact that provides for the phaseout of tariff and certain other barriers 

and the establishment of a dispute settlement mechanism. 

United Nations imposes a comprehensive trade embargo against Haiti. 

President Clinton announces that he will renew most-favored-nation status for China 

and permanently delink China's trade status from human rights issues with the 

exception of the freedom-of-emigration requirements of the Trade Act of 1974. 

The Organization for Economic Cooperation and Development holds its annual 

ministerial meeting. 

USTR Michael Kantor initiates a "Special 301" investigation of China's intellectual 

property rights enforcement practices. 

USTR announces results of the 1993 review of the U.S. Generalized System of 

Preferences (GSP) program; ten additional products become eligible. 

Leaders at the 20th annual Group of Seven (G-7) summit in Naples, Italy, agree to 

maintain momentum toward further trade liberalization, but put off acceptance of a U.S. 

proposal to launch a new round of multilateral trade talks. For the first time, Russia 

attends the summit. 

xvi 
Figure A-Continued 

Selected Trade Events, 1994 

JULY—Continued 

July 24 

July 26 

July 31 

AUGUST 

Aug. 2 

Aug. 3 

The Association of Caribbean States is formally established as 37 Caribbean nations 

sign a regional cooperation agreement. 

The United States and Japan agree to extend the 1991 transpacific semiconductor 

trade agreement for an additional 5 years. 

The White House names Japan under title VII of the 1988 Trade Act for discriminating 

against U.S. suppliers of telecommunications and medical equipment and services. 

The United States and Canada announce a 1-year understanding on wheat trade. 

The Extraordinary Challenge Committee dismisses the U.S. challenge on softwood 

lumber from Canada on the grounds that the standards for an extraordinary challenge 

have not been met. 

Aug. 4 Argentina, Brazil, Paraguay, and Uruguay sign common market accord (Mercosur) 

designed to boost trade and prosperity in the region. Negotiations of such difficult 

issues as rules of origin and common external tariffs continue. 

Aug. 16 The United States and Japan sign an agreement aimed at ensuring U.S. inventors 

quicker processing of their patent applications and overall improved protection of U.S. 

intellectual property rights. 

SEPTEMBER 

Sept. 27 President Clinton transmits to Congress draft legislation implementing the Uruguay 

Round Agreements. 

OCTOBER 

Oct. 1 The United States and Japan reach verbal understandings under the Framework talks 

for telecommunications and medical equipment and services, flat glass, and insurance. 

USTR self-initiates a section 301 investigation on barriers to access the auto parts 

replacement market in Japan. 

Six members of the Gulf Cooperation Council (GCC) agree to drop their secondary and 

tertiary boycotts against Israel. 

Oct. 16 All U.S. and United Nations sanctions against Haiti are terminated in conjunction with 

the restoration to power of President Jean-Bertrand Aristide. 

Oct. 17 USTR initiates a section 301 investigation of the EU banana import regime. 

NOVEMBER 

Nov. 1 The United States lifts the August 1993 ban on exports of U.S.-built satellites to be 

launched by China. 

Nov. 11 The United States and Japan sign a Framework Agreement on insurance. 

Nov. 15 The second annual APEC Leaders Meeting is held in Bogor, Indonesia. Leaders agree 

to the goal of attaining free and open trade and investment among members no later 

than 2020. 

European Court of Justice rules that the EU Commission has competence to negotiate 

and conclude international agreements on behalf of the member states in the area of 

goods trade, but must share competence with member states in the areas of services 

trade and trade-related intellectual property issues. 

xvii 
Figure A-Continued 

Selected Trade Events, 1994 

NOVEMBER—Continued 

Nov. 22 USTR initiates a section 301 investigation on Korean practices related to the 

importation of U.S. beef and pork. 

Nov. 28 Norway votes for the second time in a referendum not to join the EU. (The first 

referendum was in 1972.) 

Nov. 29 The U.S. House of Representatives passes H.R. 5110, the Uruguay Round Agreements 

Act (URAA), by a margin of 288 to 146. 

DECEMBER 

Dec. 1 The U.S. Senate passes S. 2167, the URAA, by a margin of 76 to 24. 

Dec. 8 President Clinton signs the URAA into law as Public Law 103-465. 

January 1, 1995, is confirmed as the date for entry into force of the WTO. 

Dec. 9-11 Summit of the Americas countries agree to complete negotiations by 2005 to establish 

hemispheric free trade. United States, Canada, and Mexico announce intent to begin 

negotiations to expand NAFTA to include Chile. 

Dec. 12 The United States and Japan announce a Framework Agreement on flat glass. 

Dec. 20 The unexpected devaluation of the peso triggers a financial crisis in Mexico and 

adversely affects the financial markets of other countries. 

Dec. 21 The United States, EU, Japan, Korea, Finland, Norway, and Sweden sign the 

Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding 

and Repair Industry, culminating 4 and 1/2 years of negotiations in the OECD. 

Dec. 26 The United States and EU agree on a 6-month interim package that compensates the 

United States for the effects of EU enlargement to include Austria, Finland, and 

Sweden. 

Dec. 30 United States, EU, Canada and other countries deposit URA ratification documents with 

GATT Secretariat in Geneva. 

Dec. 31 China suspends implementation of the 1992 U.S.-China market access agreement by 

not lifting nontariff barrier restrictions scheduled to be eliminated at the end of 1994. 

The International Economic 

Environment and World 

Trade in 1994 

World output grew by 3.5 percent in 1994, 

compared with less than 1 percent in 1993. 3The 

relatively strong growth rate reflected healthy 

economic recoveries in a number of countries, 

including the United States and Canada, as well as the 

EU. In the EU, a gradual recovery was under way in 

several member countries based on a rebound in the 

U.S. economy and on the consequent rise in foreign 

demand for EU exports. In Japan, the economy began 

to recover in 1994, but remained weak largely because 

of the continued poor performance of business 

investment. Inflation remained low in all of these 

countries. 

Growth prospects improved in several developing 

and emerging economies in 1994 as a result of 

economic stabilization programs, including monetary 

and fiscal restraints and trade and investment 

liberalization policies. In Latin America (including 

Mexico and the countries of the Caribbean, Central 

America, and South America), economic activity rose 

by 3.7 percent in 1994 and inflation was moderate, 

although unemployment remained high. 4Economic 

activity continued to expand in 1994 in the Pacific 

Rim, particularly in China, Korea, Taiwan, Singapore, 

and Thailand. A ranking of world economies by size 

shows that in 1994, 6 of the 12 largest economies were 

those of emerging economies: China, India, Brazil, 

Russia, Mexico, and Indonesia. 5Table 1 shows 

economic indicators for the United States and selected 

U.S. trading partners. 

xviii 
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xix 
World trade grew at a much faster rate than output 

in 1994, according to recently released WTO 

estimates. 6The WTO reported that the volume of 

world merchandise exports grew by 9 percent in 1994, 

the fastest rate since 1976, far outstripping the 

4-percent rise in 1993. The value of world merchandise 

exports rose by 12 percent in 1994 to a record $4.0 

trillion. A jump of about 20 percent in trade in office 

machines and computer and telecommunications 

equipment boosted world trade growth. Exports in this 

category accounted for 11 percent of world goods 

exported by value. Trade in commercial services 

(transportation, travel, and other private services and 

income) increased 6 percent to $1.1 trillion during the 

year, reversing a trend over the past decade in which 

services trade growth on average outpaced 

merchandise trade growth. In 1994, the United States 

ranked first in terms of services exports, followed by 

France and Germany. The United States also ranked 

first in terms of services imports, followed by Germany 

and Japan.? 

By region, merchandise trade recovered sharply in 

Western Europe and continued to strengthen in North 

America, Asia, and Latin America in 1994. In North 

America, exports rose in value by 11.2 percent, 

whereas imports grew by 13.8 percent. Latin America's 

exports soared 14.9 percent in value in response to 

higher demand in the United States and other industrial 

countries, as well as to increased intraregional trade. 

Economic recovery in Latin America spurred imports 

by 16.5 percent, representing the highest rate of growth 

in imports among regions. Western European exports 

and imports rose in value by 11.7 and 11.1 percent, 

respectively, after posting negative rates in 1993. In 

Central and Eastern Europe, imports rose by 9.5 

percent and exports increased by 19.4 percent, buoyed 

by Western Europe's economic recovery. The value of 

Asia's exports and imports each grew by more than 15 

percent; exports from China alone surged by 32 

percent. The United States, Germany, and Japan 

remained the world's leading merchandise exporters, as 

well as importers. 8 

United States 

In 1994, the United States posted the largest annual 

increase in real gross domestic product since the 

1990-91 recession (see table 1). 9Consumer spending, 

particularly on durable goods, rose briskly, encouraged 

by a favorable consumer credit environment and rising 

employment. Real nonresidential fixed investment rose 

by a strong margin, bolstered by moderately rising 

long-term interest rates, lower unit labor costs, 

improved labor productivity, and higher capital returns. 

Investment in producers' durable equipment 

particularly escalated. The rise in spending on 

consumer durables and producers' durable equipment, 

combined with a partial rebound in housing, propelled 

the economic recovery in 1994. 10 

Real Federal government spending decreased, 

reflecting a large decline in national defense spending. 

As in the previous year, the decline in government 

spending shifted funds toward the private sector for use 

in short-term projects, increasing the sector's liquidity 

and encouraging bank lending at relatively moderate 

interest rates. The strengthening of economic activity 

led to a decline in the unemployment rate to its lowest 

level in 3 years. 11Despite strong economic growth, 

inflation remained restrained because of the expanding 

industrial base generated by a surge in new investment, 

as well as of the Federal Reserve's tight monetary 

policy. 

In the foreign sector, the United States ranked as 

both the world's largest merchandise exporter and the 

world's leading exporter of services. Merchandise 

exports rose by 10 percent to an all-time high of $503 

billion, but imports also increased considerably by 13.5 

percent to $669 billion. 12The strengthening of 

domestic demand combined with less robust growth 

abroad led to a larger increase in imports than in 

exports and, thus, to a widening of the 1994 

merchandise trade deficit. The U.S. bilateral 

merchandise trade deficits with Japan, China, Taiwan, 

Canada, and the EU all widened. Japan and China 

together accounted for 54 percent of the total U.S. 

merchandise trade deficit. Figure B shows U.S. exports 

and imports with the world by aggregate product 

sectors. Figure C shows U.S. merchandise exports, 

imports, and trade balances with major trading 

partners. Appendix A lists leading U.S. exports to and 

imports from major U.S. trading partners. 

The U.S. trade surplus in services increased 

slightly to $60.0 billion in 1994, from $56.9 billion in 

1993. 13U.S. services trade grew in almost every 

category. Total U.S. trade in services reached $330.6 

billion in 1994, a $17.8 billion increase over 1993. 

U.S. exports of services in 1994 reached $195.3 

billion. Of this total, exports of services to the EU were 

$58.4 billion; the United Kingdom, $19.3 billion; 

Eastern Europe, $1.8 billion; Canada, $15.7 billion; 

Latin America and other Western Hemisphere nations, 

$29.7 billion; Japan, $31.2 billion; Australia, $4.1 

billion; and other countries in Asia and Africa, $38.8 

billion. 

xx 
Figure B 

U.S. merchandise trade with the world, by product sectors, 1994 

Other 

$20.9 

4.3% 

FueVraw material 

$35.9 

Manufactured 7.5% 

$329.3 Food 

68.3% $44.1 

9.2% 

1111== 

===== ======N111=1 

=========== 1=========1 =MINIMUM 

======== 1======= 

===== 

===== 

=== =MI 

Chemicals 

$51.6 

10.7% 

U.S. Exports 

(billion dollars and percent) 

Manufactured 

$496.9 

75.5% 

Other 

$22.9 

3.5% Fuel/raw material 

$73.4 

11.2% 

U.S. Imports 

(billion dollars and percent) 

xxi 

Source: Compiled from official statistics of the U.S. Department of Commerce. 
Major trading partners Exports 

Canada 103.6 128.7 -25.1 

EU 96.5 109.1 -12.6 

Japan 51.1 117.5 -66.4 

Mexico 49.1 48.6 0.5 

China 9.2 38.6 -29.4 

Taiwan 16.2 26.6 -10.4 

Korea 17.5 19.5 -2.0 

Imports Trade balance 

Figure C 

U.S. merchandise exports, imports, and trade balance (customs value basis) with major trading 

partners, 1994 

—80 

Canada EU Japan Mexico China Taiwan Korea 

Source: Compiled from official statistics of the U.S. Department of Commerce. 
The U.S. current account deficit grew in 1994 for 

several reasons, including the increased merchandise 

trade deficit, a shift in net investment income from a 

surplus in 1993 to a deficit in 1994, and an increase in 

net transfers. Net inflows of foreign capital into the 

United States rose. Both U.S. purchases of foreign 

assets and securities and purchases by foreigners of 

U.S. portfolio assets expanded. The following 

tabulation shows U.S. trade and current 

account balances with the world (in billions of dollars, 

seasonally adjusted): 14 

1993 1994 

Merchandise exports 456.9 502.6 

Merchandise imports 589.4 669.1 

Balance on merchandise trade -132.6 -166.5 

Balance on services 56.9 60.0 

Balance on goods and services -75.7 -106.4 

Balance on investment income 4.0 - 15.2 

Balance on goods, services, 

and investment income -71.8 -121.5 

Unilateral transfers -32.1 -34.1 

Balance on current account -103.9 -155.7 

Net capital inflows (+), 

outflows (-) -82.8 -188.9 

U.S. assets abroad, net, 

outflow (-) -147.9 -125.7 

Foreign assets in the U.S., 

net, inflow(+) 230.7 314.6 

Canada 

The growth of Canada's real output in 1994 was 

well above the 1993 rate but unemployment remained 

high. 15The upturn in Canada's economic activity was 

generated by a marked increase in exports benefiting 

from strongly reviving demand in the United States. 

Inflation subsided because of decreased government 

and consumer spending and of substantial gains in 

productivity. Canada's growing exports resulted in a 

merchandise trade surplus in 1994, which in turn 

reduced Canada's current account deficit from $23.8 

billion in 1993 to $18.1 billion in 1994. Excess 

payments of investment income over receipts, 

particularly to U.S. investors, accounted for the bulk of 

the current account deficit. 16 

Canada is the United States' largest trading partner, 

accounting for about one-fifth of both U.S. exports and 

imports. Indeed, two-way trade was the largest 

recorded between any two countries in 1994. The 

United States recorded a 35-percent increase in its 

merchandise trade deficit with Canada. U.S. exports to 

Canada rose 12.8 percent, but imports increased 16.5 

percent. U.S. exports to Canada, 87 percent of which 

consisted of manufactured goods, 17rose in 9 of 10 

Standard Industrial Trade Classification (SITC) 

sections (table A-1). Manufactured goods accounted 

for 71 percent of total U.S. imports from Canada. The 

U.S. trade surplus in services with Canada declined 

slightly in 1994 to $6.3 billion, reflecting both a 

decrease in U.S. exports and an increase in U.S. 

imports of services. 

European Union 

Following a severe recession in 1993, the European 

Union (EU) entered a period of recovery in 1994, 

propelled by the revival of U.S. economic growth. 

However, stubbornly high levels of unemployment 

throughout the EU persisted and weakened income 

growth and aggregate demand, dampening the overall 

recovery. Maintaining noninflationary growth 

compatible with low rates of unemployment is still a 

challenge to the EU, in part because of the rules of the 

Exchange Rate Mechanism (ERM). Monetary 

expansion to increase employment has been 

constrained by the ERM, which was established to 

stabilize exchange rates by anchoring EU currencies to 

the German mark. Under the ERM, participants have 

had to maintain their currencies' parities roughly 

aligned with the German mark, which requires them to 

maintain higher interest rates in line with German 

rates. Similarly, fiscal policy has been constrained by 

the inability of EU governments to effectively increase 

their spending because of high budget deficits. 

Economic and monetary union, scheduled for no later 

than January 1, 1999, requires participants to reduce 

their budget deficits to 3 percent and their public debts 

to 60 percent of GDP. However, in 1994 EU countries' 

aggregate budget deficits, except for Luxembourg, 

averaged over 6 percent, and gross public debt 

averaged over 83 percent of GDP, according to OECD 

data. EU countries with the highest percentages were 

Belgium, with a gross public debt of 142.0 percent of 

GDP; Greece, 120.8 percent; Italy, 123.2 percent; and 

Ireland, 88.2 percent of GDP. 18 

EU world exports and imports of goods and 

services rose in 1994, yielding higher merchandise 

trade and current account surpluses, despite an excess 

of payments of investment income over receipts. In 

1994, the EU was the United States' second largest 

trading partner, accounting for about 18 percent of total 

U.S. trade. The United States registered a trade deficit 

with the EU for the second year in a row; Germany, 

Italy, France, Denmark, and Luxembourg accounted 

for this trade deficit. Over 80 percent of U.S. exports to 

and imports from EU markets consisted of 

manufactured goods; the remainder consisted of food, 

fuel, and raw materials (table A-4). U.S. exports of 

services to the EU increased more rapidly than U.S. 

xxnl 
imports, yielding a higher U.S. services trade surplus 

($8.0 billion) with the EU in 1994. 

Japan 

In 1994, economic recovery in Japan was largely 

due to rising personal incomes and consumption, 

expanding housing construction, and to steadily rising 

public investment. Japan's industrial production rose in 

1994 following a substantial decline in 1993. 

Unemployment increased slightly, but remained well 

below other industrial countries' rates. Japan's total 

exports of goods increased in 1994, although imports 

grew more rapidly yielding a smaller merchandise 

trade surplus. The current account surplus was 

estimated to have declined slightly to $129.3 billion 

from a record high in 1993 due to the rising value of 

the yen, which encouraged increased Japanese demand 

for services, particularly for trave1. 19 

The U.S. merchandise trade deficit with Japan rose 

nearly 11 percent in 1994, accounting for 37.8 percent 

of the total U.S. deficit. Likewise, U.S. exports to and 

imports from Japan increased almost 11 percent in 

1994. U.S. exports increased in 8 of 10 SITC sections, 

and imports increased in 7 sections (table A-7). 

Sixty-three percent of U.S. exports to Japan consisted 

of manufactured goods; 35 percent consisted of food, 

fuel, and raw materials. In contrast, nearly 98 percent 

of U.S. imports from Japan consisted of manufactured 

goods. In 1994, U.S. exports of services to Japan 

accelerated faster than imports, reaching a total of 

$31.2 billion, a $3.7-billion increase over the previous 

year. Imports from Japan were $15.5 billion, resulting 

in a U.S. trade surplus in services of $15.7 billion. 

Mexico 

In December 1994, the Mexican economy suffered 

a severe financial crisis and a considerable depreciation 

of the peso after support of the currency could no 

longer be maintained. Analysts consider Mexico's 

large current account deficit (an estimated 6.6 percent 

of the 1994 GDP) the major cause of the crisis. Other 

contributing factors were Mexico's exchange-rate 

management policy and heavy reliance on short-term 

credit. For more details on Mexico's economic 

performance in 1994, including the peso crisis and its 

implications, see the Mexico section of chapter 4 of 

this report. 

Under the first year of the North American 

Free-Trade Agreement, Mexico's total trade with the 

United States grew by 24 percent. U.S. exports 

increased 22 percent, U.S. imports grew 26 percent, 

and the bilateral trade was almost balanced. U.S. 

exports to Mexico rose in 9 of the 10 SITC sections 

(table A-10). Approximately 82 percent of U.S. exports 

to Mexico was manufactured goods and the remainder 

consisted of food, fuel, and raw materials. 

Approximately 77 percent of U.S. imports consisted of 

manufactured goods, and the remainder consisted of 

food, fuel, and raw materials. 

China 

The rapid growth of the Chinese economy 

continued in 1994. Industrial production remained 

strong, increasing overall by 18 percent from its value 

the previous year. The growth in this sector was led by 

a 28-percent rise in the output of foreign-funded 

enterprises,20whereas the output of state-owned 

enterprises grew by only 5.5 percent. The primary 

problems in China's economic performance during 

1994 were the high rate of increase in the consumer 

price index, the slow growth of agricultural production, 

and the serious inefficiency of many state-owned 

industrial enterprises. 21Future correction of problems 

in the state sector will be particularly difficult since the 

required reforms could result in massive urban 

unemployment and widespread social unrest. 22 

The increase in China's exports in 1994 was a 

major factor stimulating the overall growth of the 

economy. Preliminary Chinese statistics show that 

exports expanded by 31.9 percent to $121.0 billion, 

and imports rose by 11.2 percent to $115.7 billion, 

turning a $12.2 billion deficit in 1993 into a $5.3 

billion surplus in 1994. The export growth rate was 

significantly higher than any recorded in recent years. 

A limited breakdown of exports by category indicates 

that the largest increase was in shipments of machinery 

and electronic goods. The exports of foreign-funded 

enterprises increased by nearly 38 percent to $34.7 

billion in 1994, representing 28.7 percent of the export 

total. 

U.S. exports to China increased by 6.5 percent and 

imports from China expanded by 22.7 percent in 1994, 

widening the U.S. bilateral deficit by 28.9 percent. 23 

 The U.S. trade deficit with China accounted for 16.7 

percent of the total U.S. deficit. In 1994, U.S. exports 

to China increased in 4 of 10 SITC sections, and 

imports increased in 8 sections (table A-13). 

Eighty-one percent of U.S. exports to China consisted 

of manufactured goods, and the remainder consisted of 

food, fuel, and raw materials and other goods. By 

contrast, 96 percent of U.S. imports from China 

consisted of manufactured goods. 

xxiv 
Taiwan 

In Taiwan, intraregional direct investment and 

intraregional trade flows stimulated output growth. 

Exports declined as a result of a large increase in 

wages and of the appreciation of the Taiwan dollar. 

The subsequent easing of Taiwan monetary policy 

resulted in weakening the New Taiwan dollar and in 

improving the prospects for increased exports, 

particularly with mainland China. The U.S. bilateral 

trade deficit with Taiwan increased in 1994 by 10.1 

percent as exports grew by 4.2 percent and imports by 

6.4 percent. U.S. exports to Taiwan increased in 8 of 

10 SITC sections, whereas imports increased in 7 

sections (table A-16). Approximately 75 percent of 

U.S. exports to Taiwan consisted of manufactured 

goods, and the remainder of food, fuel, and raw 

materials and other goods. In contrast, 97 percent of 

U.S. imports from Taiwan consisted of manufactured 

goods. 

Korea 

In the Republic of Korea, output continued to grow 

in 1994 largely because of the growth of intraregional 

trade and intraregional investment flows. Korea's trade 

balance shifted from a surplus in 1993 to a deficit in 

1994 because of buoyant private consumption and 

business investment growth. As a result, the current 

account deficit grew sharply compared with the level 

of the previous year. However, increasing demand in 

Europe and South East Asia, as well as the opening of 

new markets in the former Soviet Union, increased 

Korea's exports of semiconductors and automobiles. 

U.S. exports to Korea increased by 22 percent over the 

previous year and imports increased by 15 percent, 

resulting in a 22-percent lower trade deficit with Korea 

in 1994. U.S. exports to Korea increased in 9 of 10 

SITC sections, and imports increased in 7 sections 

(table A-19). Approximately 73 percent of U.S. exports 

to Korea in 1994 consisted of manufactured goods, and 

the remainder of food, fuel, and raw materials and 

other goods. In contrast, 97 percent of U.S. imports 

from Korea consisted of manufactured goods. 

xxv 
ENDNOTES 

1Section 163(b) of the Trade Act of 1974 (Public 

Law 93-618, 88 Stat. 1978) states that "the 

International Trade Commission shall submit to the 

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

the operation of the trade agreements program." 

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

3Services and construction output are not 

included. World Trade Organization (WTO), "World 

Trade Growth in 1994 Highest in Almost Two 

Decades; Gains Broadly Based Across Most 

Regions," press release No. 8, Mar. 28, 1995. 

4United Nations Economic Commission for Latin 

America and the Caribbean (ECLAC), Preliminary 

Overview of the Economy of Latin America and the 

Caribbean, 1994, LC/G.1846 (Santiago, Chile: 

ECLAC, Dec. 20, 1994), p. 1. 

5"Emerging-Market Indicators," The Economist, 

Jan. 14-20, 1995, p. 98. 

6WTO, "World Trade Growth in 1994 Highest in 

Almost Two Decades; Gains Broadly Based Across 

Most Regions," press release No. 8, Mar. 28, 1995. 

7Ibid. 

Ibid. 

9Council of Economic Advisers, Economic 

Report of the President, Feb. 1995, p. 51. See also 

U.S. Department of Commerce, Bureau of Economic 

Analysis, "Gross Domestic Product: Fourth Quarter 

1994 (Advance)," United States Department of 

Commerce News, BEA 95-03, Jan. 27, 1995, p. 3. 

10 Council of Economic Advisers, Economic 

Report of the President, Feb. 1995, pp. 49-60. 

11U.S. Department of Labor, Bureau of Labor 

Statistics, "Employment and Earnings," Jan. 1995, 

p. 11. 

12U.S. Department of Commerce, Bureau of the 

Census, "U.S. Merchandise Trade in Goods and 

Services, March 1995," U.S. Department of 

Commerce News, CB-95-96, FT-900 (95-03), May 18, 

1995, exhibit 1, p. 4. These data are on a 

balance-of-payments basis, seasonally adjusted. 

13For services trade data, see U.S. Department 

of Commerce, Bureau of Economic Analysis, "U.S. 

International Transactions, Fourth Quarter and Year 

1994," Survey of Current Business, Mar. 1995, pp. 

69-70 and 94-97. 

14U.S. Department of Commerce, Bureau of 

Economic Analysis, "U.S. International Transactions, 

Fourth Quarter and Year 1994," Survey of Current 

Business, Mar. 1995, p. 56. 

15Statistics Canada, Canadian Economic 

Observer, various monthly issues in 1994-95. 

16Statistics Canada, "Canadian Balance of 

International Payments," Canadian Economic 

Observer, May 1995, table 17, p. 30. 

17In this section, "manufactured goods" are 

defined to include SITC codes 5 through 8 (see, for 

example, table A-1). 

18 OECD Economic Outlook, No. 56, Dec. 1994, 

pp. A32 and A36. 

19 OECD Economic Outlook, No. 56, Dec. 1994, 

and Institute of Fiscal and Monetary Policy, Ministry 

of Finance, Japan, Monthly Finance Review, Jan. 

1995, No. 259. 

20Consisting mainly of equity joint ventures, 

contractual or cooperative joint ventures, and wholly 

foreign-owned enterprises. 

21Unless otherwise noted, the data on China's 

economy and trade are from Foreign Broadcast 

Information Service, "Statistical Communique of the 

State Statistical Bureau of the People's Republic of 

China on the 1994 National Economic and Social 

Development," Daily Report: China, Mar. 7, 1995, 

pp. 41-47. 

22 China and North Asia Monitor, vol. 2, No. 2 

(Feb. 1995), p. 4. 

23Based on data compiled by the U.S. 

Department of Commerce. The U.S. and Chinese 

statistics on bilateral trade differ significantly, 

reflecting mainly the difference in the way each 

country treats transshipments of merchandise through 

Hong Kong. 

xxvi 
CHAPTER 1 

Uruguay Round Implementation 

and Ongoing Negotiations 

Introduction 

The Uruguay Round Agreements (URA) were 

formally signed at a special ministerial meeting held 

under the auspices of the General Agreement on Tariffs 

and Trade (GATT) on April 15, 1994. Ministers at the 

meeting also decided that member countries would aim 

to have both the agreements and the World Trade 

Organization (WTO), created to carry out the 

agreements, enter into force in early 1995. Multilateral 

activity in 1994 focused on securing passage of 

national measures to implement the URA, and this goal 

was achieved. By late December, all of the major 

developed countries had passed the legislation or taken 

the other steps necessary to permit final ratification of 

the URA and their entry into force on January 1, 1995. 

The process of selecting the first Director-General of 

the WTO went less smoothly, however; it was not until 

March 1995 that governments could agree on Renato 

Ruggiero to take the position. Negotiations on issues 

left unfinished at the end of the Uruguay Round also 

continued in 1994. Regular GATT activity slowed in 

anticipation of the change to the WTO, although 

accession negotiations intensified. 

This chapter discusses the formal signing of the 

URA, preparations for establishing the WTO, the status 

of implementation of the agreements, and key aspects 

of the U.S. implementing legislation. It also describes 

ongoing services negotiations and regular GATT 

activities during the year. 

Marrakesh Ministerial 

Conference 

At the conclusion of the Uruguay Round in 

December 1993, participants agreed to hold a special 

ministerial session to sign the Uruguay Round 

Agreements in Marrakesh, Morocco, on April 12 to 15, 

1994. Of the 125 countries that participated in the 

Round, 111 countries signed the Final Actl at the 

ministerial. This act committed signatory governments 

to submit the Agreement Establishing the World Trade 

Organization and its Annexes (WTO Agreement) to 

their Parliaments or other appropriate bodies or 

officials for approval, and to complete the ratification 

process within 2 years of signing. 

In addition to the Final Act, Ministers approved 

three further decisions. The decision entitled "Trade 

and Environment" established the standing Committee 

on Trade and Environment under the WTO. 2The 

second, "Organizational and Financial Consequences 

flowing from the Implementation of the Agreement 

Establishing the World Trade Organization," 

considered staff and resource needs for the WTO. The 

third, "Decision on the Establishment of the 

Preparatory Committee for the World Trade 

Organization," established a Preparatory Committee 

(PrepCom) to lay the groundwork for the entry into 

force of the WTO. 

The PrepCom was charged with considering (1) 

how to set out future issues concerning trade and the 

environment, (2) financial and administrative 

arrangements for the WTO, and (3) WTO rules of 

procedure. The PrepCom was also "to discuss 

suggestions for the inclusion of additional items on the 

agenda of the WTO's work programme." 3This last 

item represented the ministerial compromise resulting 

from the debate over whether to mention 

internationally recognized labor rights ("worker 

rights") in the Marrakesh declaration, an idea 

advocated by the United States and France but opposed 

staunchly by many developing countries because of its 

potential for protectionist abuse. 4 

1 
Uruguay Round 

Agreements Act 

Introduction 

Following the Marrakesh Ministerial Conference, 

the U.S. administration and Congress drafted 

implementing legislation, and in late November and 

early December 1994, the legislation was passed by a 

wide margin. 5On November 29, the House of 

Representatives passed H.R. 5110, the Uruguay Round 

Agreements Act (URAA), by a margin of 288 in favor 

and 146 against. On December 1, the Senate passed an 

identical bill (S. 2467) by a margin of 76 for and 24 

against. Both houses followed "fast-track" procedures, 

meaning that no amendments were permitted and that 

Members of Congress could vote only for or against 

the proposed legislation. The bill was signed into law 

December 8, 1994, as Public Law 103-465, exactly 1 

year after President Clinton signed the North American 

Free-Trade Agreement (NAFTA) implementing bill. 6 

 Passage of implementing legislation by the United 

States cleared the way for other countries to ratify the 

agreements so that the WTO could come into being on 

January 1, 1995. The Japanese Parliament (the Diet) 

approved the agreements on December 8; 7the 

European Union (EU) completed its approval process 

on December 22, 1994. 8 

In the United States, debate over the implementing 

legislation initially raised doubts about timely 

congressional passage. Debate focused on issues such 

as the renewal of fast-track legislation, the impact of 

the agreements on U.S. sovereignty, and funding for 

revenues lost from tariff cuts under the URA. Early in 

the debate, the administration sought to include 

renewal of fast-track authority in the implementing 

legislation. However, the administration's fast track 

proposal, tabled in June, also included negotiating 

objectives relating to labor standards, and trade and the 

environment. Inclusion of these objectives proved 

controversial. To expedite passage of the URA 

legislation, in September the administration announced 

that it would not include fast-track renewal authority in 

its draft implementing bill. 

Once these issues appeared to be resolved 

satisfactorily9between the Congress and the 

administration, the President formally transmitted the 

implementing legislation to Congress on September 27, 

1994. 10However, the formal vote on the legislation 

was delayed when Senator Ernest Hollings (D-South 

Carolina), chairman of the Senate Commerce 

Committee and an opponent of the agreement, insisted 

that the full 45 days allowed under fast-track rules for 

study of the bill would be necessary before his 

committee would report it out for a vote. Although a 

congressional vote on the bill had been anticipated in 

early October, this action delayed the vote until after 

midterm elections. Following the threat by the 

President to recall the Senate after the midterm 

elections, both the House and Senate set dates for an 

expedited debate and vote on the bill—November 29 

and December 1, respectively. 

Further doubts about timely passage of U.S. 

implementing legislation briefly arose when 

congressional midterm elections in November shifted 

control of both the House of Representatives and the 

Senate to the Republican Party—for the first time since 

1948. However, subsequent discussions between the 

President and Republican leaders resulted in agreement 

on additional U.S. monitoring of the implementation of 

the agreements' dispute settlement provisions, which 

helped ensure congressional acceptance (see section 

below on the Dole plan). 

Overview of the Implementing 

Bill 

The URAA contains eight titles with various 

subtitles and provisions, as follows: 11 

Title I—General Provisions relating to the Uruguay 

Round Agreements 

• Approves the agreements and the 

Statement of Administrative Action 

(sAA). 12 

• Explains the relationship of the 

agreements to Federal and State law. 

• Authorizes the U.S. tariff modifications 

agreed to in the agreements. 

• Sets out consultation, notice, and report 

requirements during dispute settlement. 

• Sets out U.S. objectives for areas where 

negotiations have been extended, 

including financial services, basic 

telecommunications, and trade in civil 

aircraft. 13 

Title II—Antidumping and Countervailing Duty 

Provisions 

• Amends U.S. antidumping (AD) and 

countervailing duty (CVD) laws to 

conform to the URA. 

2 
Title III—Additional Implementation of Title VIII—Pioneer Preferences 

Agreements 

• Amends U.S. import safeguards law to 

conform with the URA. 14 

• Establishes how the United States intends 

to employ section 301 (including 

"special" and "super" 301) law on foreign 

trade barriers and unfair trade practices. 15 

• Amends U.S. law that pertains to unfair 

import practices in violation of 

intellectual property rights. 16 

• Authorizes the phaseout of bilateral 

textile import quotas and amends existing 

U.S. law to conform to other parts of the 

URA related to textiles and clothing. 

• Amends U.S. law to include the new 

coverage, thresholds, and timeframes of 

the GATT Government Procurement 

Agreement negotiated under the URA. 

• Amends U.S. law to implement the 

GATT Agreement on Technical Barriers 

to Trade (TBT). 17 

Title IV—Agriculture-related Provisions 

• Implements agricultural provisions of the 

URA, such as converting commodity 

import restrictions under section 22 18to 

tariff equivalents as part of the 

"tariffication" process in the URA. 

Title V—Intellectual Property 

• Amends U.S. laws concerning 

copyrights, trademarks, and patents to 

implement the Agreement on 

Trade-Related Intellectual Property 

Rights (TRIPs). 

Title VI—Related Provisions 

• Extends the U.S. Generalized System of 

Preferences (GSP) until July 31, 1995 19 

 and. U.S. customs users fee rules to meet 

obligations under the URA. 

Title VII—Revenue Provisions 

• Enacts the "pay-as-you-go" procedures 

required by the Budget Enforcement Act 

of 1990 for the URAA. 

• Requires the Federal Communications 

Commission (FCC) to issue licenses for 

personal communications services (PCS) 

provided over the public broadband 

communications spectrum. 2° 

Selected Subjects of the 

URAA 

Several of the amendments made to U.S. trade laws 

by the URAA are described in further detail below, 

including amendments to the U.S. antidumping and 

countervailing duty laws, section 337 of the Tariff Act 

of 1930, and the U.S. escape clause (safeguard) law. 

U.S. legislation relating to U.S. sovereignty and the 

WTO is also described in this section. The URAA 

implementation of textile and apparel rules of origin is 

described in chapter 5. 

Changes to U.S. Antidumping 

and Countervailing Duty Laws 

The URAA amended U.S. antidumping and 

countervailing duty laws in several respects to bring 

them into conformity with the Uruguay Round 

Antidumping Agreement 21and the Agreement on 

Subsidies and Countervailing Measures (hereafter 

Subsidies Agreement). These two agreements set out 

substantive and procedural rules for the conduct of 

antidumping and countervailing duty investigations. 

Unlike the predecessor codes negotiated during the 

Tokyo Round, the new agreements are binding on all 

WTO members. 

U.S. antidumping and countervailing duty laws (19 

U.S.C. 1671 et seq.) are administered by the U.S. 

Department of Commerce (Commerce) and the U.S. 

International Trade Commission (the Commission or 

USITC). Petitions are filed with both Commerce and 

USITC. In general, if Commerce finds dumping or a 

countervailable subsidy, and if the USITC finds that a 

domestic industry is materially injured or threatened 

with material injury, or the establishment of an industry 

is materially retarded, by reason of such dumped or 

subsidized imports, then Commerce issues an 

antidumping duty or a countervailing duty order. An 

antidumping duty or countervailing duty equal to the 

margin of dumping or the amount of subsidy, as 

appropriate, is collected on the imported merchandise 

subject to the order. 22 

One of the major U.S. goals in the antidumping 

and countervailing duty negotiations was to improve 

3 
the transparency of foreign proceedings to help protect 

U.S. exporters from arbitrary actions by foreign 

governments, particularly as more countries adopt such 

laws. Many of the changes reflected in the Uruguay 

Round antidumping and countervailing duty 

agreements reflected provisions in existing U.S. law. 

Thus, U.S. law was already largely consistent, both 

substantively and procedurally, with both agreements. 

Nonetheless, the URAA made several changes to U.S. 

law and procedure in order to conform them to the 

Antidumping and Subsidy Agreements' new 

provisions. Some of the more significant changes are 

described below. 

Antidumping Law 

Fair comparisons 

The URAA established a new "fair comparison" 

methodology that deducts an amount for the importer's 

profit from the U.S. price and provides for a level of 

trade adjustment in the foreign market. This 

methodology compares domestic with foreign market 

price by avoiding or adjusting for differences between 

sales that affect price comparability. The basic fair 

comparison requirements of the Tokyo Round 

antidumping agreement were carried over in the new 

agreement, but article 2.4 of the new WTO 

Antidumping Agreement sets out in much greater 

detail the methodology that countries should use to 

calculate normal value, export price, and any necessary 

adjustments in order to achieve the required "fair 

comparison." The URAA brings U.S. law into 

conformity with the agreement by setting out the 

various adjustments for export price and constructed 

export price that Commerce must make. 23 

Sunset reviews 

The URAA requires antidumping and 

countervailing duties to be revoked after 5 years unless 

a determination is made (in a "sunset" review) that 

revocation would likely lead to a continuation or 

recurrence of dumping or subsidization and injury. The 

act also contains special rules for reviewing the 

approximately 400 "transition" orders, findings, and 

suspended investigations that existed on the date the 

WTO entered into force with respect to the United 

States. These reviews are required by the WTO 

Antidumping and Subsidies Agreements, which for the 

first time set a time limit on the imposition of 

antidumping and countervailing measures. 

The URAA requires Commerce and the USITC to 

conduct a sunset review no later than 5 years after: (1) 

the issuance or finding of an antidumping or 

countervailing duty order, (2) the suspension of an 

investigation, (3) the injury determination in a 

countervailing duty proceeding under new section 753 

of the Tariff Act of 1930, or (4) a prior 5-year or 

changed circumstances review. 24Reviews are initiated 

automatically, and determinations are made on an 

orderwide rather than a company-specific basis. 25If 

no domestic interested party responds to the notice of 

initiation of a review, Commerce within 90 days after 

initiation of a review issues a final determination 

revoking the order or terminating the suspended 

investigation. If interested parties provide "inadequate 

responses" to a notice of initiation, Commerce and the 

USITC conduct an expedited review based on the facts 

available. To reduce the burden on all parties, foreign 

interested parties (including foreign governments) may 

waive their participation in a Commerce sunset review, 

and in such cases Commerce will conclude that 

revocation or termination would be likely to lead to 

continuation or recurrence of dumping or 

countervailable subsidies with respect to the submitter. 

Also, the USITC is permitted, in consultation with 

Commerce, to group 5-year reviews together when 

appropriate. 

Under special rules for reviewing transition orders, 

findings, and suspended investigations, Commerce and 

the USITC may not begin their reviews earlier than 18 

months before the fifth anniversary of the entry into 

force of the WT026(January 1, 1995). Commerce and 

the USITC have 18 months in which to complete each 

review and must complete all reviews no later than 18 

months after the fifth anniversary of the entry into 

force of the WTO. However, Commerce may not 

revoke or terminate a transition order before such fifth 

anniversary date, unless the petitioner requests an 

accelerated review. 27 

Duty absorption 

The URAA requires an examination of "duty 

absorption" during administrative reviews, if 

requested. Duty absorption may occur when the 

merchandise of a foreign producer or exporter subject 

to antidumping duties is sold in the United States 

through a related importer, providing an opportunity to 

absorb these duties by reducing or eliminating the 

importer's profit. Upon request, Commerce must 

determine during the second and fourth administrative 

reviews whether antidumping duties have been 

absorbed by a foreign producer or exporter whose 

merchandise is sold in the United States through a 

4 
related importer. Commerce must notify the USITC of 

its findings, and the USITC must take such findings 

into account when conducting 5-year sunset reviews. 28 

three specified conditions are met. Although not 

required by the Antidumping or Subsidies Agreements, 

the United States regards this provision as consistent 

with the agreements. 32 

Comparing U.S. and foreign market 

prices 

The URAA requires that Commerce compare U.S. 

and foreign market prices on an average-to-average 

basis in investigations, while providing a preference 

for average-to-individual comparisons in reviews. The 

Uruguay Round Antidumping Agreement generally 

requires that comparisons during investigations be 

average-to-average, 29but allows average-to-individual 

comparisons when the pattern of export prices (or 

constructed export prices) differs significantly among 

purchasers—i.e., where "targeted dumping" may be 

occurring. 3° Targeted dumping refers to a situation 

where an exporter sells at a dumped price to particular 

customers or regions, but at higher prices to other 

customers or regions. 

Startup production 

The URAA established a special adjustment for 

startup production costs, since a firm may experience 

unusually high costs when it is "starting up" a new 

product or new production facilities. The WTO 

Antidumping Agreement includes a new requirement 

that cost calculations—for both constructed value and 

cost of production—be adjusted "appropriately" for 

startup operations. Commerce is to make this 

adjustment only if (1) a company is using new 

production facilities or producing a new product that 

requires substantial additional investment, and (2) 

production levels are limited by technical factors 

associated with the initial phase of commercial 

production. 31 

Captive production 

The URAA established a special provision for 

captive production. The provision addresses situations 

in which vertically integrated U.S. producers sell a 

significant volume of their domestic production to U.S. 

customers (the merchant market) and transfer 

internally a significant volume of their production of 

that same product for further internal processing into a 

distinct downstream article, i.e., into captive 

production. When determining market share and 

factors affecting financial performance of the domestic 

industry in such instances, the URAA has directed the 

USITC to focus primarily on the merchant market if 

Anticircumvention 

The URAA made certain changes to the 

anticircumvention provisions in U.S. law. Negotiators 

were unable to agree on a specific text in the Uruguay 

Round regarding circumvention of antidumping orders 

(or of countervailing duty orders). Nevertheless, the 

URAA amended U.S. law to address circumvention 

when carried out through so-called "screwdriver" 

assembly operations, either in the United States or in a 

third country. 33Rather than focus, as previously, on 

the difference in value between the subject 

merchandise and its imported components, the URAA 

shifted the focus of U.S. anticircumvention inquiries 

toward the nature of the process performed, 

specifically, whether the process of assembly or 

completion in the United States (or a third country) is 

minor or insignificant, and whether the value of the 

parts imported into the United States (or a third 

country) is a significant proportion of the total value of 

the finished product. 

Countervailing Duty Law 

Definitions 

The URAA incorporated into U.S. law the 

Subsidies Agreement's definitions of "countervailable 

subsidy" and "specificity," which largely reflected 

existing U.S. law or practice. (Subsidies pertaining to 

agriculture are addressed separately under the WTO 

Agreement on Agriculture.) The Subsidies Agreement 

defines for the first time in any GATT agreement the 

term "subsidy" and requires that a subsidy, in order to 

be "actionable," must be "specific" to an enterprise or 

industry (or group thereof) within the jurisdiction of 

the granting authority. 34(Government assistance that 

is both generally available and widely and evenly 

distributed throughout the jurisdiction of the 

subsidizing authority is not considered to be an 

actionable subsidy.) 

Injury investigations for section 303 

orders 

The URAA established rules for injury 

investigations where such investigations were not 

previously required. Under the WTO Subsidies 

5 
Agreement, all countries are entitled to an injury test in 

countervailing duty investigations. Prior to the 

Uruguay Round, generally only countries belonging to 

the GATT Subsidies Code were entitled to an injury 

test in U.S. countervailing duty investigations. The 

URAA provides for an injury test for outstanding CVD 

orders under former section 303 of the Tariff Act of 

1930 where no injury test was provided. In general, a 

domestic industry seeking continuation of such a 

countervailing duty order must request a USITC injury 

investigation within 6 months of the date on which the 

country whose merchandise is subject to the order 

becomes a WTO member. If no request is received, 

Commerce will revoke the order and refund with 

interest any estimated duties collected. In conducting 

its investigations, the USITC is to perform a 

prospective analysis similar to that required in sunset 

injury reviews. 35 

"Dark amber" subsidy disciplines 

The URAA implemented the Subsidies 

Agreement's stricter disciplines on so-called "dark 

amber" subsidies. The agreement categorizes subsidies 

generally into prohibited, permitted but actionable, and 

nonactionable—known as "red light," "yellow light," 

and "green light" subsidies, respectively. Article 6.1 of 

the agreement further delineates four types of 

yellow-light subsidies, known as "dark amber" 

subsidies, that are automatically presumed to cause 

harm to other countries' industries. Under the URAA, 

Commerce is required to notify USTR when, during an 

investigation, it has reason to believe that a "dark 

amber" subsidy is involved. In such situations, 

Commerce is to recalculate those subsidies that it 

investigates in CVD proceedings, using a 

cost-to-the-government method to determine whether 

there is reason to believe that the merchandise in 

question benefits from subsidies in excess of 5 percent 

ad valorem. As with prohibited (red light) subsidies, 

the United States Trade Representative (USTR) is to 

evaluate the information in order to decide whether to 

initiate a WTO dispute settlement proceeding; USTR 

would take this action under authority provided in 

section 301 of the Trade Act of 1974. 36 

Nonactionable subsidies 

The URAA implemented the three categories of 

nonactionable (green light) subsidies in article 8 of the 

Subsidies Agreement. Three types of nonactionable 

subsidies are permitted under the Subsidies 

Agreement—for research, for regional development, 

and for certain environmental improvements. Under 

the URAA, Commerce is to ensure that (1) foreign 

governments do not abuse the limited privilege 

accorded by the Subsidies Agreement to use green 

light subsidies, and (2) the United States takes full 

advantage of its rights under article 8 of the Subsidies 

Agreement. USTR is to provide Commerce with 

subsidy notifications and accompanying information; 

Commerce will in turn analyze the material, have 

USTR seek additional information as appropriate, and 

notify USTR should it believe that a violation of article 

8 exists. U.S. industry may submit to Commerce for 

evaluation information it may have concerning 

possible violations. USTR is to invoke procedures 

available under article 8 if it determines the conditions 

and criteria for a nonactionable subsidy program are 

not being met. Under article 8 procedures, a WTO 

member may request a review of the subsidy by the 

Secretariat, request the Committee on Subsidies and 

Countervailing Measures to review the findings of the 

Secretariat, and may request that the determination of 

the Committee be submitted to binding arbitration. 

Challenging green light subsidies 

The URAA authorizes the USTR to take action 

under section 301 where green light subsidies are 

found to cause "serious adverse effects." Article 9 of 

the Subsidies Agreement allows a WTO member to 

challenge a green light subsidy that has serious adverse 

effects on a domestic industry. U.S. industry may 

submit to Commerce for evaluation information it may 

have concerning the existence of serious adverse 

effects. If Commerce makes an affirmative 

determination, it must notify USTR. If USTR 

subsequently determines that there is reason to believe 

that a subsidy program is causing serious adverse 

effects, USTR (unless the domestic industry concerned 

objects) is to invoke the procedures of article 9 and 

request consultations. If no mutually satisfactory 

solution is reached within 60 days, USTR is to refer the 

matter to the WTO Subsidies Committee. Should a 

foreign country not comply within 6 months with a 

recommendation made by the Subsidies Committee, 

USTR is to make a determination under section 304 of 

the Trade Act 37as to what action to take under section 

301 of the Trade Act to carry out the permitted 

retaliation. 38 

Expiration of green light provisions 

The URAA provides for the automatic expiration 

of the green light provisions of U.S. countervailing 

duty law 5-1/2 years after the WTO Agreement enters 

into force. It also sets out procedures to be followed if 

6 
the green light provisions in U.S. law are to be 

extended. 39 

Changes to Section 337 

Under section 337 of the Tariff Act of 1930 (19 

U.S.C. 1337), the USITC conducts investigations into 

certain alleged unfair practices in import trade. Most 

complaints filed under this provision involve 

allegations of patent infringement, trademark 

infringement, or misappropriation of trade secrets. 4° 

The URAA amends section 337 to address, among 

other things, a 1988 GATT panel report that found 

certain procedural aspects of section 337 violated U.S. 

national treatment obligations under article III of 

GATT 1947. The panel report, adopted in November 

1989, cited four areas where section 337 proceedings at 

the USITC against imported goods differ from 

proceedings in U.S. Federal district courts in 

infringement actions brought against domestically 

produced goods: 

• Section 337 imposes time limits on the 

USITC, but imposes none on Federal 

district courts; 

• Counterclaims are not permitted at the 

USITC, but are permitted in district 

courts; 

• A right holder may seek relief against 

domestically produced goods only in 

district court, while relief against 

imported goods may be sought at both the 

USITC and district court, creating the 

possibility that actions could be 

maintained against imported products 

simultaneously in two separate fora; and 

• General exclusion orders are available 

remedies at the USITC, but not available 

in district court proceedings. 

The URAA addressed all four of these areas. First, 

it amended section 337 to eliminate the time limits on 

section 337 investigations. Instead, it directs that the 

USITC complete investigations at the earliest 

practicable time and that the USITC set target dates for 

completion of investigations. Second, it amended 

section 337 to permit counterclaims, although once a 

counterclaim is raised, the respondent must file a 

notice of removal of the counterclaim with a district 

court of proper venue. Third, to ensure that a 

respondent in a section 337 proceeding is not required 

to defend its products at the same time in a Federal 

district court action, the URAA amended title 28 of the 

U.S. Code to require a Federal district court hearing an 

infringement case to stay its proceedings with respect 

to any claim that involves the same issues pending 

before the USITC, if requested to do so by a 

respondent in a section 337 case. When a district court 

dissolves its stay after the section 337 proceeding is 

completed, the USITC record may be offered as 

evidence in the court's proceedings to the extent 

permitted under the Federal Rules of Evidence and 

Federal Rules of Civil Procedure. 41Fourth, taking 

note of the fact that the GATT panel had noted that 

there might sometimes be objective reasons why 

general exclusion orders are necessary, the URAA 

amended section 337 to authorize the USITC to issue 

limited exclusion orders unless the USITC determines 

that a general exclusion order is necessary to prevent 

circumvention of a limited order, or there is a pattern 

of violation of section 337 and it is difficult to identify 

the source of the infringing products. This change was 

viewed as a codification of past USITC practices. 

Changes to Section 201 

The URAA amended sections 201-204 of the Trade 

Act of 197442to implement the changes required to 

conform the U.S. safeguards law with the new WTO 

Agreement on Safeguards. Because U.S. law was 

already largely consistent with the Agreement on 

Safeguards, relatively few changes were required. 

In addition to certain technical changes, the URAA 

made two significant changes to sections 201-204. 

First, it revised the critical circumstances provision in 

section 202(d) of the Trade Act to speed up the time 

for making a critical circumstances determination and 

implementing provisional relief, and revised the 

statutory definition of critical circumstances to 

conform with the definition in Article 6 of the 

Safeguards Agreement. 43Under the revised time 

schedule, if an industry, in a petition filed under section 

202(a), alleges that critical circumstances exist, the 

USITC must determine within 60 days of the filing of 

the petition whether such circumstances exist and, if 

so, transmit a recommendation for provisional relief to 

the President. The President then has 30 days in which 

to decide what if any provisional relief action to take. 

Any provisional relief generally would remain in effect 

pending completion of a full 180-day USITC 

investigation, which would commence after the critical 

circumstances phase, and any review by the President 

of USITC recommendations made as a result of the full 

investigation. To accommodate the limitation on such 

measures in article 6 of the agreement, amended 

7 
section 202(d) provides that the period of provisional 

relief may not exceed 200 days. 44 

Second, the URAA added a new section 202(i) to 

the Trade Act that requires the USITC to promulgate 

regulations to provide access to confidential business 

information under protective order to authorized 

representatives of interested parties who are parties to 

an investigation under section 202. The Statement of 

Administrative Action approved by the Congress as 

part of the URAA stated that it was expected that the 

USITC regulations would generally follow the 

appropriate provisions in section 777 of the Tariff Act 

(relating to administrative protective orders issued in 

the course of antidumping and countervailing duty 

investigations) and the regulations issued by the 

USITC thereunder. 45 

Sovereignty and the WTO 

Dispute Settlement Review 

Commission 

A key issue for many members of Congress in 

deciding whether to vote for or against U.S. 

implementing legislation was how U.S. laws and 

sovereignty might be affected by the agreements. Some 

members of the public expressed concern that the 

WTO would unacceptably infringe on U.S. Federal, 

State, or local sovereignty. Indeed, negotiations in the 

Round had involved a number of issues subject to an 

admixture of Federal, State, and local control in the 

United States. For example, U.S. States are the primary 

regulators of services. Also, U.S. Federal obligations 

agreed in the Uruguay Round concerning product 

standards will now extend to the sub-Federal (i.e. 

State) level. 

Concern focused on the dispute panel process 

under the Dispute Settlement Understanding (DSU). 

Concern was expressed that dispute settlement panels, 

which would be closed to outside representation and 

participation, might serve as "secret tribunals" that 

would order changes in U.S. law. Concern was also 

expressed that new international standards in the URA, 

applicable at both national and sub-Federal level, could 

give rise to WTO actions undercutting or overriding 

U.S. environmental standards at the Federal, State, or 

local level that provide greater environmental 

protection or are considered more appropriate to the 

circumstances. Still others warned that the United 

States would be outvoted on important issues where 

each country, no matter how small, would have one 

vote equal to that held by the United States. 46 

The USTR sought to allay such concerns during 

congressional debates. 47Moreover, U.S. implementing legislation states that dispute panels will have no 

authority to order changes in any Federal, State, or 

local law or regulation. Section 102 of the implementing legislation states as follows: 

No provision of any of the Uruguay Round 

Agreements, nor the application of any such 

provision to any person or circumstance, that 

is inconsistent with any law of the United 

States shall have effect. 

USTR officials also pointed out that concerns that 

the United States will be outvoted on important issues 

is contradicted both by GATT tradition to operate by 

consensus and by the WTO itself. For example, article 

2:4 of the Dispute Settlement Understanding states that 

"Where the rules and procedures of this Understanding 

provide for the DSB [dispute settlement body] to take a 

decision, it shall do so by consensus." The article 

states that a consensus exists "if no Member, present at 

the meeting of the DSB when the decision is taken, 

formally objects." 

The Statement of Administrative Action that 

accompanied the implementing legislation provides a 

description of the significant actions needed to 

implement the agreements into U.S. law and, as such, 

represented an "authoritative expression" by the 

administration of its views regarding the interpretation 

and application of the URA for purposes of U.S. 

international obligations and domestic law. 48The 

SAA makes clear that the WTO will have no power to 

change U.S. law and that U.S. law will take precedence 

in any situation where there is a conflict between U.S. 

law and any of the agreements. In the case of a ruling 

in dispute settlement proceedings, only the U.S. 

Congress and U.S. administration will have the power 

(1) to decide whether to implement such a dispute 

panel recommendation, (2) to decide how to implement 

it, and (3) to order any change of U.S. law. 49Should a 

State-level practice be the subject of a WTO dispute, 

the U.S. administration agreed to involve the States in 

an indirect manner and to work with the States 

concerned to bring them into conformity with U.S. 

obligations under the URA. 

Nonetheless, an additional safeguard was agreed in 

late November 1994 as the administration aimed to 

ensure passage of the bill in the Senate. The WTO 

Dispute Settlement Review Commission—often called 

the "Dole plan" for its sponsor, Senator Robert Dole 

(R-Kansas)--was announced November 23, 1994. 

Under a bill introduced in the new Congress, S. 16, the 

commission will consist of five Federal appellate 

judges, each of whom will serve for a term of 4 years 

that will be appropriately staggered. The commission 

8 
members would be appointed by the President after 

consultation with the congressional leadership. 

The commission will review only final dispute 

settlement reports, that is, reports adopted after panel 

consideration or after Appellate Body consideration. 5° 

The commission will consider whether a panel or the 

Appellate Body: 

• Exceeded its authority or terms of 

reference (or failed to apply article 17.6 

on standard of review in the case of the 

Uruguay Round Antidumping 

Agreement); 51 

• Added to the obligations or diminished 

the rights that the United States assumed 

under the agreements; or 

• Acted arbitrarily or capriciously, or 

otherwise departed from the procedures 

set out for panels and the Appellate Body 

in the agreements. 

In light of the above points, the commission will 

determine whether these actions materially affected the 

outcome of the report. 

The commission will have 120 days from the 

report's adoption to issue a determination. Following 

an affirmative determination, Congress may pass a 

joint resolution that calls upon the President to 

negotiate new dispute settlement rules to correct the 

problem identified by the commission. If the 

commission makes three affirmative determinations 

within any 5-year period, Congress may pass a joint 

resolution withdrawing approval of the WTO 

Agreement. 52 

Paying for the 

Uruguay Round 

The Budget Enforcement Act of 1990 53established 

a "pay-as-you-go" mechanism to ensure that any new 

legislation passed by the Congress does not increase 

the deficit. Under this act, new legislation that 

increases mandatory spending or decreases Federal 

receipts for any year through FY 1998 triggers 

automatic mandatory spending cuts unless the costs of 

legislation are offset. 54Whereas House of 

Representatives' rules require a full offset for revenues 

lost over a period of 5 years, the Senate's rules require 

a full offset for revenues lost over a 10-year period. 

Although virtually all sides agreed that the 

short-term costs of lost tariff revenues were likely to be 

small relative to the revenue gained due to the 

long-term dynamic benefits of the agreements in terms 

of greater economic growth, jobs, and exports, this 

procedural difference between the two houses 

heightened concerns for passage of the bill in the 

Senate. 55The net shortfall in Federal tax revenue was 

estimated by the Office of Management and Budget to 

be about $12 billion over the next 5 years 56and by the 

Congressional Budget Office (CBO) to be $11.5 billion 

over 5 years and $31.8 billion over 10 years. 57 

Options examined in an effort to balance this 

revenue shortfall included: reduced spending on 

agriculture; further reduction of the section 936 tax 

exemption for investments made in Puerto Rico; 

reduced tax write-offs on such items as industrial 

inventories held, percentage depletion allowances, 

advertising, meals, and foreign source income 

preferences; as well as increased passenger fees for 

cruise ships. 58A variety of revenue measures were 

agreed in September by House and Senate conferees 

just sufficient to cover the 5-year $12 billion shortfall 

required under House procedural rules. 59However, 

the Senate could only account for the revenue shortfall 

over the 10-year period required under its procedural 

rules by voting for a waiver of the budget rule—a more 

difficult hurdle requiring a super majority of 60 votes 

compared to a simple majority required to pass a trade 

agreement. Nonetheless, prior to the 76 to 24 vote in 

favor of the URAA, the Senate voted 68 to 32 to 

approve a budget waiver. 6° 

Establishing the WTO 

Implementation Conference 

At their meeting in Marrakesh, Ministers agreed to 

hold a subsequent conference to determine whether a 

critical mass of countries would be in a position to 

implement the WTO on January 1, 1995, as agreed. At 

the Implementation Conference of the Preparatory 

Committee for the WTO, held on December 8, 1994, 

the committee chairman—Mr. Peter Sutherland—

proposed and it was so agreed that the committee 

confirm January 1, 1995, as the date of entry into force 

of the WTO, based on the committee's understanding 

that members were committed to making every effort 

to conclude their ratification processes by that date. 61 

The conference also adopted several decisions to 

provide for the orderly transition from the GATT to the 

WTO. It adopted the decision on "Transitional 

Co-Existence of the GATT 1947 and the WTO 

Agreement," which provides for a 1-year co-existence 

of the two institutions to allow time to settle 

9 
outstanding disputes. However, the decision provides 

that the CONTRACTING PARTIES (that is, the 

Contracting Parties acting as a collective body) may, in 

the event of unforeseen circumstances, extend the 

termination date of GATT 1947 for up to 1 additional 

year.62Moreover, the conference invited members of 

the Tokyo Round Agreement on Antidumping 

Practices and Agreement on Subsidies and 

Countervailing Measures to maintain their 

dispute-settlement mechanisms for a period of 2 years 

after the WTO begins operations, because antidumping 

and countervailing duty cases are often more 

complicated technically and thus can take longer to 

resolve than cases arising under the General 

Agreement.63Finally, the decision provides further 

time to GATT Contracting Parties to complete the 

ratification process and still qualify as so-called 

founding members of the WTO. 

The decision on "Avoidance of Procedural and 

Institutional Duplication" aims to minimize duplication 

while the GATT 1947 and the WTO co-exist. Thus, the 

decision considers notifications to and meetings of a 

WTO body—for example the Committee on Subsidies 

and Countervailing Measures—to automatically meet 

notification and meeting requirements under 

procedural rules for GATT 1947. Joint meetings will 

follow WTO rules of procedure, although members of 

the GATT 1947 bodies are free to hold separate 

meetings as appropriate. 

The decision on "Participation in Meetings of 

WTO Bodies by Certain Signatories of the Final Act 

Eligible to Become Original Members of the WTO" 

enables countries eligible to become original WTO 

members, but unable to complete their domestic 

approval process, to participate in the WTO while 

completing the ratification procedures. More 

specifically, the decision allows countries that were 

Contracting Parties to GATT 1947 as of the 

Implementation Conference to function as WTO 

members but without decision-making rights in WTO 

bodies (except the Textiles Monitoring Body) during 

the first 7 months the WTO is in force, that is, through 

July 31, 1995. 

The "Transfer Agreement between GATT 1947, 

ICITO and the WTO" and the agreement's annex 

containing the "Transfer of Assets, Liabilities, 

Records, Staff and Functions from the Interim 

Commission of the International Trade Organization to 

the World Trade Organization" provide the formal 

basis to transfer the day-to-day operations from the 

GATT to the WTO. The Interim Commission of the 

International Trade Organization (ICITO) is the official 

entity that has provided support services to the GATT 

Secretariat since 1947. The ICITO Executive 

Committee agreed at the Implementation Conference 

to continue to provide these services until the 

appointment—by June 30, 1995—of the WTO 

Secretariat staff, at which time the ICITO will cease to 

exist. The annex to the transfer agreement transfers all 

assets and liabilities of the GATT 1947 and the ICITO 

to the WTO as of the entry into force of the WTO. 

Quad Countries and Acceptance 

of the WTO 

The Japanese Parliament (the Diet) approved the 

URA on December 8, 1994, allowing Japan to deposit 

its instruments of ratification in Geneva several weeks 

later. Having ratified or otherwise approved the 

agreements in their respective bodies, Canada, the EU, 

and the United States also deposited their instruments 

of ratification, all within minutes of one another, on 

December 30. This membership of the "quadrilateral" 

(often abbreviated "quad") countries ensured that the 

WTO would have a sufficient "critical mass" of the 

world's major trading nations to begin WTO 

operations. 64 

At the same time, the United States also notified its 

acceptance of the International Bovine Meat 

Agreement65and its withdrawal from the Tokyo 

Round agreements on (1) technical barriers to trade, (2) 

subsidies and countervailing measures, (3) customs 

valuation, (4) antidumping, and (5) import licensing 

procedures. Prior to the URA, these five agreements 66 

 were voluntary plurilateral agreements. All five were 

the subject of negotiations during the Uruguay Round 

and, with changes agreed to during the Round, are now 

part of GATT 1994 and are applicable to all WTO 

members. 67 

As permitted under GATT Article XXXV 

(nonapplication of the agreement between particular 

Contracting Parties), the United States also duly 

notified the Director-General that it did not consent to 

apply the WTO Agreement and the multilateral trade 

agreements in annexes 1 (concerning goods, services, 

and intellectual property) and 2 (concerning dispute 

settlement rules) between the United States and 

Romania.68 

Status of URA Ratification 

Countries that had attached their market-access 

schedules to GATT 1994 by the entry into force of the 

WTO are considered "original members," although this 

designation confers no additional benefits. Least 

developed country members (LLDCs) 69had until April 

10 
15, 1995 to submit their schedules. If ratification was 

not complete by the WTO entry into force, 

governments could still accept the WTO for a 2-year 

period provided they had lodged their market-access 

schedules by the appropriate deadlines. Failing these 

deadlines, governments must undergo the formal 

accession process to the WTO. 7° 

Eighty-one countries had ratified the agreements 

by the entry into force of the WTO on January 1, 1995, 

as listed in table 1-1. Thirty-eight countries were also 

in the process of ratifying the WTO Agreement, and 

nine least developed countries had accepted the WTO 

subject to verification of their schedules of 

market-access commitments. 

Choosing a WTO 

Director-General 

The WTO is slated to be an institution on a par 

with the other multilateral Bretton Woods institutions 

created after the Second World War, such as the 

International Monetary Fund and the World Bank. 

Thus, choosing the first WTO Director-General was an 

important event in 1994. In the past, the post of 

Director-General of the GATT has also served as the 

chair for the Trade Negotiating Committee (TNC), 

which typically coordinates the recurrent "rounds" of 

multilateral trade negotiations that take place under the 

auspices of the GATT. From 1980 through June 1993, 

Arthur Dunkel of Switzerland served as GATT 

Director-General as well as TNC chairman for the 

majority of the 1986-1993 Uruguay Round. Starting 

July 1, 1993, Peter Sutherland of Ireland was appointed 

GATT Director-General and served as the TNC 

chairman presiding over the conclusion as well as the 

Marrakesh Ministerial signing of the URA. Once the 

Round was concluded, Mr. Sutherland stated his 

intention to step down but agreed to remain on as 

interim Director-General until a successor could be 

chosen. 

Table 1-1 

Countries that have ratified the URA, as of Jan. 1, 1995 

Suriname 

Swaziland 

Sweden 

Tanzania 

Thailand 

Uganda 

United Kingdom 

United States 

Uruguay 

Venezuela 

Zambia 

Antigua and Barbuda 

Argentina 

Australia 

Austria 

Bahrain 

Bangladesh 

Barbados 

Belgium 

Belize 

Botswana 

Brazil 

Brunei Darussalam 

Canada 

Chile 

Colombia 

Costa Rica 

Cote d'Ivoire 

Czech Republic 

Denmark 

Dominica 

European Communities 

Finland 

France 

Gabon 

Germany 

Ghana 

Greece 

Guyana 

Honduras 

Hong Kong 

Hungary 

Iceland 

India 

Indonesia 

Ireland 

Italy 

Japan 

Kenya 

Korea 

Kuwait 

Lesotho 

Luxembourg 

Macau 

Malawi 

Malaysia 

Malta 

Mauritania 

Mauritius 

Mexico 

Morocco 

Myanmar 

Namibia 

Netherlands 

New Zealand 

Nigeria 

Norway 

Pakistan 

Paraguay 

Peru 

Philippines 

Portugal 

Romania 

Saint Lucia 

Saint Vincent and the Grenadines 

Senegal 

Singapore 

Slovak Republic 

South Africa 

Spain 

Sri Lanka 

Source: GATT, "The World Trade Organization is launched with 81 Members," News GATT/WTO, GW/13, Jan. 4, 

1995. 

11 
During 1994, the following three men were most 

widely recognized as leading candidates to head the 

WTO, although GATT Contracting Parties were unable 

to achieve the necessary consensus 71to support any 

one in time for the entry into force of the WTO on 

January 1, 1995: Renato Ruggiero, former trade 

minister of Italy; Carlos Salinas de Gortari, former 

President of Mexico; and Kim Chul-su, former trade 

minister of South Korea. By the end of 1994, member 

support had split largely along regional lines. Not until 

March 1995 did consultations lead to a consensus to 

support Renato Ruggiero as the first Director-General 

of the WTO, following the withdrawal of Carlos 

Salinas as a candidate. As part of the consultations 

regarding the appointment of Mr. Ruggiero, an 

understanding was reached to create a fourth Deputy 

Director-General post. 72 

Services Negotiations 

Progress during the Uruguay Round on 

negotiations regarding services was slower than those 

concerning goods. By the close of the Round on 

December 15, 1993, negotiators had reached 

agreement on the services framework under the 

General Agreement on Trade in Services (GATS) and, 

by the signing of the WTO Agreement in April 1994, 

had also agreed on commitments to be lodged in over 

90 national schedules. However, it was agreed that 

negotiations would continue in -certain service sectors 

where countries considered more specific rules and 

liberalized commitments desirable. These negotiations 

are scheduled to conclude by July 1, 1995, for financial 

services and movement of natural persons; by April 30, 

1996, for basic telecommunications; and "no later than 

June 1996" for maritime transport services. Resultant 

rules and commitments are to be incorporated into 

sectoral annexes attached to the GATS framework and 

national schedules. 

Framework Agreement and 

Services Annexes 

The GATS framework agreement sets out overall 

principles and rules designed to help govern world 

trade in services. The framework, along with the 

national schedules of commitments, include basic 

obligations regarding: 

• Total coverage, where participants agree 

to include in principle all traded services 

and their suppliers; 

• National treatment, where foreign firms 

supplying services are treated no less 

favorably than domestic firms supplying 

services; 

• Most-favored-nation treatment (MFN), 

where foreign firms supplying services 

are treated no less favorably than any 

other foreign firms supplying services; 

• Transparency, where regulations 

governing services trade will be 

published and administered impartially, 

and will include "enquiry points" where 

foreign service firms can secure 

information on necessary national 

qualifications, authorizations, etc.; 

• Payments transfers, where there will be 

no restrictions on the international 

transfer of payments for services on 

current account except temporarily for 

reasons of balance-of-payments 

difficulties; 

• Progressive liberalization, where services 

negotiations will take place at 5-year 

intervals and can only improve on (not 

re-open) previous commitments; 73 

• Market access, where specific 

commitments granting foreign service 

suppliers access to domestic service 

markets—as well as limits on this 

access—will be clearly set out in national 

schedules; and 

• Dispute settlement, where a procedure for 

resolving disputes between GATS 

participants concerning trade in services 

would be available for the first time. 

National schedules record the specific 

commitments that each country will make concerning 

market access and national treatment to be afforded to 

foreign service suppliers. These schedules are attached 

to the framework agreement. Any general limitations 

or specific exemptions imposed by a country on these 

commitments are also lodged in these schedules. 

Separate annexes follow the framework agreement and 

national schedules and are focused on rules specific to 

an individual service sector or aspect of trade in 

services. These annexes cover (1) exemptions to MFN 

obligations in trade in services, (2) rules governing the 

movement of persons supplying services, (3) 

air-transport services, (4) financial services, (5) 

maritime transport services, and (6) 

telecommunications.74 

12 
A number of ministerial decisions in the URA 

created negotiating and other working groups to 

conduct the ongoing negotiations. The negotiating 

groups covering natural persons, financial services, 

maritime transport, and basic telecommunications met 

in 1994, but none concluded their discussions. 

Although a working group on professional services 

was provided for as part of the URA, no substantive 

talks in this area took place in 1994. Finally, no 

multilateral discussions concerning air-transport 

services occurred during 19947 5 

Movement of Natural Persons 76 

At the conclusion of the Uruguay Round in 1993, 

participants agreed to provide temporary entry for 

management and specialist personnel during the 

ordinary conduct of business providing services. 

Countries also agreed to commitments that will allow 

temporary entry subject to national immigration laws 

but that will not apply to natural persons seeking 

access to the employment market in a member country, 

to citizenship, or to residence on a permanent basis. 77 

In 1994, the Negotiating Group on Movement of 

Natural Persons, which is charged with reaching 

further commitments to liberalize the movement of 

natural persons, met in multilateral session to discuss 

progress made to date in bilateral discussions. 

Although countries reported useful discussions during 

the year, no conclusions were reached. 78The group is 

to conclude its negotiations by July 1, 1995. 79 

Financial Services 

At the conclusion of the Round, participants 

reached agreement on four accords in financial 

services: (1) the Annex on Financial Services, (2) the 

Second Annex on Financial Services, (3) the Decision 

on Financial Services, and (4) the Understanding on 

Commitments in Financial Services. Participants 

agreed to continue negotiations covering financial 

services through June 1995 to secure commitments in 

areas that include banking, insurance, and securities. 8° 

The Annex on Financial Services contains 

provisions that permit financial authorities—such as 

central banks or monetary authorities—to take 

prudential measures deemed necessary for the 

protection of investors, depositors, policy holders, or 

fiduciaries, to ensure the integrity and stability of the 

financial system. In authorizing such prudential action, 

member countries seek to reassure financial agents that 

liberalization of trade in financial services—even when 

based upon such widely recognized principles as MFN 

and national treatment that predominate in trade in 

goods—will not endanger sound financial practice. 

Scheduled Conclusion for Financial 

Services Talks 

The Second Annex on Financial Services and the 

Decision on Financial Services are temporary 

provisions intended to apply between the entry into 

force of the WTO on January 1, 1995, and the 

scheduled conclusion of financial services negotiations 

by July 1, 1995. Under the decision, member countries 

agreed to trade financial services on an MFN basis for 

the first 6 months of operation of the WTO, at the end 

of which time, participants are free to "improve, 

modify or withdraw" commitments without the usual 

penalty requiring due compensation. Once these 

modifications are complete, negotiators will update 

each country's schedule and list of MFN exemptions in 

the Annex on Article II Exemptions. 81The second 

annex provides the timeframe for these adjustments, 

authorizing GATS members to revise their financial 

services commitments 4 months after the WTO 

agreement enters into force and to complete this 

revision within 60 days, that is, before July 1, 1995. 

During this 6-month period, the second annex 

effectively suspends MFN exemptions taken by 

participants at the end of the Round. 82For example, 

the United States currently has in place an exemption 

from the MFN obligation for financial services 

(excluding insurance), which is conditional upon the 

breadth and openness of commitments undertaken by 

other participants during the January-June 1995 period, 

when negotiations on commitments are to be 

completed. As agreed in December 1993, the United 

States will suspend application of its exemption during 

the initial 6-month period of the operation of the WTO, 

that is, from January through June 1995. Thus, the two 

provisions taken together aim to minimize the number 

of MFN exemptions notified at the end of the period 

and provide the broadest coverage possible by the 

scheduled conclusion of negotiations. 

In 1994 and into 1995, the United States and the 

EU have continued to hold bilateral talks with roughly 

15 countries in an effort to reach a multilateral 

agreement that covers as broad a range of financial 

services as possible. These countries include Japan and 

Korea, but also other South and Southeast Asian 

countries, such as Hong Kong, India, Indonesia, 

Malaysia, the Philippines, Singapore, Taiwan, and 

Thailand. They also include major Latin American 

countries such as Brazil, Chile, and Venezuela. All of 

these countries maintain major market access or 

national treatment barriers in the area of financial 

13 
services and, in some cases, have not included whole 

areas of financial sector activity for negotiation. 83 

Controversy Over "Conditional" 

MFN Approach 

During the Round, repeated difficulty inducing 

sufficiently broad offers led U.S. negotiators to adopt a 

negotiating tactic that withheld the application of MFN 

treatment for financial services from countries that had 

not made sufficient commitments to open their 

financial services markets. This two-tier approach, 

granting MFN treatment to some but not to others, 

came to be known as "conditional" MFN. The 

underlying concern of U.S. negotiators was that the 

application of unconditional MFN treatment was 

unlikely to provide incentive to countries where market 

access for financial services is less open, to remove 

their barriers. The two-tier approach was an alternative 

to withdrawing whole or partial financial service 

sectors from the negotiating table. 

However, this approach aroused objections from 

other participants because of its abandonment of the 

traditional GATT principle of unconditional MFN that 

had always been applied to trade in goods. 

Consequently, in October 1994 at the first meeting of 

the Interim Group on Financial Services, the United 

States announced that it intended to drop its two-tier 

approach. Although welcoming the U.S. statement, 

other delegates expressed concern that the United 

States might reinstate this approach. 84 

U.S. negotiators made clear that the dropping of 

the two-tier approach in no way diminished the 

importance of their objectives, which was the 

attainment of a broad-based financial services 

agreement founded on MFN and national treatment 

principles that achieved full market access. Without 

substantive improvements in offers, the United States 

stated that it will not make commitments in this sector 

but will instead enter an exemption to U.S. MFN 

obligations at the conclusion of negotiations in June 

1995. U.S. negotiators emphasized that minimal 

changes in other members' financial services schedules 

will not suffice as the basis for the United States to 

grant MFN treatment in financial services. 85At the 

meeting, for example, the United States announced that 

it is seeking a more ambitious set of agreements in the 

insurance area than had been achieved in December 

1993 by the key countries that are major providers and 

consumers of insurance services. 86 

Alternative Financial Commitments 

The Understanding on Commitments in Financial 

Services allows participants to take on liberalization 

commitments based on an alternative approach to the 

specific commitments set out under the GATS 

framework agreement. 87Although no commitments 

additional to the understanding were agreed during 

1994, most OECD countries 88agreed to make specific 

commitments on financial services starting in 1995 at a 

more detailed level than that generally agreed in the 

GATS Annex on Financial Services. 89The 

understanding sets out principles concerning subjects 

where participants will take on additional obligations. 

The subjects in the understanding cover the (1) 

standstill on establishing new exceptions to these 

alternative commitments, (2) elimination or reduction 

of monopoly rights, (3) purchase of financial services 

by public entities, (4) application of national treatment 

to trade in financial services, (5) permission to 

establish a commercial presence regarding financial 

services, (6) permission to offer new financial services, 

(7) permission to transfer information and to process 

information, (8) temporary entry of personnel involved 

in the supply of financial services, (9) willingness to 

remove or limit adverse effects on other participants 

caused by nondiscriminatory measures related to the 

supply of financial services, and (10) application of 

national treatment to other participating members 

equivalent to that provided to domestic firms supplying 

financial services. 90 

Maritime Transport Services 

The Negotiating Group on Maritime Transport 

Services (NGMTS) was created to continue talks 

aimed at reaching commitments to further liberalize 

three areas of maritime transport services: (1) 

international shipping, (2) auxiliary services, and (3) 

access to and use of port facilities. The NGMTS is 

scheduled to make a final report no later than June 

1996. The final report shall set a date for 

implementation of commitments reached in these talks. 

Application of all exemptions to MFN treatment in the 

maritime sector taken at the December 1993 end of the 

Round will be suspended until the conclusion of these 

negotiations, at which time countries will be free to 

improve, modify, or withdraw any commitments 

without being required to offer compensation. 91 

 Remaining exemptions will then be listed in the GATS 

Annex on Article II Exemptions. During 1994, it was 

agreed that a questionnaire would be submitted to 

participants in early 1995, which includes among other 

items, a model schedule of commitments for the 

maritime transport sector.92 

14 
Telecommunications 

During the Round, participants came to recognize 

that the telecommunications sector often serves a dual 

function in national economies: (1) providing basic 

telecommunication services to its general public; and 

(2) providing the underlying transport network for 

other economic activities. 93Telecommunication 

services commonly are grouped into two categories: 

basic (such as voice telephone, telex, telegraph) and 

value-added (such as electronic/voice mail, 

online/database information retrieval, data/transaction 

processing). 94Although many countries offered 

commitments on value-added telecommunications at 

the end of the Round in December 1993, negotiations 

over basic telecommunications were extended for 2 

years. 

The Negotiating Group on Basic Telecommunications (NGBT) was established to continue 

negotiations aimed at liberalizing trade in basic 

telecommunication services. It was created in April 

1994 and is scheduled to issue a final report on its 

progress no later than April 30, 1996. 95 

The markets in basic telecommunication services 

differ broadly among countries. In contrast to the 

United States, which has one of the most open and 

competitive telecommunications markets in the world, 

many basic telecommunications markets in Europe are 

still dominated by public or private monopolies or 

other "single providers"—through Post, Telephone, 

and Telegraph bodies (PTTs).96As part of talks in 

1994 to accommodate the different perspectives on 

basic telecommunications services, the GATT 

Secretariat, in consultation with the members of the 

NGBT, drafted a questionnaire to serve as a common 

basis for the exchange of information. The 

questionnaire addressed the definition of basic 

telecommunications, market structure, competitive 

environment, and regulatory issues. 97Responses to 

the questionnaire will provide the basis for further 

discussions, such as on establishing rules concerning 

interconnection, competition safeguards, transparency, 

and the independence of regulators from operators. 98 

Professional Services 

Key principles established in the GATS to facilitate 

international trade in services are particularly relevant 

to professional services firms. GATS article VII 

(recognition) provides that a member "may recognize 

the education or experience obtained, requirements 

met, or licenses or certifications granted in a particular 

country" and that, wherever appropriate, such 

recognition "should be based on multilaterally agreed 

criteria."99In addition, GATS article VI (domestic 

regulation) exhorts countries making specific 

commitments in the field of professional services to 

also provide "adequate procedures to verify the 

competence of professionals of any other Member." 1 °° 

The Decision on Professional Services in the URA, 

citing both articles, calls for the establishment of the 

Working Party on Professional Services. 1 ° 1Formally 

established under the WTO in 1995, the Working Party 

is to issue a report with recommendations— 

On the disciplines necessary to ensure that 

measures relating to qualification requirements and 

procedures, technical standards, and licensing 

requirements in the field of professional services do 

not constitute unnecessary barriers to trade. 1 °2 

Taking into account the importance of both 

governmental and nongovernmental bodies in 

regulating professional services, the Working Party is 

to give priority to making recommendations toward 

developing multilateral disciplines to give operational 

effect to member countries' specific commitments in 

the field of accounting services. 

The Working Party is to concentrate on1 Developing multilateral disciplines 

relating to market access so as to ensure 

that domestic regulatory requirements 

are: (i) based on objective and transparent criteria, such as competence and 

the ability to supply the service; (ii) not 

more burdensome than necessary to 

ensure the quality of the service, thereby 

facilitating the effective liberalization of 

accountancy services; 

2 The use of international standards and, in 

doing so, it shall encourage the 

cooperation with the relevant international organizations as defined under 

paragraph 5(b) of article VI, so as to give 

full effect to paragraph 5 of article VII; 

3 Facilitating the effective application of 

paragraph 6 of article VI of the 

agreement by establishing guidelines for 

the recognition of qualifications. 1 °3 

In September 1994, the Subcommittee on 

Services—operating under the PrepCom—reported on 

its contacts with the International Federation of 

Accountants concerning its questionnaire on 

accounting practices in over 80 countries. The 

subcommittee said that the federation will share the 

results of its questionnaire as they become available, 

and also reported that the subcommittee made no other 

15 
contacts in 1994 concerning other professional services 

such as architectural, engineering, or legal services. 104 

Regular GATT 

Activities in 1994 

Dispute Settlement Panels 

Dispute-settlement cases in 1994 were nearly 

one-half those registered in 1993: prepanel 

consultations fell from 31 to 15; panels established fell 

from 7 to 4; panel reports completed fell from 4 to 3; 

and questions of implementation over adopted reports 

fell from 10 to 2. 1 °7 

GATT Council 

The Contracting Parties to the GATT held their 

50th session from December 8 to 9, 1994. During 

1994, the GATT Council spent much time preparing 

for the entry into force of the WTO. It also focused 

attention on the many requests for accession and 

observership and on reviews under the Trade Policy 

Review Mechanism, which during 1994 resumed a 

fuller schedule than during recent preceding years 

when efforts were devoted to finishing the Uruguay 

Round negotiations. However, dispute settlement 

activity declined as many members waited for the 

WTO to begin operation. 

Regarding regional trade arrangements, the 1994 

chairman of the GATT Council pointed out at the 50th 

session that biennial reporting requirements for such 

free-trade agreements had not been followed for quite 

some time, and he recommended that the GATT or 

WTO Council take up this matter in 1995. The report 

from the Committee on Trade and Development (CTD) 

highlighted that—even though developing countries 

now account for a quarter of world trade—not all 

regions have gained equally and that some, such as 

Africa, are still cause for concern. 105 

Trade Policy Review Mechanism 

The TPRM reviewed the trade policies of 14 

countries during 1994. These countries were Australia, 

Canada, Hong Kong, Iceland, Indonesia, Israel, Peru, 

Macau, Senegal, Sweden, Tunisia, Turkey, the United 

States, and Zimbabwe. The TPRM, which had operated 

provisionally since its establishment at the April 1989 

Mid-Term Review of the Uruguay Round, was made 

permanent as a result of the Uruguay Round 

negotiations. A review in 1994 of the operation of the 

TPRM since 1989 resulted in an agreement to 

substitute a statement of policy by the government 

under review for a detailed description of its trade 

policies. The GATT/WTO Secretariat already develops 

such information in the course of its review. Another 

decision adopted allows more flexible scheduling for 

those members whose trade policies are normally 

reviewed every 2 years, that is, Canada, the EU, Japan, 

and the United States. 106 

U.S. Tobacco Measures 

In January 1994, the GATT Council established a 

panel requested by Brazil to examine U.S. legislation 

concerning the use of imported tobacco in domestic 

cigarette manufacture. A number of other countries 

joined Brazil as participants: Argentina, Canada, 

Chile, Colombia, El Salvador, Guatemala, Thailand, 

and Zimbabwe. 108At issue was U.S. legislation that 

imposed an assessment if a minimum of 75-percent 

domestic tobacco content was not used in the 

manufacture of cigarettes during the 1993/94 period 

covered in the bill. Other complaints about the 

legislation included an internal tax and charges levied 

on imported tobacco not matching the domestic content 

requirements, in the form of a budget-deficit 

assessment; a no-net-cost assessment; and a fee 

charged for inspecting imported tobacco. The panel 

report, adopted in October 1994, found the 

domestic-content minimum and the budget-deficit 

assessment to be inconsistent with U.S. obligations 

under GATT article III (national treatment of 

international taxation and regulations), but not the 

no-net-cost assessmentl° 9or the inspection fee. 110 

 The United States agreed to take steps to remedy the 

offending measures. 

EU Common Import Regime for 

Bananas 

The GATT Council considered the panel report on 

the EU policy for importing bananas several times 

during 1994, but it was not adopted. The EU said that 

all parties must be willing to show flexibility if a 

solution were to be found. 111 

U.S. Tuna Product Import 

Restrictions 

In July 1994, the GATT Council first considered 

the panel report on a complaint by the EU and the 

Netherlands (on behalf of the Netherlands Antilles) 

against a U.S. import ban on tuna and tuna products 

not complying with the U.S. Marine Mammal 

Protection Act (MMPA). This report was a sequel to a 

16 
previous panel report concerning U.S. import 

restrictions on tuna. The earlier report was issued in 

response to a complaint brought by Mexico in 1991, 

but did not come before the GATT Council because 

both the United States and Mexico requested the case 

be withdrawn in favor of a bilateral solution. Because 

of the interrelationship of tuna and dolphins in the 

case, the 1991 panel is often known as "tuna-dolphin I" 

and the 1994 panel is known as "tuna-dolphin II." 

In its report, the "tuna-dolphin II" panel 

distinguished between the environmental objectives of 

the U.S. MMPA, which the panel said were not in 

dispute and not an issue for it to decide, and the action 

taken in pursuit of these objectives—the trade 

embargoes on tuna products. It was the latter action 

that was in dispute. The panel examined the case with 

reference to GATT article XX (general 

exceptions)—which permits trade measures necessary 

to protect plant, animal, and human health and 

life—and to whether it allows trade embargoes in 

pursuit of these goals. The panel concluded that the 

U.S. trade embargoes (1) did not meet the obligations 

of GATT article III (national treatment), (2) were 

contrary to article XI (general elimination of 

quantitative restrictions), and (3) were not justified 

under the exceptions in article XX. 

The United States requested that the GATT 

Council consult on holding an open, public meeting to 

discuss the panel findings because of widespread 

public interest in its implications, especially on the part 

of environmental organizations. However, Council 

members expressed serious reservations about this 

proposal. They said it would start an "unimaginable 

process" and that a forum that might be appropriate at 

more local levels of government would not necessarily 

work in an intergovernmental body like the GATT. 112 

The report was considered for adoption several 

times following its July discussion, and was finally 

forwarded to the GATT Contracting Parties at their 

50th session in December. At the session, the 

Contracting Parties elected to send the panel report 

back to the GATT Council. The United States said that 

due to its WTO ratification efforts, it had not had 

sufficient time to study the report. 113 

U.S. Gasoline Standards 

In October 1994, the GATT Council established a 

panel at the request of Venezuela to examine U.S. 

standards for reformulated and conventional gasoline. 

Venezuela said that the new standards, adopted by the 

U.S. Environmental Protection Agency in December 

1993, would cost them $150 million in such shipments 

to the United States, which totaled $478 million in 

1993. Venezuela charged that the standards were less 

favorable to imported gasoline and that a preference 

given to a U.S. company with an overseas refinery was 

inconsistent with the GATT principle of MFN 

treatment. Venezuela later withdrew its complaint from 

under GATT 1947 rules and requested consultations to 

bring the dispute under the WTO dispute-settlement 

mechanism 114 

U.S. Automobile Taxes 

In May 1993, a panel was formed at the request of 

the EU to examine the consistency of U.S. legislation 

on taxes levied on automobiles with U.S. obligations 

under the GATT. In November 1994, the panel 

concluded that (1) the U.S. luxury tax on cars 

(currently those above $32,000) is not inconsistent 

with GATT article III (national treatment on internal 

taxation and regulation); (2) the U.S. gas guzzler tax 

(levied on cars with fuel economy below 22.5 miles 

per gallon) is not inconsistent with article III; and (3) 

the CAFE regulation (corporate average fuel economy) 

is inconsistent with article III. 115The panel report was 

forwarded to the GATT Contracting Parties at their 

50th session. 

At the session, the Contracting Parties elected to 

send the panel report back to the GATT Council. The 

EU said it was concerned with differences between the 

interpretation of GAIT provisions in this panel report 

and the interpretation in a panel report on Japan's 

taxes on certain alcoholic beverages. 116 

Polish Car Import Restrictions 

In November 1994, a panel was established at the 

request of India to examine whether Poland's general 

increase in car tariffs violated GATT article I (MFN 

treatment) when considered in conjunction with 

Poland's establishment of a specific duty-free quota for 

EU cars. Because the quota was established before the 

Poland-EU Interim Agreement on Trade-Related 

Matters became effective, India did not believe that 

GATT article XXIV (free-trade arrangements) 

considerations applied. A panel report is tentatively 

expected in late summer 1995. 

U.S. Footwear Imports 

At the GATT 50th session in December 1994, the 

United States announced that its Uruguay Round 

implementing legislation had settled a longstanding 

grievance by Brazil involving U.S. MFN treatment of 

nonrubber footwear imports. 117Specifically, the 

legislation mandated the payment of interest on certain 

17 
monies deposited as countervailing duties on 

unliquidated entries of nonrubber footwear from Brazil 

on or prior to October 28, 1981. 118 

GATT Committees 

Tariff Concessions 

The Committee on Tariff Concessions oversees 

renegotiation of member tariff schedules under GATT 

article XXVIII (modification of schedules). The 

committee helps balance concessions between 

members as they adopt the Harmonized System (HS) of 

tariff nomenclature, which went into effect in 1988. A 

number of developing country members held such 

renegotiations in 1994. 119 

Trade and Development 

The Committee on Trade and Development 

continued its charge in 1994 to address trade issues of 

particular interest to developing countries. Among the 

topics it considered were the implications of the 

Uruguay Round for developing countries and the 

operation of the "enabling clause" 120in such areas as 

the GSP and various regional integration schemes such 

as, for example, the Association of Southeast Asian 

Nations. 121At the end of 1994, the GATT 

Director-General established a Special Unit for Least 

Developed Countries that will operate under the 

committee's auspices. This change should help extend 

the benefits of expanded trade liberalization to 

developing countries. 122 

Balance of Payments 

During 1994, the Balance-of-Payments Committee 

held consultations with seven countries. Full 

consultations—examining a country's trade-restriction 

and balance-of-payments situation—were held with 

Israel, Poland, and the Slovak Republic. More general 

reviews by means of simplified consultations were held 

with India, Pakistan, Sri Lanka, and Tunisia. 123 

Trade and Environment 

The Committee on Trade and Environment was 

created under the WTO by ministerial decision at 

Marrakesh in April 1994, to begin once WTO 

operations began in 1995. In the interim, the 

Subcommittee on Trade and Environment was to carry 

out preparatory work on trade and environment issues. 

During 1994, the subcommittee continued the work 

program originally set out by the GATT Working 

Group on Environmental Measures and International 

Trade (EMIT) in 1991. The work program of the EMIT 

was to focus on (1) the relation between trade 

provisions in existing international environmental 

agreements and GATT principles and provisions; (2) 

the "transparency" of national environmental 

regulations with trade effects; and (3) the trade effects 

of packaging and labeling requirements aimed at 

protecting the environment. 124 

In addition, the subcommittee took up (1) the 

relation between the provisions of the multilateral 

trading system and trade measures taken for 

environmental purposes, including those related to 

multilateral environmental agreements; and (2) the 

effect of environmental measures on market access and 

the benefits of removing trade restrictions and 

distortions, particularly where developing and 

least-developed countries were concemed. 125In its 

first meeting in 1995, the full committee was to look at 

the issue of exports of domestically prohibited goods. 

The full committee is scheduled to report to ministers 

by January 1997, 2 years after the entry into force of 

the WTO. At that time, the committee is to make 

recommendations on its future workplan, and ministers 

are to review its recommendations and terms of 

reference. 

Regional Trade 

Arrangements—Article XXIV 

Article XXIV requires notification and review of 

any departures from the GATT principle of MFN 

treatment due to formation of regional trade 

arrangements, such as customs unions or free-trade 

agreements. In May, the council established a Working 

Party to review the NAFTA, which came into force at 

the start of 1994, for its conformity with GATT 

provisions. 126In June, the council established a 

Working Party to examine the Central European 

Free-Trade Agreement (CEFTA) between the Czech 

Republic, Hungary, Poland, and the Slovak Republic 

for its GATT conformity. Other Working Parties were 

established to review free-trade agreements between 

the European Free-Trade Area (EFTA) members and 

Bulgaria, the Czech Republic, Israel, Romania, and the 

Slovak Republic and between Switzerland and the 

Baltic States (Estonia, Latvia, and Lithuania). A 

Working Party was also established to review a 

customs union between the Czech and the Slovak 

Republics. Working Party reports on preferential tariff 

arrangements were approved concerning EFTA and 

Turkey; EFTA and the Czech Republic; and EFTA and 

the Baltic States, Finland, Norway, and Sweden. 

18 
In June, Colombia—also on behalf of Mexico and 

Venezuela—announced to GATT members that the 

three countries had entered into a free-trade agreement 

called the "Treaty of the Group of Three." It entered 

into effect in January 1995 and is expected to eliminate 

tariffs over 10 years. 127The EU reported signing 

free-trade agreements with Estonia, Latvia, and 

Lithuania. 128 

At the 50th session in December, the GATT 

membership approved two waivers concerning MFN 

trade obligations: (1) for the Fourth Convention of 

Lome (Lome IV), a trade and aid pact between the EU 

and African, Caribbean, and Pacific (ACP) countries 

largely made up of former European colonies, and (2) 

for Germany, duty-free treatment of imports under 

trade arrangements between the former German 

Democratic Republic and its trading partners. Lastly, 

The Contracting Parties agreed that the Committee on 

Trade and Development would review the Southern 

Common Market (Mercosur), but that the review's 

terms of reference would be under article XXIV. 129 

Accessions and 

Observers—Articles XXVI/ 

XXXIII 

Following the accession of 10 new members 

during 1993, an additional 14 countries joined the 

GATT during 1994. A further 21 applications for 

membership were under examination in accession 

working parties. 130During 1994, the following 

countries joined (in order): Paraguay, Grenada, the 

United Arab Emirates, Guinea-Bissau, St. Christopher 

and Nevis, Liechtenstein, Qatar, Angola, Honduras, 

Slovenia, Guinea, Papua New Guinea, Djibouti, and 

the Solomon Islands. 131 

Of these, only Paraguay, Honduras, and Slovenia 

became members under the standard article XXXIII 

(accession) terms of accession. The others joined 

through the use of article XXVI:5(c) (acceptance, entry 

into force, and registration), which permits a country 

that was formerly a territory of a GATT member and 

that currently possesses full autonomy over the conduct 

of its external commercial relations to become a 

Contracting Party after simple notification to the 

GATT. (See table 1-2 for a list of the Contracting 

Parties to the GATT in 1994.) 

Moreover, a number of countries continued to 

apply to join the GATT on a de facto basis, upon 

achieving commercial autonomy, following their 

independence. Every 3 years, the GATT DirectorGeneral names those countries that continue this 

practice. A 1967 GATT recommendation grants like 

treatment to these countries in return. Table 1-3 lists 

countries that maintained a de facto application of the 

GATT in 1994. 

In addition to the 25 countries reported in various 

stages of accession at the end of January 1995, GATT 

Contracting Parties have accepted these additional 

countries as observers: Azerbaijan, the Former 

Yugoslav Republic of Macedonia, Georgia, Iran, 

Kazakhstan, Kirghizia, Sudan, Turkmenistan, 

Uzbekistan, and Vietnam. 132Regarding the accession 

of China, 133the Working Party on China's Status as a 

Contracting Party met at the end of June 1994 and 

announced that, for the first time, nearly all elements 

sought by Contracting Parties for inclusion in a draft 

protocol of accession for China were under 

discussion. 134 

Tokyo Round Codes Committees 

Introduction 

The nine codes resulting from the 1973 to 1979 

Tokyo Round of multilateral trade negotiations 

established additional rules and disciplines covering 

nontariff measures. Membership in the codes is 

voluntary, open to those GATT members (and in some 

cases to non-GATT members) willing to undertake the 

additional rights and obligations of each. These codes 

continued in operation in 1994. Changes to them as a 

result of the URA became effective with the entry into 

force of the WTO on January 1, 1995. 

Under the WTO Agreement, five of these codes 

will be superseded by WTO agreements of the same 

name and become applicable to all WTO members. 

The rules encompassed by the Tokyo Round codes on 

antidumping practices, subsidies and countervailing 

measures, customs valuation, import-licensing 

procedures, and technical barriers to trade—as 

amended and applied through the WTO 

Agreement—will become binding on all WTO 

members. The Tokyo Round codes concerning civil 

aircraft, government procurement, bovine meat, and 

dairy products have become WTO plurilateral 

agreements. They will remain limited in membership 

to those signatories joining voluntarily. 

As part of transferring its membership from Tokyo 

Round codes to their WTO counterparts, the United 

States gave notice on December 30, 1994, that it was 

withdrawing from the five codes that would be 

replaced by those applicable to all WTO members. 

However, for the limited purpose of resolving dispute 

19 
Table 1-2 

Contracting Parties to the General Agreement on Tariffs and Trade (GATT) and their accession 

dates, as of Dec. 31, 1994 

Country Accession date 

Angola1 Apr. 8, 1994 

Antigua and Barbuda Mar. 30, 1987 

Argentina Oct. 11, 1967 

Australia Jan. 1, 1948 

Austria Oct. 19, 1951 

Bahrain Dec. 13, 1993 

Bangladesh Dec. 16, 1972 

Barbados Feb. 15, 1967 

Belgium Jan. 1, 1948 

Belize Oct. 7, 1983 

Benin Sept. 12, 1963 

Bolivia Sept. 8, 1990 

Botswana Aug. 28, 1987 

Brazil July 30,1948 

Brunei Darussalam Dec. 9, 1993 

Burkina Faso May 3, 1963 

Burundi Mar. 13, 1965 

Cameroon May 3, 1963 

Canada Jan. 1, 1948 

Central African Republic May 3, 1963 

Chad July 12, 1963 

Chile Mar. 16, 1949 

Colombia Oct. 3, 1981 

Congo May 3, 1963 

Costa Rica Nov. 24, 1990 

Cote d'Ivoire Dec. 31, 1963 

Cuba Jan. 1, 1948 

Cyprus July 15, 1963 

Czech Republic Apr. 15, 1993 

Denmark May 28, 1950 

Dominica Apr. 20, 1993 

Dominican Republic May 19, 1950 

Djiboutil Dec. 16, 1994 

Egypt May 9, 1970 

El Salvador May 22, 1991 

Fiji Nov. 16, 1993 

Finland May 25, 1950 

France Jan. 1, 1948 

Gabon May 3, 1963 

Gambia Feb. 22, 1965 

Germany Oct. 1, 1951 

Ghana Oct. 17, 1957 

Greece Mar. 1, 1950 

Grenadal Feb. 9, 1994 

Guatemala Oct. 10, 1991 

Guineas Dec. 8, 1994 

Guinea-Bissaul Mar. 17, 1994 

Guyana July 5, 1966 

Haiti Jan. 1, 1950 

Honduras1 Apr. 9, 1994 

Hong Kong Apr. 23, 1986 

Hungary Sept. 9, 1973 

Iceland Apr. 21, 1968 

India July 8, 1948 

Indonesia Feb. 24, 1950 

See footnotes at end of table. 

20 
Table 1-2-Continued 

Contracting Parties to the GATT and their accession dates, as of Dec. 31, 1994 

Country Accession date 

Ireland Dec. 22, 1967 

Israel July 5, 1962 

Italy May 30, 1950 

Jamaica Dec. 31, 1963 

Japan Sept. 10, 1955 

Kenya Feb. 5, 1964 

Korea Apr. 14, 1967 

Kuwait May 3, 1963 

Lesotho Jan. 8, 1988 

Liechtenstein.' Mar. 29, 1994 

Luxembourg Jan. 1, 1948 

Macau Jan. 11, 1991 

Madagascar Sept. 30, 1963 

Malawi Aug. 28, 1964 

Malaysia Oct. 24, 1957 

Maldives Apr. 19, 1983 

Mali Jan. 11, 1993 

Malta Nov. 17, 1964 

Mauritania Sept. 30, 1963 

Mauritius Sept. 2, 1970 

Mexico Aug. 24, 1986 

Morocco June 17, 1987 

Mozambique July 27, 1992 

Myanmar July 29, 1948 

Namibia Sept. 15, 1992 

Netherlands Jan. 1, 1948 

New Zealand July 30, 1948 

Nicaragua May 28, 1950 

Niger Dec. 31, 1963 

Nigeria Nov. 18, 1960 

Norway July 10, 1948 

Pakistan July 30, 1948 

Papua New Guineas Dec. 16, 1994 

Paraguay.' Jan. 6, 1994 

Peru Oct. 7, 1951 

Philippines Dec. 27, 1979 

Poland Oct. 18, 1967 

Portugal May 6, 1962 

Romania Nov. 14, 1971 

Rwanda Jan. 1, 1966 

Qatari Apr. 7, 1994 

St. Christopher and Nevis.' Mar. 24, 1994 

St. Lucia Apr. 13, 1993 

St. Vincent and the Grenadines May 18, 1993 

Senegal Sept. 27, 1963 

Sierra Leone May 19, 1961 

Singapore Aug. 20, 1973 

Slovak Republic Apr. 15, 1993 

Slovenia.' Oct. 3, 1994 

Solomon Islands 1 Dec. 28, 1994 

South Africa June 13, 1948 

Spain Aug. 29, 1963 

Sri Lanka July 29, 1948 

Suriname Mar. 22, 1978 

Swaziland Feb. 8, 1993 

See footnotes at end of table. 

21 
Table 1-2-Continued 

Contracting Parties to the GATT and their accession dates, as of Dec. 31, 1994 

Country Accession date 

Sweden Apr. 30, 1950 

Switzerland Aug. 1, 1966 

Tanzania Dec. 9, 1961 

Thailand Nov. 20, 1982 

Togo Mar. 20, 1964 

Trinidad and Tobago Oct. 23, 1962 

Tunisia Aug. 19, 1990 

Turkey Oct. 17, 1951 

Uganda Oct. 23, 1962 

United Arab Emirates 1 Mar. 8, 1994 

United Kingdom Jan. 1, 1948 

United States Jan. 1, 1948 

Uruguay Dec. 6, 1953 

Venezuela Aug. 31, 1990 

Yugoslavia Aug. 25, 1966 

Zaire Sept. 11, 1971 

Zambia Feb. 10, 1982 

Zimbabwe July 11, 1948 

1 New member in 1994. 

Source: GATT, Analytical Index: Guide to GATT Law and Practice, 6th edition (1994), Geneva, p. 1,064; and official 

GATT documents. 

Table 1-3 

Countries that maintain a de facto application to the General Agreement following independence 

and dates of independence, as of Dec. 31, 1994 

Independence 

Country date 

Algeria July 3, 1962 

Bahamas June 10, 1973 

Cambodia Nov. 9, 1953 

Cape Verde July 5, 1975 

Comoros July 6, 1975 

Equatorial Guinea Oct. 12, 1968 

Kirabati July 12, 1979 

Sao Tome and Principe July 12, 1975 

Seychelles June 29, 1976 

Tonga June 5, 1970 

Tuvalu Oct. 1, 1978 

Yemen Nov. 30, 1967 

Source: GATT, "De Facto Application of the GATT," Focus, No. 109, July 1994, p. 5; and official GATT documents. 

settlement issues, the United States foresees remaining 

a party to the Tokyo Round codes on antidumping 

practices and on subsidies and countervailing measures 

for 2 more years. 135(For membership in these 

agreements, see table 1-4, Signatories to the Tokyo 

Round agreements, as of December 31, 1994.) 

Antidumping Practices 

The Committee on Antidumping Practices adopted 

one panel report during 1994, concerning U.S. 

antidumping duties on imports of fresh and chilled 

salmon from Norway. The panel concluded that the 

U.S. duties were inconsistent with the GATT 

Antidumping Code provisions regarding determination 

of dumping. 136The committee also had before it, but 

was unable to adopt, three other reports: (1) U.S. 

antidumping duties on imports of stainless steel plate 

from Sweden, (2) U.S. antidumping duties on imports 

of portland cement from Mexico, and (3) U.S. 

antidumping duties on imports of seamless stainless 

steel hollow products from Sweden. 

22 
Table 1-4 

Signatories to the Tokyo Round agreements, as of Dec. 31, 1994 

[Accepted (A); accepted, subject to ratification (S); provisional acceptance 

(P); reservation, condition, declaration, or any combination 0] 

Anti- Import Civil Customs Gov't Dairy 

dump- Subsi- licen- air- Stan- valu- procure- Bovine proing dies sing craft dards ation ment meat ducts 

Contracting Party: 

Angola 

Antigua 

Argentina S S S S A* A A 

Australia A A* A A A A A 

Austria A A A A A A A A 

Bahrain 

Bangladesh 

Barbados 

Belgium A A 

Belize 

Benin 

Bolivia S S 

Botswana A 

Brazil A A A A* A 

Brunei 

Burkina Faso 

Burundi 

Cameroon 

Canada A A A A A A* A A 

Central African Republic 

Chad 

Chile A A A 

Colombia A* P A 

Congo 

Costa Rica 

Cote d'Ivoire 

Cuba 

Cyprus A 

Czech Republic A A A A 

Denmark A* A* 

Djibouti 

Dominica 

Dominican Republic 

Egypt A A A A A A A 

El Salvador 

Fiji 

Finland A A A A A A A A 

France A A 

Gabon 

Gambia 

Germany A* A* 

Ghana 

Greece S A 

Grenada 

Guatemala 

Guinea 

Guinea-Bissau 

Guyana 

Haiti 

Honduras 

See footnotes at end of table. 

23 
Table 1-4—Continued 

Signatories to the Tokyo Round agreements, as of Dec. 31, 1994 

[Accepted (A); accepted, subject to ratification (S); provisional acceptance 

(P); reservation, condition, declaration, or any combination (*)1 

Anti- Import Civil Customs Gov't Dairy 

dump- Subsi- licen- air- Stan- valu- procure- Bovine proing dies sing craft dards ation ment meat ducts 

Contracting party—Continued: 

Hong Kong A A A A A A 

Hungary A A A A A A 

Iceland 

India A A A A A* 

Indonesia A A 

Ireland A A 

Israel A A A 

Italy A A 

Jamaica 

Japan A A A A A A A A A 

Kenya 

Republic of Korea A A A A 

Kuwait 

Lesotho A 

Liechtenstein 

Luxembourg A A 

Macau 

Madagascar 

Malawi 

Malaysia A 

Maldives 

Mali 

Malta 

Mauritania 

Mauritius 

Mexico A A A A* 

Morocco A A* 

Mozambique 

Myanmar 

Namibia 

Netherlands A A 

New Zealand A A A A A* A A 

Nicaragua 

Niger 

Nigeria A A 

Norway A A A A A A A A A 

Pakistan A A A A 

Papua New Guinea 

Paraguay P 

Peru A 

Philippines A* A A 

Poland A S A S A A 

Portugal A A 

Romania A A A A A A A 

Rwanda S 

Qatar 

St. Christopher 

St. Lucia 

St. Vincent 

Senegal 

See footnotes at end of table. 

24 
Table 1-4—Continued 

Signatories to the Tokyo Round agreements, as of Dec. 31, 1994 

[Accepted (A); accepted, subject to ratification (S); provisional acceptance 

(P); reservation, condition, declaration, or any combination (*)] 

Anti- Import Civil Customs Gov't Dairy 

dump- Subsi- licen- air- Stan- valu- procure- Bovine proing dies sing craft dards ation ment meat ducts 

Contracting party—Continued: 

Sierra Leone 

Singapore A A A A 

Slovak Republic A A A A 

Slovenia A A A 

Solomon Islands 

South Africa A A A A 

Spain A A 

Sri Lanka 

Suriname 

Swaziland 

Sweden A A A A A A A A A 

Switzerland A A A A A A A A A 

Tanzania 

Thailand A 

Togo 

Trinidad 

Tunisia A A 

Turkey A 

Uganda 

United Arab Emirates 

United Kingdom A* A* 

United States A A A A A A A A 

Uruguay A A A 

Venezuela 

Yugoslavia2 a s a a a a 

Zaire 

Zambia 

Zimbabwe 

Other government entities: 

Bulgaria A A 

European Union3 A A A A A A A A A 

Total signatories: 

25 26 29 22 46 34 12 26 .... 16... 

1 Hong Kong, which had applied several of the Tokyo Round agreements as a territory under the auspices of the 

United Kingdom, changed its status under these agreements in 1986 and now applies them in its own individual 

capacity. 

2 The membership shown under Yugoslavia is for the Socialist Federal Republic of Yugoslavia (SFRY) and was 

excluded from the totals following the GATT Council decision of June 1993 that the Federal Republic of Yugoslavia 

(FRY) of Serbia and Montenegro is not the successor state to the SFRY. 

3 The EU is a signatory to all the Tokyo Round agreements. Because several of these agreements cover matters 

that go beyond the authority of the EU, individual member states can also be signatories. 

Source: GATT, "Annex IV: Tokyo Round Agreements - Legal Status at 6 May 1994," GATT Activities 1993, Geneva, 

Aug. 1994, annex IV, pp. 163-168; GATT, Analytical Index: Guide to GATT Law and Practice, 6th edition (1994), 

Geneva, pp. 1057-1059; official GATT documents; and USTR, 1995 Trade Policy Agenda and 1994 Annual Report, 

Washington, DC, pp. 38-39. 

25 
Subsidies and Countervailing 

Measures 

In 1994, two panel reports were adopted and a 

number of other reports remained under consideration. 

The Committee on Subsidies and Countervailing 

Measures adopted reports concerning (1) U.S. 

countervailing duties on imports of fresh and chilled 

salmon from Norway and, (2) Brazil's countervailing 

duties on milk powder and certain types of milk from 

the EU. At the request of the EU, the committee 

established a new panel to examine U.S. countervailing 

duties on certain carbon steel flat products from 

various EU member states. 137 

Customs Valuation 

In 1994, two countries—Peru and Slovenia—

joined the Agreement on Customs Valuation, bringing 

the total number of signatories to 34. During the year, 

the committee examined legislation provided by 

Argentina, the EU, and Mexico to administer the 

agreement. 138Also, the Customs Cooperation Council 

(CCC)—which is based in Brussels, Belgium, and 

works closely with members of the committee—

announced that it had adopted a new informal name, 

the World Customs Organization (WO), to reflect its 

role as the single international organization dealing 

with customs matters between governments. 

Import Licensing 

During 1994, the Committee on Import Licensing 

carried out its charge of reviewing notifications by 

members concerning their national import-licensing 

requirements and procedures. It also heard concerns 

from various members pertaining to the agreement, 

such as those about the EU import-licensing system for 

bananas. At the end of 1994, the Tokyo Round 

Agreement on Import Licensing Procedures had 29 

signatories. 139However, the Agreement on Import 

Licensing under the WTO will be applicable to all 

WTO members. 

Technical Barriers to Trade 

In addition to conducting its 15th annual review of 

the 1979 Tokyo Round Agreement on Technical 

Bathers to Trade, commonly known as the Standards 

Code, the committee discussed marks of origin 

requirements and endorsed recommendations to ensure 

that notifications under the Standards Code would 

continue smoothly under the WTO until such time as 

the WTO Committee on Technical Bathers to Trade 

could meet. As of November 1994, there were 44 

signatories to the GATT TBT Agreement with Slovenia 

accepting membership in 1994. 140 

Government Procurement 

In 1994, work was completed on the new 

Agreement on Government Procurement, which was 

signed in Marrakesh on April 15, by Austria, Canada, 

the 12 member states of the European Union, Finland, 

Hong Kong, Israel, Korea, Japan, Norway, Sweden, 

Switzerland, and the United States. The new agreement 

will come into effect on January 1, 1996. During the 

balance of the year, the committee carried out 

statistical reviews on procurement during 1990-93 

under the provisions of the current agreement, and the 

Interim Committee on Government Procurement—

with responsibility for implementing the new agreement—began work on classification systems and rules 

of origin for statistical reporting under the agreement, 

as well as on use of information technology in national 

procurement systems. 141 

Negotiations were also completed in 1994 

regarding the accession of Aruba—a possession of the 

Netherlands—to the GATT Agreement on Government 

Procurement. The Interim Committee also accepted 

Aruba's request for accession to the new agreement 

under the WTO. Aruba will become a member of the 

current agreement 30 days following receipt of its 

instrument of accession by the GATT/WTO DirectorGeneral. 

During 1994, there were 12 signatories to the 

current Agreement on Government Procurement, 

which differed slightly from the signatories to the new 

agreement. Singapore is a signatory of the current 

agreement, but will not belong to the 1996 agreement; 

Korea is not signatory to the current agreement, but 

will belong to the 1996 agreement. 

Trade in Civil Aircraft 

In 1994, the committee made technical changes to 

the Agreement on Trade in Civil Aircraft to revise it 

for its operation under the WTO as a plurilateral 

agreement of the same name. 142These revisions take 

account largely of the WTO Subsidies Agreement and 

the unified approach to dispute settlement available 

through the WTO Dispute Settlement Understanding. 

There were 22 members in 1994. 

The Subcommittee on Trade in Civil Aircraft met 

during 1994 to carry on talks aimed at improving and 

expanding the agreement's disciplines by expanding 

coverage of (dubbed "multilateralizing") the U.S.-EU 

bilateral agreement on large civil aircraft to other 

26 
participants. However, wide disagreement has clearly 

shown a lack of common basis for further negotiations 

at this time. 143In addition to signatories to the 

agreement, the subcommittee is open to nonsignatories 

and had 32 participants by yearend 1994. 144 

International Dairy Arrangement 

In 1994, the Dairy Products Council adopted 

technical revisions to the International Dairy 

Arrangement to transfer its operation to the WTO as 

one of the four plurilateral agreements. The Council 

also extended the arrangement until its WTO 

counterpart could begin operations, following the entry 

into force of the WTO. There were 17 participants in 

the arrangement by the end of 1994. 

During the year, one of the committees that carry 

out provisions of the arrangement suspended for 1 year 

the minimum export prices set under the protocol 

concerning butter and anhydrous milk fat. A 

derogation from the minimum price provisions 

regarding butter and butter oil sales to the former 

Soviet Union was also extended in 1994 for the second 

time. 

Arrangement Regarding Bovine 

Meat 

During 1994, participants in the Arrangement 

Regarding Bovine Meat agreed on technical revisions 

needed to incorporate it into the WTO Agreement as 

one of the four plurilateral agreements, and agreed to 

extend the arrangement until its counterpart under the 

WTO comes into effect. 

27 
ENDNOTES 

1Final Act Embodying the Results of the 

Uruguay Round of Multilateral Trade Negotiations, 

Marrakesh, Apr. 15, 1994 (hereafter Final Act). 

2The Committee on Trade and Environment is 

scheduled to report to ministers by January 1997, 2 

years from the entry into force of the WTO. For 

further information, see the section on "Subcommittee 

on Trade and Environment" in this chapter. 

3General Agreement on Tariffs and Trade 

(GATT), "Decision on the Establishment of the 

Preparatory Committee of the World Trade 

Organization," Apr. 14, 1994. 

4Only an oblique reference appeared in the 

declaration after the GATT Director-General 

dissuaded the United States from insisting on the 

insertion of more specific worker-rights language: 

"Ministers affirm that the establishment of the World 

Trade Organization (WTO) ushers in a new era of 

global economic cooperation, reflecting the 

widespread desire to operate in a fairer and more 

open multilateral trading system for the benefit and 

welfare of their peoples." GATT, "Marrakesh 

Declaration of 15 April 1994," Apr. 15, 1994, par. 2, 

in GATT, "The Marrakesh Declaration," Focus, No. 

107, May 1994, p. 7. 

5For a description of each of the individual 

agreements that make up the URA, see U.S. 

International Trade Commission (USITC), The Year in 

Trade: Operation of the Trade Agreements Program, 

45th Report, 1993, USITC publication 2769, 1994, 

ch. 1. For further information on the impact of the 

URA on the U.S. economy, see USITC, Potential 

Impact on the U.S. Economy and Industries of the 

GATT Uruguay Round Agreements (investigation No. 

332-353), USITC publication 2790, 1994. 

6Public Law 103-465, 108 Stat. 4809, Dec. 8, 

1994. 

7U.S. Department of State telegram, "Japanese 

Ratification of GATT/WTO," message reference No. 

017821, prepared by U.S. Embassy, Tokyo, Dec. 7, 

1994. 

8European Commission Delegation at 

Washington DC, Office of Press and Public Affairs, 

"Statement on EU Adoption of the Uruguay Round 

and the World Trade Organization," European Union 

News, Dec. 19, 1994. 

8Sovereignty and funding issues are discussed 

in detail later in this chapter. 

10Prior to submitting formal implementing 

legislation to the Congress, the administration 

informally submitted draft legislation that was 

informally "marked up" by the House and Senate 

committees having jurisdiction in the subject areas. 

11 Largely taken from U.S. House, Committee on 

Ways and Means, "Summary of H.R. 5110, the 

'Uruguay Round Agreements Act,' Uruguay Round 

Agreements Act, 103d Cong., 2d sess., 1994, H. 

Rept. 103-826, pt. 1, Oct. 3, 1994 (Washington, DC: 

GPO, 1994), p. 4. 

12 Uruguay Round Agreements Act Statement of 

Administrative Action, published in H. Doc. 103-316, 

103d Cong., 2d Session, 1994. The Statement of 

Administrative Action was submitted to the Congress 

on September 27, 1994, in compliance with section 

1103 of the Omnibus Trade and Competitiveness Act 

of 1988, and accompanied the implementing bill for 

the Agreement Establishing the World Trade 

Organization and the agreements annexed to that 

Agreement (the Uruguay Round Agreements). In 

enacting the URAA, Congress approved the 

Statement of Administrative Action (see URAA, sec. 

101(a)(2), approved Dec. 8, 1994; Pub. Law 103-465, 

108 Stat. 4809). 

13These objectives include such goals as 

seeking commitments to lower barriers in markets 

abroad to U.S. suppliers of financial services, 

opening foreign markets for basic telecommunications 

services on a nondiscriminatory basis, and reaching 

multilateral and bilateral agreement to competitive 

opportunities for U.S. exports in the civil aircraft 

sector. 

14See section 201 et seq. of the Trade Act of 

1974, as amended. 

15See section 301 et seq. of the Trade Act of 

1974, as amended. 

16See section 337 of the Trade Act of 1974, as 

amended. 

17Commonly known as product standards. 

18Of the Agricultural Adjustment Act of 1933, as 

amended. 

19Statement of Administrative Action (SAA), p. 

26; at U.S. Congress, Uruguay Round Trade 

Agreements, Texts of Agreements, Implementing Bill, 

Statement of Administrative Action, and Required 

Supporting Statements, 103d Cong., 2d sess., 1994, 

H. Doc. 103-316, vol. 1, Sept. 27, 1994 (Washington, 

DC: GPO, 1994), (hereafter URAA documents), p. 

682. 

20It also requires the FCC to designate the three 

companies to which the FCC has already awarded 

PCS licenses as "broadband PCS pioneers" and to 

charge them a portion of the value of the public 

broadband spectrum employed. These firms will pay 

the higher of (1) $400 million plus interest, or (2) a 

sum equal to 85 percent of the average per capita 

bids for comparable PCS licenses in the 20 largest 

U.S. metropolitan markets in which all PCS 

broadband licenses remain to be awarded. 

21Formally entitled the Agreement on 

Implementation of Article VI of the General 

Agreement on Tariffs and Trade 1994. 

22For more information on antidumping and 

countervailing duty investigations, see chapter 5 of 

this report. 

23See sections 223-224, amending the Tariff Act 

of 1930. For further detail, see SAA, p. 152-161; 

URAA documents, pp. 822-831; and U.S. Senate, 

Committee on Finance; on Agriculture, Nutrition, and 

Forestry; and on Governmental Affairs; Uruguay 

28 
Round Agreements Act, 103d Cong., 2d sess., 1994, 

S. Rept. 103-412, Nov. 22, 1994 (Washington, DC: 

GPO, 1994), (hereafter URAA Senate Report), pp. 

62-76. 

24See section 220(a) of the URAA, as it amends 

section 751 of the Tariff Act of 1930. 

25The substantive standards that Commerce and 

the USITC must follow in making such 

determinations are set forth in new section 752 of 

the Tariff Act. 

26See new section 751(c) of the Tariff Act of 

1930. 

27 SAA, p. 209-221; URAA documents, pp. 

879-891; and Senate URAA Report, pp. 45-52. 

28See section 220(a) of the URAA, amending 

section 751(a) of the Tariff Act. For further detail, see 

SAA, p. 215; URAA documents, p. 885; and Senate 

URAA Report, p. 44. 

29See article 2.4.2. 

30Section 229(a) of the URAA codified the 

requirements in new section 777A(d) of the Tariff Act, 

but did not change existing Commerce practice of 

using average-to-individual comparisons in reviews. 

For further detail, see SAA, pp. 172-173; URAA 

documents, pp. 842-843; and Senate URAA Report, 

pp. 79-80. 

31Section 224 of the URAA codified this 

requirement in new section 773(f)(1)(C) of the Tariff 

Act. For further detail, see SAA, URAA documents, 

pp. 835-836; and Senate URAA Report, pp. 75-76. 

32For further discussion relating to the captive 

production provisions under URAA section 222(b)(2) 

amending section 771(7)(C)(iv) of the 1930 Tariff Act, 

see SAA, p. 182-183; URAA documents, pp. 

852-853; and Senate URAA Report, pp. 54-56. 

33See section 230 amending section 781 of the 

Tariff Act of 1930. For further detail, see SAA, pp. 

222-224; URAA documents, pp. 892-894; and Senate 

URAA Report, pp. 81-82. 

34Although U.S. law did not previously 

distinguish between actionable and nonactionable 

subsidies, the specificity test in article 2 of the SAA, 

as incorporated by URAA section 251 amending 

section 771(5) of the Tariff Act generally reflects 

preexisting U.S. law and practice. For further 

information, see SAA, pp. 254-266; URAA 

documents, pp. 924-936; and Senate URAA Report, 

pp. 90-96. 

35For further information, see SAA, pp. 272-275; 

URAA documents, pp. 942-945; and Senate URAA 

Report, pp. 100-101. 

38For further information, see SAA, pp. 278-279; 

URAA documents, pp. 948-949; and Senate URAA 

Report, p. 102. 

37That is, under section 304(a)(1) of the Trade 

Act of 1974 as to what action to take under section 

301(a)(1)(A). 

38For further information, see SAA, pp. 280-281; 

URAA documents, pp. 950-951; and Senate URAA 

Report, p. 103. 

39Section 282(c) applies to noncountervailable 

subsidies other than those covered by the Agreement 

on Agriculture. For further information, see SAA, pp. 

284-285; URAA documents, pp. 954-955; and Senate 

URAA Report, pp. 104-105. 

40For more information on section 337 

investigations, see chapter 5 of this report. 

41For further information, Senate URAA Report, 

pp. 119-121. 

4219 U.S.C. 2251-2254. 

43Under section 202(d)(2)(A), critical 

circumstances exist when (i) there is clear evidence 

that increased imports (either actual or relative to 

domestic production) of the article are 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; and (ii) delay in 

taking action under this chapter would cause damage 

to that industry that would be difficult to repair. 

44For further discussion, see the SAA, pp. 

290-91 and the Senate URAA Report, p. 108. 

45For further discussion, see the SAA, pp. 

289-90 and Senate URAA Report, pp. 107-08. 

46 USTR, letter to Senator Robert Dole 

concerning the WTO, dispute settlement, sovereignty, 

and term of patent protection, Nov. 23, 1994, p. 2. 

47An example of such concern came from the 

National Conference of State Legislators (NCSL) in a 

May 18, 1994, letter to President Clinton. The 

legislators expressed concern that State tax and 

regulatory authorities were not sufficiently protected 

from unjustified allegations of discrimination under 

WTO dispute proceedings. State officials were 

particularly mindful of the 1992 GATT "beer II" 

dispute brought by Canada against U.S. Federal and 

State regulations regarding the sale of beer and 

wine, which called into question many State tax 

benefits and preferences to producers, and may 

provide a precedent for challenging such preferences 

under the WTO as discriminatory. "States seek 

protection from international challenges in GATT bill," 

Inside U.S. Trade, May 27, 1994, pp. 11-12. 

48SAA, p. 1; URAA documents, p. 656. The 

SAA does not generally address U.S. law or practice 

that remains unchanged, because much of U.S. law 

already conforms with and supports the requirements 

of the URA. 

49SAA, p. 3; URAA documents, p. 659. 

50For a description of the URA Dispute 

Settlement Understanding, see USITC, The Year in 

Trade: OTAP, 1993, USITC publication 2769, ch. 1. 

51In discussing a panel's examination of 

antidumping determinations made by national 

authorities, article 17.6 says that "the panel shall 

determine whether the authorities' establishment of 

the facts was proper and whether their evaluation of 

those facts was unbiased and objective. If the 

establishment of the facts was proper . . . even 

though the panel might have reached a different 

conclusion, the evaluation shall not be overturned." 

The article further describes by similar logic that "the 

panel shall find the authorities' measure to be in 

conformity with the agreement if it rests upon one of 

those permissible interpretations," that is, upon 

29 
interpretations made "under customary rules of 

interpretation of public international law." 

52 USTR, letter to Senator Robert Dole, p. 2. The 

Senate Committee on Finance held a hearing on the 

bill on May 10, 1995. As of late May 1995, the bill 

was still pending. 

53 Title XIII of the Omnibus Budget Reconciliation 

Act of 1990, Public Law, 101-508, Nov. 5, 1990. 

54 Senate URAA Report, pp. 134-135. 

55 The benefit to the United States is calculated 

variously by a number of economic models and 

studies as an increase in U.S. national income by 

the years 2002 to 2005 of anywhere between $13 

and $60 billion greater than otherwise expected in 

the absence of the URA. These estimates are 

considered conservative in many cases because the 

models used in these studies are rarely able to 

capture the dynamic effects associated with 

implementing the Round, which are likely to be 

generated to the benefit of national and world 

welfare. For a brief review of studies on the 

economywide benefits of the Uruguay Round, see 

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

Industries of the GATT Uruguay Round Agreements 

(investigation No. 332-353), USITC publication 2790, 

1994, pp. 1-9 to 1-14. 

56 Office of Management and Budget, letter from 

Alice Rivlin to the Speaker of the House of 

Representatives and President of the Senate 

concerning the Balanced Budget and Emergency 

Deficit Control Act of 1985, as amended, Dec. 13, 

1994. 

57 CBO, letter to Congressman John Dingell 

concerning CBO review of H.R. 5110, The Uruguay 

Round Agreements Act of 1994, Oct. 3, 1994, pp. 7; 

and CBO, "How the GATT affects U.S. antidumping 

and countervailing duty policy," Sept. 1994, pp. 85; 

as cited in Congressional Record, vol. 140, No. 149, 

Dec. 1, 1994, p. S 15273. 

58 Trade Reports International Group, 

"Administration loses out on UR budget waiver," 

Washington Trade Daily, May 5, 1994, pp. 1-2; 

"Baucus calls for budget waiver for UR bill," May 20, 

1994, p. 1. 

59 Congressional Record, vol. 140, No. 143, Dec. 

1, 1994, pp. S 15378 to S 15379. 

60 Helen Dewar, "Senate Approves GATT on Big 

Bipartisan Vote," Washington Post, Dec. 2, 1994, p. 

Al 

61 Preparatory Committee for the World Trade 

Organization, "Minutes of Meeting-Held at the 

International Conference Centre, Geneva, on 

December 8, 1995, on the occasion of the 

Implementation Conference," PC/M/10, Dec. 19, 

1994. 

62 Thus, because the WTO Agreement entered 

into force January 1, 1995, the legal instruments 

supporting GATT 1947 will end before January 1, 

1996, or January 1, 1997, if postponed in light of 

unforeseen circumstances. See GATT, 'The WTO 

enters into force," Focus, No. 113, Dec. 1994, p. 5. 

63 GATT, "The WTO enters into force," Focus, 

No. 113, Dec. 1994, pp. 1, 4. 

64 U.S. Department of State telegram, "United 

States Accepts the WTO Agreement," message 

reference No. 011010, prepared by U.S. Mission, 

Geneva, Dec. 30, 1994. 

65 Ibid. 

66 The Tokyo Round agreements were negotiated 

as nontariff measure codes of conduct, and have 

come to be called codes, such as the Standards 

Code, Subsides Code, Customs Valuation Code, 

Antidumping Code, and Import Licensing Code. 

67 U.S. Department of State telegram, "United 

States Accepts the WTO Agreement," message 

reference No. 011010, prepared by U.S. Mission, 

Geneva, Dec. 30, 1994. Section 101(d) of the URAA 

lists the multilateral and plurilateral agreements that 

the United States accepted as part of the Uruguay 

Round. Concerning the plurilateral agreements with 

voluntary membership, the URAA enacted U.S. 

participation in the Agreement on Government 

Procurement and the International Bovine Meat 

Agreement. The United States is not a signatory to 

the International Dairy Agreement. The United States 

is a signatory to the Agreement on Civil Aircraft, 

although no changes were made to this agreement 

as a result of the Uruguay Round. Office of the 

United States Trade Representative (USTR), Uruguay 

Round - Final Texts of the GATT Uruguay Round 

Agreements Including The Agreement Establishing 

The World Trade Organization As Signed on April 15, 

1994, Marrakesh, Morocco (Washington, DC); URAA 

documents, p. 1318. 

68 U.S. Department of State telegram, "United 

States Accepts the WTO Agreement," message 

reference No. 011010, prepared by U.S. Mission, 

Geneva, Dec. 30, 1994. Under title IV of the Trade 

Act of 1974, as amended, the United States must 

apply discriminatory rates of duty ("column 2" rates) 

to products from certain Communist countries. 

Whereas those countries cited under the legislation 

are generally not GATT members, Romania is a 

GATT member. Thus, the U.S. Government must 

notify the WTO that it has no authority to grant 

nondiscriminatory most-favored-nation (MFN) 

treatment to Romania. 

69 For purposes of the Round, the LLDCs are 

considered to be Benin, Burkina Faso, Burundi, 

Central African Republic, Chad, Gambia, Haiti, 

Lesotho, Madagascar, Malawi, Mali, Mozambique, 

Myanmar, Sierra Leone, Tanzania, Togo, Rwanda, 

Uganda, and Zaire. 

70 U.S. Department of State telegram, "Accession 

to the World Trade Organization," message reference 

No. 068265, prepared by U.S. State Department, 

Washington, DC, Mar. 16, 1994. 

71 Where consensus is defined as meaning no 

objection is voiced when a decision is made. 

72 GATT, "Summary Record of the Meeting - Held 

in the Centre William Rappard, Geneva, on Thursday, 

24 March 1995," CONTRACTING PARTIES Seventh 

Special Session - 24 March 1995, 7SS/SR/1, Apr. 

21, 1995. As part of the understanding to support 

Renato Ruggiero as the first Director-General of the 

WTO and to create a fourth Deputy Director-General 

post, it was widely reported in the media that Mr. 

Ruggiero was to serve a single 4-year term and be 

succeeded by a non-European candidate, in addition 

30 
to which, Kim Chul-su would be chosen to fill the 

newly created post of Deputy Director-General. 

73GATT, "The General Agreement on Trade in 

Services," Focus, No. 107, May 1994, pp. 14-15. 

74The full listing found under GATS article XXIX 

(Annexes) is, in order, (1) Annex on Article II 

Exemptions, (2) Annex on Movement of Natural 

Persons Supplying Services under the Agreement, 

(3) Annex on Air Transport Services, (4) Annex on 

Financial Services, (5) Second Annex on Financial 

Services, (6) Annex on Negotiations on Maritime 

Transport Services, (7) Annex on 

Telecommunications, and (8) Annex on Negotiations 

on Basic Telecommunications. 

75During the Round, key participants—primarily 

the United States and the EU—were unsuccessful in 

their attempts to disentangle the network of bilateral 

agreements that presently regulates all aspects of 

aviation services. As a consequence, air-transport 

services are not covered in general under the GATS 

and no multilateral discussions concerning them took 

place in 1994. 

76"Movement of Natural Persons" refers to the 

temporary admission and stay of foreign nationals 

into the territory of another GATS member as part of 

a business supplying services abroad through the 

temporary assignment or provision of management or 

specialized personnel. As such, the laws of the 

government that grants entry to such personnel do 

not apply to these "natural persons" as regards 

issues of citizenship, permanent residence, or access 

to local employment markets or benefits. 

77Final Act, p. 306. 

78U.S. Department of State telegram, "GATS 

Negotiating Group on Movement of Natural Persons 

Meets," message reference No. 009549, prepared by 

U.S. Mission, Geneva, Nov. 7, 1994. 

79Final Act, p. 410. At the end of June 1995, 

the group agreed to an extension until July 28, 1995, 

to submit improved offers conceming personnel 

movements, following the same extension agreed in 

negotiations on financial services, which some 

participants see as tied to negotiations on the 

movement of natural persons. 

80The annex lists a dozen banking and other 

financial services that are covered, including deposit 

acceptance and lending; money and payments 

transmission, such as credit cards; trading in 

monetary instruments, securities, foreign exchange, 

etc.; asset and portfolio management; financial 

settlement and clearing services; and advisory 

services, such as investment research, advice, and 

so forth. Insurance and their related services include 

direct insurance (life and nonlife), coinsurance, 

reinsurance, retrocession, insurance intermediation 

(such as insurance brokers or agents) and auxiliary 

services such as insurance consultancy, actuarial, 

risk assessment, and claim settlement services. Final 

Act, p. 309. 

81Final Act, p. 411. 

82Final Act, p. 311; and U.S. Department of the 

Treasury, "Financial Services Negotiations in the 

Uruguay Round," National Treatment Study 1994, 

Dec. 1, 1994, p. 95. 

83Treasury, ibid., p. 98. On June 29, 1995, the 

United States announced that it would maintain its 

exemption from MFN obligations concerning trade in 

financial services because certain participants had 

not come forth with sufficiently improved offers. 

However, in an effort to induce other participants to 

stand by the financial services commitments currently 

offered, the EU arranged for improved offers that 

were tendered before July 28, 1995, to be 

considered favorably. 

84U.S. Department of State telegram, "General 

Agreement on Trade in Services: Informal Group on 

Financial Services," message reference No. 008808, 

prepared by U.S. Mission, Geneva, Oct. 14, 1994. 

85USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 29. 

86U.S. Department of State telegram, "General 

Agreement on Trade in Services: Informal Group on 

Financial Services," message reference No. 008808, 

prepared by U.S. Mission, Geneva, Oct. 14, 1994. 

87Final Act, p. 421. 

88These talks involved the EU—which conducted 

negotiations as a single entity—as well as Australia, 

Austria, Finland, New Zealand, Norway, Sweden, 

Switzerland, Turkey, and the United States. Treasury, 

p. 96. Austria, Finland, and Sweden became 

members of the European Union (EU) at the start of 

1995. 

89 USTR, Uruguay Round of Multilateral Trade 

Negotiations Source Book, Feb. 1994, p. E-6. A 

number of countries not party to the understanding 

did, nonetheless, offer more specific commitments in 

their national schedules. 

9°Final Act, pp. 421-424. 

91An exemption separated from the other 

exemptions to be considered in the maritime sector 

was included at the Round's conclusion under the 

GATT 1994. This exemption allows specific 

mandatory legislation concerning the prohibited use, 

sale, or lease of foreign-built vessels for purposes of 

commercial cabotage, which was enacted prior to a 

country becoming a Contracting Party to GATT 1947, 

to continue to be considered in conformity with the 

General Agreement. Section 27 of the U.S. Merchant 

Marine Act of 1920, known as the Jones Act, states 

that no vessel is to transport merchandise by water 

between U.S. ports except in U.S. registered and 

built vessels that are predominately owned and 

crewed by U.S. citizens. Thus, the U.S. Jones Act is 

"grandfathered" under GATT 1994 as its 1920 

creation predates the original GATT 1947. 

92U.S. Department of State telegram, "Meeting 

of Negotiating Group Maritime Transport Services 

(NGMTS), October 17, 1994," message reference No. 

008924, prepared by U.S. Mission, Geneva, Oct. 18, 

1994. 

93The Annex on Telecommunications ensures 

that members have agreed to provide access to and 

use of public telecommunications transport networks 

and services to GATS signatories that require the 

use of the public network to supply their service. 

This annex also stipulates that foreign firms may 

attach the equipment of their choice to the network 

or may use customized software in the process of 

providing its services. USTR, Uruguay Round of 

31 
Multilateral Trade Negotiations Source Book, Feb. 

1994, p. E-10. 

94However, not all suppliers are agreed on 

which services belong to which group. Another 

difference in scope is illustrated by the U.S. term 

"enhanced services" generally describing the same 

computer-based telecommunications services that 

other countries call "valued-added 

telecommunications services" (VAS), but which is a 

broader term than VAS for most countries. 

95Final Act, p. 414. 

96 A 1982 Department of Justice consent decree 

that initiated the 1984 breakup of AT&T marked a 

major milestone in the liberalization of competition in 

the U.S. telecommunications market. The EU is 

currently making efforts to deregulate its 

telecommunications networks by 1998. 

97U.S. Department of State telegram, "GATS: 

Negotiating Group on Basic Telecommunications 

Meets," message reference No. 06228, prepared by 

U.S. Mission, Geneva, July 18, 1994. 

98U.S. Department of State telegram, 

"Negotiating Group on Basic Telephony's Third 

Meeting, October 24-26, 1994," message reference 

No. 009523, prepared by U.S. Mission, Geneva, Nov. 

4, 1994; and USTR, 1995 Trade Policy Agenda and 

1994 Annual Report, p. 30. 

99Final Act, p. 291. 

100Ibid., p. 290. 

101 Ibid., p. 415. 

102 Ibid. 

103Ibid. 

104 U.S. Department of State telegram, "Meeting 

of the Subcommittee on Services of the WTO 

Preparatory Committee," message reference No. 

008343, prepared by U.S. Mission, Geneva, Sept. 

28, 1994. 

105 GATT, "Chairman Pays Tribute to the GATT 

on the Eve of the WTO," Focus, No. 113, Dec. 1994, 

p. 2. 

106 USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, pp. 34-35. 

107 GATT, "Dispute Settlement Activity Declines 

as Members Await WTO," Focus, No. 112, Nov. 

1994, p. 4. 

108 GATT, "Panel Established on US Tobacco 

Legislation," Focus, No. 105, Jan.-Feb. 1994, p. 3; 

and GATT, "Argentina Joins Tobacco Panel," Focus, 

No. 106, Mar.-Apr. 1994, p. 2. 

109 A charge placed on flue-cured and burley 

tobacco imports identical to that placed on domestic 

tobacco. 

110 A fee comparable to that levied on domestic 

tobacco for inspection purposes. See GATT, "Swift 

Action on Tobacco Dispute," Focus, No. 111, Oct. 

1994, p. 3; USTR, 1995 Trade Policy Agenda and 

1994 Annual Report, p. 36. 

111 GATT, "Panel Report on EC Banana Import 

Regime Presented," Focus, No. 108, June 1994, p. 

5. For more information, see chapter 4 of this report. 

For a description of the preceding panel on the EU 

banana import regime, see USITC, The Year in 

Trade: OTAP 1993, USITC publication 2769, ch. 1. 

112 GATT, "Second Tuna Panel Presents Report," 

Focus, No. 110, Aug.-Sept. 1994, p. 6. 

113 GATT, "Trade Disputes," Focus, No. 113, Dec. 

1994, p. 8. 

114 GATT, "US Gasoline Standards," Focus, No. 

111, Oct. 1994, p. 3; USTR, 1995 Trade Policy 

Agenda and 1994 Annual Report, p. 36. 

115The panel found the separate fleet accounting 

requirement and the fleet averaging methodology to 

be inconsistent with GATT article III obligations, but 

found that the methodology was aimed primarily at 

fuel conservation that might possibly provide 

justification under the exception for conservation 

measures allowed under GATT art. XX when 

considered in conjunction with the domestic 

consumption restrictions already in place. USTR, 

1995 Trade Policy Agenda and 1994 Annual Report 

(hereafter 1995 Trade Policy), p. 36. 

116 GATT, "Trade Disputes," Focus, No. 113, Dec. 

1994, p. 8. In February 1987, the Council agreed to 

establish a panel at EC request to examine 

Japanese measures affecting imported wines and 

alcoholic beverages. The panel found Japanese 

liquor taxes to be inconsistent with GATT provisions 

relating to discrimination against imported products 

but found that Japanese labeling practices were not. 

117 GATT, "Trade Disputes," Focus, No. 113, Dec. 

1994, p. 8. In April 1991, the GATT Council 

established a panel at Brazil's request to examine 

whether U.S. actions with respect to the imposition of 

countervailing duties on imports of Brazilian 

nonrubber footwear were discriminatory. In February 

1992, the panel report found that the United States 

did not grant Brazil the benefits of an injury 

determination that it was due once it became a 

signatory of the Subsidies Code in 1980. GATT, 

"Brazil Lodges Complaint Against US Countervailing 

Duty on Footwear," Focus, No. 80, Apr. 1991, p. 10. 

118Section 137, H.R. 5110; URAA documents, 

pp. 78-79. 

119Countries receiving extensions in 1994 of 

waivers from MFN obligations while undertaking 

HS-related renegotiations were Argentina, 

Bangladesh, Bolivia, Costa Rica, El Salvador, 

Guatemala, Israel, Jamaica, Mexico, Morocco, 

Nicaragua, Pakistan, Peru, Sri Lanka, Trinidad and 

Tobago, and Venezuela. Members receiving 

extensions of waivers to complete regular art. XXVIII 

renegotiations were Egypt, Malawi, Senegal, Uruguay, 

and Zaire. GATT, "Tariff Matters," Focus, No. 109, 

July 1994, p. 6; USTR, 1995 Trade Policy, pp. 34, 

37. 

1213The 1965 Decision on Differential and More 

Favorable Treatment, Reciprocity and Fuller 

Participation of Developing Countries. 

121USTR, 1995 Trade Policy, p. 37. 

122 GATT, "Tighter GATT Focus on Needs of 

Developing Countries," Focus, No. 112, Nov. 1994, 

p. 8. 

123USTR, 1995 Trade Policy, p. 37; GATT, "BOP 

Consultations with Israel, Poland and Tunisia," Focus, 

32 
No. 110, Aug.-Sept. 1994, p. 7; and GATT, "BOP 

Consultations," Focus, No. 111, Oct. 1994, p. 5. 

124USTR, "The GAIT Working Group on 

Environmental Measures and International Trade," 

The GATT Uruguay Round Agreements: Report on 

Environmental Issues, Aug. 1994, p. 30. 

125 GATT, "Sub-Committee Completes 

Preparatory Work on Trade-Environment Issues," 

Trade and the Environment, No. TE 011, Jan. 6, 

1995, p. 3. 

126 GATT, "Working Parties," Focus, No. 108, 

June 1994, p. 8. 

127For a description of the G-3 Agreement, see 

Thomas Jennings, "G-3 Agreement Closer to Reality," 

International Economic Review (1ER), Jan. 1995, pp. 

10-13; and Thomas Jennings and James Stamps, 

"Chile's Trade Agreements With Latin American 

Partners," IER, Nov. 1994, pp. 9-11. 

128 GATT, "Free Trade Agreements," Focus, No. 

109, July 1994, p. 6. 

128USTR, 1995 Trade Policy, p. 34. Mercosur 

being an agreement entirely among developing 

countries, a number of developing country 

Contracting Parties considered the Committee on 

Trade and Development to be the more appropriate 

review body because it is more familiar with special 

GATT rules afforded to such countries. However, 

because such "special and differential" treatment 

rules are often less stringent than rules applied to 

developed country GATT members, the latter 

countries considered an article XXIV working party 

the more appropriate review body. As a compromise, 

it was agreed that the committee will carry out the 

review but under the standard review terms under 

article XXIV. 

130According to USTR, as of Jan. 31, 1995, 25 

countries were in various stages of accession 

negotiations to either GATT 1947 or the WTO. They 

were Albania, Algeria, Armenia, Belarus, Bulgaria, 

Cambodia, China, Chinese Taipei (Taiwan), Croatia, 

Ecuador, Estonia, Jordan, Latvia, Lithuania, the 

former Yugoslav Republic of Macedonia, Moldova, 

Mongolia, Nepal, Panama, the Russian Federation, 

Saudi Arabia, Sudan, Ukraine, Uzbekistan, and 

Vietnam. USTR, GATT Affairs, "Procedures for 

Accession to the WTO," facsimile transmission dated 

Feb. 8, 1995. 

131 GATT, "Paraguay Becomes 115th Member of 

GATT," press release, GATT/1604, Jan. 6, 1994; 

GATT, "Grenada Becomes 116th Member of GATT," 

press release, GATT/1617, Feb. 16, 1994; GATT, 

"The United Arab Emirates Becomes 117th Member 

of the GATT," press release, GATT/1621, Mar. 9, 

1994; GATT, "Guinea-Bissau Becomes 118th Member 

of the GATT," press release, GATT/1623, Mar. 21, 

1994; GATT, "Saint Kitts and Nevis Becomes 119th 

Member of the GATT," press release, GATT/1624, 

Mar. 25, 1994; GATT, "Liechtenstein Becomes 120th 

Member of the GATT," press release, GATT/1626, 

Mar. 31, 1994; GATT, "Qatar Becomes 121st Member 

of the GATT," press release, GATT/1628, Apr. 11, 

1994; GATT, "Angola Becomes 122nd Member of the 

GATT," press release, GATT/1629, Apr. 11, 1994; 

GATT, "Honduras Becomes 123rd Member of the 

GATT," press release, GATT/1630, Apr. 11, 1994; 

GATT, "Slovenia Becomes 124th Member of the 

GATT," press release, GATT/1650, Oct. 10, 1994; 

GATT, "The Republic of Guinea Becomes 125th 

Member of the GATT," press release, GATT/1661, 

Dec. 13, 1994; GATT, "Admission of Djibouti as a 

Contracting Party - Certification by the 

Director-General," L/7609, Dec. 21, 1994; GATT, 

"Admission of Papua New Guinea as a Contracting 

Party - Certification by the Director-General," L/7610, 

Dec. 22, 1994; and GATT, "Admission of Solomon 

Islands as a Contracting Party - Certification by the 

Director-General," U7607, Dec. 28, 1994. 

132GATT, "Accession Working Parties," Focus, 

No. 109, July 1994, p. 6; and USTR, GATT Affairs, 

"Procedures for Accession to the WTO," facsimile 

transmission dated Feb. 8, 1995, 6 pp.; USTR, 1995 

Trade Policy, p. 35. 

133For further information, including 1994 

developments, see the section on China in chapter 4 

of this report. 

134GATT, "China WP Begins Discussions on 

Protocol Elements," Focus, No. 109, July 1994, p. 3. 

135USTR, 1995 Trade Policy, p. 39. 

138GATT, "Antidumping, Subsidies Committees 

Consider New Panel Reports," Focus, No. 98, Apr. 

1993, p. 8. 

137The 1993 panel regarding U.S. countervailing 

duties on certain hot-rolled lead and bismuth carbon 

steel products from France, Germany, and the United 

Kingdom, requested by the EU, continued its work in 

1994. 

138USTR, 1995 Trade Policy, p. 38. 

138Ibid. 

140 Ibid. 

141 Ibid. 

142Ibid., pp. 38-39. 

143U.S. Department of State telegram, "GATT 

Aircraft Code Committee Meeting, October 21, 1994," 

message reference No. 009338, prepared by U.S. 

Mission, Geneva, Nov. 1, 1994. 

144Ibid. For further detail concerning negotiations 

on trade in civil aircraft, see USITC, OTAP 1993, 

USITC publication 2769, pp. 45-47. 

33 

CHAPTER 2 

Regional Trade Activities 

Regional trade initiatives were an important 

component of U.S. trade policy in 1994. The United 

States played an active role in the multifaceted work of 

the Asia-Pacific Economic Cooperation forum. A 

U.S.-initiated meeting among leaders in the Western 

Hemisphere prominently featured discussion of trade 

and other economic issues. The North American 

Free-Trade Agreement (NAFTA) entered into effect on 

January 1, 1994, serving as the primary U.S. vehicle 

for the conduct of trade relations with Mexico and 

Canada. Activities in all three regions resulted in 

commitments to further liberalize trade and investment. 

A review of 1994 developments follows. 

Asia-Pacific Economic 

Cooperation 

Asia-Pacific Economic Cooperation (APEC) is 

an important organization for promoting open trade 

and economic cooperation in the Asia-Pacific region. 

Established in 1989 as an informal, consultative forum, 

the APEC 18 members are some of the most dynamic 

and fastest growing economies in the world. 1They are 

also significant U.S. trading partners, with U.S.-APEC 

trade totaling $747.8 billion in 1994, including imports 

of $447.4 billion (or 68 percent of total U.S. imports) 

and exports of $300.3 billion (or 63 percent of total 

U.S. exports). 2The main APEC accomplishment in 

1994 was setting a long-term goal of achieving free 

and open trade in the Asia-Pacific region by the year 

2020. A variety of trade facilitation measures also 

progressed. The following section provides 

background information and a summary of 1994 

developments. 

Overview 

APEC operates by consensus and its decisions are 

nonbinding. The APEC Chair rotates annually among 

the members and is responsible for hosting the annual 

Ministerial conference, a meeting of foreign and 

economic Ministers. APEC senior officials meet 

regularly between the Ministerials to review APEC 

progress and to implement the decisions of the 

Ministers. The senior officials also oversee and 

coordinate, with the approval of the Ministers, the 

budgets and work programs of the 10 APEC 

committees and working groups. Annual informal 

meetings of APEC economic leaders were instituted in 

1993 at President Clinton's suggestion. 

During 1994, there was a broadening and 

deepening of APEC activities as evidenced by an 

increase in the number and scope of meetings, 

proposals, and programs. For example, in addition to 

four senior officials meetings (SOMs) and a sixth 

annual Ministerial meeting, a series of meetings took 

place involving APEC Ministers in charge of finance, 

environment, trade, and small and medium enterprises. 

In general, APEC work during 1994 centered on 

ongoing working group efforts and the 1993 Leaders' 

initiatives, which identified several priorities for APEC 

action in the ensuing year, including 3— 

• To expand the economic dialog; 

• To advance global and regional trade and 

investment liberalization; 

• To involve to a greater degree the 

business sector in APEC activities; 

• To establish education cooperation; 

• To develop cooperation among small and 

medium enterprises (SMEs); and 

• To build upon shared goals in APEC, 

which include improving training and 

skills development, advanced 

telecommunications and transportation 

systems, and enhanced protection of the 

environment. 

Indonesia, in its role as chair of APEC in 1994, 

identified four priority areas for APEC during the year: 

human resources development, improvement of small 

and medium enterprises, infrastructure development, 

and business/private sector cooperation. Progress was 

made on each of these issues during 1994. 4 

35 
Working Group and Committee 

Activity 

The 10 technically oriented APEC working groups 

focused their activities in 1994 on a wide range of 

economic cooperation issues. In addition to trade 

promotion and trade and investment data, the groups 

addressed industrial science and technology, human 

resources development, regional energy cooperation, 

marine resource conservation, telecommunications, 

transportation, tourism, and fisheries. 5The Committee 

on Trade and Investment (CTI), formally established at 

the 1993 Ministerial, is the primary vehicle for 

advancing APEC trade-related work. 

One of the most contentious issues addressed 

during 1994 by the CTI was developing a set of 

nonbinding investment principles for consideration by 

the senior officials and the Ministers, as laid out in the 

1993 Leaders' initiatives. An Investment Experts 

Group was established under CTI auspices to formulate 

the principles. Attaining agreement on three of the 

proposed principles—regarding national treatment, 

repatriation of profits, and performance 

requirements—was particularly difficult. A consensus 

was ultimately reached among APEC senior officials 

on an investment code including 12 principles. 

Nevertheless, the United States expressed serious 

reservations about the principles being proposed. Its 

concerns were twofold. First, the principles were 

weaker than those accepted by the United States in 

more formal agreements such as Bilateral Investment 

Treaties, the NAFTA, and the Uruguay Round 

Agreement on trade-related investment measures. 6 

 Second, the United States maintained that progress on 

implementing the principles would be difficult to 

gauge, because, as drafted, they did not set clear 

standards or objectives, but rather call for best efforts 

to move in certain general directions. 

Following pressures from the other APEC 

members, the United States eventually agreed to the set 

of 12 nonbinding principles along with the other 

Ministers, considering them a useful first step in an 

ongoing APEC dialogue on investment policy. The 

principles cover such matters as—transparency, 

nondiscrimination between sources of investment, 

national treatment, investment incentives, performance 

requirements, expropriation and compensation, 

repatriation and convertibility, settlement of disputes, 

entry and sojourn of personnel, avoidance of double 

taxation, investor behavior, and removal of barriers to 

capital exports. 

In addition to investment, the CTI pursued a 

variety of trade facilitation measures. These efforts aim 

to simplify, harmonize, and increase the transparency 

of rules and rule making and aim to lay the foundation 

for additional liberalization of trade and capital flows. 

The CTI Ad Hoc Standards Experts Group launched 

pilot studies on aligning standards by APEC members 

in several sectors and agreed to initiate discussions on 

mutual recognition of testing and other conformity 

assessment procedures.? The Ad Hoc Customs 

Procedures Group initiated a pilot project on paperless 

processing of air-express shipments. In addition, the 

CTI published a survey of APEC members' investment 

regimes. 

Efforts by APEC groups other than the CTI during 

1994 also should facilitate trade. The Working Group 

on Trade and Investment Data has made efforts in 1994 

to develop a harmonized merchandise trade database 

for all APEC members and on the development of 

harmonized APEC-wide published data on services 

trade and on flows in foreign direct investment. 8The 

Working Group on Trade Promotion's activities during 

1994 included a seminar/training course on trade 

promotion, the first APEC trade fair, the establishment 

of the Asia-Pacific business network (APB-Net), and 

the collection of data useful to commercial business. 

Among the trade-related sectoral initiatives that 

progressed during 1994 were the development of 

guidelines for regional harmonization of equipment 

certifications and for trade in international value-added 

network services, that were generated by the Working 

Group on Telecommunications and approved by 

Ministers at their November 1994 meeting. 9Ministers 

also congratulated the Transportation Working Group 

for its work on regional transportation congestion 

points and for the completion of a survey on regional 

transport systems and services that could eventually 

result in upgrading the APEC transportation sector. 1 ° 

The Fisheries Working Group focused much of its 

efforts in 1994 on developing "areas of cooperation in 

fish harvesting and post-harvesting technologies, 

seafood trade, health and quality control for fisheries 

products, and aquaculture training and development." 11 

Trade and Finance Ministers' 

Meetings 

When APEC Trade Ministers met in Jakarta on 

October 6, they assessed the outcome of the Uruguay 

Round, its implications for the Asia-Pacific region, and 

what actions might be appropriate to promote further 

regional and global trade liberalization. They requested 

that by November 1995, APEC supply them with a 

listing of all regional trade barriers that remain after 

36 
the Uruguay Round, along with recommendations for 

their elimination In addition, they requested a report 

presenting options for a possible APEC dispute 

mediation mechanism by the same date. As noted 

below, both tasks have since been assigned to the 

Committee on Trade and Investment. 

At their March 1994 meeting, APEC Finance 

Ministers agreed to further discuss areas of mutual 

interest, such as recent economic developments, capital 

flows, and financial market issues. They also instituted 

a plan to study regional capitalization, infrastructure 

financing, and bank supervision. Future meetings of 

Finance Deputies and Ministers were slated for March 

and April 1995, respectively. 

Annual Ministerial Meeting 

The sixth APEC Ministerial meeting was held in 

Jakarta on November 11-12. The meeting was chaired 

by Minister Hartaro, Coordinating Minister for 

Industry and Trade of the Republic of Indonesia and 

leader of Indonesia's delegation. The APEC Ministers 

endorsed the set of 12 nonbinding investment 

principles prepared by the CTI and asked the 

Committee to continue work on investment issues over 

the coming year. They also endorsed turning two ad 

hoc CTI groups—those addressing customs procedures 

and standards—into permanent subcommittees. 

In order to strengthen APEC work on economic 

policy issues, the Ministers agreed to transform the 

current Ad Hoc Economic Trends and Issues 

Committee into a permanent Economic Committee to 

discuss growth strategies, capital flows, and other 

macroeconomic issues. Ministers noted that the 

Economic Committee's 1995 work plan will initially 

focus on the Committee's ongoing activities of 

preparing an annual economic outlook, analyzing the 

so-called 3Es project, 12examining the links between 

privatization and liberalization, and studying the 

foreign direct investment trends of the region, 

industrial-technological linkages, and exchange-rate 

movements. 

In an apparent reference to China and Taiwan, the 

Ministers expressed strong support for the completion 

of negotiations to enable non-General Agreement on 

Tariffs and Trade (GATT) members of APEC to 

become original members of the World Trade 

Organization (WTO). They affirmed that "these 

negotiations should be based on substantive and 

commercially meaningful commitments." 13 

With regard to other issues of importance to the 

United States, the Ministers endorsed a U.S. proposal 

to create an ongoing business/private sector advisory 

body as recommended unanimously by the Pacific 

Basin Forum (PBF). 14Ministers welcomed U.S. 

proposals for a meeting of Transport Ministers in 1995 

and urged the Working Group on Telecommunications 

and other relevant fora to study the Global Information 

Infrastructure project. 15 

APEC Leaders' Meeting 

On November 15, Indonesia's President Soeharto 

hosted the second informal meeting of APEC Leaders 

in Bogor, Indonesia. APEC Leaders assessed the steps 

taken during 1994 to further the goals articulated at 

their last informal meeting, notably their commitment 

in the Blake Island Vision Statement to "continue to 

reduce barriers to trade and investment to enable 

goods, services, and capital to flow freely among our 

economies." 16At the conclusion of their 1994 

meeting, APEC Leaders issued the Bogor Declaration 

of Common Resolve, which laid out APEC plans for 

future economic cooperation and committed APEC to 

the long-term goal of achieving GATT-consistent free 

and open trade and investment in the Asia-Pacific 

region by 2020. 17Even though the Bogor Declaration 

is nonbinding, it represents the first step towards the 

creation of the world's largest free-trade area. 

The Bogor Declaration set two different deadlines 

for attaining free trade: 2010 for developed economies 

and 2020 for developing economies. The declaration 

did not identify which countries would be considered 

developed or developing, or the criteria on which such 

a distinction would be made. The phased-in timetable 

reflected the strong preferences of developing Asian 

economies for recognition of the diverse levels of 

economic development within APEC. 

The differential timetable raised some concern that 

the United States could be disadvantaged if it is 

required to open its market fully before barriers are 

eliminated elsewhere in the Asia-Pacific region. 

However, in the Bogor Declaration, APEC Leaders 

stated that "we will start our concerted liberalization 

process from the very date of this statement." 18The 

United States has maintained that, regardless of the end 

point, all APEC members should contribute from the 

outset to realizing the goal of open trade and 

investment in the region and receive benefits 

commensurate with their contribution. 19 

The actual blueprint for liberalization is to be 

developed during 1995, taking into account the 

recommendations on how to realize the APEC 

long-term vision through trade facilitation, trade 

liberalization, and technical cooperation that were 

made by the Eminent Persons Group (EPG) 2° and 

presented to Ministers earlier in the year, as well as the 

37 
PBF October 1994 recommendations. A core group of 

senior officials, under Japan's leadership as the chair of 

APEC in 1995, are expected to steer APEC efforts to 

prepare detailed proposals for implementing the Bogor 

Declaration's free-trade goals. The "action plan" will 

be considered by the APEC Leaders at their next 

meeting in Osaka in November 1995. 

Developing the plan is expected to be difficult 

given the concerns that some APEC members have 

expressed over further liberalization of such sensitive 

sectors as agriculture and textiles, which will already 

undergo substantial adjustment as a result of the 

Uruguay Round. A "building block" approach was 

identified as one method for beginning the process of 

liberalization. Under this approach, action on such 

noncontroversial subjects as customs procedures and 

technical standards, which are already being addressed 

within the committees and working groups, would 

form the basis for progress in other areas. The Clinton 

administration has pledged to "consult closely with 

Congress and the U.S. business community as it works 

with our APEC partners to develop a plan that 

addresses the widest possible range of bathers to the 

free flow of goods, services, and capital." 21 

The Bogor Declaration also expanded on many 

themes of the 1993 Leaders' Initiatives and decisions 

taken by APEC Ministers. APEC Leaders "reaffirmed 

the importance of the ratification of early establishment 

of the WTO and full implementation of Uruguay 

Round commitments."22The leaders committed to 

further strengthen the multilateral trading system, 

emphasizing their willingness to accelerate 

implementation of their Uruguay Round commitments. 

APEC members also reiterated their opposition to 

creating an inward-looking trading bloc, agreeing 

instead to not only reduce bathers among APEC 

members, but between APEC economies and 

non-APEC economies. 23APEC thus continues to 

embrace the concept of "open regionalism," a term the 

U.S. administration defines as referring to plurilateral 

trade arrangements that (a) are fully consistent with 

GATT requirements, notably that such arrangements do 

not increase average external bathers, (b) are open to 

new members, and (c) permit additional unilateral or 

reciprocal liberalization by participants. 24In addition, 

the Declaration of Common Resolve includes- 

• A commitment to continued unilateral 

liberalization by APEC members; 

• A standstill commitment in which APEC 

members agree to 'endeavor to refrain 

from using measures which would have 

the effect of increasing levels of 

protection' ; and 

• A commitment to accelerate APEC trade 

facilitation programs and investment 

efforts. 25 

The leaders requested that APEC Ministers and 

senior officials submit trade facilitation proposals on 

customs, standards, investment principles, and 

impediments to market access for them to consider at 

their 1995 meeting. 26These issues are currently being 

addressed by the CTI whose work program for 1995 

includes the following: 

• Reviewing regional trade arrangements; 

• Reporting on deregulation initiatives by 

member economies; 

• Developing proposals on dispute mediation; 

• Conducting workshops to promote 

effective Uruguay Round implementation 

by APEC economies; 

• Cataloguing impediments to trade in the 

region; 

• Encouraging investment; 

• Supporting trade by small and medium 

sized enterprises; 

• Completing the pilot phase of the tariff 

database and manual project; 

• Simplifying customs procedures; 

• Harmonizing standards and conformance 

procedures; and 

• Examining the role of competition policy 

in trade.27 

The United States also received support from the 

leaders for the development of APEC study centers 

that would link APEC universities (12 in the United 

States so far) together through electronic communications networks. 

Future Issues and Directions 

Several issues relating to membership and 

organization will confront APEC in the medium term. 

Two years remain on the moratorium on membership 

adopted in 1993. However, the organization has 

continued to receive requests for either full 

membership or participation in APEC working groups 

38 
as nonmembers. 28At their 1994 meeting, APEC 

Ministers charged senior officials with working out 

criteria and principles to be used in considering such 

applications for submission in the 1995 APEC 

Ministerial. In addition, some countries and groups 

such as Colombia, Vietnam, and the European Union 

(EU) have requested observer status. APEC members, 

under increasing pressures from nonmembers, will 

continue to grapple with how far and wide, 

geographically, to expand membership, without 

diluting the organization's regional focus. 

Another issue with implications for the future 

direction of APEC is the size and scope of secretariat 

activities. So far, a majority of APEC Ministers have 

emphasized their strong preference for a small, simple 

secretariat with most of the substantive work being 

carried out by the working groups or APEC members. 

However, as APEC work and projects multiply, the 

differences in perspectives between the developed 

economies, which increasingly would like to see more 

institutionalization, and the developing economies, 

which would prefer APEC to remain informally 

structured, could become more pronounced. 

At their November 11-12 Ministerial, APEC 

Ministers acknowledged that the original agreement 

establishing the APEC secretariat was coming to an 

end. The Ministers requested that senior officials 

examine the secretariat's current arrangement and 

functions to determine if it was fulfilling APEC's ever 

changing needs, and present suggestions for new 

arrangements at the next Ministerial Meeting. 

Ministers also sanctioned the creation of a special task 

force, to review staffing and funding of the secretariat, 

that will report to the next Ministerial. 29 

Finally, the diverse levels of economic 

development and differences in political systems 

within APEC are bound to become more visible, 

especially as the difficult work on liberalization of 

trade and investment progresses. Nontrade issues such 

as technology transfer, environment, development 

assistance, infrastructure development (especially 

information infrastructure), energy, and other topics 

may also highlight the North-South differences within 

APEC. 

Summit of the Americas 

Introduction 

The United States hosted the Summit of the 

Americas in Miami, FL, December 9-11, 1994—the 

first time inter-American leaders had so convened in 

more than 25 years. In attendance were the 34 

democratically elected Presidents and Prime Ministers 

of North America, Central America, South America, 

and the Caribbean. Summit participants pledged to 

complete negotiations for a Hemispheric free-trade 

area—the Free-Trade Area of the Americas 

(FTAA)—by 2005. In addition, the United States, 

Canada, and Mexico formally invited Chile to join 

NAFTA, and agreed to begin negotiations to that end in 

early 1995. 

The Western Hemisphere currently accounts for 

nearly two-fifths of the market for U.S. merchandise 

exports and represents the source for nearly one-third 

of U.S. imports of goods. U.S. trade with Latin 

America30has increased significantly in recent years 

as those countries have stabilized their economies and 

begun to lift longstanding barriers to trade and 

investment. Latin America's merchandise trade with 

the United States totaled $77.2 billion in 1994, up 12 

percent from 1993. The largest U.S. trading partners in 

Latin America in terms of two-way trade during 1994 

were Brazil ($16.5 billion), Venezuela ($11.8 billion), 

Colombia ($6.9 billion), Argentina ($5.9 billion), the 

Dominican Republic ($5.8 billion), and Chile ($4.5 

billion). U.S. exports to the region totaled $39.5 billion 

in 1994, up nearly 13 percent from $35.0 billion in 

1993.31 

Key developments during 1994 leading up to the 

Summit of the Americas and an overview of the 

summit plans for the FTAA and for Chile's entry into 

NAFTA are discussed below. 

Pre-Summit Developments 

In signing the NAFTA implementation legislation 

on December 8, 1993, President Clinton called for an 

economic summit of the Hemisphere's leaders to "plan 

how to extend the benefits of trade to the emerging 

market democracies of all the Americas." 32On March 

11, 1994, President Clinton formally announced the 

U.S. intention to host the Summit of the Americas in 

early December 1994 and to address two themes: 

"first, how to strengthen our democracies, defend them 

collectively, and improve our governance; second, how 

to promote economic growth while advancing a 

strategy of sustainable development that protects the 

environment and alleviates poverty." 33 

As plans for the summit developed, the Clinton 

administration advanced its views of future 

Hemispheric economic relations by espousing the idea 

of open regionalism34and by issuing two reports 

prepared for the Congress. By endorsing open 

regionalism, the Clinton administration aimed to create 

39 
"a hemisphere tightly intertwined through commerce 

and capital flows, yet open to competition with the rest 

of the world."35Administration officials considered 

the emergence of market-opening and trade-creating 

subregional trade agreements in the Hemisphere as a 

favorable development, describing such agreements as 

"building blocks" for expanding trade. 36 

Section 108 of the NAFTA implementing 

legislation required the administration to produce two 

reports for the Congress in 1994 on possible extension 

of NAFTA to other countries. The first report, Report 

to the President and the Congress on Significant 

Market Opening, was prepared by the United States 

Trade Representative (USTR) and submitted to the 

President and the Congress on May 1, 1994. It 

provided, on a country-by-country basis, information 

on "significant market opening" worldwide. The report 

singled out Chile as a "regional leader in long term 

macroeconomic stabilization." Furthermore, it stated 

that "the United States is committed to a free-trade 

arrangement with Chile." The second report, 

Recommendations of Future Free Trade Area 

Negotiations, was prepared by the President and 

submitted to the Congress on July 1, 1994. That report 

stated that "other than Chile, the administration is not 

now prepared to name specific countries as candidates 

for future free trade area agreements." 

President Clinton's March 1994 announcement of 

the Summit of the Americas launched activity in 

several arenas to develop a summit agenda. The White 

House, the National Security Council, and the National 

Economic Council had lead roles in summit 

preparations. U.S. officials conducted two rounds of 

consultations with officials of other countries in the 

Hemisphere during spring and fall 1994 before 

finalizing the summit agenda. Starting on July 20, 

1994, the House Foreign Affairs Subcommittee on 

Western Hemisphere Affairs held a series of hearings 

on trade and economic issues in preparation for the 

summit. 

The two largest hemispheric regional 

organizations, the Inter-American Development Bank 

(IDB) and the Organization of American States (OAS), 

along with numerous private- and public-sector 

organizations, sponsored conferences and working 

group meetings during the runup to the Miami summit. 

In September 1994, the IDB, the OAS, and the United 

Nations Economic Commission for Latin America and 

the Caribbean (ECLAC) released a report on 

Hemispheric free trade. 37To achieve Hemispheric 

economic integration, the report recommended either 

converging and widening existing subregional 

agreements or allowing the members of subregional 

agreements to accede to NAFTA as a group. 

Anticipating that the OAS would have a prominent role 

in implementing any goals announced at the summit, 

Vice President Gore and OAS Secretary General Cesar 

Gaviria signed the OAS Headquarters Agreement on 

November 17, 1994. The agreement aimed to 

strengthen cooperation between the United States and 

the OAS by underscoring a common commitment to 

reduce trade barriers, strengthen democratic 

institutions, improve health and education, and manage 

natural resources wisely within the Hemisphere. 38 

U.S. preparation for the summit was affected by 

delays in the legislative approval of the GATT 

Uruguay Round implementing bill and debate over 

renewed fast-track negotiating authority. 39The 

administration's proposal extending fast-track 

negotiating authority originally was included in the 

draft House and the Senate versions of the GATT 

Uruguay Round implementing legislation (H.R. 5110 

and S. 2467). However, controversy over the proposal, 

particularly the inclusion of labor and environmental 

negotiating objectives within the ambit of the authority, 

led the Clinton administration to drop the request for 

fast-track authority on September 13, 1994, in order to 

expedite passage of the Uruguay Round bill. This was 

viewed as a setback by some proponents of a 

Hemispheric free-trade agreement, who had come to 

view renewal of fast-track authority before the summit 

as a signal of U.S. commitment to enter into serious 

negotiations. Moreover, they were concerned that the 

failure to renew would undercut any invitations to join 

NAFTA that the United States, Canada, and Mexico 

might extend during the summit. 4° 

Based on consultations with other invited 

participants, the Clinton administration finalized the 

agenda for the Summit of the Americas in late 

September 1994. The three broad themes established 

were as follows: 

• Making democracy work: reinventing 

government to institutionalize 

representative, transparent, and 

responsive democratic government; 

• Making democracy prosper: 

Hemispheric economic integration to 

maximize economic potential, promote 

greater openness in markets and capital 

movements, and to sustain and extend the 

benefits of growth; and 

• Making democracy endure: sustainable 

development by alleviating poverty and 

raising standards of health and 

education.41 

40 
The Summit 

The 1994 Summit of the Americas was the first 

meeting of the Hemisphere's leaders since a 1967 

summit held in Punta del Este, Uruguay. Unlike the 

situation in 1967, the 34 Western Hemisphere leaders 

in attendance at the Summit of the Americas all were 

democratically elected. Cuba was the only country in 

the Hemisphere not represented at the Miami summit 

The focal point of the Summit of the Americas was 

the signing, on December 11, 1994, of a Declaration of 

Principles by all 34 summit heads of state. In the 

Declaration, signatories "resolve to begin immediately 

to construct the Free Trade Area of the Americas 

(FTAA) in which barriers to trade and investment will 

be progressively eliminated, . . . to conclude the 

negotiations of the Free Trade Area of the Americas no 

later than 2005, and agree that concrete progress 

toward the attainment of this objective will be made by 

the end of this century." 42The summit participants 

drafted a "Plan of Action" that schedules the 

Hemisphere's Trade Ministers to convene in June 1995 

to draft a more complete plan for FTAA negotiations. 

USTR Michael Kantor announced that the United 

States will host such a meeting in Denver, CO, on June 

30, 1995.43Another Ministerial convention is 

scheduled for March 1996, when the date will be set 

for the next summit meeting of the Hemisphere's heads 

of state. Signatories also pledged to keep their policies 

consistent with the provisions of the GATT/WTO, to 

refrain from erecting bathers to nations not included in 

the FTAA, and to avoid "disguised restrictions" on 

trade as economic integration and free trade in the 

Hemisphere are implemented. 

In a separate joint statement also released on 

December 11, 1994, President Clinton, Prime Minister 

Jean Cretien of Canada, President Eduardo Frei of 

Chile, and President Ernesto Zedillo of Mexico stated 

their intention to begin negotiations for Chile to accede 

to NAFTA.44The joint statement also outlined the 

initial schedule for consultations among NAFTA 

partners and established mileposts for negotiating 

Chilean accession. Canadian, Mexican, and U.S. 

representatives met in Mexico City on December 20, 

1994, to begin drafting criteria for Chilean admission 

into NAFTA.45According to the December 11, 1994, 

joint statement, the Trade Ministers of the NAFTA 

countries are to review the preparatory work on 

Chilean accession by May 31, 1995. Full accession 

negotiations are to occur "expeditiously thereafter," 

although the joint statement establishes no timetable 

for accession to be implemented. 

The North American 

Free-Trade Agreement 

The North American Free-Trade Agreement 

(NAFTA) marked its first year of operation in 1994. 

NAFTA's entry into force resulted in the immediate 

elimination of duties on about one-half of U.S. exports 

to Mexico in terms of value and the launch of 

progressive reductions in remaining tariffs over a 

15-year period. Nontariff barriers to trade in goods and 

impediments to services and foreign direct investment 

also started to come down. NAFTA was accompanied 

by agreements on labor and the environment, as well as 

efforts to expand cooperation on transportation issues 

of mutual interest. 

NAFTA's first year was marked by vigorous trade 

and investment expansion, but some friction as 

progress on implementing NAFTA-related commitments proved fitful and frustration over technical 

obstacles to trade grew. Much of 1994 policy activity 

was devoted to establishing NAFTA-related institutions and resolving startup difficulties. Nevertheless, 

NAFTA appears to have served as a vehicle for 

governmental cooperation on a variety of regulatory 

matters and provided a valuable context for resolving 

both new and long-standing problems. The three 

NAFTA partners actively began to consider ways to 

expand their special trading relationship to other 

countries in the Western Hemisphere. Other efforts to 

address the pact's effect on third countries were also 

made. A survey of developments in each area follows. 

Overview 

The rapid expansion of trade among NAFTA 

signatories in its inaugural year was consistent with 

recent trade patterns and testimony to the continued 

integration of the economy of the United States with 

that of Mexico and Canada. 46U.S. exports to Mexico 

grew at twice the rate of U.S. exports to other markets 

(though at a somewhat slower pace than Mexico's 

overall imports) and Mexico's exports to the United 

States rose slightly faster than its exports to the rest of 

the world. Mexico's trade with Canada, meanwhile, 

expanded at an even faster clip, though from a much 

smaller base. 47U.S.-Mexico trade in automobiles and 

parts, electronics, consumer goods, and agricultural 

commodities expanded vigorously, as did the number 

of successful joint ventures among North American 

firms.48NAFTA appears to have helped Mexico to 

attract foreign direct investment for much of 1994, 

particularly from Europe and Asia, even in the face of 

unsettling domestic political and economic 

41 
developments that adversely affected inflows of 

portfolio capital. (For more details about Mexico's 

trade, investment, and economic performance in 1994, 

see chapter 4.) 

Despite some reports to the contrary, 49the "good 

news" about the first NAFTA year was widely 

heralded. In a statement marking the anniversary of 

congressional passage of the accord, Ambassador 

Kantor declared that "export expansion to Mexico in 

1994 alone has supported 130,000 export-related jobs 

in the U.S. economy—and we know these jobs pay 

higher than average wages." 50Noting that U.S. 

exports to Mexico and Mexico's exports to the United 

States were both rising, President Clinton said of 

NAFTA, "It's been a good deal for us and a good deal 

for them. There has been no 'giant sucking sound,' 

except for American goods crossing the border." 51 

 The President's Council of Economic Advisors, 

meanwhile, noted that U.S. gains from NAFTA include 

an improved "ability to specialize and compete more 

effectively in world markets" and increased 

opportunities for U.S. firms as Mexico develops. 52 

Figures on the number of workers applying for 

U.S. NAFTA-related adjustment assistance suggest 

that,53if the Commerce Department's estimates are 

accurate,54the jobs supported by NAFTA-induced 

exports were far higher than the number of jobs lost to 

competition with Mexico and Canada during NAFTA's 

inaugural year (although there is reason to believe that 

some displaced workers chose to apply for other 

adjustment programs rather than the NAFTA 

Transitional Adjustment Assistance program). 55 

Even with overall trade and job gains, events 

conspired to bring divisions over NAFTA to the 

surface by the year's end. Other aspects of the job 

picture were a primary focus of such debate. 56Using a 

disputed methodology that looked at both imports and 

exports,57and netted out re-exports, a staff study by 

the Joint Economic Committee prepared for one of its 

members argued in late November that during 

NAFTA's first 9 months, its impact on employment had 

"been, at best, a wash." 58House Majority Leader 

Richard Gephardt lamented the fact that U.S. imports 

from Mexico had grown faster than U.S. exports and 

that some U.S. workers had lost jobs to competition 

with NAFTA partners. 59Economic events in Mexico 

fueled such arguments, when, less than a month after 

the anniversary of NAFTA passage, newly sworn-in 

President Ernesto Zedillo was forced to abandon the 

peso's official rate of exchange for the dollar in light of 

the country's precariously low foreign exchange 

reserves and widening current account deficit (see 

chapter 4 for details). 

In January 1995 several members of the U.S. 

House of Representatives introduced legislation to 

require U.S. withdrawal from NAFTA. 6° No hearings 

have been held on the bill. The case for withdrawal 

was weakened when Mexico announced on February 

28, 1995, that it would impose tariffs on a small 

number of selected imports from countries with which 

it has no free-trade agreement up to the levels it had 

bound in the Uruguay Round, and seek to negotiate 

bilateral quotas on textiles and apparel. Both steps 

were part of a larger, apparently successful, effort to 

stabilize the peso on foreign-exchange markets (see 

chapter 4 for details). 

Before the peso crisis, a variety of developments 

had already raised tensions among the three NAFTA 

parties. A long series of technical problems and 

apparent lapses in applying the agreement, mostly 

involving Mexico, arose in 1994, disrupting trade and 

causing frustration to U.S. businesses. 61U.S. and 

Canadian negotiators spent much of 1994 seeking to 

resolve long-standing disputes over commodities such 

as lumber, wheat, and dairy products, and began 

wrangling over proposed Canadian restrictions on U.S. 

broadcasters and magazines. 62Mexico objected to 

several U.S. actions such as the imposition of 

local-content labeling requirements for automobiles, a 

continued embargo on Mexican tuna in accordance 

with the Marine Mammal Protection Act, dumping 

duties on Mexican cement, and the U.S. request for 

Mexican and Canadian agreement to extensive public 

participation in NAFTA dispute settlement procedures. 

The peso crisis and ensuing policy response have 

raised some concern about the near-term prospects for 

U.S trade relations with Mexico and the rest of the 

Hemisphere. Yet all of the measures announced by 

Mexico thus far to deal with the crisis appear to be 

consistent with NAFTA and with Mexico's other 

international trade obligations. Few of the stabilization 

measures are directly trade-related, and the 

trade-related measures concern a small number of 

consumer nondurable goods (textiles and apparel, 

shoes, and leather goods). Not only do Mexico's 

international obligations appear to have influenced the 

policy response of the Mexican Government in a fairly 

orthodox direction that includes the removal of 

remaining economic distortions, but they appear to 

have provided a more consistent framework for the 

conduct of U.S. trade than would otherwise exist.63 

42 
Implementation of NAFTA 

Commitments 

Much of 1994's NAFTA-related policy activity 

was devoted to establishing the institutions, rules, and 

procedures necessary for NAFTA itself to fully 

function as a legal instrument. 64Doing so involved 

both domestic and cooperative measures by the three 

NAFTA parties.65 

On the cooperative level, Trade Ministers from the 

NAFTA countries met for the first time as the 

Free-Trade Commission on January 14, 1994. Among 

the topics on the agenda were the launching of 

committees and working groups already established 

under NAFTA auspices. The Ministers agreed to 

establish two new committees to ensure effective 

implementation of NAFTA's commitments, one on 

government procurement and another on investment 

and services. Each of the committees and working 

groups are staffed by current government employees. 

Nearly all NAFTA committees and working groups 

began operation in 1994. Those that did not meet in 

1994 had little basis on which to proceed. 66Their 

primary activities during the year were exchanging 

information, setting work plans, and anticipating and 

addressing a variety of technical and administrative 

matters that arose after the agreement's inception. 

The following discussion describes developments 

during 1994 in key aspects of the NAFTA agreement: 

rules of origin, customs administration, marking rules, 

agriculture, technical standards, services, and 

government procurement. 

Rules of Origin 

The NAFTA Working Group on Rules of Origin 

and its Customs Subgroup held numerous meetings in 

1994 in an effort to ensure consistent application of 

NAFTA rules of origin and work out problems 

identified. During 1994, NAFTA rules of origin 

reportedly proved cumbersome to comply with for 

many companies, 67particularly ones where regional 

value-content rules apply. 68In an effort to rectify such 

difficulties, the NAFTA Working Group on Rules of 

Origin is developing changes in NAFTA rules of origin 

for chemicals and chemical products. For certain 

chemicals and chemical products, the working group is 

proposing to replace some value-content rules with the 

change in tariff classification method, which is used for 

most products covered by the agreement. 69 

Meanwhile, preliminary U.S. Customs Service data 

on compliance with NAFTA-origin rules reportedly 

show a very high level of compliance for imports from 

Mexico for which NAFTA preferences are claimed 

(only 2 percent did not comply). About one-fifth of the 

claims for NAFTA preferences from Canada reviewed 

were not in compliance, with some industries having 

particularly high rates of noncompliance. U.S. Customs 

is reportedly working on an "appropriate intervention 

strategy."70 

Customs Administration 

There was some initial confusion among Mexican 

customs officials as to the need for NAFTA certificates 

of origin.71According to NAFTA, certificates of 

origin are only required if NAFTA treatment is 

claimed. Even then, the certificates do not need to be 

presented with every shipment as it clears customs but 

rather must be in the possession of the importer and 

made available when requested by the customs 

administration. Initially, some Mexican customs 

officials were insisting that a NAFTA certificate be 

presented with each shipment. Although this was not 

contrary to NAFTA rules, it was viewed as 

unnecessarily burdensome by U.S. officials. 72The 

U.S. Government has also complained that lack of 

prior notification and differing interpretations of 

regulatory requirements by Mexico pose a problem for 

U.S. exporters. Meanwhile, some Mexican importers 

of U.S. beer, cigarettes, and footwear apparently were 

removed from Mexico's import registry due to lack of 

familiarity with re-registration requirements. 73 

More indirectly related to NAFTA were U.S. 

retailer complaints when they began to suffer side 

effects of Mexican actions taken in the summer of 

1994 to prevent circumvention of dumping duties on 

textiles, apparel, and footwear from China and other 

East Asian suppliers. J.C. Penney, Walmart, and 

K-Mart, who source from the Far East, were among the 

retailers who found it difficult if not impossible to 

comply with the certificate-of-origin requirements 

imposed on non-NAFTA shipments to Mexico, given 

their use of large distribution and storage centers in the 

United States to serve both the U.S. and the Mexican 

markets. (The requirements do not apply to goods 

marked "Made in the U.S.A." or goods that qualify for 

NAFTA tariff preferences and have a NAFTA 

certificate of origin.) 74The National Retail Federation 

proposed an alternate tracking system to Mexico's 

Commerce Ministry, SECOFI, in late October 1994, 75 

 but Mexican authorities reportedly are skeptical that 

the system will reliably prevent transshipments. 76 

U.S. retailers with stores along the U.S. border 

with Mexico complained that disparities in duty-free 

exemptions were diminishing their sales prospects with 

Mexican citizens. 77In a December 1, letter to the 

43 
Senate Appropriations Committee, Ambassador Kantor 

said that cooperation among the three NAFTA customs 

administrations offers "the best prospects for 

successful resolution of such concerns." Previous 

USTR and Customs comparisons pointed out that, 

taken as a whole, Mexico's policy is actually more 

liberal than that of the United States or Canada. In late 

1994, the three NAFTA parties agreed to discuss the 

matter within the context of several trilateral customs 

fora.78 

Marking Rules 

NAFTA's marking rules—which were created for 

use on NAFTA shipments—are used for a variety of 

other customs administration purposes. During the 

NAFTA tariff phaseouts, they are used to determine 

which tariff (the Canada rate or the Mexico rate) 

applies to goods that undergo processing in or have 

inputs from more than one NAFTA country. They also 

are used to establish whether certain textile and 

agricultural products qualify for NAFTA treatment. At 

the Free-Trade Commission meeting on January 14, 

1994, Mexico and Canada took issue with the U.S. 

position that NAFTA does not require that marking 

rules by the three NAFTA parties be uniform. Rather, 

the United States maintained, NAFTA only requires 

that rules be published. 

Mexico and Canada were of the view that the 

marking rules for all three countries should be both 

published and uniform. They were reportedly 

particularly interested in a U.S. commitment to be 

bound by the published rules (even if they were not 

uniform). Canada suggested that the problem would be 

obviated if the three countries voluntarily negotiated 

uniform marking rules. All three countries agreed on 

the desirability of attaining uniform rules. Currently, 

about 5 percent of the rules are not uniform among the 

parties. However, bridging the gaps is viewed as 

difficult. Moreover, the United States continues to 

insist that it needs the flexibility to unilaterally modify 

its marking rules, because the same rules are now 

being applied to all other import programs that require 

a determination of origin to be made. 79 

By the time NAFTA entered into force, the three 

countries had agreed on uniform regulations for 

chapter 4 of NAFTA and uniform standards for chapter 

5. The United States had published its regulations in 

late 1993 as proposed interim rules. Modification of 

the proposed rules became a prime focus of the 

NAFTA Committee on Rules of Origin. By the end of 

1994, the three NAFTA parties reached agreement on a 

set of uniform modifications to the chapter 4 

regulations that will be published verbatim by each 

NAFTA signatory shortly and are slated to become 

effective January 1, 1996. 

Agriculture 

In accordance with NAFTA, Mexican import 

licenses were replaced with tariff rate quotas (TRQs) as 

of January 1, 1994. Despite the elimination of the 

licenses, the United States continues to express several 

concerns about market access as a result of Mexico's 

administration of the new regime, which pertains to a 

variety of agricultural and other goods. 80 

The initial U.S. concern was that for most 

agricultural commodities a mechanism for allocating 

TRQs had not been put in place. Even after the 

allocation procedures were announced, the United 

States continued to be concerned with how Mexico 

allocated quotas. Among the methods Mexico 

employed were holding public auctions for the quota 

rights. U.S. officials expressed concern that auctions 

could add to the cost and uncertainty of doing business 

in Mexico and restrict trade. Mexico explained that it 

viewed auctions as a more transparent and fair 

mechanism for allocating quota rights than a first 

come, first served system. Based on its experience in 

1994, USTR recently stated that "rights to import 

quotas have been auctioned at prices representing 

marginal or insignificant percentages of the goods' 

value."81 

The United States' main objective was ensuring 

that fair and transparently applied opportunities were 

available to fill the TRQs. At a May 10, 1994 meeting, 

Mexico agreed to inform the U.S. Government of 

quota fill rates and quota holders on a timely basis. 

Mexico's TRQ administration was discussed at the 

November 15, 1994, initial meeting of the Committee 

on Agricultural Trade established by NAFTA article 

706. According to U.S. trade data, most 1994 TRQs 

were filled. 82However, a variety of restrictions have 

been applied to in-quota imports, information on 

holders of quota rights and fill rates has been difficult 

to obtain, and U.S. exporters continue to face similar 

uncertainties in 1995. 83 

Unlike other wood products, construction grade 

lumber is not subject to TRQs. However, Mexico 

interpreted its NAFTA commitment to provide 

duty-free access for such lumber as being strictly 

limited to the specified end use. SECOFI thus decided 

to impose an import-registry requirement that 

essentially limited duty-free import access to 30 or so 

construction firms. Previously, U.S. construction grade 

lumber was imported by distributors and other 

channels. 

44 
Differing interpretations of the precedence to be 

accorded liberalization commitments contained in 

NAFTA and in the Uruguay Round Agreement 

regarding agriculture were also evident. During 1994, 

these differences fueled a long-standing dispute 

regarding Canada's treatment of U.S. dairy, poultry, 

eggs, and other products. Although the Government of 

Canada has provided assurances to the United States 

regarding minimum access levels for such products, 84 

 the United States claims that NAFTA provisions 

calling for the gradual elimination of all existing tariffs 

and prohibiting any new tariffs apply as well to the 

high tariffs resulting from Uruguay Round tariffication. 

Canada maintained that it should be allowed to 

implement and maintain the new Uruguay Round 

tariffs on imports, including with respect to imports 

from its NAFTA partners, because those tariffs simply 

replace Canada's previous quantitative restrictions, 

which are allowed under NAFTA. The issue is 

particularly sensitive for Canada because of Quebec's 

threat of secession from Canada. Quebec farmers 

receive a large share of their income from the protected 

dairy, poultry, and egg sectors. 85 

Such differences also affect U.S. sugar trade. When 

the changes in the U.S. tariff schedule associated with 

the Uruguay Round were proclaimed, the United States 

ultimately decided to count Mexican and Canadian 

sugar and Canadian sugar-containing products under 

the global tariff-rate quotas established in the Uruguay 

Round. Domestic sugar producers feared that failure to 

do so could undermine the U.S. sugar program and set 

a bad precedent as NAFTA was expanded to other 

countries in the Hemisphere. The result of the 

complicated changes introduced is that Canada will 

face an immediate reduction in the quantity of sugar 

and sugar-containing products it exports to the United 

States, while Mexico could eventually displace other 

sugar suppliers to the U.S. market. 86 

Technical Standards 

Product standards were a source of frustration 

throughout 1994. The unanticipated enforcement by 

Mexico of product standards, and certification and 

labeling requirements issued March 7 and effective the 

following day essentially closed down the border for 

several days. NAFTA and the Uruguay Round 

Agreement on Technical Barriers to Trade both call for 

advanced notification of new regulatory requirements 

so as to minimize trade disruptions. Among other 

things, the March rules required that Spanish-language 

labels be affixed to goods prior to entry into Mexican 

territory, changed technical standards for over 400 

products, and stipulated that product certification 

would only be granted to importers and were 

nontransferrable. 87U.S. officials immediately 

consulted with the Mexican authorities, resulting in the 

issuance on March 17 of clarification that ameliorated 

some problems with the March 7 rules. 88 

The NAFTA Committee on Standards Related 

Measures serves as a regular forum for vetting 

regulatory issues. At its June 15 meeting, the 

committee agreed to establish a working group on 

labeling. Nevertheless, new product certification rules 

issued by Mexico and additional Spanish-language 

labeling and packaging requirements proposed in July 

served to keep concerns over technical barriers high for 

the remainder of the year. 89The new testing and 

certification rules affect 300 or so products subject to 

mandatory safety and performance standards and are 

significantly more restrictive than prior Mexican 

practice. 90Even so, U.S. officials are encouraged by 

the advance notification and extended comment period 

Mexico provided for these measures, and report that 

dialogue in the NAFTA Committee on Standards has 

sometimes influenced Mexico's emerging policy. 91 

Mexican sanitary and phytosanitary requirements 

on grains, meat, potatoes, and tree fruits such as 

cherries and peaches were also a source of U.S. 

concern during the year. 92Proposed fumigation 

requirements for grain sparked a series of bilateral 

discussions with Mexican plant health authorities in 

1994.93Bilateral talks among farm officials during 

late June apparently resulted in improvements to new 

meat inspection and labeling rules before they entered 

into effect July 6. 94The U.S. Meat Industry Trade 

Policy Council had expressed serious reservations 

about draft rules that had been issued on April 27. 95 

 At its October 6 meeting, the NAFTA Committee on 

Sanitary and Phytosanitary measures agreed to 

establish a four-person panel of scientific experts to 

examine Mexico's ban on imports of U.S. sweet 

cherries. In addition to specific problems, the United 

States has expressed concern about the issuance by 

Mexico, starting in August 1994, of a large number of 

new sanitary and phytosanitary import regulations that 

represent significant departures from current practice 

and have impeded U.S. agricultural exports. 96 

Despite such problems, work on harmonization of 

technical regulations and product approval procedures 

among the NAFTA parties began in 1994. For 

example, a work program on telecommunications was 

agreed to by the July 1, 1994, deadline established in 

NAFTA.97Work on harmonizing various land 

transportation standards was also well under way. 98 

 After consulting on September 1, members of the 

Automotive Standards Council agreed to begin 

developing a plan for addressing incompatible safety 

45 
and environmental regulations for motor vehicles in 

1995.99U.S. and Mexican plant health officials made 

good progress on technical arrangements that should 

make it possible for Mexico to export avocadoes, 

apples, and peaches to the U.S. market.lw 

Services 

Mexico accepted and processed the first round of 

applications to participate in its commercial banking 

system. Final regulations establishing the application 

procedure were published in the April 21, 1994, Diario 

Oficial. A total of 102 applications were filed by U.S., 

European, and Japanese firms eager to exploit the 

opportunities created by NAFTA. 1 °1Preliminary 

authorizations were issued in October 1994 for foreign 

investments worth 6.25 percent of total investment in 

Mexico's banking sector. In accordance with NAFTA 

annex VII (B), foreign holdings were capped at 8 

percent for 1994. 102 

Reservations for six U.S. States and all Canadian 

Provinces from the commitments contained in the 

NAFTA financial-services chapter 14 were exchanged 

by January 1, 1994, the deadline set in NAFTA. 

However, the parties agreed to a 6-month grace period 

during which outstanding issues with the Canadian 

Provincial authorities could be worked out. 103At the 

mid-April meeting of the NAFTA Financial Services 

Committee, Mexico reportedly expressed concern 

about the extensiveness of U.S. reservations in the 

insurance area. 104Work on developing the 

reservations for the remaining 44 U.S. States formally 

began in mid-July and was completed as scheduled by 

January 1, 1995. A parallel effort to specify State-level 

quantitative restrictions that will be exempted from 

NAFTA was also under way. The three parties agreed 

to extend the deadline for completing the list, which 

will become part of annex V to NAFTA chapter 12, 

until March 1995. 

NAFTA committed Mexico to treat U.S. package 

delivery service firms no less favorably than Mexico's 

own providers in like circumstances. However, Mexico 

initially disagreed with this interpretation and refused 

to implement its NAFTA commitment until similar 

access was provided for Mexican firms in the United 

States. NAFTA recognizes no such quid pro quo: the 

United States specifically included courier services in 

its reservation list, thereby formally exempting the 

sector from the national treatment, most-favored-nation 

(MFN), and local-presence provisions of NAFTA 

chapter 12. 105Several vain attempts at progress were 

made during which the United States agreed to 

liberalize access to the U.S. small package market for 

Mexican companies. 106President Clinton notified 

Congress on October 6 that he intends to modify a 

moratorium on the issuance of certificates of operating 

authority to Mexican owned or controlled small 

package carriers. However, because firms such as 

United Parcel Service (UPS) still do not enjoy access 

to the Mexican market on par with Mexican national 

firms, the United States has not lifted its 

moratorium. 107Rather, the United States announced in 

April 1995 that it would pursue a complaint under 

NAFTA dispute settlement procedures. Mexico, 

meanwhile, issued draft regulations on small package 

delivery service laying out new limitations. 108 

The United States has thus far been unsuccessful in 

its efforts to secure treatment for U.S. carriers within 

Mexico's 20-kilometer border zone comparable to that 

granted by Mexico to Canada after NAFTA's entry into 

force. 109Mexico and Canada signed a memorandum 

of understanding (MOU) in March 1994, granting 

Canadian motor carriers access to Mexican trucking 

terminals and facilities in the border zone, a right not 

enjoyed by U.S. carriers. Because the access to 

Canadian carriers was granted after NAFTA was 

implemented, Mexico is, the United States maintains, 

obligated by the NAFTA MFN clause to grant the 

United States comparable access. The United States 

thus requested the same rights for U.S. carriers. 

Although discussions have been held on the matter, to 

date, Mexico has not granted the United States 

comparable access. The United States is considering 

next steps. 11 ° 

Government Procurement 

Implementation of NAFTA commitments 

regarding public procurement proceeded fairly well. 

During 1994, the three sides discussed creation of an 

electronic bulletin board to facilitate access to 

information regarding NAFTA-covered procurements 

and began the efforts called for in NAFTA to help 

small businesses avail themselves of contract 

opportunities. 

For its part, the United States has been monitoring 

Mexico's implementation of the procedural reforms 

called for in NAFTA and its calculation of the amount 

of procurement that will be "set-aside" (exempted) 

from the agreement's obligations. On January 1, 1994, 

Mexico instituted a new government procurement law 

that covers purchases by Federal agencies, parastatal 

firms, and the Department of the Federal District 

(Mexico City). 111 Article 5 of the law requires that 

government procurement practices be consistent with 

NAFTA procurement provisions. Article 23 requires 

government purchasing agents to publish annual 

46 
procurement and construction plans by March 31 of 

each year. 112 

Issues unresolved at yearend included—transitional 

set aside reporting by Mexico's state oil company, 

PEMEX, and national electricity commission, CFE; 

concerns over U.S. legislation streamlining the Federal 

procurement system; a proposed U.S. concordance on 

construction; and revisions in the Goods Annex 

1001.B-1 suggested by Canada and Mexico. 113 

Dispute Settlement 

NAFTA creates several mechanisms for the 

resolution of disputes that supplement WTO dispute 

settlement mechanisms. One of these, contained in 

NAFTA chapter 19, allows private parties to appeal 

antidumping and countervailing duty decisions to 

binational panels. The panels, formed from rosters of 

experts maintained by each NAFTA party, are 

empowered to require domestic administering 

authorities to reconsider their decisions in light of the 

panel findings. 114This system was first developed in 

the U.S-Canada Free-Trade Agreement, and has been 

carried over to NAFTA with little change. 

Such dispute settlement mechanisms are an 

important complement to the procedural guarantees 

and more uniform approach to the assessment of 

dumping and countervailing duties embodied in 

NAFTA. Because NAFTA provisions are modeled on 

current U.S. and Canadian practice, Mexico's system 

for administering antidumping and countervailing duty 

investigations will undergo the greatest change as a 

result of NAFTA. In 1994, Mexico had one of the 

world's highest levels of unfair-trade cases brought 

against imports by domestic industries, nearly 

one-third of them involving sales by U.S. firms. 115 

 Antidumping cases have quadrupled in recent years, 

particularly in such sectors as chemicals, metals, 

textiles, mineral products and paper, according to a 

U.S. Department of Commerce analysis of June 1994. 

NAFTA also envisions that panels of experts will 

consider disputes concerning financial services 

(chapter 14) and all other obligations of the agreement 

(chapter 20), and that private investors will have access 

to a roster of arbitrators for purposes of resolving 

investor-state disputes (chapter 11). Separate rosters of 

experts for each type of dispute are called for in the 

agreement. 

At yearend, however, the three parties had yet to 

formally exchange dispute settlement rosters for any of 

the provisions of the agreement and were not close to 

agreeing on the rules of procedure that would guide 

dispute settlement under NAFTA chapter 20. Even so, 

NAFTA parties threatened to bring disagreements over 

various policies to NAFTA dispute settlement in 1994 

and chapter 19 dispute settlement panels were formed 

in the absence of formal rosters. 116Agreement on 

rules of procedure was not possible in light of the U.S. 

request during 1994 to open the formally closed 

dispute settlement process to greater public scrutiny 

and fairly extensive participation by nonparties. 117 

 Canada and Mexico were united in their opposition to 

such changes. 

With respect to chapter 20, one dispute was 

effectively settled during the initial consultative phase 

of the procedure, obviating the need to convene a panel 

to consider the matter. 118The cancellation of plans to 

privatize Toronto International Airport and a proposed 

Canadian requirement that cigarettes be sold in plain 

paper packaging both evoked protests by U.S. 

investors, though they declined to pursue investor-state 

dispute settlement under NAFTA chapter 11. 119 

In all, a total of nine chapter 19 dispute 

proceedings were initiated in 1994. Two were appeals 

of U.S. agencies' determinations, one of them by 

Mexico. The remaining seven were filed by U.S. 

producers: four were appeals of Canadian agencies' 

determinations, and three were appeals of Mexican 

agencies' determinations. One of the proceedings 

initiated in 1994 reached a conclusion during the year: 

panel review of an appeal of a Canadian decision 

regarding apples was terminated by consensus of the 

participants. In addition, six panels requested under the 

U.S.-Canada Free-Trade Agreement issued decisions in 

1994. 120 

An Advisory Committee on Private Commercial 

Disputes was formally named on October 28, 1994, as 

called for in article 2022 of NAFTA. It met for the first 

time on November 14, 1994, initiating work on a 

variety of issues at the request of the NAFTA 

Commission. Four working groups, composed of 

private-sector members from each NAFTA country, 

were established to conduct research and analysis of 

issues relating to alternate dispute resolution. Their 

progress on these issues was to be reviewed when the 

full committee met in June 1995. 121 

"Deepening" NAFTA 

The three NAFTA parties pursued negotiations on 

several matters during 1994 in an effort to "deepen" 

NAFTA commitments beyond NAFTA itself. The most 

notable of these involved creation of a trilateral 

coordinating secretariat for the NAFTA to serve as the 

counterpart for the secretariats for the supplemental 

47 
agreements on labor and environmental cooperation, 

specific provisions of NAFTA, and tariffs. 

At their January 14 meeting, NAFTA Ministers 

mandated the establishment of a NAFTA Coordinating 

Secretariat (NAFTACS) to complement the National 

Secretariats already provided for in the agreement. 122 

 Negotiations during 1994 centered on defining its role 

and budget. Mexico worked vigorously throughout the 

year to ensure the creation of a coordinating secretariat 

commensurate in size and stature with the secretariats 

established under the supplemental agreements on the 

environment and labor. 123As its disagreement with 

the United States over the functions and staffing of the 

proposed trade secretariat endured, Mexico refused to 

settle other NAFTA matters of interest to the United 

States. 124 

A MOU to establish the secretariat was initialed in 

August, reflecting trilateral agreement on the functions 

of the secretariat and the ultimate level of staffing. 

Although the United States finally agreed to staff the 

NAFTACS at 15, such matters as the schedule for 

reaching full staffing, whether persons on temporary 

leave from governmental or private employment would 

be eligible, and budgetary issues remain unresolved, 

and the MOU has yet to be formally signed. 

Several of the NAFTA committees and working 

groups—namely those on standards-related measures, 

services, government procurement, trade and 

competition, and antidumping and subsidies—are 

charged by NAFTA with further developing NAFTA 

disciplines or taking specific steps to facilitate trade 

among the NAFTA parties. Most of these efforts 

appeared to be on track by yearend. Among their 

accomplishments was agreement by the Working 

Group on Trade and Competition to apply the 1986 

Organization for Economic Cooperation and 

Development (OECD) recommendation on antitrust 

cooperation to transactions of interest to all three 

NAFTA partners, in recognition of Mexico's entry into 

the OECD. 125The Committee on Government 

Procurement held initial discussions regarding 

expansion of coverage to sub-Federal entities, as 

required by NAFTA article 1024. 

During congressional consideration of NAFTA 

implementing legislation, Ambassador Kantor sought 

and received assurances from Mexico and Canada that 

they would engage in early discussions on accelerating 

the pace of tariff elimination beyond that envisioned in 

NAFTA. Little progress on the issue was made in 

1994. Despite considerable U.S. and Canadian business 

interest and a trilateral meeting on the matter held 

March 10, 126tariff acceleration negotiations were 

effectively put off until after Mexico's August 1994 

presidential election. The tariff acceleration talks are 

set to formally resume, NAFTA Ministers announced 

after their June 7, 1995 meeting. 

Status of Supplemental 

Agreements to NAFTA 

Even though neither accord had a fully 

functioning secretariat by yearend, considerable 

progress was made in implementing supplemental 

agreements on environmental and labor cooperation 

that accompanied NAFTA. Progress on implementing 

environmental accords has generally outpaced progress 

on the labor agreement. There have been efforts to 

ensure coordination between the commissions on labor 

and environment and the Free-Trade Commission. 127 

 In the United States, the Cabinet-level National 

Economic Council played a role in ensuring a 

consistent U.S. policy in all three fora. 

Agreements on Environmental 

Cooperation 

Three environment-related agreements supplement 

NAFTA. The first—the North American Agreement on 

Environmental Cooperation (NAAEC)—is trilateral. 

The other two, to establish a North American 

Development Bank (NADBank) and Border 

Environmental Cooperation Commission (BECC), are 

bilateral agreements between the United States and 

Mexico. 

The NAAEC establishes a Commission for 

Environmental Cooperation (CEC) to oversee its 

operation. The CEC is composed of a Council of 

Ministers and a Secretariat, headed by an Executive 

Director, and a 15-member Joint Public Advisory 

Committee. Prior to the CEC formal establishment, the 

three countries' Environmental Ministers met on 

March 24, in Vancouver, Canada, to establish the CEC 

initial priorities. 128Montreal, Canada, was named the 

site for the CEC secretariat on March 28, and a 

Mexican executive director for the CEC secretariat was 

named on July 6. 129A meeting regarding the CEC 

was held in San Francisco during early July at which it 

was agreed that the Commission would have a staff of 

31. Members of the Joint Public Advisory Committee 

were announced shortly thereafter. On July 26, the 

CEC Council, composed of the Environment Ministers 

of Canada, Mexico, and the United States, held its first 

regular public session. They approved a 1994 work 

plan and reviewed a tentative 1995 work plan for the 

CEC, 13° along with CEC budgets for 1994 and 

48 
1995. 131A series of informal trilateral discussions 

about the 1995 work plan were held in the fall of 1994. 

Locations of NADBank and BECC—San Antonio, 

Texas and Ciudad Juarez, Mexico, respectively—were 

announced on March 30, 1994. 132NADBank's 

primary role is to develop financing packages for 

projects BECC approves. BECC, in turn, relies upon an 

advisory committee to recommend environmental 

infrastructure projects along the U.S.-Mexico border 

for its approval. BECC's board of directors was named 

and met for the first time in October 1994. 133 

 However, BECC's advisory committee was not 

formally named until January 13, 1995. Thus, no 

border environmental projects could be approved or 

funded in NAFTA first year. The NADBank director 

was named in early 1995 and the organization is now 

operative. 134 

The United States took several domestic measures 

to implement the environment accord. On May 13, 

President Clinton issued an Executive Order on how 

the United States intends to implement the NAAEC. 135 

 The order sets U.S. policy priorities for the CEC and 

explains the consultative process that will be used by 

the Federal Government to ensure that the interests of 

the States and the public are taken into account in U.S.-

CEC related activity. On July 27, EPA Administrator 

Carol Browner announced the establishment of another 

two advisory boards to help her fulfill her 

responsibilities as a member of the CEC Counci1. 136 

 These boards met for the first time on September 13, 

and developed recommendations for Browner 

regarding implementation of the CEC draft 1995 work 

plan. 

An Executive Order regarding the NADBank and 

BECC, and establishing the Community Adjustment 

and Investment Program Advisory Committee, was 

issued on May 13. 137Among other things, the order 

will guide the Treasury Department in its oversight of 

these institutions. A U.S. appropriation of $56 million 

for the NADBank's operation in fiscal year 1995 

became available on October 1 (the beginning of fiscal 

year 1995). However, environmental groups expressed 

concern about planned cuts in NAFTA-related budgets 

at the U.S. Environmental Protection Agency and the 

Department of Interior for fiscal year 1995. On the 

chopping block were funds for technical assistance, 

border city sewage treatment facilities, and 

enforcement- and conservation-related activities. 138In 

Mexico, the austerity measures imposed after the peso 

crisis and economic downturn they induced have 

apparently had a negative impact on Mexico's ability 

to pursue environmental priorities. 139 

The North American Agreement on 

Labor Cooperation 

The North American Agreement on Labor 

Cooperation (NAALC) establishes a Commission for 

Labor Cooperation to administer it and calls for the 

establishment of National Administrative Offices 

(NAOs) by each partner to carry out specified 

functions. The Commission for Labor Cooperation is 

overseen by a council (comprised of the three NAFTA 

Labor Ministers) and has a trilateral secretariat. 

The first meeting of the council was held on March 

21, 1994, 140and was preceded by senior-level 

preparations. 141The council discussed budgetary and 

organizational matters and agreed to conduct 

cooperative activities on occupational safety and 

health, employment and job training, productivity and 

quality in the workforce, and labor law and worker 

rights. Five joint technical seminars, two workshops, 

and a cooperative conference on labor law matters 

were held among NAFTA countries during 1994.142 

Dallas was announced as the site of the NAFTA 

Labor Secretariat at the council's meeting in March. A 

Canadian was selected to be executive director of the 

secretariat in February 1995 and a list of permanent 

staff has been proposed. 143The formal opening of the 

secretariat is slated for summer 1995. 

All three NAFTA partners have established the 

National Administrative Offices (NAOs) for the labor 

agreement. 144A permanent staff for the U.S. NAO has 

been in place since February 1995. The NAOs are each 

country's initial points of contact regarding 

NAFTA-related labor matters, and are empowered to 

accept public submissions and recommend 

consultations with NAFTA partners regarding labor 

law matters. 

The U.S. NAO received four complaints regarding 

enforcement of Mexican labor law during the course of 

1994. 145After conducting a review of two of them, 

the U.S. NAO declined to recommend that the U.S. 

Secretary of Labor pursue Ministerial consultations 

under the NAALC, the next step in the complaint 

procedure. 146In its October 12 report, the U.S. NAO 

explained that the complaints had not fully exhausted 

Mexico's own redress mechanisms and therefore it was 

not able to conclude that Mexico had not enforced its 

own labor laws, as required by the NAALC. 147 

Business leaders, who were eager to ensure that the 

NAO did not stray from its delineated role, 148 

 generally praised the decisions while complaining 

about the NAO's use of public hearings. 149Union 

leaders expressed frustration with the refusal of the 

named corporations to participate in NAO hearings and 

with the difficulty of using the trilateral mechanism to 

49 
rectify laws and practices that allegedly discourage 

union representation. 150House Majority Leader 

Richard Gephardt (D-MO), Majority Whip 

Representative David Bonior (D-MI) and 60 Members 

of Congress separately expressed concern about the 

proposed timing and location of NAO hearings, urging 

that every effort be made to secure wide 

participation. 151Late in the year, the U.S. Secretary of 

Labor announced that a U.S. advisory panel was being 

created to guide U.S. implementation of the NAFTA 

labor accord that may help sort out such concems. 152 

NAFTA's Impact on the 

Federal-State Relationship 

Each NAFTA party saw its Federal Government's 

relationship with States or Provinces evolve as NAFTA 

matters arose. In the United States, USTR orchestrated 

a March 18 briefing for NAFTA state points of contact. 

State-level "leads" for each committee and working 

group established under NAFTA were named in early 

summer, and U.S. Government representatives to some 

committees such as that on land transportation made 

particular efforts to include sub-Federal representatives 

in meeting preparations. 153 

Despite such progress, there were some apparent 

communication lapses. For example, after formally 

requesting consultations under chapter 20 regarding 

Canada's collection methods for Provincial sales 

taxes, 154USTR Michael Kantor was informed by a 

number of prominent U.S. Governors that proceeding 

with the case was inadvisable, given the similarity of 

U.S. State-level practices to those of the Canadian 

Provincial authorities. 155Similar concerns had been 

raised earlier by the Federation of Tax 

Administrators. 156 

Mexican Federal authorities were reportedly 

dismayed to learn of the removal of U S milk from 

store shelves by the authorities in the Mexican State of 

Baja California. 157The action was apparently taken in 

response to pressure from the State's dairy farmers in 

the face of rising imports. 158Similar problems have 

been reported in the Mexican State of Sonora. 159 

Pacts were negotiated with Canada's 10 Provinces 

regarding their acceptance of NAFTA supplemental 

agreements on labor and environmental cooperation. 

After Cabinet approval, the so-called Canadian 

Intergovernmental Agreements were forwarded to the 

Provinces for signature. However, as of the end of 

1994, Canada was still not eligible for its full rights 

under the accords because it lacked sufficient 

Provincial acceptance. 160For example, Canada was 

not eligible to submit labor-related complaints to a 

NAO. 161 

Transportation Cooperation 

Effective January 1, 1994, Mexico and the United 

States each granted permission for the other's charter 

bus companies to operate international charters and 

tours in their territory, consistent with earlier 

commitments made by both parties. 162As a 

complement to their governments' NAFTA efforts, 

Transportation Ministers from the United States, 

Canada, and Mexico met on April 29, 1994, in an 

effort to ensure that NAFTA success is not impeded by 

bottlenecks in transportation facilities or services. 

Ministers agreed to pay particular attention over the 

coming year to border infrastructure and 

efficiency-enhancing technology. NAFTA-related 

efforts to minimize regulatory bathers to automotive 

trade were also given impetus. 

NAFTA Expansion 

At their January 14, 1994 meeting, NAFTA Trade 

Ministers gave expansion of NAFTA to other countries 

a prominent place on the agenda. The subject 

continued to dominate NAFTA-related news 

throughout the year. The three NAFTA partners all 

appeared to agree that Chile was next in line for 

membership, but when and how to accomplish its 

inclusion was a matter of debate. Canada was 

particularly vocal in its support of moving quickly and 

following the NAFTA accession route. 163Mexico also 

expressed a preference for accession, with protocols 

tailored to the applicant's level of development. 164 

Ambassador Michael Kantor stated at the April 15, 

1994, meeting in Marrakesh that both a bilateral 

free-trade agreement (FTA) with Chile and NAFTA 

accession were still under consideration by the United 

States. Separately, the United States conducted 

bilateral investment talks with Chile. 165The Clinton 

administration indicated that it planned to include labor 

and environment as part of the overall 

trade-negotiating package. Chile closely monitored the 

congressional debate over "fast track" negotiating 

authority. 166 Chile also proceeded to formally seek a 

free-trade arrangement with Mercosur and to 

renegotiate its bilateral FTA with Mexico so as to make 

it more compatible with NAFTA provisions. 167 

NAFTA Ministers formally invited Chile to enter 

into accession negotiations at the December 9-11 

Miami Summit of the Americas. A meeting to discuss 

the work that is needed before Chile can join NAFTA 

was held among U.S., Canadian, and Mexican officials 

50 
on December 20. The technical adjustments to NAFTA 

that will be necessary if Chile joins will be among the 

topics addressed in the early months of 1995. 

NAFTA's Impact on Third 

Countries 

Countries not included in NAFTA pursued a 

variety of paths in 1994 in an effort to protect their 

interests. Some, such as Trinidad and Tobago, joined 

Chile in pursuing full-fledged NAFTA membership. 168 

 Others urged that their NAFTA partners take steps to 

provide comparable access or restore favorable access 

granted them under other programs or agreements. 

Indeed, NAFTA has been cited as an example of "open 

regionalism" because it does not preclude its 

signatories from unilaterally extending NAFTA-like 

benefits to other trading partners or otherwise 

liberalizing access to their markets. 169 

On May 26, 1994, the Clinton administration 

formally proposed to provide NAFTA parity for 

Caribbean textile and apparel goods in the Uruguay 

Round implementing bill. Known as the "Interim Trade 

Program," Caribbean Basin Initiative (CBI) countries 

would have been granted NAFTA-like tariff and quota 

treatment for textiles and apparel in return for 

commitments to provide stronger protection for U.S. 

investors and holders of intellectual property rights 

(IPR). 170 

Propelled by NAFTA, Mexico was the fastest 

growing supplier of textiles and apparel to the U.S. 

market in 1994. The growth in imports from CBI 

countries, meanwhile, was well below the rate recorded 

in recent years. 171However, the U.S. attempt to 

alleviate the adverse effects of the shift in U.S. imports 

from Caribbean and Central American countries to 

Mexico as a result of NAFTA was dropped when it 

became apparent that it would complicate 

congressional approval of the Uruguay Round 

implementing bill. 172The U.S. administration's 

decision brought numerous expressions of concern by 

leaders in the Caribbean region, along with vows by 

several to pursue full-fledged NAFTA membership 

with renewed vigor. U.S. textile and apparel trade 

associations had lobbied hard for the NAFTA-parity 

plan, arguing that it would underwrite continued U.S. 

employment in the industry and bolster U.S. 

competitiveness vis-a-vis other suppliers, matters of 

particular importance in light of the phase-out of the 

Multifiber Arrangement. NAFTA parity legislation has 

been reintroduced in 1995. 

Meanwhile, Mexico formally signed an FTA with 

Costa Rica in April 1994. In June, it also inked the 

so-called Group of Three accord establishing free trade 

between Mexico, Colombia, and Venezuela. 173The 

deals were the most recent of a series of FTAs Mexico 

has signed in recent years. 174Mexico also continued 

compensation negotiations with its fellow members of 

the Latin American Integration Association 

(ALADI). 175Although article 44 of the 1980 Treaty of 

Montevideo requires ALADI members to extend trade 

concessions made to non-ALADI members to all 

ALADI members, Mexico was unwilling to 

automatically extend NAFTA benefits to its trading 

partners in Latin America. Negotiations during 1994 

with partners such as Brazil, Argentina, Chile, and 

Uruguay reportedly focused on developing an 

interpretive protocol to article 44 that would allow an 

ALADI member to offer compensation in lieu of 

extending benefits negotiated with third countries. 

Brazil is reportedly eager for compensation 

arrangements to reach fruition soon, since it is 

Mexico's largest trading partner in the region. 176 

Countries outside the Hemisphere continued to 

examine NAFTA effects on their own trading interests. 

The OECD conducted an examination of NAFTA 

investment commitments against the obligations of the 

United States and Canada under its codes of conduct. 

Although welcoming NAFTA's extensive scope and 

liberalizing bent, the Committee on Capital 

Movements and Invisible Transactions (CMIT) 

expressed concern about two cases of discrimination 

previously incorporated into the U.S.-Canada 

Free-Trade Agreement that had been carried over into 

the NAFTA, one regarding the thresholds for review of 

foreign investors acquisitions of Canadian businesses 

and the other regarding Canada's restrictions on 

foreign ownership and market share in the financial 

service sector. To address the committee's concerns, 

Canada announced that it would apply the NAFTA 

thresholds for review of foreign acquisitions to all 

WTO members and remove its caps on foreign 

ownership and market share in the financial sector. The 

committee agreed that these steps fully responded to its 

recommendations. 177 

During its December 1993 consideration of a draft 

report on Mexico, the CMIT and the Committee on 

Investment and Multinational Enterprises had 

expressed some reservations about Mexico's foreign 

investment law. In light of an extensive liberalization 

of Mexico's investment law promulgated in January 

1994 and Mexico's pledge to extend to all OECD 

countries virtually all of the benefits for foreign 

investors and financial services' firms it agreed to 

provide to the United States and Canada under the 

NAFTA, the OECD accepted that Mexico's 

commitments in the OECD are comparable to those of 

51 
its existing members and invited Mexico to join the 

organization on April 14, 1994. 178 

A GATT Working Party began an examination of 

NAFTA in May. Initial questions by the Working Party 

were forwarded to the three NAFTA signatories in late 

October. They were given 60 days to formally 

respond. 179 

Prospects for 1995 

The peso crisis and its aftermath will certainly 

exert considerable influence over NAFTA-related 

developments in 1995 (see chapter 4 for a fuller 

discussion). Meanwhile, calls for the inclusion of 

currency coordination mechanisms in future trade 

agreements may grow stronger. Negotiations on Chile 

accession to NAFTA appear to be proceeding as 

planned, as do broader efforts to accomplish free trade 

in the Hemisphere. Nevertheless, U.S. export prospects 

are considerably dimmer now than they appeared just 6 

months ago and concerns about possible import surges 

from Mexico have been heightened. Attention to 

implementation of NAFTA commitments will remain 

an important means of ensuring that U.S. relations with 

its first and third-best trading partners remain on track. 

52 
ENDNOTES 

1Current APEC members are Australia, Brunei, 

Canada, Chile, China, Hong Kong, Indonesia, Japan, 

Korea, Malaysia, Mexico, New Zealand, Papua New 

Guinea, the Philippines, Singapore, Taiwan, Thailand, 

and the United States. Chile participated in working 

group meetings in 1994 and became a full member 

of APEC at the sixth ministerial meeting in November 

1994. 

2Compiled from official statistics of the U.S. 

Department of Commerce. 

3APEC 1994 Work Program Progress On 

Leaders' Priorities and Issues, APEC draft working 

paper. 

4Joint Statement, Asia-Pacific Economic 

Cooperation Ministerial Meeting, Jakarta, Indonesia, 

Nov. 11-12, 1994. 

5U.S. Department of Commerce, "Asia-Pacific 

Economic Cooperation (APEC): The Seattle 

Ministerial Meeting," Business America, prepared by 

Raphael Cung, Nov. 12, 1993, p. 2. 

6See chapter 3 for further discussion of the U.S. 

Bilateral Investment Treaty (BIT) program. The United 

States does not have any BITs with APEC members. 

U.S. policy since 1991 has been to link agreement to 

negotiate BITs with agreement to negotiate bilateral 

agreements on intellectual property rights (IPR). 

7As a result of agreement by the subcommittee 

during 1994, alignment of APEC-member standards 

with international standards will be studied during 

1995 with respect to the electric and electronic 

apparatus, food, and chemical products sectors and 

discussions on mutual recognition will take place for 

the toy and food sectors. 

8Joint Statement, p. 8. 

9Ibid., p. 9. 

10Ibid. 

11Ibid. 

12Undertaken by Japan to foster understanding 

of the importance of concurrently attaining the 3Es: 

economic growth, energy security, and environmental 

protection in the region. 

13Joint Statement, p. 3. 

14Ibid., p. 4. The PBF was launched in June 

1994 to serve as a channel between APEC and the 

private sector. In October 1994, the PBF issued a 

report entitled Business Blueprint For APEC. 

15Ibid., p. 7. 

16"APEC Economic Leaders' Vision Statement," 

Dispatch, U.S. Department of State, Bureau of Public 

Affairs, Nov. 29, 1993, vol. 4, No. 48, p. 833. 

17APEC Economic Leaders' Declaration of 

Common Resolve, Bogor, Indonesia, Nov. 15, 1994, 

p. 4. 

18Ibid., p. 7. 

19USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 52. 

20APEC Ministers established a 

nongovernmental Eminent Persons Group (EPG) in 

1992, chaired by C. Fred Bergsten, and consisting of 

representatives from member economies to develop 

a vision of trade in the region to the year 2000. 

21Council of Economic Advisers, Economic 

Report of the President, Feb. 1995, p. 230. 

22APEC Declaration of Common Resolve, p. 1. 

23Ibid., p. 4. 

24Council of Economic Advisers, Economic 

Report of the President, Feb. 1995, p. 220. 

25Ibid., p. 3. 

26Ibid., p. 5. 

27Report of the 1st APEC CTI Meeting of 1995 

to the Senior Officials Meeting, Asia-Pacific Economic 

Cooperation, The First Senior Officials Meeting in 

Fukuoka for the Seventh Ministerial Meeting, Japan, 

1995, Document 3-C. 

28Vietnam, Iran, and Russia have formally 

requested membership. Peru has requested 

participation in the working groups on fisheries and 

tourism. 

29Joint Statement, p. 13. 

30 Data for Latin America include South America, 

Central America, and the Caribbean, but do not 

include Mexico. 

31Compiled from official statistics of the U.S. 

Department of Commerce. 

32"Remarks on Signing the North American Free 

Trade Agreement Implementation Act," Dec. 8, 1993, 

Weekly Compilation of Presidential Documents, Dec. 

13, 1993, p. 2549. 

33"Remarks Announcing the Summit of the 

Americas," Mar. 11, 1994, Weekly Compilation of 

Presidential Documents, Mar. 14, 1994, p. 500. 

34Open regionalism is defined in the section on 

APEC, above. For a more detailed analysis of open 

regionalism in the context of the Latin American and 

Caribbean countries, see United Nations Economic 

Commission for Latin America and the Caribbean 

(ECLAC), Open Regionalism in Latin America and 

the Caribbean, LC/G.1801 SES.25/4, (Santiago, 

Chile: ECLAC, 1994). 

35Richard E. Feinberg, Special Assistant to the 

President for Inter-American Affairs, National Security 

Council, "Substantive Symmetry in Hemispheric 

Relations: Address to the Latin American Studies 

Association, Mar. 10, 1994," reprinted in Dispatch, 

U.S. Department of State, Bureau of Public Affairs, 

Mar. 14, 1994, vol. 5, No. 11, p. 158. 

36In addition to NAFTA, other similar subregional 

agreements operative or under negotiation during 

1994 included the Andean Pact, the Central 

American Common Market (CACM), the Group of 

Three, the Southern Common Market (Mercosur), 

and numerous other multilateral and bilateral 

agreements. Andean Pact members are Bolivia, 

Colombia, Ecuador, Peru, and Venezuela. CACM 

53 
members are Costa Rica, El Salvador, Guatemala, 

Honduras, and Nicaragua. Group of Three members 

are Colombia, Mexico, and Venezuela. Mercosur 

members are Argentina, Brazil, Paraguay, and 

Uruguay. 

37OAS, IDB, ECLAC, Toward Free Trade in the 

Western Hemisphere (Washington, DC: OAS, IDB, 

ECLAC, 1994). 

38Vice President Gore, "The OAS and the 

Summit of the Americas: Address Before the 

Organization of American States," Nov. 17, 1994, 

reprinted in Dispatch, U.S. Department of State, 

Bureau of Public Affairs, Nov. 28, 1994, vol. 5, No. 

48, p. 785. 

39Fast-track authority requires extensive 

consultations with Congress during the course of 

negotiations in return for a congressional commitment 

to hold an up-or-down vote on the resulting 

agreement within a fixed period of time. 

40For example, Rudi Dornbusch, "What's Missing 

at the Latin Summit: Free Trade and a Free Cuba," 

Business Week, Oct. 17, 1994, p. 50. 

41"Fact Sheet: The Summit of the Americas," 

Dispatch, U.S. Department of State, Bureau of Public 

Affairs, Sept. 26, 1994, vol. 5, No. 39, p. 647. 

42The Declaration of Principles and Plan of 

Action are reprinted in Business America, Dec. 1994, 

pp. 10-13. 

43USTR, "Kantor Announces Date of 

Hemispheric Trade Ministers Meeting," press release 

95-12, Feb. 9, 1995. 

44"Joint Statement by the Leaders of Canada, 

Chile, Mexico, and the United States," Dec. 11, 1994, 

Weekly Compilation of Presidential Documents, Dec. 

19, 1994, p. 2497. 

45"Chile: Meeting Maps Goals for NAFTA 

Talks," Washington Report on Latin America and the 

Caribbean, Jan. 6, 1995, p. 3. 

46For a discussion, see chapter 4 of this report, 

and Congressional Research Service (CRS), "United 

States-Mexico Economic Relations: Has NAFTA 

Made a Difference?" CRS Report for Congress, 

prepared by J.F. Hornbeck, No. 95-398 E, Mar. 15, 

1995. 

47U.S. Commerce Department and SECOFI 

data. For a brief review of trade during the first 

NAFTA year, see U.S. Department of Commerce, 

Office of the North American Free Trade Agreement, 

NAFTA: First Year Snapshot, Feb. 17, 1995. 

48U.S. Department of State, "NAFTA Scorecard: 

For Mexico, Increased Competition But Also a 

Helping Hand and Stabilizing Force," message 

reference No. 302344Z, prepared by U.S. Embassy, 

Mexico City, Mar. 30, 1995. 

49See, for example, Alliance for Responsible 

Trade, Citizens Trade Campaign, "NAFTA's First 

Year: Lessons for the Hemisphere," issued by the 

Institute for Policy Studies on Dec. 6, 1994; and 

Sarah Anderson and John Cavanagh, "NAFTA's 

Unhappy Anniversary," New York Times, Feb. 7, 

1995. 

50USTR, "Kantor Statement on the First 

Anniversary of NAFTA Passage," press release 

94-61, Nov. 18, 1994. 

51"Remarks on Goals of the Summit of the 

Americas in Miami, Florida, Dec. 9, 1994," Weekly 

Compilation of Presidential Documents, Dec. 19, 

1994, p. 2487. 

52Council of Economic Advisers, Economic 

Report of the President, Feb. 1995, p. 222. 

53For information on investigative activity under 

NAFTA adjustment assistance, see chapter 5. 

54These estimates have been questioned by one 

coalition of U.S. interest groups, which claims that 

only 535 new jobs can be directly attributed to 

NAFTA. See "NAFTA's First Year: Lessons for the 

Hemisphere," issued by the Institute for Policy 

Studies, Dec. 6, 1994. The report was sponsored by 

the Alliance for Responsible Trade, Citizens Trade 

Campaign, with contributions from such organizations 

as the United Auto Workers, the United Electrical, 

Radio, and Machine Workers of America, and Public 

Citizen. 

55The NAFTA Transitional Adjustment Assistance 

program places the initial responsibility for reviewing 

and investigating petitions for relief on the States. 

There have been reports of difficulties by States in 

administering the program, as well as concerns by 

unions that the eligibility criteria and training 

enrollment requirements are too rigid. Some unions 

thus have counseled their members to apply for both 

the overall trade adjustment assistance (TAA) 

program and NAFTA-TAA benefits. U.S. Department 

of Labor, teleconference with USITC staff, May 3, 

1995. For background, see AFL-CIO, NAFTAMath: 

Midyear-1994, Aug. 1994. 

56In a September 15 letter to U.S. Secretary of 

Labor Robert Reich, the Service Employees 

International Union objected to the inclusion of 

registered nurses in the category of professions 

whose Canadian and Mexican members are eligible 

under NAFTA to work temporarily in the United 

States. (Most of the nurses entering under NAFTA 

temporary entry provisions are Canadian and were 

eligible to enter the United States under another visa 

provision, H-1A, which predates NAFTA.) The union 

was also concerned about proposed additions to the 

list of health care professionals eligible for such 

treatment. "Union Urges Reich to Cut Nurses from 

Temporary Entry List," Inside NAFTA, vol. 1, No. 22, 

Nov. 2, 1994, p. 7 and U.S. Department of Labor, 

Immigration and Naturalization Service, and U.S. 

Department of Commerce officials, telephone 

conversations with USITC staff, May 1-4, 1995. 

57U.S. Department of Commerce officials, for 

example, have objected to the study's use of 

numbers on how many jobs are supported by each 

$1 million increase in U.S. exports to project job 

losses due to higher imports from the NAFTA region. 

58Joint Economic Committee, "1994 U.S.-Mexico 

Trade Data: NAFTA Impacts," staff study, Nov. 1994, 

p. 1. 

59Office of House Majority Leader Congressman 

Richard A. Gephardt, "Gephardt Comments on Year 

Anniversary of NAFTA Passage," Nov. 18, 1994. 

6° H.R. 499, requiring withdrawal of the United 

States from NAFTA, was introduced on January 13, 

1995 by Rep. DeFazio (D-OR) with 17 co-sponsors. 

61In early 1995, USTR reported that "Many of 

these problems are being corrected as Mexico 

54 
adjusts to a new trade regime." USTR, 1995 Trade 

Policy Agenda and 1994 Annual Report, p. 51. 

62 See chapter 4 section on Canada, for a fuller 

discussion of the wheat and lumber issues. For 

background regarding proposed restrictions on Sports 

Illustrated and Country Music Television, see USTR, 

1995 Trade Policy Agenda and 1994 Annual Report, 

p. 51. 

63This paragraph is based on USITC staff 

interviews with officials at various executive branch 

departments and congressional research agencies. 

64For a readable explanation of NAFTA-related 

institutions, see U.S. General Accounting Office 

(GAO), North American Free Trade Agreement: 

Structure and Status of Implementing Organizations, 

GAO/GGD-95-10BR, Washington, DC, Oct. 1994. 

65For example, in August 1994, Mexico revised 

its law to bring coverage of patents and trademarks 

into compliance with NAFTA chapter 17 (intellectual 

property). Implementing regulations issued in 

November clarified product coverage and 

strengthened procedures against infringement. The 

U.S. Embassy reported that "U.S. industry reps 

believe that Mexico is on the right track juridically, 

but has a long way to go to achieve satisfactory 

enforcement results." U.S. Department of State, 

"International Anti-Counterfeiting Coalition," message 

reference No. 15750, prepared by U.S. Embassy, 

Mexico City, July 1, 1994. 

66According to USTR, the following groups did 

not meet in 1994: (1) the Committee on Trade in 

Worn Clothing, (2) the Working Group on Dumping 

and Antidumping Duties, (3) the Working Group on 

Subsidies and Countervailing Duties, (4) the Advisory 

Committee on Private Commercial Disputes 

Regarding Agriculture, (5) the Working Group on 

Agricultural Subsidies, (6) the Bilateral Working 

Group on Agricultural Grading and Marketing 

Standards, and (7) the Working Group on Emergency 

Action. "Status report on NAFTA Committees and 

Working Groups," Mar. 10, 1995, telefax transmittal 

by USTR to USITC staff, Mar. 15, 1995. 

The first three groups are charged with 

addressing matters that were left unresolved by the 

NAFTA negotiations. In 1994, the need for the U.S. 

Congress to pass Uruguay Round implementing 

legislation-including domestic adjustments to 

dumping and subsidy law-and lack of a domestic 

consensus were cited by U.S. negotiators counseling 

patience and realistic expectations for NAFTA 

working groups on dumping and subsidies. See for 

example, "Roh: Instant Results on New Regional 

Antidumping Rules Unlikely," Inside NAFTA, vol. 1, 

No. 12, June 15, 1994, pp. 3-4. 

With respect to groups 4-6, NAFTA created a 

Committee on Agricultural Trade that met on 

November 15, 1994. There appears to be some 

sentiment that it would be useful to consolidate some 

of the other agriculture-related groups under that 

committee's umbrella. The final group's mandate was 

not considered very compelling in 1994, given the 

lack of formal complaints regarding import surges 

during the year. 

67Damian Fraser, "Trade Balance Still Largely 

Unchanged," Financial Times, Nov. 23, 1994, p. 17. 

68"Compliance with NAFTA Origin Rules Said to 

Create Trade Barriers," Inside NAFTA, vol. 1, No. 24, 

Nov. 30, 1994, pp. 3-4. 

69Section 103 of the NAFTA implementing bill 

requires the President to seek advice from the U.S. 

International Trade Commission (USITC) on the 

proposed changes. An investigation to provide such 

advice is underway. 

70"Many Imports from Canada Not Proving 

NAFTA Origin, Official Says," Inside NAFTA, vol. 2, 

No. 3, Feb. 8, 1995, p. 4, and confirmed via May 1, 

1995 conversation with U.S. Treasury official. 

71U.S. Department of State, "NAFTA Certificate 

of Origin Requirement Causing Some Confusion, But 

Few Complaints at Mexican Ports of Entry," message 

reference No. 532, prepared by U.S. Embassy, 

Mexico City, Jan. 11, 1994 and "Certificates of Origin 

Cause Unexpected Border Costs and Delays," 

NAFTA Watch, vol. 1, No. 4, Mar. 16, 1994, p. 3, 

which quotes John Simpson, the Deputy Assistant 

Secretary for Regulatory Tariff and Trade 

Enforcement at the U.S. Treasury. 

72Treasury Department official, telephone 

conversation with USITC staff, May 1, 1995. 

73USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, pp. 230-31. 

74The new non-NAFTA certificate of origin 

requirements were first proposed on May 31 and 

were imposed (after a 1-and-1/2-month delay 

announced July 13) on August 30. The requirements 

are somewhat less onerous with respect to current 

GATT signatories than with respect to non-GATT 

signatories. Despite lingering concerns about the final 

requirements, Mexico was credited for providing 45 

days advance notice of the rules and for delaying 

their imposition in an effort to address the concerns 

raised during the comment period. U.S. Department 

of State, "Government of Mexico Briefs U.S. 

Business on New Certificate of Origin Requirements; 

Directive Partly in Effect July 15," message reference 

No. 16848, prepared by U.S. Embassy, Mexico City, 

July 14, 1994. J.C. Penney has postponed opening 

its first two stores in Mexico, reportedly due to 

difficulties in delivering merchandise. Walmart recently 

announced that it was canceling plans to open 25 

new stores in Mexico, but this was reportedly based 

on the impact of the peso devaluation on consumer 

spending in Mexico. 

75Key elements of the proposal were reportedly 

formally rejected by Mexico at a February 7, 1995 

meeting by the Federation with SECOFI officials, 

prompting a pledge of heightened USTR attention to 

the matter. "Kantor Raises Profile of USTR Efforts 

Vs. Mexican Origin Documents," Inside NAFTA, vol. 

2, No. 4, Feb. 22, 1995, p. 1 and pp. 18-19. 

76"Mexico to Issue Revised Transshipment 

Curbs; Retailers Still Unhappy," Inside NAFTA, vol. 1, 

No. 17, Aug. 24, 1994, p. 4. 

77Mexico has a $50-per-person, per-crossing 

limit, and $350 monthly limit for families entering the 

border zone. Mexican passengers arriving in Mexico 

by air are subject to a $300-per-arrival limit (no 

monthly limits apply). The United States allows $200 

per crossing and $400 in duty-free personal 

exemptions, per family, per month. 

55 
78USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 52. 

79Treasury Department official, telephone 

conversation with USITC staff, May 1, 1995. 

80The agricultural products affected are corn, dry 

edible beans, barley, malt, poultry, non-fat dry milk or 

milk powder, fresh potatoes, animal fats and oils, and 

fresh and fertilized eggs. Similar regimes apply to 

lumber and trucks. In addition, NAFTA sets Tariff 

Preference Levels (TPLs) for textiles and apparel 

under which certain textiles and apparel that fail to 

meet the NAFTA "yarn forward" rule of origin are 

granted duty-free treatment. The United States and 

Mexico remained at odds over how to allocate the 

quotas for these TPLs for much of the year. 

81USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, p. 230. 

82U.S. Department of Agriculture, Foreign 

Agricultural Service (FAS) official in Washington, DC, 

telefax transmittal to USITC staff, May 3, 1995. 

83USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, p. 230. According to the 

USTR report, quota rights have been limited to 

certain industries or companies (corn, barley/malt, 

and poultry); certain end uses (corn); limited regions 

of Mexico (fresh potatoes and poultry); certain prices 

(milk powder); and limited parts of the year (whole 

turkey and dried beans). 

84U.S. Department of Agriculture, "Canadian 

Uruguay Round Implementation," message reference 

No. 05718, prepared by U.S. Embassy, Ottawa, Nov. 

8, 1994. 

85FAS official, telefax transmittal to USITC staff 

of Apr. 27, 1995 and background paper on Canadian 

dairy and poultry, May 3, 1995. For background, see 

Thomas Jennings, "Tariffication or Duty Free," 

International Economic Review (Washington, DC: 

USITC, Apr. 1994), pp. 12-13. In 1995, the United 

States formally requested consultations with Canada 

regarding dairy, poultry, eggs, and other products 

under NAFTA dispute settlement procedures. 

88Canada formally requested consultations on 

the new restrictions under NAFTA's dispute 

settlement mechanism in a Feb. 10, 1995, letter 

signed jointly by Minister of Agriculture Ralph 

Goodale and Minister of Trade Roy MacLaren. 

Regarding Mexico's future share of the U.S. sugar 

market, as part of its Uruguay Round Agreement 

market-access commitment for agriculture, the United 

States retariffied its tariff-rate quota on raw and 

refined sugar and established tariff-rate quotas for 

sugar-containing products. The United States has 

traditionally allocated such quotas among suppliers 

on the basis of their import market share during a 

representative period. However, the U.S. Uruguay 

Round tariff proclamation makes clear that Mexico's 

exports under the NAFTA sugar provisions will enter 

the United States under the first tier of the U.S. 

global tariff-rate quota for raw and refined sugar. FAS 

official, telephone conversation with USITC staff, May 

5, 1995. 

87USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, p. 231. 

88USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 51. 

89Two separate labelling proposals were 

published in the June 20 and 21 Diario Oficial and 

cover labels and packaging for general consumer 

goods, pre-packaged food, and nonalcoholic 

beverages. The U.S. Government, with substantial 

input from the private sector, officially commented on 

the proposed rules in a September 14 letter, 

reprinted in "USTR Letter to Mexican Commerce 

Secretariat Labelling Proposal," Inside NAFTA, vol. 1, 

No. 20, Oct. 20, 1994, pp. 10-11. The rules are 

reportedly close to being finalized. Still at issue is 

whether Mexico will permit "overstickering" and clarify 

several ambiguous aspects of the proposed rules, 

how burdensome requirements for importer 

identification will be, and the length of the transition 

period during which manufacturers can adjust and 

existing stock can be sold. Partly in response to 

concerns about such proposals, the Commerce 

Department's National Institute of Standards and 

Technology announced in February 1995 plans to 

station a U.S. standards expert at the U.S. Embassy 

in Mexico City to provide additional technical support 

to business. 

90Third-party labs—not manufacturers 

themselves—generally must conduct tests and 

followup monitoring, all testing must be done in 

Mexican labs, and each importer must obtain its own 

certification (versus prior practice, in which foreign 

suppliers and various customers shared the product 

certificate issued for given models). USTR, 1995 

National Trade Estimate Report on Foreign Trade 

Barriers, p. 232. 

91Commerce Department official, telephone 

conversation with USITC staff, May 4, 1995. 

92USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, p. 232; and "Calif. 

Lawmakers Urge Clinton to Press Mexico on Fruit 

'Barriers,' Inside NAFTA, vol. 1, No. 14, July 13, 

1994, p. 7. 

93"Mexico to Issue Proposed Rule Requiring 

Grain Fumigation," Inside NAFTA, vol. 1, No. 17, 

Aug. 24, 1994, pp. 8-9. 

94There have been reports during early 1995 of 

further problems, however, such as proposed 

salmonella standards for ground meat and shelf-life 

standards for frozen poultry meat. 

35"Mexico Eases Up On Application of Meat 

Inspection Rules at Border," Inside NAFTA, vol. 1, 

No. 14, July 13, 1994, pp. 6-7. On June 3, however, 

SECOFI announced in the Diario Oficial that it was 

initiating a dumping investigation on U.S. beef 

imports in response to a petition filed by the National 

Cattlemen's Confederation. 

USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, p. 232. 

97The work program covers five issues and sets 

deadlines for each, as follows: (1) attachment issues 

and harm to the network (January 1996); (2) 

electromagnetic interference and compatibility for 

authorized equipment (July 1996); (3) product safety 

issues (November 1995); (4) acceptance of test 

results (November 1994); and non-harm-related 

measures (July 1996). The deadline regarding test 

results was driven by article 1304.6 of NAFTA, which 

56 
calls for each NAFTA government to adopt by 

January 1, 1995, "provisions necessary to accept test 

results from laboratories or testing facilities in the 

territory of another Party of tests performed in 

accordance with the accepting Party's 

standards-related measures and procedures." This 

deadline was met by all three NAFTA parties. 

98USTR, "Status of NAFTA Committees and 

Working Groups," Mar. 10, 1995; and U.S. 

Department of Transportation, "Plans for 

Establishment of Land Transportation Standards 

Subcommittee," 59 F.R. 30632. 

99The National Highway Traffic Safety 

Administration has solicited public input regarding the 

effort. See 59 F.R. 66402. 

100 "Mexican Anti-Pest Measures Could Clear 

Way for Avocado Sales," Inside NAFTA, vol. 1, No. 

12, June 15, 1994, p. 8; confirmed by Animal Plant 

Health Inspection Service (APHIS) official in 

telephone conversation with USITC staff, May 3, 

1995. 

101 U.S. Department of State, "Applications by 

Foreign Financial Institutions To Establish Foreign 

Subsidiaries in Mexico," message reference No. 

18570, prepared by U.S. Embassy, Mexico City, Aug. 

3, 1994. 

102 U.S. Department of State, "Government of 

Mexico Gives Green Light to 52 Foreign Financial 

Institutions," message reference No. 18570, prepared 

by U.S. Embassy, Mexico City, Oct. 19, 1994. 

103 For detailed background on the 

federal-provincial disagreement over exemptions by 

British Colombia and Ontario, see "NAFTA Ministers 

Delay Challenges of Sub-Federal Financial 

Practices," Inside NAFTA, vol. 1, No. 3, Feb. 9, 

1994, pp. 5-6. 

104"U.S. Lags in Naming Candidates for 

Financial Dispute Panels," Inside NAFTA, vol. 1, No. 

9, May 4, 1994, p. 12. 

105 See, for example, the U.S. report on July 

11-12 U.S.-Mexico transportation consultations, 

entitled "U.S.-Mexico Transportation Bilateral Session 

Report," dated July 13, 1994, and reprinted in Inside 

NAFTA, vol. 1, No. 16, Aug. 10, 1994, p. 17. 

106 U.S. Department of State, "Issues for 

Upcoming Transportation Summit," message 

reference No. 08669, prepared by U.S. Embassy, 

Mexico City, Apr. 14, 1994. 

107 According to USTR, they have not been 

granted full operating authority, and are thus 

hampered in their provision of services in the 

Mexican market relative to Mexican nationals. UPS' 

Mexican competitors are permitted to use large 

trucks to carry small-package shipments, whereas 

UPS must use small delivery vans. UPS drafted a 

petition for redress for the Mexican inaction in late 

1994. See U.S. Department of State, "Small Package 

Delivery Service - UPS," message reference No. 

343025, prepared by U.S. Embassy, Mexico City, 

Dec. 30, 1994. 

108Citing a lack of progress in resolving the 

dispute, UPS announced July 10 that it would end 

ground service between the United States and 

Mexico effective July 31, 1995. Because UPS' 

within-Mexico ground service will continue, the United 

States will continue to press the dispute. 

109U.S. Department of State, "Canada-Mexico 

MOU on Trucking," message reference No. 005445, 

prepared by U.S. Embassy, Mexico City, Mar. 9, 

1994 and "U.S. Mexico Transportation Bilateral 

Session Report of July 13," reprinted in Inside 

NAFTA, Aug. 10, 1994, p. 17. This was despite 

reports that the United States and Mexico had 

reached agreement that Mexico would provide such 

access at the April 29 transportation summit. "Mexico 

to Have Package Delivery Rules in Place by July 1," 

Inside NAFTA, vol. 1, No. 10, May 18, 1994, p. 9. 

11 0 Transportation Department official, telefax 

transmittal to USITC staff, May 1, 1995; Commerce 

Department official, telefax transmittal to USITC staff, 

May 4, 1995. 

111U.S. Department of State, "Foreign 

Government Procurement Practices-Title VII 

Report-Mexico," message reference No. 006410, 

prepared by U.S. Embassy, Mexico City, Mar. 23, 

1995. 

112U.S. Department of State, "Request for 

Information on Mexican Government Procurement," 

message reference No. 057332, Washington, DC, 

Mar. 7, 1994. 

113U.S. Department of State, "NAFTA 

Government Procurement Working Group Meeting, 

Oct. 28 1994, Ottawa, Canada," message reference 

No. 308812, prepared by U.S. Embassy, Ottawa, 

Nov. 16, 1994. 

114A constitutional challenge to the binational 

panel process was initiated by the Coalition for Fair 

Lumber Resources during 1994, but dropped as part 

of an overall settlement of the softwood lumber issue 

with Canada announced in mid-December. Interests 

opposing the mechanism, as well as one former 

participant, have recently urged that the chapter 19 

dispute settlement procedure be abandoned in favor 

of WTO dispute settlement. See chapter 4 of this 

report for details. 

115The number of cases begun in the most 

recent year was double the rate of the previous year, 

according to The Commerce Department's Chief 

Counsel for Import Administration Stephen Powell. 

"NAFTA AD Review to Test Validity of SECOFI 

Rulings, U.S. Official Says," Inside NAFTA, vol. 1, 

No. 22, Nov. 16, 1994, p. 6. 

116The United States has formally initiated 

dispute settlement proceedings against Canada under 

the NAFTA, requesting in mid-July 1995, formation of 

a dispute settlement panel upon agreement on the 

rules of procedure to be used in dispute settlement. 

The U.S. complaint concerns the high tariffs Canada 

began to apply on over-quota imports of dairy, egg, 

and poultry products from the United States effective 

January 1, 1995, the date on which Canada began 

implementation of the Uruguay Round Agreements. 

In a letter dated February 2, 1995, USTR, Michael 

Kantor requested expedited consultations in 

accordance with article 2006(4) of the NAFTA, which 

calls for consultations within 15 days to deal with 

disputes regarding perishable agricultural 

commodities. Formal consultations were held on June 

7, 1995. 

117During the Uruguay Round, the United States 

succeeded in securing agreement on some steps to 

57 
make the operation of the WTO's dispute settlement 

procedure more transparent. Art. 2012 of NAFTA, on 

the other hand, states that dispute settlement will be 

conducted in confidence. In a January 12, 1994, 

letter to USTR Kantor, Public Citizen reportedly urged 

that specific "elements of democratic decisionmaking" 

be injected into NAFTA decision-making processes. 

118On March 18, 1994, Canada requested formal 

consultations with the United States under NAFTA 

dispute settlement procedures regarding an 

agreement announced four days earlier between the 

United States and Russia on uranium. Canada was 

concerned about the agreement's requirement that 

U.S. imports from Russia be matched with 

U.S.-mined uranium, fearing that it would result in 

displacement of Canada's C$400 million in annual 

exports to the United States and charging that the 

clause violates NAFTA national treatment obligations. 

During consultations with Canada, the United States 

pledged to closely monitor imports during the life of 

the 10-year U.S.-Russia uranium agreement. These 

"assurances and clarifications" were recorded in an 

agreed summary of an October 20, 1994, meeting. 

Canada notified the United States via a February 23, 

1995, letter from Canadian Trade Minister Roy 

MacLaren to USTR Michael Kantor that it was 

dropping its NAFTA challenge to the uranium deal in 

light of the U.S. pledges. The letter is reprinted in 

"MacLaren Letter and Agreed Summary of Key 

Meeting," Inside NAFTA, vol. 2, No. 5, Mar. 8, 1995, 

P. 7. 

119R.J. Hofley, "NAFTA's Investment Dispute 

Regime Awaits Test," NAFTA Watch, vol. 1, No. 16, 

Sept. 15, 1994, p. 7. 

120For details, see "Status Report: Completed 

NAFTA and FTA Dispute Settlement Panel Reviews," 

Mar. 1995, issued by the U.S. Section of the NAFTA 

Secretariat, Washington, DC. 

121Advisory Committee on Private Commercial 

Disputes, Report to USTR on Progress, submitted by 

the U.S. co-chairs, Mar. 22, 1995, provided by USTR 

to USITC staff by telefax, Mar. 24, 1995. 

122USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 49. 

123The Secretariat of the North American 

Agreement on Environmental Cooperation will have a 

staff of about 35-40; the North American Agreement 

on Labor Cooperation Secretariat will have a staff of 

about 15. The supplemental agreements differ from 

NAFTA in that the secretariats play a pivotal role in 

ensuring fulfillment of each of the enunciated 

disciplines and purposes of the agreement, whereas 

NAFTA contains detailed rules that are binding on 

the parties and already establishes several types of 

bodies (a Commission, National Secretariats, and 

committees and working groups) to administer the 

agreement. Whereas the secretariats for the 

supplemental agreements are seen as having a 

somewhat arms-length relationship with the three 

NAFTA national governments, as will the proposed 

NAFTACS, the current NAFTA institutions are staffed 

by current government employees from appropriate 

departments of each NAFTA Party. 

124This was reported in such articles as "Delays 

Threatened in NAFTA Trade Secretariat 

Negotiations," NAFTA Watch, vol. 1, No. 15, Aug. 31, 

1994, p. 2; and confirmed by USITC staff with 

officials at USTR and the U.S. Embassy, Mexico City. 

125USTR, "Status Report on NAFTA Committees 

and Working Groups," Mar. 10, 1995, telefax 

transmittal by USTR to USITC staff, Mar. 15, 1995, 

P. 7. 

126USTR has reportedly received over 2,000 

applications for accelerated duty elimination, 

according to its 1995 Trade Policy Agenda and 1994 

Annual Report, p. 48. 

127For example, participants in the NAFTA 

Committee on Standards-Related Measures agreed to 

maintain close contact and avoid duplication with 

work being done under the supplemental agreement 

on environmental cooperation. 

128U.S. Department of State, "Statement of EPA 

Administrator Carol M. Browner at the March 23 

1994 Meeting of the North American Commission for 

Environmental Cooperation (CEC)," message 

reference No. 0264, prepared by U.S. Consul, 

Vancouver, Mar. 25, 1994. 

129Victor Lichtinger of Mexico was selected to 

be the first executive director of the trilateral 

secretariat for the CEC. U.S. Department of State, 

"Mexican Environmental NGO's Critical of Selection 

Process for Mexico's Choices for NACEC," message 

reference No. 20076, prepared by U.S. Embassy, 

Mexico City, Aug. 19, 1994. 

139Workplan items include a study comparing 

how each party sets environmental standards and 

establishing a process for making technical 

regulations, standards, and evaluation procedures 

more compatible. Separate studies will compare the 

three countries' environmental assessment 

methodologies, transboundary issues, environmental 

impact assessments, and conservation and 

eco-system protection measures. "North American 

Environmental Chiefs Approve Green Panel's 

Workplan," Inside NAFTA, vol. 1, No. 15, July 27, 

1994, p. 22. 

131The budgets were set at $2 million for the 

remainder of 1994 and $9 million for 1995. Ibid. 

132An adjunct facility will be located in Los 

Angeles. Its primary mission will be disbursing the 10 

percent of NADBANK funding to be used anywhere 

in the United States to facilitate adjustment by 

communities to NAFTA. 

133Officials from the States of California, New 

Mexico, and Texas were named by the U.S. 

Department of State as public members to BECC 

board of directors on July 20. The ex-officio U.S. 

members are EPA Administrator Carol Browner and 

Chairman of the International Boundary and Water 

Commission John Bernal. Mexico named its 3 

non-Federal government members on July 15. 

134Alfredo Philips Olmedo, former head of 

Mexico's Banco de Comercio Exterior, was tapped for 

the post. 

135E.O. 12915, May 13, 1994. 

136The National Advisory Committee is 

comprised of 15 industry, nongovernmental 

organization, and academic representatives; the 

Government Advisory Committee is comprised of 13 

State, local, and tribal government officials. Both will 

meet twice yearly. 

137E.O. 12916, May 13, 1994. 

58 
138"Environmental Groups Attack Cuts in 

NAFTA-related FY 95 Budget," Inside NAFTA, vol. 1, 

No. 14, July 13, 1994, p. 4. 

139U.S. Department of State, "NAFTA Scorecard: 

For Mexico, Increased Competition But Also a 

Helping Hand and Stabilizing Force," message 

reference No. 302344Z, prepared by U.S. Embassy, 

Mexico City, Mar. 30, 1995. 

148U.S. Department of Labor, "First Meeting of 

the Ministerial Council, Commission for Labor 

Cooperation, North American Agreement on Labor 

Cooperation," press communique, Washington, DC, 

USDOL: 94-143, Mar. 21, 1994. A second meeting 

of the council was held on April 28, 1995. At the 

meeting an extensive plan of cooperative activities 

for 1995 was approved, as were rules that will 

govern the operation of the commission and the 

secretariat. 

141U.S. Department of State, "NAFTA Labor 

Commission: Senior Officials Meeting in Ottawa, 

February 7-8," message reference No. 000811, 

prepared by U.S. Embassy, Ottawa, Feb. 14, 1994. 

142U.S. National Administrative Office, Annual 

Report, North American Agreement on Labor 

Cooperation, prepared by Bureau of International 

Labor Affairs, U.S. Department of Labor, Washington, 

DC, Jan. 1995. 

143John McKennirey, the new executive director 

for the secretariat, led Canada's negotiating team for 

the North American Agreement on Labor Cooperation 

as well as its efforts to secure Provincial, business, 

and labor support for the accord. For further 

background, see U.S. Department of State, 

"Implementing the North American Agreement on 

Labor Cooperation," message reference No. 066376, 

prepared by U.S. Department of State, Washington, 

DC, Mar. 17, 1995. 

144A notice of establishment and procedural 

guidelines for the U.S. NAO were published at 59 

F.R. 16660. In July 1994, Irasema T. Garza was 

named Secretary of the U.S. NAO, replacing Jorge 

Perez-Lopez, who had been acting in that capacity 

since January 1. 

145The petitions were filed by U.S. and Mexican 

unions and involved efforts to organize unions and 

minimum employment standards in specific 

foreign-owned maquiladora facilities in Mexico. U.S. 

National Administrative Office, Annual Report, Jan. 

1995. The first two were filed February 14, 1994, and 

concerned General Electric and Honeywell. They 

were accepted by the U.S. NAO for formal review on 

April 20. A complaint regarding Sony's Magneticos 

subsidiary was filed in August. A fourth complaint, 

involving the same General Electric facility as had 

been the subject of a complaint in February, was 

accepted for review on November 4, 1994, but the 

request for review was withdrawn by a letter dated 

January 19, 1995. 

146North American Agreement on Labor 

Cooperation, article 22. A hearing on the submission 

regarding Sony was held February 12, 1995, and a 

public report issued April 11. The report 

recommended that consultations be held between 

Ministers regarding one of the issues raised in the 

submission-union registration. In an April 10, 1995, 

letter to his Mexican counterpart, U.S. Secretary of 

Labor Robert Reich formally requested consultations 

with the Government of Mexico regarding union 

registration. These consultations resulted in a June 

12 announcement of a series of programs to educate 

workers about their rights regarding union 

registration. The two sides also agreed to consult 

further on union registration. 

147How one would establish such a pattern of 

nonenforcement of domestic labor laws remains an 

open question, as discussed in "NAFTA's Labor Side 

Agreement: Does it Meet the Test?," NAFTA Watch, 

vol. 1, No. 14, Aug. 11, 1994, pp. 6-7. 

148In a letter to NAO Secretary Irasema Garza, 

for example, the U.S. Council for International 

Business and the National Association of 

Manufacturers urged that only cases "ripe for review" 

be undertaken. The standard should be whether 

sufficient evidence is provided that Mexico is not 

enforcing its own labor law and whether the 

complainant has exhausted domestic administrative 

and legal remedies, as required by the NAALC, the 

business group said. Edward Potter, international 

labor counsel for the U.S. Council for International 

Business, letter to NAO Secretary Irasema Garza, 

Feb. 1, 1995. 

149Under the guidelines issued by the Secretary 

of Labor on February 7, 1994 the NAO is required to 

hold hearings "unless the [NAO] Secretary 

determines that a hearing would not be a suitable 

method" for understanding the issues raised. For a 

discussion of business views of the NAO procedure, 

see "U.S. NAFTA Labor Rules Too Focused on 

Disputes, Trade Groups Say," Inside NAFTA, vol. 1, 

No. 4, Feb. 23, 1994, p. 6, "NAO Chief Directs Labor 

Inquiry Away from Firms' Behavior," Inside NAFTA, 

vol. 1, No. 19, Sept. 21, 1994, p. 18, and "Union 

Withdraws NAFTA Case from NAO Citing Costs to 

Workers," Inside NAFTA, vol. 2, No. 2, Jan. 25, 

1995, p. 9. 

159See, for example, Pharis Harvey, International 

Labor Rights Education and Research Fund, "Failure 

of the Labor Side Agreement," in NAFTA's First Year: 

Lessons for the Hemisphere," issued by the Institute 

for Policy Studies, Dec. 6, 1994. 

151As a result, the U.S. NAO rescheduled 

hearings set for August 31 to September 12. 

Mexico's presidential elections were slated for August 

21. 

15259 F.R. 64713. 

153Direct inclusion of private sector 

representatives in NAFTA committee deliberations 

has, however, proved unacceptable to Canada and 

Mexico. "Private Role on Land Transport Panel is 

Barred Prior to First Meeting," Inside NAFTA, vol. 1, 

No. 16, Aug. 10, 1994, p. 17. 

154On February 9, 1994, USTR Michael Kantor 

formally requested a meeting of the Free-Trade 

Commission to consider U.S. complaints over New 

Brunswick's collection methods for Provincial sales 

taxes. 

155The July 14, 1994 letter, signed by 19 U.S. 

Governors, is reprinted in full in "U.S. Governors Call 

on Kantor to Reconsider New Brunswick Case," 

Inside NAFTA, vol. 1, No. 16, Aug. 10, 1994, p. 4. 

156Joe Huddleston, president, Federation of Tax 

Administrators, letter to USTR Michael Kantor, May 

59 
26, 1994, as cited in "New Brunswick Sales Tax 

Dispute Raises Ire at State Level," Inside NAFTA, 

vol. 1, No. 11, June 1, 1994, p. 3. 

157"Baja California Bans U.S. Milk . . . but 

Consumption Demands Favor U.S. Milk Imports: 

Mexican Official," NAFTA Watch, vol. 1, No. 10, June 

13, 1994, p. 2. After condemning Baja California's 

unilateral move against imported milk, Mexico's 

Federal Government announced that it was imposing 

a new standard on fluid milk shipped from the United 

States, setting shelf life limits of 24 hours. It also 

canceled a waiver of the previous 0-percent duty on 

milk that had been in effect for northern border areas 

during the past several years and imposed the 

9-percent NAFTA duty. 

158U.S. Department of State, "Baja State Blocks 

Imports of U.S. Milk," message reference No. 792, 

prepared by U.S. Embassy, Mexico City, May 20, 

1994. 

159FAS official, telefax transmittal to USITC staff, 

May 3, 1995. 

189The NAAEC permits only Canada to 

challenge another country's practices that would fall 

under Provincial jurisdiction in Canada if Provinces 

accounting for 55 percent of Canada's GDP agree to 

abide by the agreement. In the case of the NAALC, 

Canada may challenge a labor law if Provinces 

representing 35 percent of Canada's workforce agree 

to accept its disciplines. For a reprint of an internal 

Canadian analysis of Provincial obligations under 

NAFTA, see "Chretien Cabinet Gives Nod to 

Provincial Pacts on NAFTA," Inside NAFTA, vol. 1, 

No. 14, July 13, 1994, pp. 1 and 16-17. 

161 U.S. Department of State, "Implementing the 

North American Agreement on Labor Cooperation," 

message reference No. 066376, Washington, DC, 

Mar. 17, 1995. 

182U.S. Interstate Commerce Commission, 

"Passenger Operations by Mexican Motor Carriers: 

Implementation of the North American Free Trade 

Agreement," 59 F.R. 1406. 

163 U.S. Department of State, "Canadian Trade 

Minister Visits Mexico and Chile," message reference 

No. 000019, prepared by U.S. Embassy, Ottawa, 

Jan. 4, 1994; and "Canadian Trade Minister Charges 

U.S. Lagging on NAFTA Expansion," Inside NAFTA, 

vol. 1, No. 19, Sept. 21, 1994, p. 7. 

164 "Serra Puche Backs NAFTA Accession 

Through Separate Annexes," Inside NAFTA, vol. 1, 

No. 9, May 4, 1994, pp. 1 and 13. 

165 U.S. Department of State, "BIT: Chile 

Acceptance of May 23 and 24," message reference 

No. 115697, Washington, DC, May 3, 1994. 

166 U.S. Department of State, "U.S.-Chile 

Investment Discussion June 2-3: A Positive First 

Step," message reference No. 159035, Washington, 

DC, June 14, 1994. 

167 U.S. Department of State, "Chile-May 

Economic Roundup," message reference No. 03636, 

prepared by U.S. Embassy, Quito, June 10, 1994. 

For a description of Chile's bilateral free trade 

agreements, including that with Mexico, see Thomas 

Jennings and James Stamps, "Chile's Trade 

Agreements with Latin American Partners," 

International Economic Review, (Washington, DC: 

USITC, Nov. 1994), pp. 11-17. 

168U.S. Department of State, "GOTT 

[Government of Trinidad and Tobago] Decides to 

Pursue NAFTA Membership," message reference No. 

00973, prepared by U.S. Embassy, Port of Spain, 

Mar. 31, 1994. 

169Council of Economic Advisers, Economic 

Report of the President, Feb. 1995, p. 226. 

170Initially, some concern was expressed about 

the limited nature of the program and its conditions. 

See, for example, U.S. Department of State, 

"Jamaican Reaction to Announcement of an Interim 

Trade Program for the Caribbean Basin," message 

reference No. 003698, prepared by U.S. Embassy, 

Kingston, May 31, 1994. 

171For details, see USITC, U.S. Imports of 

Textiles and Apparel Under the Multifiber 

Arrangement (investigation No. 332-343), USITC 

publication 2884, Apr. 1995. 

172For background on the late September 

decision to drop the proposal from the Uruguay 

Round implementing bill, see "Administration Drops 

CBI Parity from GATT Bill After Union Pressure," 

Inside NAFTA, vol. 1, No. 20, Oct. 5, 1994, pp. 1-2. 

173U.S. Department of State, "G-3 Text," 

message reference No. 009729, prepared by U.S. 

Embassy, Bogota, June 29, 1994. 

174Mexico has also concluded FTAs with Bolivia 

and Chile, and several more are under negotiation. 

For background, see U.S. Department of State, 

"Status Report: Mexico's Other FTA's," message 

reference No. 01316, prepared by U.S. Embassy, 

Mexico City, Jan. 19, 1994. 

175U.S. Department of State, "Brazil Seeks 

Compensation from Mexico in Exchange for ALADI 

Article 44 Waiver," message reference No. 03670, 

prepared by U.S. Embassy, Brasilia, May 12, 1994. 

178"Mexico, Other ALADI Members Negotiate 

Compensation Clause," Inside NAFTA, vol. 1, No. 11, 

June 1, 1994, pp. 1 and 17. 

177Organization for Economic Cooperation and 

Development, Directorate for Financial, Fiscal, and 

Enterprise Affairs, Committee on Capital Movements 

and Invisible Transactions, NAFTA: Implications for 

the Positions of Canada and the United States under 

the OECD Codes of Liberalization, Nov. 28, 1994, 

DAFFE/INV (94) 18/Rev. 2. and U.S. Department of 

State telegram, "OECD Committee on Capital 

Movements and Invisible Transactions (CMIT) 

Meeting Report, November 1994," message reference 

No. 31848, prepared by U.S. Embassy, Paris, Nov. 

18, 1994. 

178U.S. Department of State, "Mexican 

Accession to the OECD: Review of Mexico's 

Positions Under the Codes of Liberalization," 

message reference No. 06331, prepared by U.S. 

Embassy, Paris, Mar. 8, 1994 and Christian Schricke, 

"Mexico, 25th Member of the OECD," OECD 

Observer, No. 188, June/July 1994, pp. 6-7. 

179The WTO Working Party on NAFTA met 

again on July 28-29, 1995. Thus far, the United 

States has formally responded to more than 360 

questions. Additional questions and meetings are 

likely, according to USTR. 

60 
CHAPTER 3 

Other Trade Agreement Activities 

This chapter reviews the trade agreement activities 

of the Organization for Economic Cooperation and 

Development (OECD), the United Nations Conference 

on Trade and Development (UNCTAD), and the U.S. 

Bilateral Investment Treaty (BIT) program in 1994. 

The OECD and the UNCTAD both provide a 

multilateral forum for consultation and policy 

coordination on economic issues of interest to their 

members. Bodies associated with the UNCTAD, such 

as the international commodity organizations, serve to 

coordinate and regulate specific aspects of 

international trade. The work of the OECD and 

UNCTAD has generally complemented the work done 

in the General Agreement on Tariffs and Trade 

(GATT). At the bilateral level, the agreements that the 

United States has negotiated with various countries 

under the BIT program aim to create a more favorable 

business environment for U.S. companies undertaking 

and operating investments abroad. 

Organization for Economic 

Cooperation and 

Development 

Introduction 

Since its founding in 1960, the OECD has provided 

a forum for cooperative action among a group of 

industrialized countries. With the accession of Mexico 

in 1994, the first new member since 1973, the OECD 

now comprises 25 nations. 1The primary purpose of 

the OECD is to promote policies that contribute to (1) 

sound economic expansion in member as well as in 

non-member countries in the process of economic 

development and (2) the expansion of world trade on a 

multilateral, nondiscriminatory basis in accordance 

with international obligations. 

The communiqué of the annual OECD ministerial 

meeting, held June 7 and 8, 1994, focused on matters 

of employment, the strengthening of the multilateral 

trading system through the forthcoming World Trade 

Organization (WTO), and the OECD's role vis-à-vis 

nonmembers, such as Korea, China, and the Central 

European countries. The OECD agreed to undertake an 

examination of trade in relation to internationally 

recognized core labor standards. In the area of OECD 

trade agreement activity, a major shipbuilding 

agreement was successfully concluded in 1994 after 4 

and 1/2 years of negotiation. 

Shipbuilding Agreement 

Reached 

In July 1994, the OECD Working Party Six on 

Shipbuilding reached the Agreement Respecting 

Normal Competitive Conditions in the Commercial 

Shipbuilding and Repair Industry, an ad referendum 

text that slates participating governments to eliminate 

subsidies and other trade-distorting practices in the 

shipbuilding sector. 2The European Union, Japan, 

Korea, Finland, Norway, Sweden, and the United 

States signed the agreement on December 21, 1994, in 

Paris, France. 3These signatories account for close to 

80 percent of world shipbuilding. Negotiators hope to 

extend the agreement to Brazil, China, Poland, Russia, 

and Ukraine, where most of the remaining shipbuilding 

capacity is located. 

The agreement is expected to enter into force on 

January 1, 1996, once its signatories have deposited 

their respective instruments of ratification with the 

OECD. It will eliminate most subsidies and other 

distorting practices, both direct and indirect, and 

provide for the effective enforcement of these 

prohibitions. Rules on domestic and export credit 

financing for ships, as well as a mechanism to prevent 

injurious pricing, are also included in the pact to help 

prevent noncommercial pricing of vessels among 

signatories. The agreement covers construction and 

repair of self-propelled seagoing vessels of 100 gross 

tons and above, although the home-build provisions of 

the so-called U.S. Jones Act4will not be changed by 

the agreement. However, there are provisions in the 

agreement that will allow other parties to respond if 

shipbuilding under the Jones Act undermines the 

balance of rights and obligations in the agreement. 

61 
Elimination of Subsidies 

From January 1, 1996, the agreement will ban all 

new direct and indirect subsidies for shipbuilding with 

the exception of those for research and development. 

Subsidies granted for ship contracts that are signed in 

1995 for delivery by 1998 will be allowed. 5 

Commercial Interest Reference Rate (CIRR), in which 

repayment is capped at 12 years with a 20-percent 

downpayment.8Market distortions in the shipbuilding 

sector are expected to be reduced by more closely 

aligning these export and domestic credit terms. 

Domestic credit terms are allowed to retain a 

home-build requirement. 

Injurious Pricing Discipline 

The agreement establishes for the shipbuilding 

industry an "injurious pricing" dispute mechanism 

based on the dispute panel system formed under the 

WTO Antidumping Agreement6and modified when 

necessary to address issues unique to shipbuilding. The 

shipbuilding agreement allows signatories to conduct 

investigations to determine whether the agreement's 

price provisions are satisfied when a buyer from a 

signatory country purchases a vessel produced in 

another signatory country and to also determine 

whether the purchase causes or threatens material 

injury to a domestic industry. Signatories may impose a 

charge on the shipbuilder equal to the pricing margin 

causing injury if it is determined that, as a result of 

such affirmative investigations, there is a violation of 

the agreement's injurious pricing provisions? 

As a means to enforce collection of an injurious 

pricing charge imposed under this procedure, the 

agreement provides for countermeasures in the event 

the shipbuilder fails to pay. In such cases, the 

investigating party may deny on- and off-loading 

privileges to certain vessels built by the nonpaying 

foreign shipbuilder. Injurious pricing determinations by 

a party are subject to binding dispute resolution, which 

is also modeled after the WTO dispute settlement 

system. 

Domestic and Export Credits 

The agreement brings export credits for 

shipbuilding under the 1992 "Helsinki rules" of the 

OECD Export Credit Arrangement, providing 

discipline for officially supported export credit 

financing for ships for the first time. Under the 

Helsinki rules, a member wishing to grant 

below-market export credits for a project deemed 

commercially viable by other members is required to 

justify its action. Under the shipbuilding agreement, 

domestic credit for shipbuilding may be provided only 

on terms equivalent to export credits, bringing both 

domestic and export financing for ships closer to 

market terms. Domestic terms under the agreement 

will follow loan rates made under the arrangement's 

Dispute Settlement for Export 

Credits 

Export credit disputes that cannot be settled 

through the agreement's Understanding on Export 

Credit's Consultative Mechanisms will undergo a 

group review by parties to the agreement. If the group 

review finds that the contested practice significantly 

undermines the agreement's balance of rights and 

obligations, the group can "establish the conditions 

under which the offending party discontinues the 

measure giving rise to the dispute." 9Alternatively, it 

can recommend possible amendments to the agreement 

or the understanding that could resolve the issue. 

Responsive Measures to the U.S. 

Jones Act 

The agreement leaves intact U.S. coastwise laws, 

known collectively as the "Jones Act," by specifically 

exempting them and by establishing no caps on 

construction of vessels for this market. These laws 

mandate that all domestic point-to-point service 

("cabotage") is carried on U.S.-built, -owned, and 

-crewed vessels. 10 

However, negotiators agreed to a threshold for 

annual U.S. shipbuilding production for Jones Act 

trade, beyond which other parties can take "responsive 

measures" if they find that this production significantly 

undermines the balance of rights and obligations of the 

agreement. Responsive measures might include 

imposing a charge or restricting bids or contracts to 

shipyards benefitting from the act in order to impose a 

lost sales opportunity comparable to the benefit arising 

from delivery of coastwise vessels. 

If the United States considers the responsive 

measures taken to be disproportionate, it can invoke a 

dispute panel under the agreement. Moreover, during 

the first 3 years of the agreement, no responsive 

measures may be taken if U.S. deliveries and expected 

deliveries for Jones Act trade do not exceed a threshold 

of 200,000 gross tons in any year. This threshold will 

expire after 3 years, at which time there will be a 

review of these provisions. 

62 
Review and Withdrawal Terms 

At the end of 3 years, the agreement and its 

dispute-settlement mechanism will be reviewed by the 

participants, and modifications or such other measures 

as withdrawal of other rights under the agreement or 

possibly withdrawal of GATT concessions will be 

considered. Decisions by the parties to the agreement 

would have to be unanimous. Parties dissatisfied with 

either the results of the review or with the continuation 

of the agreement may withdraw at that time with 3 

months' notice, rather than with the standard 1 year's 

notice. 

Mexico Accedes to the OECD 

In April 1994, Mexico signed an agreement to join 

the OECD as its 25th member. 11Mexico ratified the 

agreement in time for the OECD ministerial meeting of 

June 7-8, 1994, to become the first full-fledged 

member of the OECD since 1973 when New Zealand 

became a member. Formal accession discussions began 

in 1990, although Mexico first became associated with 

the OECD in 1982 through discussions in the OECD 

Steel Committee and had been involved with the 

OECD Development Center and the Development 

Assistance Committee (DAC) even earlier as a major 

industrializing economy. Mexico became a full 

member of the Steel Committee in September 1990, 

after which it became an observer in other OECD 

committees. In July 1992, Mexican President Salinas 

confirmed in an address to the OECD Council his 

country's desire to accede formally. 

Bribery Recommendation 

Reached 

Following several years of feasibility studies, the 

OECD adopted in May 1994 the Recommendation on 

Bribery in International Business Transactions. 12 

 Although virtually all countries have laws that make 

bribery of their own public officials illegal, often the 

corruption of foreign officials is not illega1. 13The 

OECD recommendation, recognizing the problem 

arising from the absence of international agreements on 

such matters, supports the elimination of bribery not 

only for moral reasons, but also for more equal 

competitive conditions in world trade and investment. 

The OECD Working Group on Bribery in International 

Business Transactions is carrying out followup work to 

improve the recommendation. In particular, the 

Working Group will address tax measures that can abet 

or indirectly condone illicit payments and aims to 

make bribery a criminal action. 14 

United Nations Conference 

on Trade and Development 

The UNCTAD is a forum for deliberation on issues 

addressing international trade and economic 

cooperation. UNCTAD is a permanent organ of the 

United Nations (UN) General Assembly. Founded in 

1964, its current membership comprises all 184 UN 

members, including the United States, plus Monaco, 

Switzerland, and Vatican City. The most recent 

UNCTAD ministerial conference, UNCTAD VIII, was 

held in 1992. 15 

UNCTAD is the primary organization within the 

UN system responsible for international commodity 

policy and commodity trade. In this role, UNCTAD 

promotes 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. 

At the end of 1994, the United States was a 

member of four UNCTAD-based international 

commodity agreements covering jute and jute products, 

natural rubber, tropical timber, and wheat. 16Only the 

agreement covering natural rubber contained 

provisions to affect international market prices of the 

product; the other commodity agreements served 

primarily as fora for discussion among producers and 

between producing and consuming countries. Table 3-1 

and the following sections summarize significant 

developments related to these agreements during 1994. 

Jute 

The International Jute and Jute Products 

Agreement (IJA) has been in effect since January 9, 

1984, and is presently scheduled to expire on January 

9, 1996. The main objectives of the IJA are to improve 

the competitiveness and quality of jute and jute 

products, to ensure adequate supplies, and to maintain 

and develop the demand for jute. The IJA operates 

without any economic provisions to affect international 

jute and jute product prices or supply. 

The IJA is administered by the International Jute 

Organization (IJO), with the assistance of the 

International Jute Council (IJC). The IJO concentrates 

on assembling information, undertaking research and 

development projects, and conducting studies 

pertaining to the current situation in the world jute 

market. It also serves as a consultative group to 

exporters and importers of jute and jute products. The 

main responsibilities of the IJC are to organize and 

conduct semiannual sessions and to oversee the 

meetings of the Committee on Projects. 

63 
Bufferstock 

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64 
The United States is the world's third largest 

consumer and importer of jute and jute products. On 

March 21, 1994, the United States served notice to the 

host Governments of India and Bangladesh and to the 

United Nations of its intention to withdraw from the 

IJA. The United States, which had been a member of 

the IJA since 1985, formally withdrew effective June 

30, 1994, primarily because of U.S. budgetary 

constraints. 

Natural Rubber 

The International Natural Rubber Agreement 

(INRA) uses a buffer stock mechanism to stabilize 

natural rubber prices. The International Natural Rubber 

Organization supervises the operation and administers 

the provisions of the agreement. It is assisted by the 

International Natural Rubber Council (INRC). INRA II 

has been operational since 1987, when it succeeded the 

first INRA (1982-87). 

INRA II was scheduled to expire on December 28, 

1993, but was extended for 1 year by the INRC to 

permit the continuation of negotiations on a new 

agreement. A UN Conference on Natural Rubber was 

held in April 1994 to negotiate the successor 

agreement, but negotiations stalled because of 

differences of opinion between producing and 

consuming nations over the role of the intervention 

price levels. Producing members advocated the 

adoption of some form of price support mechanism, 

whereas consumer members argued for the current 

price stabilization mechanism. 17In late November 

1994, the Council again extended INRA II for another 

year as negotiations continue. 

Nevertheless, INRA II has been regarded as a 

success mainly because of its unique buffer stock 

arrangement, which was developed to stabilize prices 

but not support them. The agreement sets a buffer 

stock capacity of 550,000 metric tons (mt). Additions 

to or sales from the buffer stock are performed by the 

Buffer Stock Manager, who is guided by a price range 

scheme. 18 

The United States is the largest consumer and 

importer of natural rubber and, as such, plays a vital 

role in the operation of the INRA and in the continued 

negotiations on a successor agreement. Thailand, 

Indonesia, and Malaysia account for approximately 

70 percent of world production, which was estimated 

to be 5.5 million mt in 1994. During the first 10 

months of 1994, U.S. imports of natural rubber 

amounted to 843,143 mt ($780 million), a 2-percent 

increase in quantity and a 10-percent increase in value 

over the corresponding period of 1993. 

Tropical Timber 

The International Tropical Timber Agreement 

(ITTA) has been in effect since 1985. Although 

scheduled to expire on March 31, 1994, the ITTA was 

extended until December 1995 to allow time to 

conclude and ratify a new agreement. The new 

agreement, concluded in 1994, is now being circulated 

for ratification by member states. The main objective 

of the ITTA is to promote sustainable management of 

the world's tropical production forests. It operates 

without any economic provisions to affect international 

tropical timber prices or supply. The ITTA is 

administered by the International Tropical Timber 

Organization with the assistance of the International 

Tropical Timber Council (ITTC). 

The ITTC met three times in 1994. These meetings 

focused on species labeling and certification programs. 

The ITTC initiated two studies to analyze problems 

associated with the implementation of such programs. 

The member countries also agreed to review progress 

toward meeting their 1993 commitments to achieve 

sustainable management of tropical production forests 

by the year 2000. 19The United States, which has been 

a member of the ITTA since 1985, imports specialty 

tropical timber items that are not available from U.S. 

forest resources. 

Wheat 

The International Wheat Agreement (IWA) has 

been operative since 1971. When it expires on June 30, 

1995, the IWA is to be replaced by the International 

Grains Agreement (IGA), which is currently awaiting 

ratification by member nations. 2° The initial duration 

of the new 1995 agreement will be 3 years, until June 

30, 1998, with subsequent extensions of the agreement 

permitted for no more than 2 years each. 21Neither the 

IWA nor the IGA has economic provisions to affect 

wheat prices or supply. 

The activities of the IWA are allocated to two 

conventions: a Wheat Trade Convention and a Food 

Aid Convention. As part of its responsibilities, the 

IWA provides technical studies, collects market 

information, and coordinates food aid pledges by 

exporters and importers to needy developing nations. 

The various functions of the IWA are administered by 

the International Wheat Council, the only commodity 

organization in which the United States participates as 

an exporting nation. 

The original IWA was replaced by a new 

agreement negotiated in 1986. Although the 1986 IWA 

continued to focus on wheat, it expanded the scope of 

research and reporting to include information on other 

65 
grains. It also increased pledges under the Food Aid 

Convention. However, the principal difference between 

the 1971 and the 1986 IWA was that the latter 

agreement downplayed the language in the original 

IWA dealing with eventual price intervention, an 

activity the United States opposes. 

The board of the IWA concluded the new 

agreement at a meeting held in December 1994. 

Although this agreement follows the same general lines 

as the 1986 agreement (the IGA will be composed of 

the Grains Trade Convention and the Food Aid 

Convention), there are certain differences which are 

listed below. The target is to have the new agreement 

in force by July 1995. 22 

• The new name will be the International 

Grains Agreement, since all cereal grains 

are now involved (pulses have been 

added to the list of items that may be 

supplied under the Food Aid 

Convention). 

• Different food aid contribution quantities 

are specified for the various countries 

participating in the Food Aid Convention, 

and the basic minimum annual food 

contribution of a country acceding to the 

Food Aid Convention is set at 20,000 

tons (no minimum contribution was 

previously specified). 

• Voting rights, which are based on trade 

volume, have been changed to reflect 

updated trade statistics (the United States 

is to have 475 votes; the European Union, 

443; Canada, 243; Japan, 187; Australia, 

122; and the Russian Federation, 100). 

Worldwide consumption of wheat reached 564.3 

million mt in 1993/94,23nearly a 4-percent increase 

over the 543.6 million mt of wheat consumed in 

1992/93. The United States accounted for about 6 

percent of world wheat consumption. The increased 

world consumption, together with a 1992/93-1993/94 

world production decline from 561 5 million mt to 

558 8 million mt, resulted in a decrease in world stocks 

from 148.1 million mt to 142.5 million mt during the 

same period. 24 

The United States was the largest exporter of wheat 

during 1992/93-1993/94, accounting for 33 percent of 

world trade in wheat. Nevertheless, during this period, 

U.S. wheat exports declined by close to 12 percent, 

from 112.5 million mt to 99.5 million mt. U.S. wheat 

imports, primarily from Canada, rose from 1.9 million 

mt to 3.2 millon mt during the same period. 

Bilateral Investment 

Treaty Program 

The first negotiation under the U.S. Bilateral 

Investment Treaty (BIT) program began in 1980 in 

order to guarantee U.S. direct investors certain rights 

and protection abroad. The treaties included in the 

program reduce restrictions on foreign direct 

investment that distort international trade and capital 

flows, such as entry restrictions, performance 

requirements, and capital transfer requirements. These 

treaties were originally negotiated with developing 

countries exclusively, but in the past few years the 

program has focused more on the countries of Eastern 

Europe and the former Soviet Union. With the United 

States making a concerted effort to expand commercial 

ties in the Hemisphere, the focus of the BIT 

negotiating efforts is shifting toward Latin America. 

In 1994, revisions were made to the U.S. prototype 

treaty from which the U.S. Government negotiates 

BITs. Before 1994, the prototype had been updated 

only slightly since 1984. 25The 1994 changes to the 

prototype treaty were made for three main reasons: (1) 

to capture the best practices of the NAFTA and other 

treaties already in force, of the new model clauses 

developed by the International Centre for Settlement of 

Investment Disputes,26and of the practices of other 

OECD countries; (2) to reflect changes in U.S. policy 

concerning certain sectors, such as aviation and 

banking; and (3) to broaden the language of the treaties 

to make them more applicable to developed 

countries.27 

The new prototype BIT has the same main 

objectives as its predecessors. The treaty gives a 

comprehensive definition of direct investment, 

including tangible as well as intangible property, and of 

rights, such as leases, mortgages, and intellectual 

property. After defining investment and the parties to 

the treaty, the treaty states its five main provisions: (1) 

national treatment or most-favored-nation treatment for 

investments, (2) standards for expropriation and 

compensation for expropriation, (3) the right to transfer 

funds, (4) limits on performance requirements, and (5) 

a dispute settlement mechanism. Exceptions to the 

above provisions, typically sectors not subject to 

national treatment, are stated in annexes to the 

individual treaties. 

The provisions on national or most-favored-nation 

treatment require that the establishment, acquisition, 

66 
expansion, management, conduct, and sale of 

investment, as defined by the treaty, shall receive no 

worse treatment than what the country accords to its 

own investors in a like situation or to an investor from 

a third country (most favored nation) under like 

circumstances. At a minimum, investment cannot be 

treated less favorably than required by international 

law. Sectors of the economy that are exempt from these 

rules are listed in an annex to the treaty. 

Compensation and expropriation rules in the treaty 

are intended to enumerate the circumstances under 

which expropriation or nationalization is allowable and 

to define the compensation issues involved. 

Expropriation is allowable only for public purposes 

and must be conducted in a nondiscriminatory manner; 

prompt, adequate, and effective compensation must be 

paid. Compensation must be equal to the market value 

of the assets and be freely transferable outside the 

country. 

With a few stated exemptions, the provisions 

covering the right to transfer funds state that all 

transfers of funds, such as capital contributions, capital 

gains, proceeds from sales, profits, interest, and the 

rest, should be free from obstructions and should not 

be delayed. Governments may restrict the free transfer 

of funds in situations when bankruptcy occurs or when 

criminal proceedings or judgments are pending. 

In keeping with the provisions of NAFTA and the 

WTO, the new bilateral treaty prototype includes 

prohibitions on the use of performance requirements. 

The BITs include more prohibitions than the WTO. 

Requirements prohibited under the new BIT prototype 

include local content, technology transfer, export, 

research and development in the country of the 

investment, and restrictions on the number of foreign 

employees. 

The dispute settlement mechanism established in 

the treaty insures access to binding third-party 

arbitration to resolve investment disputes. As in the 

NAFTA, there are three main avenues for dispute 

resolution. The parties to the investment may use the 

local courts, use a previously agreed upon method, or 

use outside arbitration. The arbiter will typically be the 

International Centre for the Settlement of Investment 

Disputes. By signing the treaty, a foreign government 

essentially agrees to abide by the recommendations of 

the outside arbiter, making that judgement enforceable 

under domestic law. Such recourse can be faster and 

more predictable than the recourse available in a 

strictly domestic process. 

Table 3-2 shows the current status of the U.S. 

Bilateral Investment Treaty program. As of March 1, 

Table 3-2 

U.S. bilateral investment treaties, as of 

Mar. 1, 1995 

Country Year 

In force 

Argentina 1994 

Bangladesh 1989 

Bulgaria 1994 

Cameroon 1989 

Congo 1994 

Czech Republic 1992 

Egypt 1992 

Grenada 1989 

Kazakhstan 1994 

Kyrgystan 1994 

Moldova 1994 

Morocco 1991 

Panama 1991 

Poland1 1994 

Romania 1994 

Senegal 1990 

Slovakia 1992 

Sri Lanka 1993 

Tunisia 1993 

Turkey 1990 

Zaire 1989 

Signed—not in force 

Albania 1995 

Armenia 1992 

Belarus 1994 

Ecuador 1993 

Estonia 1994 

Georgia 1994 

Haiti 1983 

Jamaica 1994 

Latvia 1995 

Mongolia 1994 

Russia 1992 

Trinidad & Tobago 1994 

Ukraine 1994 

Uzbekistan 1994 

Negotiations commenced 

Barbados 1992 

Bolivia 1990 

Colombia 1992 

Costa Rica 1991 

Honduras 1994 

Hungary 1990 

Lithuania 1993 

Nicaragua 1994 

Pakistan 1991 

Peru 1992 

Turkmenistan 1992 

Venezuela 1992 

1 A Business and Economic Relations Treaty, 

incorporating BIT elements, is in force. 

Source: The Office of the United States Trade 

Representative. 

67 
1995, the United States had signed BITs with 35 

countries, and 21 of the 35 treaties had been ratified by 

both the United States and the other signatory country 

and entered into force. 28The 35 countries accounted 

for approximately $27 billion of U.S. foreign direct 

investment (141)I) at the end of 1993, or about 5 percent 

of the total cumulative U.S. FDI of $549 billion. 29 

 Formal negotiations are underway with another 12 

countries, most of them Latin American. No BITs have 

been signed nor are any being negotiated with 

developing countries in Asia. However, at their 

November 1994 ministerial, 17 Asia-Pacific leaders 

agreed to non-binding investment principles similar to, 

but less rigorous than, U.S. BITs. 

European countries and Japan have had BIT 

programs since the early 1960s. By January 1994 there 

were 570 BITs signed worldwide, representing an 

increase of 13 percent from the previous year. 

Germany, England, and France had the most with 89, 

59, and 58, respectively. 30Non-U.S. BITs usually 

have less specific requirements and provide fewer 

specific rights for foreign investors than do the U.S. 

treaties. 

68 
ENDNOTES 

1The 25 OECD member countries are Australia, 

Austria, Belgium, Canada, Denmark, Finland, France, 

Germany, Greece, Iceland, Ireland, Italy, Japan, 

Luxembourg, Mexico, the Netherlands, New Zealand, 

Norway, Portugal, Spain, Sweden, Switzerland, 

Turkey, the United Kingdom, and the United States. 

2U.S. Department of State telegram, "OECD 

Shipbuilding Subsidy Negotiations Yield Breakthrough 

Agreement," message reference No. 20676, prepared 

by U.S. Embassy, Paris, July 28, 1994; Office of the 

United States Trade Pepresentative (USTR), 1995 

Trade Policy Agenda and 1994 Annual Report, p. 44. 

See also John Ridding, "Shipbuilding Nations Avert 

Trade War Over Yard Subsidies," Financial Times, 

July 18, 1994, p. 21; Guy de Jonquieres, "Subsidies 

Deal Averts US Sanctions," Financial Times, July 19, 

1994, p. 12; Andrew Baxter, "No Clear Winners and 

Losers," Financial Times, July 18, 1994, p. 13; Tara 

Patel, "US, European Shipbuilders Back OECD Pact 

on Subsidies," Journal of Commerce, July 19, 1994, 

p. 1A; Bruce Barnard and Tara Patel, "France 

Threatens to Veto Pact on Shipyard Aid," Journal of 

Commerce, July 19, 1994, pp. 1A, 8A. 

3USTR, "Agreement Reached on Shipbuilding," 

press release 94-71, Dec. 21, 1994. 

4The Merchant Marine Act of 1920, 46 U.S.C. 

883, sec. 27. The home-build provisions require 

vessels in the Jones Act fleet to be built in U.S. 

shipyards. 

5Final Act of Negotiations Concerning the 

Agreement Respecting Normal Competitive 

Conditions in the Commercial Shipbuilding and 

Repair Industry, Annex 1, B.3, and Accompanying 

Note 5. 

6WTO, "Agreement on Implementation of Article 

VI of the General Agreement on Tariffs and Trade 

1994," Final Act, pp. 145-170. 

7Final Act of Negotiations Concerning the 

Agreement Respecting Normal Competitive 

Conditions in the Commercial Shipbuilding and 

Repair Industry, Annex III: Shipbuilding Injurious 

Pricing Code, Art. 1. 

8Bruce Barnard and Tara Patel, "France 

Threatens to Veto Pact on Shipyard Aid," Journal of 

Commerce, July 19, 1994, pp. 1A, 8A. Domestic 

credit programs, such as in the United States under 

title XI of the Jones Act and in Japan through the 

Japanese Development Bank, will be brought into 

conformity with the agreement in 1996. Current U.S. 

home credit terms, for example, allow up to 25-year 

financing. U.S. Department of State telegram, "OECD 

Shipbuilding Subsidy Negotiations Yield Breakthrough 

Agreement," message reference No. 20676, prepared 

by U.S. Embassy, Paris, July 28, 1994. 

9U.S. Department of State telegram, "OECD 

Shipbuilding Subsidy Negotiations Yield Breakthrough 

Agreement," message reference No. 20676, prepared 

by U.S. Embassy, Paris, July 28, 1994. 

10 Including intracoastal, inland waterway, and 

Great Lakes shipping. 

11U.S. Department of State telegram, "April 14 

Press Conference on Mexico's Accession to the 

OECD with Foreign Minister Tello and OECD 

Secretary-General Paye," message reference No. 

10244, prepared by U.S. Embassy, Paris, Apr. 15, 

1994. 

12U.S. Department of State telegram, "OECD 

Council Adopts Recommendation on Illicit Payments," 

message reference No. 172866, prepared by U.S. 

Department of State, Washington, DC, June 29, 

1994. 

13OECD, "Illicit Payments," The Annual Report 

of the OECD, 1992, p. 28. 

14U.S. Department of State telegram, "OECD: 

Illicit Payments," message reference No. 32346, 

prepared by U.S. Embassy, Paris, Nov. 23, 1994. 

15For a more detailed discussion of UNCTAD 

VIII, see U.S. International Trade Commission 

(USITC), The Year in Trade: Operation of the Trade 

Agreements Program, 44th Report, 1992, USITC 

publication 2640, 1993, pp. 39-40. 

16The United States did not participate in 

agreements covering cocoa, coffee, and sugar. For a 

discussion of these agreements, see USITC, The 

Year in Trade: Operation of the Trade Agreements 

Program, 45th Report, 1993, USITC publication 2769, 

1994, pp. 76-78. 

17The Economist Intelligence Unit, Rubber 

Trends (London, Mar. 1994), p. 16. 

18The agreement establishes a reference price, 

upper and lower intervention prices, upper and lower 

trigger-action prices, and upper and lower indicative 

prices. The reference price, initially fixed at 201.66 

Malaysian/Singapore cents per kilogram, is revised 

based on market trends or net changes in the buffer 

stock. The upper and lower intervention prices are 

calculated at plus and minus 15 percent of the 

reference price. The upper and lower trigger-action 

prices are calculated at plus and minus 20 percent of 

the reference price. The upper and lower indicative 

prices were initially fixed at 270 and 150 

Malaysian/Singapore cents per kilogram, respectively. 

Operation of the buffer stock mechanism, i.e., selling 

or buying stocks, is based on the Daily Market 

Indicator Price-a composite, weighted average of 

daily official current-month prices of RSS 1, RSS 3, 

and TSR 20 rubber quoted in Malaysian/Singapore 

currency on the Kuala Lumpur, London, New York, 

and Singapore markets. 

19For more information, see USITC, The Year in 

Trade: OTAP, 1993, USITC publication 2769, p. 78. 

20Like the past agreements, the new agreement 

will have to be ratified by the U.S. Senate. 

21International Wheat Council, "International 

Grains Agreement, 1995," press release, Dec. 12, 

1994. 

22Information on the new agreement has been 

provided by the U.S. Department of Agriculture, 

Foreign Agricultural Service. 

23The crop years extend from July 1 to June 30. 

69 
24 U.S. Department of Agriculture, Economic 

Research Service, Wheat: Situation and Outlook 

Report, WHS-309, Nov. 1994. 

25 For a description of the 1984 prototype and 

the BIT program's origins, see USITC, Operation of 

the Trade Agreements Program, 35th Report, 1983, 

USITC publication 1535, 1984, pp. 36-43. 

26 The International Centre for Settlement of 

Investment Disputes was created in 1965. An 

organization belonging to the World Bank Group, it 

has been a primary vehicle for the resolution of 

private-government investor disputes. 

27 The United States has negotiated bilateral 

treaties of Friendship, Commerce, and Navigation 

with most developed countries. These treaties 

provide for national treatment and protect against 

expropriation. 

28 The domestic procedure for ratifying a bilateral 

treaty varies from country to country. U.S. ratification 

requires a two-thirds vote of the Senate. The treaty 

enters into force when the two countries complete 

their respective procedures and exchange an 

instrument of ratification. 

29 If Mexico and Canada—with whom the United 

States has BIT equivalent obligations—are included, 

the proportion rises to 20 percent. This calculation 

was made using data from the U.S. Department of 

Commerce, Bureau of Economic Analysis, Survey of 

Current Business, June 1994. 

39 UNCTAD, World Investment Report 1994: 

Transnational Corporations and Integrated 

International Production, p. 279. 

70 
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 1994: Canada, the European Union (EU), 

Japan, Mexico, China, Taiwan, and the Republic of 

Korea (Korea). An analysis of U.S. trade flows with 

these partners was provided in the introduction to this 

report. 

Canada 

January 1, 1994, marked the entry into force of the 

North American Free-Trade Agreement (NAFTA). 

NAFTA had been preceded by 5 full years of operation 

of the United States-Canada Free-Trade Agreement 

(CFTA). Because the timetable and most terms of the 

CFTA were continued under the NAFTA for these 2 

parties, the new agreement's impact on trade relations 

to the north was less dramatic than the opening of a 

new, more liberal, trading relationship with the United 

States' closest southern trading partner, Mexico. 

Nevertheless, the year demonstrated the usefulness of 

the pact and its mechanisms for the resolution of 

bilateral differences. 

A number of issues were significant in the context 

of the U.S.-Canada 1994 bilateral trading relationship. 

These included renewed bilateral differences on 

salmon, steel, beer, and culture. Uniquely Canadian 

issues—such as a comprehensive Canadian agreement 

to loosen Provincial protectionism and lower 

inter-Provincial trade barriers, and the continuing issue 

of possible Quebec independence—while internal to 

Canada, were monitored by the United States because 

they may affect the strong economic relationship 

between the two North American partners. The most 

significant bilateral trade disputes during the year 

involved the agricultural products, wheat and lumber. 

Both disputes were at least temporarily resolved during 

the year after much attention by policymakers on both 

sides. Despite these and other trade disagreements and 

difficulties associated with implementing and 

expanding the NAFTA, the general state of 

U.S.-Canadian economic relations in 1994 was 

positive. 

Wheat 

Among the many U.S.-Canadian agricultural issues 

in recent years, wheat took on a high priority during 

1993, 1when U.S. wheat imports from Canada began 

rapid growth. During 1994, U.S. wheat farmers 

continued to press the U.S. Government to respond to 

their claims that the Canadian Government's pricing 

structure and transportation subsidies were directly 

contributing to increased imports, a decrease in the 

U.S. domestic price of wheat, and flagging U.S. 

exports. In response, the President directed the U.S. 

International Trade Commission (USITC) to initiate an 

investigation under section 22 of the Agricultural 

Adjustment Act of wheat imports (almost all of which 

are from Canada) in January 1994. The U.S. 

Government meanwhile threatened to raise U.S. tariffs 

on imports of Canadian wheat through a General 

Agreement on Tariffs and Trade (GATT) article 

XXVIII action. Throughout the year, talks between 

U.S. and Canadian officials continued with an aim to 

resolve the conflict and avoid the imposition of quotas 

or tariffs. Although the wheat matter was temporarily 

settled by a 1-year agreement reached between the two 

countries in August 1994, differences regarding the 

countries' wheat-trading policies remain. 

During 1993, rising Canadian shipments of wheat 

to the United States prompted widespread complaints 

from American farmers and their representatives in 

Congress. These complaints concerned two Canadian 

programs: Canadian Wheat Board (CWB) pricing 

procedures and government transportation subsidies 

authorized by the Western Grain Transportation Act 

(WGTA). 

CWB is the sole legal exporter for most wheat 

produced in Canada. 2The CWB designates marketing 

quotas for western Canadian farmers and has a 

marketing monopoly on grains for domestic human 

consumption and for exports. U.S. wheat producers 

71 
claimed in 1993 and 1994 that the CWB used its 

monopolistic pricing practices (since it is responsible 

for the distribution of nearly all wheat produced in 

Canada) to unfairly undercut the prices of U.S. wheat 

in the United States and in third-country markets 

(Mexico, for example). In addition, U.S. wheat 

producers claimed that the Canadian system of pricing 

is unfair because the CWB can adjust returns paid to 

producers, depending upon whether it runs a surplus 

(profit) or a deficit (loss) in its financial operations. 3 

The Canadian Government provides direct 

payments to Canadian railroads for rail shipments of 

western grain eastward to Thunder Bay on Lake 

Superior and westward to British Columbia under the 

WGTA. Its payments were seen as an export subsidy 

by American farmers, who believed that subsidies paid 

for by the WGTA were responsible, in part, for an 

increase in Canadian world wheat exports taking place 

at the expense of U.S. producers. 4Canada claimed 

that the payments for eastbound shipments constituted 

a domestic subsidy that had no relevance to the 

international market. 5 

The U.S. concerns centered on both foreign and 

domestic effects of Canadian practices. On the one 

hand, U.S. exports to third-country markets were 

directly affected by Canadian sales; on the other hand, 

the increase in exports of Canadian wheat was having a 

dampening effect on the U.S. domestic price of wheat. 

With the failure of discussions in 1993, the wheat 

dispute stretched into early 1994. On November 16, 

1993, the President directed the USITC to undertake an 

investigation, pursuant to section 22 of the Agricultural 

Adjustment Act, to determine if imports of wheat, 

wheat flour, and semolina were being or were 

practically certain to be imported so as to materially 

interfere with the U.S. Department of Agriculture 

(USDA) program for wheat. 6As described in the 

President's November 16, 1993 letter, the USITC 

would, after 60 days, begin a section 22 investigation 

of U.S. imports of wheat, wheat flour, and semolina, 

unless the President otherwise indicated (giving U.S. 

and Canadian officials 60 days to work out their 

differences). However, an agreement was not reached 

by the U.S.-imposed deadline of January 14. As a 

result, on January 18, the USITC initiated its 

investigation. 

Section 22 procedures require the USITC to 

investigate whether the subject imports are materially 

interfering with USDA programs designed to support a 

domestic agricultural commodity, in this case, wheat. 

The USITC makes a recommendation to the President. 

After the USITC investigation and report, the President 

decides whether or not to impose quantitative restraints 

(quotas) or fees (tariffs) on imports. Such fees cannot 

exceed 50 percent of the value of the imported product 

and restraints cannot reduce imports by more than 50 

percent. 

As part of the investigation, the USITC held 

hearings in North Dakota, Montana, and Washington, 

DC, for U.S. wheat farmers, importers, millers, 

exporters, and other persons with an interest in the 

matter to present their views. Three Commission 

members and selected staff also conducted a 2-day 

fact-finding trip to Winnepeg, Manitoba, Canada. The 

CWB indicated at the Washington, DC, hearing and in 

written submissions that U.S. markets and wheat prices 

were not being affected by imports of Canadian wheat, 

and that the USDA support programs offered American 

farmers enough protection to cover the effect of 

changing wheat prices. In addition, it noted that the 

purpose of the CFTA was, in fact, to increase trade 

between the countries. After the hearings and during 

the period of USITC investigation and decision 

making, bilateral talks continued, but few 

advancements occurred. 

While the USITC was conducting its investigation, 

action under the GATT was also being considered. 

With the bilateral wheat talks in progress, the National 

Economic Council (NEC), an advisory body to the 

President, was considering an option to impose 

restrictions on Canadian wheat imports under article 

XXVIII of the GATT.? The NEC met in March 1994 

to approve a plan that would raise U.S. tariffs on 

Canadian wheat shipments. In response, Canadian 

officials reportedly threatened to impose 

countermeasures on U.S. exports to Canada of such 

goods as wine, poultry, bourbon, and canned fruit, 8 

 prompting a new round of talks. 

However, with the parties unable to reach 

agreement and following Canada's refusal to increase 

U.S. market access for dairy, poultry, and eggs, 9as 

well as its insistence on maintaining Canada's 

prevailing levels of wheat exports, on April 22 the 

United States Trade Representative (USTR) announced 

it would act in 90 days to limit U.S. wheat imports 

under GATT article XXVIII. 1 ° The article allows the 

imposition of tariff-rate quotas or other restrictions 

after 90 days of bilateral negotiations; trade 

compensation is to be offered to the nation adversely 

affected. Canada threatened countermeasures and 

retaliation. 11 

On July 15, 1994, the USITC reported its split 

findings in the section 22 investigation: (1) three 

Commissioners found that wheat, wheat flour, and 

semolina were not being imported under such 

72 
conditions and in such quantities as to "render, or tend 

to render, ineffective" the USDA wheat program but 

that the evidence of regional impact of increased wheat 

imports could support the President finding either 

"material interference" or "no material interference"; 

and (2) three Commissioners found (in two separate 

opinions) that wheat, wheat flour, and semolina were 

being imported under such conditions and in such 

quantities as to materially interfere with certain USDA 

programs for wheat. 12 

Further bilateral wheat discussions were held after 

the USITC submitted its report to the President. In late 

July, U.S. Agriculture Secretary Mike Espy warned 

that if no satisfactory agreement could be reached, the 

tariffs and quotas permitted under section 22 of the 

Agricultural Adjustment Act would be imposed on 

August 1, the date marking the end of the 90-day 

negotiation period established under article XXVIII of 

the GATT. 13 

On August 2, 1994, the two Governments 

announced a 1-year agreement that restricted U.S. 

imports of wheat (virtually all of which have been and 

are expected to remain Canadian) into the United 

States for the duration of about 1 year, beginning on 

August 1, 1994. 14Details of the agreement were 

finalized in a memorandum of understanding (MOU) 

dated September 20, 1994. The MOU limited imports 

of Canadian durum and nondurum wheat during the 

period September 12, 1994 - September 11, 1995, in 

the following ways: 

• For durum wheat imports not exceeding 

300,000 metric tons, the NAFTA duty 

rate would apply; for imports over 

300,000 but not over 450,000 metric tons, 

a $23/ton tariff, less the otherwise 

applicable NAFTA duty, but not over 50 

percent ad valorem, was imposed; and for 

shipments over 450,000 metric tons, the 

tariff rate was set at $50/ton, less the 

otherwise applicable NAFTA duty, but 

not over 50 percent ad valorem. 

• For all other wheat imported into the 

United States from Canada (nondurum 

wheat, namely) not exceeding 1,050,000 

metric tons, the NAHA. rate would 

apply; a tariff rate of $50/ton, less the 

otherwise applicable NAFTA duty, but 

not over 50 percent ad valorem, was 

imposed on shipments over 1,050,000 

metric tons. 15 

The agreement also established a Joint 

Commission on Grains to survey all areas related to the 

countries' systems for grain marketing and support. 16 

 The Joint Commission, composed of private-sector 

experts, is to present recommendations to both 

Governments by June 12, 1995, in order to help find 

long-term solutions to bilateral and third-country grain 

trade problems. 17Finally, the agreement contains a 

"peace clause" that commits both countries to refrain 

from further action during the 12-month period; 

accordingly, the United States withdrew its threatened 

action under GATT article XXVIII. 18 

The agreement settled the wheat dispute for the 

period of approximately 1 year. The MOU will expire 

on September 11, 1995. The underlying issue of 

bilateral trade in wheat awaits further consideration 

and the Joint Commission recommendations in 

mid-1995. 

Lumber 

The U.S.-Canada trade dispute involving lumber is 

one of the longest running disagreements in the 

bilateral relationship; its origins date back to 1982. 19 

 By the beginning of 1994, the final outcome of a 

lumber countervailing duty case, initiated in 1992, was 

still undetermined. 

As 1994 began, two 1992 decisions in an earlier 

countervailing duty (CVD) case involving softwood 

lumber, one by the Department of Commerce, the other 

by the USITC, had been reviewed by panels 

established under the dispute resolution mechanism of 

the CFTA (chapter 19 of the agreement) and had been 

remanded to each agency. Thus, both the U.S. 

International Trade Administration (ITA) and the 

USITC had early 1994 deadlines either to return a 

revised determination responding to a remand by a 

review panel, or to await a panel decision reviewing 

such a revised decision. The ITA had to respond to a 

panel remand while the USITC was awaiting a panel 

view of its response to a previous remand. 

Events during 1994 illustrate how the innovative 

mechanism established under the CFTA to handle 

challenges to domestic determinations of dumping and 

countervailing duties operates. The lumber issue was 

thus a matter of considerable interest to trade 

practitioners on both sides of the border, particularly 

since the dispute settlement mechanism has been 

carried over into NAFTA. 

ITA Determination 

On December 17, 1993, the CFTA (chapter 19) 

dispute resolution panel issued its second decision on 

review of Commerce's earlier remand determination. 

In a majority ruling, the five-member panel held that 

73 
more evidence was needed to prove that Canadian 

subsidies were market distorting. The panel thus 

remanded the case again. The Commerce Department 

(ITA) was given 20 days to respond to the panel 

decision.20The decision was somewhat unusual in 

that a chapter 19 panel split along national lines for the 

first time in the history of the CFTA. The three 

Canadian panelists supported the need for additional 

proof; the two Americans disagreed. While binational 

panels cannot make the determinations required of 

domestic agencies—they can only review the decisions 

of those agencies—the majority was unusually 

forthright in its second remand decision. 21 

On January 6, 1994 the Commerce Department 

filed a determination with the Binational Secretariat, 

essentially following the binational panel's instructions 

in the December 17 remand decision. The ITA 

determined that Canadian Provincial stumpage 

programs and log export restrictions do not constitute a 

countervailable subsidy. 22 

On March 7, 1994, the binational panel upheld the 

ITA remand determination, affirming that Provincial 

stumpage programs and British Columbia's log export 

restrictions were not countervailable under U.S. law. 

Following a series of bilateral discussions concerning 

possible conflicts of interest on the part of two of the 

three Canadian panelists, the United States on April 6, 

1994, lodged an extraordinary challenge to the 

binational panel's action of December 17, 1993. 23 

USITC Determination 

October 25, 1993 was the deadline set for a USITC 

determination on remand by another binational panel in 

the same lumber case. On October 18, the USITC 

upheld its original determination by the same 4-2 

vote.24The Commission reopened the record on what 

was a crucial issue, that of price suppression in the 

U.S. market as a result of imports from Canada. 

According to the Rules of Procedure for binational 

panel reviews, the USITC decision was then returned 

to the panel, which had 90 days, or until January 24, 

1994, either to uphold the USITC determination or 

remand the case to the Commission again. Panels 

under chapter 19 of the CFTA/NAFTA are not allowed 

to reverse the decision of a domestic agency in 

antidumping or countervailing duty cases. They may 

only uphold agency determinations or send them back 

with instructions for further review. 

On January 28, 1994, the binational panel again 

remanded the case to the USITC. 25The panel found 

that the Commission's price trends analysis did "not 

constitute substantial evidence and is otherwise not in 

accordance with law." 26It instructed the Commission 

to "provide a full analysis and explanation of the 

underlying data and the methodology employed in the 

creation and presentation of the price trends analysis" 

should it use such an analysis to support an affirmative 

determination. The Commission was given 45 days to 

complete its redetermination on remand. 

On March 7, 1994, the Commission returned its 

decision to the pane1. 27The redetermination decision, 

by a vote of 3-2, upheld the Commission's injury 

determination. In the vote on the second remand 

determination, one Commissioner who had participated 

in the original decision, Anne Brunsdale, did not 

participate, because of her resignation. Another 

Commissioner, Peter Watson, changed his vote from 

affirmative to negative. 

The binational panel, exercising its review 

authority, again remanded the case to the USITC on 

July 6.28The panel held that a finding of the plurality 

decision was "not supported by substantial evidence on 

the record and is inconsistent with previous rulings of 

the Panel."29A third remand determination was due 

on August 6, 30 days later. However, on August 3, the 

USITC decided to defer its vote on the third remand 

because of the actions on that date of an extraordinary 

challenge committee, established under the CFTA, 

concerning the panel's review of Commerce's 

actions. 30 

Extraordinary Challenge 

On February 24, 1994, the USTR General Counsel 

announced his intention to file an extraordinary 

challenge under the NAFTA to the decision of the 

binational panel reviewing the ITA determination in 

the softwood lumber case. Since its December 1993 

decision, questions had been raised about two of the 

three Canadian panelists, who belonged to law firms 

that represented numerous clients in the Canadian 

lumber industry. The firms also represented Canada's 

Federal and Provincial Governments, parties to the 

softwood lumber case. The United States called for the 

removal of the panelists and the reconstitution of the 

panel, and urged that the decision of the initial panel be 

vacated. 31The basis for the challenge concerned 

"conflict of interest issues presented by the panelists' 

client relationships, and the failure to disclose 

them . ."32 

The challenge was officially filed by the United 

States on April 6, 1994. 33An extraordinary challenge 

committee of three judges (two Canadians and one 

American) heard the case, and on August 3, 1994, in a 

split decision, dismissed the U.S. request on the 

grounds that the standards for an extraordinary 

74 
challenge had not been met Like the CFTA chapter 19 

dispute settlement panel in the Commerce action on 

softwood lumber, the three judges also split along 

national lines, the first time such a result had occurred 

with an extraordinary challenge committee. 34The 

effect of the committee's decision was to eliminate any 

duties on Canadian softwood lumber entering the 

United States. It also meant that whatever interim 

duties had been collected on imports of softwood 

lumber from Canada would be refunded. 

Given the panel's decision—the final step of the 

NAFTA dispute settlement process—the Coalition for 

Fair Lumber Imports (Coalition), had no further 

recourse within the structure of the free-trade 

agreement to pursue its grievance against Canadian 

imports. Three years of contentious litigation had 

apparently come to an end and the bilateral dispute 

settlement mechanism had been thoroughly tested. 35 

The Coalition brought suit in September by 

challenging the constitutionality of the panel process in 

the Federal Court of Appeals for the District of 

Columbia. The suit was a direct challenge to one of the 

more innovative aspects of the bilateral free-trade 

agreement, and a decision overturning the process 

could have led the Canadians to seriously reconsider 

their continued participation in NAFTA. 

On December 15 both governments announced 

agreement to establish a "bilateral consultative 

process...to settle our differences without having to 

resort to the kind of litigation we have seen in the 

past."36On the same day, the Coalition announced 

that the lawsuit in Federal court was being dropped. 37 

 The United States and Canada both acknowledged that 

these actions, together with the return of CVD cash 

deposits, represented "very positive steps in moving 

beyond litigation and dispute toward a more positive 

and mutually advantageous atmosphere for bilateral 

lumber trade." 38The consultative process will proceed 

at a government-to-government level, although the 

views and input of the respective industries and the 

private sector will be sought. 39 

European Union 

The year 1994 was a relatively quiet one in 

U.S.-EU trade relations. After the end of the Uruguay 

Round of trade talks, no major bilateral trade issues 

occurred until the second half of the year. Leaders from 

both sides began talking about the "sound" and 

"thriving" bilateral relationship that required 

"strengthening."40Indeed, in November the EU 

Ambassador to the United States proposed a 

trans-Atlantic free-trade area to revitalize the 

partnership. 41 

Most bilateral trade issues in 1994 continued from 

previous years and were not the source of major 

friction. However, in the fall, the United States 

complained about the EU banana import regime and 

requested compensation for EU enlargement. 

Bananas 

The EU import regime for bananas has been the 

target of complaints from numerous sources, including 

EU member states and Latin American banana 

producers. On October 17, 1994, the United States 

joined the critics and launched an investigation under 

section 301 of the 1974 Trade Act. The investigation 

was instituted in response to a petition received from 

Chiquita Brands International Inc. and the Hawaii 

Banana Industry Association. The petitioners claimed 

that not only is the EU banana regime dating from 

July 1, 1993, discriminatory, but that the more recent 

Framework Agreement reached between the EU and 

four Latin American nations compounds the 

discrimination. 

The EU banana import regime has undergone 

several changes over the past few years. In the past, 

Germany was the only member state to operate a free 

market. The other 11 member states imposed a 

20-percent tariff, of which 6 member states—France, 

Italy, Portugal, Spain, Greece, and the United 

Kingdom—also applied quotas on bananas produced in 

Central and South America. These import restrictions 

ensured an EU market for bananas produced in certain 

developing countries in Africa, the Caribbean, and the 

Pacific (ACP countries) and in EU territories, by 

protecting them from competition with the less 

expensive bananas from Latin America. ACP bananas 

entered all EU member states duty- and quota-free 

under the Lome Convention by which the EU grants 

preferential treatment for products from ACP 

countries. 

As part of the 1992 integration program, the 

European Commission proposed an EU-wide package 

of duties and quotas on imports of non-ACP (for 

example, Central and South American) bananas. 

Several member states opposed these measures, 

particularly Germany, which was the largest EU 

consumer of bananas and had previously imported all 

bananas free of duty and quotas. Latin American 

producers also opposed the proposed regime because it 

would limit their access to all EU member-state 

markets. 

75 
In response, the EU Commission proposed easing 

the quota and duty restrictions. After several 

adjustments, a new banana trade regime entered into 

force on July 1, 1993, replacing the nationally based 

programs.42Under the EU-wide rules, ACP bananas 

receive duty-free entry up to a ceiling of 857,700 

metric tons, allocated to each of the banana-producing 

countries on the basis of their historic exports to the 

EU; imports in excess of this amount are subject to a 

duty of European Currency Units (ECU) 750 per 

metric ton. Non-ACP bananas are subject to a two-tier 

tariff-rate quota—ECU 100 per metric ton on imports 

of up to 2 million metric tons, and ECU 850 on imports 

above that ceiling. Also, of the 2 million tons, only 

66.5 percent can be marketed by operators that have 

traditionally marketed such bananas in the EU. Most of 

the remainder is to be marketed by European firms, 

which have historically marketed only ACP bananas. 

Claiming discrimination from the EU-wide import 

regime, five Latin-American banana-producing 

countries (Colombia, Costa Rica, Guatemala, 

Nicaragua, and Venezuela) initiated dispute-settlement 

procedures in the GATT in June 1993. 43Although a 

panel found in January 1994 that the banana regime 

was GATT-illegal," the panel report was never 

adopted. On March 29, 1994, the EU reached an 

accord with four of these producer countries (excluding 

Guatemala) that increased and guaranteed the volume 

of their export quotas in return for their agreement to 

withdraw their GATT complaint and not challenge the 

import regime in GATT for the duration of the 

agreement (December 31, 2002). 45 

The so-called "Framework Agreement" between 

the EU and four Latin American countries raised the 

non-ACP quota to 2.1 million tons in 1994 and to 2.2 

million tons in 1995. Also, the agreement lowered the 

in-quota tariff on Latin American bananas by 25 

percent to ECU 75 per metric ton. It allocates specific 

export quotas (as a percent of the non-ACP quota) to 

each of the four Latin American signatories and 

permits the signatory governments to grant export 

licenses for 70 percent of their quota allocations. 

Because implementation of the agreement was delayed 

from October 1, 1994, to January 1, 1995, the Latin 

American signatories requested and received 

compensation from the EU. 

In September 1994, with the new EU banana 

regime in effect and implementation of the Framework 

Agreement imminent, Chiquita and the Hawaii Banana 

Industry Association filed a petition with the USTR 

requesting a section 301 investigation. The USTR had 

45 days to respond and on October 17, initiated an 

investigation of the EU banana regime. The USTR did 

not initiate proceedings at that time against the 

signatories of the Framework Agreement because the 

agreement had not yet entered into effect. 46 

According to the petition, Chiquita marketed 

approximately 40 percent of the Latin American 

bananas sold in the EU in 1992. Chiquita claims that 

the banana regime has increased its costs; disrupted its 

sourcing, marketing, and distribution channels; and 

decreased its EU market share and opportunities for 

market growth. More specifically, Chiquita claims that 

the EU-wide quotas and tariffs for non-ACP bananas, 

as well as new licensing rules permitting only 

two-thirds of the non-ACP quota to be marketed by 

traditional operators (for example, Chiquita) have 

reduced the company's market share in the EU by more 

than 50 percent. 

According to Chiquita, the discrimination will 

grow even worse once the Framework Agreement is 

implemented. By allocating specific export quotas to 

each of the four Latin American signatories, the 

agreement will require major changes in the company's 

sourcing patterns, increasing its costs. Furthermore, 

Chiquita claims that the Framework Agreement is 

discriminatory and costly because it makes export 

licenses mandatory for all marketing companies except 

European ones. The Latin American signatories have 

the right to sell these licenses to the highest bidder. 

The EU immediately criticized the USTR decision 

to initiate the section 301 investigation. Caribbean 

producers, concerned that the U.S. investigation could 

threaten their banana industry, met with U.S. officials 

on the sidelines of the Miami Summit. The two parties 

agreed to form a technical working group in 1995 to 

seek a mutually beneficial solution. 

At the end of the year, the GATT granted a waiver 

to the Lome Convention under which the EU grants 

ACP products, including bananas, preferential 

treatment. Both the United States and Guatemala 

expressed concerns at the GATT meeting about the EU 

banana regime and reserved their right to take action 47 

48 if these were not addressed by the EU.

Enlargement and U.S. 

Compensation 

On January 1, 1995, Austria, Finland, and Sweden 

became the newest members of the EU, raising the 

total number of member states from 12 to 15. As a 

result of the accession, some of the tariffs facing U.S. 

exports to the new member states increased. 

Anticipating this impact from enlargement early in the 

fall, the U.S. Government requested compensation 

from the EU. After a series of bilateral talks in 

76 
December 1994, the two parties reached an interim 

agreement. 

Austria, Finland, Sweden, and Norway signed a 

treaty of accession with the EU on June 24, 1994, at 

the semiannual summit of EU leaders in Corfu, Greece. 

Accession was approved separately by national 

referendum in each of the applicant countries except 

Norway, whose voters on November 28 rejected 

membership. 

EU accession required that Austria, Finland, and 

Sweden accept in full the "acquis communautaire," the 

body of primary and secondary legislation making up 

the EU legislative and policy framework. In addition, 

these countries had to dismantle tariffs between 

themselves and the 12 former member states (the 

customs union) and align their customs tariffs with the 

EU common external tariff (CET) schedule, which 

treats imports from nonmembers uniformly. According 

to the U.S. Government, "it is likely that U.S. 

production and trade in some sectors will be adversely 

affected" when the acceding countries apply the EU 

CET schedule.49As a result, the United States 

requested talks on compensation early in the fall. 

When a customs union expands, nonmembers have 

the right under GATT article XXIV.6 to seek 

compensation on a bilateral basis for any withdrawal of 

previously negotiated trade concessions. 50In the 

absence of appropriate compensation, affected 

countries can retaliate by withdrawing trade 

concessions covering an equivalent value of trade. 

The EU was reluctant to begin formal negotiations 

with the United States until after the Norwegian 

referendum made clear which countries would actually 

join the EU. Furthermore, the EU argued that 

compensation negotiations under the GATT did not 

need to conclude until after enlargement took place. 51 

 However, under U.S. pressure, and because tariff 

changes in the three entrants would be implemented 

immediately on January 1, without any transition 

periods, bilateral talks gained momentum in 

December. 52The United States requested that the EU 

offset each individual tariff increase, whereas the EU 

was "adamant that it will take an overall view of the 

impact on trade with the United States, rather than 

merely compensating on a sector-by-sector basis." 53 

 According to the EU, if all three applicant countries 

were taken together, lower tariffs in agriculture would 

more than offset the possibility of higher tariffs in 

industrial goods.54After U.S. threats of retaliation, 

both sides agreed in late December on an interim 

solution that entered into effect on January 1, 1995, for 

a 6-month period. 

The new agreement establishes tariff-rate quotas, 

which permit U.S. exports of certain products to enter 

Austria, Finland, and Sweden at the tariff rates 

prevailing in these countries before enlargement up to 

an agreed-upon quota. For exports above that quota, 

the EU tariff would apply. 55The following products 

are covered: semiconductors, computers, computer 

parts, chemicals, records and tapes, optical fibers and 

lenses, medical instruments, oscilloscopes, orthopedic 

equipment, crayfish, plywood, and aluminum. 56 

The interim agreement provides time to negotiate a 

permanent solution, which is scheduled to enter into 

effect on July 1, 1995. 57At U.S. insistence, it was 

agreed that two product areas that were omitted from 

the interim agreement—agriculture and paper—will be 

included in any permanent solution. 58Other countries 

seeking compensation from the EU include Japan, 

Canada, Australia, New Zealand, Norway, Iceland, 

Thailand, South Korea, and Indonesia. 

Other 

The EU ban on growth hormones in livestock 

production continued throughout 1994. This ban 

entered into force against third countries in 1989 and 

has significantly reduced U.S. exports of beef to the 

EU. The EU moratorium on the marketing and use of 

bovine somatotropin (BST), a genetically engineered 

natural hormone that boosts milk production in dairy 

cows,59remained in effect during 1994 and in 

December, was extended for another 5 years, or until 

December 31, 1999. However, member states are 

permitted to make "limited practical tests" of BST, if 

they so choose. The European Commission is to 

prepare a report evaluating BST by July 1, 1998, based 

on the data collected from such tests. 

A dispute over the Third-Country Meat Directive, 

which requires EU inspection of foreign meat plants, 

was resolved in a 1992 bilateral agreement that 

recognized equivalency between the veterinary 

inspection systems of the United States and the EU. 

The agreement also established interim requirements 

for determining the eligibility of U.S. cattle- and 

pig-slaughtering facilities for exporting meat to the 

EU.60The 1992 agreement set a target date for full 

implementation of the agreement by December 31, 

1993, which was later extended to January 1, 1995. 

However, this target date was not met. The United 

States will continue to monitor amendments to the 

directive that should ultimately permit certification by 

the U.S. Department of Agriculture that U.S. 

establishments meet EU standards. 61 

77 
Two other ongoing issues related to EU internal 

market directives saw no progress in 1994. 62In the 

area of government procurement, U.S. claims that the 

EU Utilities Directive discriminates against U.S. 

suppliers of telecommunications equipment and 

services resulted in U.S. sanctions against the EU in 

May 1993. These sanctions, as well as EU 

countersanctions, remained in effect throughout 1994 

after the two sides were unable to reach an agreement 

in time for the signing of the Uruguay Round. 63The 

United States continued to complain about the 

Broadcast Directive, 64which requires EU member 

states to guarantee "where practicable" that 

broadcasters reserve a majority proportion of their 

entertainment transmission time for European 

operations. The EU Commission had intended to 

propose changes to the directive during 1994, but 

proposals were not forthcoming because 

Commissioners could not agree on whether or not to 

strengthen the directive, in particular the quota 

provisions. 65The United States has denounced the 

quotas in the Broadcast Directive as a violation of the 

GATT. 

Finally, EU ratification of the Uruguay Round 

Agreements (URA) stalled during the fall when 

member states questioned whether the EU Commission 

had exclusive competence to sign the URA on behalf 

of the member states. On November 15, the European 

Court of Justice ruled on the relative responsibilities of 

the EU Commission and the member states in the 

World Trade Organization (WTO). The Court ruled 

that the EU Commission has exclusive responsibility in 

the area of trade in goods, but that it must share 

competence with member states in issues of trade in 

services and intellectual property. The ruling thus 

required all member states to sign the URA alongside 

the EU Commission, which was duly accomplished 

before the end of the year. It also determined the extent 

of EU authority in the future to negotiate and conclude 

international agreements on behalf of the member 

states. However, court cases are expected to arise to 

resolve questions of competence on a case-by-case 

basis.66 

Japan 

During 1994, U.S.-Japan trade relations centered 

on bilateral negotiations conducted in the context of 

the "U.S.-Japan Framework for a New Economic 

Partnership" (the Framework Agreement). Reached on 

July 9, 1993, the Framework Agreement committed the 

two countries to negotiate on five major "baskets" of 

issues: (1) government procurement, (2) regulatory 

reform and competitiveness, (3) other major sectors, 

(4) economic harmonization, and (5) implementation 

of existing arrangements and measures. 67The 

Framework Agreement also called for semiannual 

meetings of the two countries' heads of state 

Agreements were to be reached in priority areas by the 

time of their first meeting in 1994, or within 6 months. 

The four priority sectors were automotive industries; 

insurance; and, in the area of government procurement, 

telecommunications and services, and medical 

equipment and services. A fifth priority sector, flat 

glass, was added to the negotiating agenda in July. 

The Framework Agreement represented a 

heightened U.S. policy with an emphasis on attaining 

measurable results in the opening of markets. Progress 

on both the macroeconomic and macroeconomic fronts 

was deemed crucial. In fact, the main source of dispute 

during the negotiations centered on divergent opinions 

on the wisdom of including quantitative criteria or 

indicators in the sectoral agreements to measure 

progress in opening Japan's markets. After the first few 

months of 1994, negotiations came to a standstill 

because of an unprecedented admission by the two 

countries' leaders that they were unable to find 

sufficient common ground to proceed; however, by the 

end of the year the two sides were able to reach 

agreement in four of the five priority sectors. 68 

U.S.-Japan Framework 

Agreement 

With agreements in the four areas initially 

designated as priorities unlikely by the time of a 

scheduled summit between President Clinton and 

Japan's Prime Minister Hosokawa on February 11, last 

minute efforts between high-level officials were made 

to break the deadlock in negotiations on January 24 

and 25. However, on February 11, 1994, President 

Clinton and Prime Minister Hosokawa announced that 

the two countries had failed to reach agreement in any 

of the four priority areas. Concluding that "it is better 

to have reached no agreement than to have reached an 

empty agreement," President Clinton stated that 

Japan's offers had not met the standards agreed to at 

the beginning of the talks; namely, that any agreement 

would include "objective criteria that would result in 

tangible progress." 69Prime Minister Hosokawa said 

that the two countries' views on objective criteria "did 

not converge." The United States insisted that the 

inclusion of objective criteria was the only practical 

method to measure the success or failure of the 

agreement. Japanese negotiators, however, continued 

to equate objective criteria with numerical targets, 

opposing them because they are inconsistent with the 

78 
principles of free trade and could frustrate Japan's 

efforts to deregulate its economy. 70Bilateral trade 

negotiations essentially came to a halt following the 

summit. 

Reactions to the breakdown in talks were mixed. In 

the United States, some criticized the administration's 

pursuit of numerical targets during the negotiations. 

Others feared that there could be increased distrust and 

uncertainty between the two countries, leading 

ultimately to a trade sanctions war. On the other hand, 

110 economists, businessmen, and academics signed a 

letter to the President supporting his results-oriented 

approach to Japan. 71The letter indicated that 

long-term access to Japan's markets would occur "only 

through innovative mechanisms toward results that can 

be measured in a number of ways, other than market 

share arrangements." Several economists disagreed 

with this assessment, pointing out that Japan's trade 

surplus is inevitable as long as its savings are higher 

than domestic investment. Thus, they noted, removing 

barriers in Japan was unlikely to have a major impact 

on Japan's surplus. 72Some analysts suggested that the 

breakdown in talks had less to do with the two leaders 

being unable to bridge their trade disagreements than it 

did with an unwillingness to do so. According to this 

view, both leaders calculated that they could score 

more political points at home by walking away than by 

forging a compromise. 73 

Over the following weeks, a variety of proposals 

were put forth. Among the recommendations were to 

"trilateralize" the talks by encouraging the EU to 

participate, to pursue U.S. complaints in the GATT, to 

reinstitute a Wiseman's group (blue ribbon panel), and 

to strengthen back channels among key officials to 

solve trade issues. 74Congress also took action. On 

February 23, Congressman Gephardt (D-MO) and 

Senator Rockefeller (D-WV) co-sponsored the Fair 

Market Access Act of 1994. The proposed legislation 

would require the Commerce Department to set market 

access goals for competitive U.S. exports to use as 

targets under the section 301 provisions if an 

agreement with Japan were not reached within a year's 

time.75Senators Baucus (D-MT) and Danforth 

(R-MO) introduced legislation to reinstate "Super 301" 

on February 22, noting that it was aimed at Japan. 76 

 On March 3, USTR Michael Kantor announced that 

President Clinton had signed an Executive Order 

reinstating the Super 301 provision for a period of 2 

years. The President telephoned Prime Minister 

Hosokawa to reassure him that Japan was not being 

singled out for identification. 77 

In Japan, meanwhile, there was strong support 

among industrial leaders and the public for Prime 

Minister Hosokawa's rebuke of U.S. requests for 

inclusion of numerical indicators in any agreement. 78 

 Prior experience with the U.S.-Japan semiconductor 

agreement, which contains market share goals, had 

apparently soured many on the notion of numerical 

targets. However, there were also signs that Japan was 

considering steps that could provide a sufficient basis 

for a resumption of the talks. For example, an 

influential member of Prime Minister Hosokawa's 

cabinet announced that Japan could support some type 

of nonbinding import goals based on efforts to 

purchase foreign goods. 79On February 26, the 

Japanese Cabinet approved the outlines of an economic 

stimulus and market opening plan that would include 

deregulation, improved transparency in government 

procurement procedures, toughened enforcement of 

antitrust rules, and measures to increase imports. This 

also appeared to be an attempt to ease bilateral strains; 

however, U.S. officials declared the package to be 

insufficient. 80 

In early March, Secretary of State Christopher met 

with Prime Minister Hosokawa and Foreign Minister 

Hata. Although he stopped short of formally resuming 

negotiations, the Secretary engaged in general 

discussions on trade and security issues and urged 

Japan to keep its commitments under the Framework 

Agreement, particularly with regard to significantly 

reducing its current account surplus. 81On March 29, 

Prime Minister Hosokawa announced a deregulation 

plan and a three-part economic package intended to 

further open Japan's markets to foreign products. 

Ambassador Kantor responded by saying that the 

proposal was too vague. 82 

Informal contacts and meetings occurred over the 

next month, and on May 24 the two countries 

announced the resumption of the framework talks. 

During July, the Clinton administration decided to 

elevate flat glass to a priority area for market 

liberalization. Although some progress had been made 

in negotiations on telecommunications, medical 

equipment, and insurance during the previous 2 

months, the issue of including criteria to evaluate 

progress continued to elude negotiators. On July 31, 

the USTR stated that unless Japan committed to 

making significant purchases of foreign medical and 

telecommunication equipment by September 30, 

restrictions could be placed on U.S. imports from 

Japan in accordance with procurement-related 

provisions of the Omnibus Trade and Competitiveness 

Act of 1988. 83Foreign Minister Kono insisted that 

framework negotiations could progress only if the 

United States abandoned its "results-oriented 

approach."84 

At the end of September, the United States 

abandoned its demand that numerical targets be 

included in the agreement. 85The intensive rounds of 

negotiations that ensued led to the announcement on 

79 
October 1 of agreements, in principle, in each of the 

priority sectors under negotiation, except autos and 

auto parts, which constitute 60 percent of the $60 

billion annual U.S. trade deficit with Japan. 86Details 

of the glass agreement were to be worked out within 30 

days. Each of the agreements was characterized as 

tangible, concrete, and results oriented, in that each 

required—(1) an annual evaluation of progress in the 

value and share of procurement of foreign products and 

services, and (2) over the medium term, a significant 

increase in the access for and sales of foreign products 

and services. 87 

With an agreement formally concluded on 

government procurement of telecommunications and 

medical equipment, Ambassador Kantor terminated the 

sanctions that had been scheduled to go into effect in 

the public procurement sector against Japan on October 

4.88However, on October 1, USTR initiated a section 

301 investigation against Japan for lack of progress in 

the Framework Agreement talks on auto parts and for 

its vague, restrictive, and complicated regulatory 

barriers to sales of foreign `aftermarkee replacement 

auto parts. 89Japan immediately threatened to 

terminate the Framework Agreement talks if unilateral 

sanctions were imposed and cautioned that it might 

employ other retaliatory measures, such as launching a 

complaint with the GATT. The United States and Japan 

failed to reach an accord on auto parts during 1994. 

Talks were scheduled to resume in 1995. 90 

The U.S. Government announced in November that 

it would shift the emphasis of the Framework 

Agreement talks in 1995 from sector-specific 

negotiations to deregulation and administrative 

reforms. To encourage meaningful deregulation, the 

United States presented the Japanese Government with 

a detailed paper on November 15, highlighting specific 

reforms that it would like incorporated into Japan's 

5-year deregulation plan scheduled for release on April 

1, 1995.91According to Ambassador Kantor, "the 

elimination of regulatory impediments in the Japanese 

market, combined with more open and transparent 

Japanese Government processes and a proactive 

competition policy, are necessary and interlinked 

measures to address some of Japan's broader structural 

problems that impede market access." 92Finance and 

telecommunications will be the focus of the 

negotiations, followed by retail distribution, 

transportation, and pharmaceutical deregulation. 93 

 Although no longer a top priority, industry-specific 

sectoral talks will continue on such issues as autos and 

auto parts, energy production and delivery, financial 

services, direct foreign investment, construction 

materials, medical equipment and pharmaceuticals, and 

legal services. 94 

Sectoral Discussions 

Flat Glass 

Although negotiators missed the October 31 

deadline set for finalizing an agreement to improve 

foreign access to Japan's $4.5 billion flat-glass market, 

a verbal understanding reached on October 1 between 

USTR Michael Kantor and the Minister of 

International Trade and Industry (MITI) Ryutaro 

Hashimoto was viewed as adequate progress for the 

United States to postpone initiating a formal trade 

complaint under Super 301. 95 

Ambassador Kantor stated that because of the 

October 1 understanding, "the Japanese distribution 

system will become open to foreign glass suppliers and 

traditional links between Japanese manufacturers and 

distributors [will] be broken." 96He also stated that "in 

the first year the U.S. expects that three-quarters of the 

100 largest Japanese wholesalers and glaziers would 

obtain 30 to 40 percent of their flat glass from 

non-traditional sources, both foreign and domestic." 97 

 However, MITI Minister Hashimoto issued a letter on 

October 7 in which he characterized Ambassador 

Kantor's statements concerning the October 1 

agreement as "misunderstandings" or "misperceptions" 

of their oral accord. On November 1, Ambassador 

Kantor and Minister Hashimoto issued separate 

statements announcing that both sides continued to be 

optimistic, but had yet to formalize the agreement 

because "technical and practical problems remain." 98 

Issues that continued to forestall agreement 

included the wording of a statement from Japanese 

glass wholesalers and distributors detailing their 

commitment to purchase glass from multiple sources 

(including foreign companies) and the specific type of 

criteria that would be used to measure the openness of 

Japan's highly centralized flat-glass market. U.S. 

negotiators sought inclusion of some type of 

quantitative indicator that would monitor market 

openness and measure to what extent Japanese 

wholesalers were actually broadening their purchasing 

patterns beyond a single source. 

The United States contends that foreign investment 

in and exports to Japan are limited because of the 

anticompetitive relationship (the so-called keiretsu 

structure) that exists between Japan's three dominant 

glass manufacturers and its leading glass wholesalers. 

Three producers, Asahi Glass Co., Ltd.; Nippon Sheet 

Glass Co., Ltd.; and Central Glass Co., Ltd.; have 

supplied between 95 and 97 percent of Japan's market 

for flat glass over the last 20 years either through 

domestic production or imports from offshore 

subsidiaries or through affiliates. Each is either owned 

80 
or affiliated with a keiretsu structure that—in the U.S. 

industry view—is anticompetitive and acts as a barrier 

to free market access. The majority of Japan's 400 

flat-glass wholesalers have exclusive sales contracts 

with Asahi, Central Glass, or Nippon Sheet Glass. 99 

Japan's flat-glass market is second in size only to 

that of the United States. 100U.S. negotiators 

characterized the Japanese flat-glass market as an 

"oligopoly of three large producers with separate, 

de-facto exclusive, and tightly controlled distribution 

systems." 101 U.S. officials cited a report issued in 

1993 on the Japanese flat-glass market by Japan's 

Fair-Trade Commission (JFTC) as further evidence of 

the distribution system's anticompetitive effects. 102 

 The United States also insisted that the Japanese 

Government be more assertive in using its 

antimonopoly law to end the current system of 

exclusive sales contracts that ties most distributors to 

one glass manufacturer. 

Another point of contention was Washington's 

demand that the Japanese Government guarantee that 

its distribution system would be open to all foreign 

manufacturers, regardless of ownership ties. U.S. 

producers are concerned that Japanese distributors 

would simply fill future contract orders with glass from 

Japanese overseas affiliates rather than from foreign 

manufacturers. Consequently, U.S. negotiators 

proposed that Japan collect data on flat-glass imports 

on the basis of suppliers' ownership ties, so that 

purchases from U.S. and other foreign companies 

could be differentiated from purchases from Japanese 

offshore affiliates. Japan was also requested to mandate 

the use of specialty glass (safety glass, for example), an 

area dominated by U.S. producers, in certain publicly 

financed projects. 

Japanese negotiators insisted that their Government 

lacked the authority to force or encourage flat-glass 

imports or to guarantee foreign access to the 

distribution system. They further maintained that glass 

wholesalers had already taken steps to ensure that 

Japan's glass distribution network is open to foreign 

products. Japan also refused the U.S. request that 

imports be segregated on the basis of ownership ties, 

since doing so would be precedent setting and 

discriminate in favor of U.S.-owned firms. 103U.S. 

officials countered by insisting that the United States 

was not requesting special treatment, but was simply 

requesting data so that each country could differentiate 

between imports from Japanese- and foreign-affiliated 

firms. On December 6, the Clinton administration 

dropped its demand for import data based on patterns 

of ownership, believing that it could follow such trends 

in Japanese glass imports by less conventional 

methods . 1 °4 

On December 12, Ambassador Kantor and 

Minister Hashimoto separately announced that the 

United States and Japan had reached a final agreement 

on flat glass. Ambassador Kantor stated that "the 

Government of Japan has agreed that the goal of this 

agreement is to increase market access and sales for 

competitive foreign glass, regardless of capital 

affiliation. We have solid objective criteria with which 

to judge the results." 105The agreement calls for 160 

of Japan's 400 flat-glass distributors to publicly state 

that they will no longer discriminate on the basis of 

ownership ties and to detail their plans to diversify 

their sources of supply. To U.S. negotiators this was an 

important step towards loosening keiretsu relationships 

in the flat-glass industry. Asahi Glass, Nippon Sheet 

Glass, and Central Glass will also release statements 

affirming that their wholesalers are free to acquire flat 

glass from any source, even non-Japanese foreign 

producers. Finally, the agreement calls for "active 

Japanese Government promotion of the use of safety 

and insulating glass windows in public works projects, 

areas where American firms have a clear competitive 

advantage; significant import promotion measures by 

the Japanese Government; and a Japanese Government 

commitment to end discrimination in public sector 

procurement of flat glass." 106 

The agreement does not include specific import 

targets, but will measure the "change in the extent to 

which Japanese glass distributors deal in or use 

imported flat glass, regardless of capital affiliation 

[ownership ties]; change in the sales and market share 

of foreign flat glass in Japan; and the change in the 

sales (volume and value) of insulating and safety glass 

in Japan." 107The Government of Japan will monitor 

the agreement and MITI will publish an annual report 

detailing the degree to which Japanese wholesalers are 

handling imported flat glass manufactured by 

non-Japanese related firms. 108The two Governments 

have also agreed to meet annually or at the request of 

either government. 

Insurance 

Before the Framework Agreement talks stalled in 

February 1994, U.S. and Japanese negotiators were 

confident that they were well on their way to reaching 

an agreement on insurance. However, the United States 

and Japan had yet to settle their differences over the 

speed or the degree of deregulation, how Japan would 

relax its pricing restrictions that effectively prevent the 

introduction of new products, and which areas would 

be deregulated first. 

81 
In 1994, U.S. companies continued to face 

restrictions in the so-called Third Area of Japan's 

insurance market. 109Before the framework 

negotiations began, the Ministry of Finance had 

indicated that it intended to deregulate this sector, 

where foreign firms dominate, before beginning to 

liberalize the markets for life and nonlife insurance. In 

the framework negotiations, the United States urged 

that priority be given to opening the other, much larger, 

markets, including commercial, fire, and auto 

insurance, where Japanese companies are dominant. 

U.S. firms worried that they would be forced out of the 

Japanese insurance market if the Third Area were 

deregulated before they were permitted a chance to 

achieve a more prominent position in the primary 

insurance sector. The United States also raised 

concerns about delays in approving new products, the 

role of trade associations in setting premium rates, and 

anticompetitive business practices (keiretsu 

relationships). The United States indicated that if such 

barriers were eliminated, the foreign market 

penetration in Japan would be closer to that in the 

United States and Western Europe, where the foreign 

market share is between 10 and 33 percent. 11 ° 

Japan is the world's second-largest life insurance 

market, with premiums valued at $320 billion. 111 

 Foreign penetration in Japan's insurance market is 

approximately 2 to 3 percent, far lower than in other 

developed nations. 112According to Ambassador 

Kantor: 

The limited access by foreign firms [in the 

Japanese market] stems from a combination 

of bathers such as an opaque regulatory 

system, exclusionary purchasing practices 

associated with old interconnected corporate 

structures called keiretsu, and obstacles in the 

distribution system. Foreign companies in 

Japan traditionally had to contend with 

opaque government regulation fostered by 

Japanese laws which are written very 

generally, as well as informal and unpublished 

"guidance" issued to private companies by 

Japanese bureaucrats. As a result, foreign 

companies are unable to know specific 

requirements in advance, and have no basis to 

be certain that they are being treated 

according to the same standards as Japanese 

companies. This means that Japanese 

regulators using their discretionary powers are 

able to arbitrarily require foreign insurance 

companies to meet a variety of conditions and 

requirements, such as coordinating their 

product applications with Japanese insurance 

companies. This runs counter to the principal 

of fair competition and market access. 113 

The United States suggested that Japan's insurance 

regulatory system tends to limit innovation and 

rate-based competition, areas where U.S. companies 

enjoy a decided competitive advantage over their 

Japanese counterparts. 114 

On October 1, the United States and Japan 

announced a preliminary accord to liberalize Japan's 

life and nonlife insurance market and grant greater 

access to foreign insurers. 115On October 11, a joint 

statement was signed by USTR and the Government of 

Japan formalizing the agreement. 116Under the 

agreement, Japan promised to make its rules and 

regulations more transparent, provide important 

procedural protections for foreign companies, initiate 

specific liberalization and deregulation proposals, and 

strengthen its antitrust policies. For the first time, 

standards for the approval of insurance licenses will be 

documented and made public. To begin basic market 

liberalization, the Government will institute a 

simplified notification system for large commercial 

insurance that will allow companies to offer new 

products after informing regulators in lieu of going 

through the more onerous former approval 

procedure. 117A three-stage deregulation plan 

covering insurance products and rate approvals will be 

introduced. Insurance rate restrictions pertinent to large 

commercial fire insurance (a huge market in Japan) 

will be relaxed. A Western-style brokerage system will 

also be introduced "in order to diversify and promote 

competition in insurance distribution channels. "118 

The Japanese Government has agreed to enforce its 

Antimonopoly Act and to re-evaluate the 

Antimonopoly Act exemption contained in the 

Insurance Business Law of 1955. The Japan Fair-Trade 

Commission will also reevaluate keiretsu relationships 

and their impact on foreign competition in Japan's 

insurance market. Lastly, the Japanese Government 

promised not to make any "radical changes" in the 

business environment governing the Third Area until 

significant liberalizations occur in the life and nonlife 

areas of the Japanese insurance market. 

Semiannual bilateral meetings with the United 

States during the first 3 years will focus on evaluating 

compliance with the agreement using qualitative and 

quantitative criteria. 119Quantitative criteria will 

include "the number and ratio of approvals for new or 

modified products and rates; the value of premiums by 

foreign insurance providers in Japan; and the market 

share of total insurance premiums for foreign insurance 

companies in Japan." 120 Qualitative indicators will 

encompass "whether the Japanese Ministry of Finance 

is promptly and fairly reviewing product applications; 

making the standards transparent and available; and 

providing meaningful and fair opportunities for foreign 

82 
insurance companies in Japan to be informed of and 

exchange views with the Ministry of Finance officials 

regarding insurance reform." 121U.S. industry 

anticipates that this agreement could potentially boost 

premium earnings by foreign companies by $1 billion 

over the next several years. 122 

Telecommunications 

During framework discussions on government 

procurement of telecommunication equipment and 

services, the United States sought to address (1) 

restrictive technical specifications, standards, and 

solicitation terms used in awarding contracts; (2) 

inadequate subcontracting opportunities for foreign 

firms; (3) inadequate time for submitting bids; (4) 

restrictive qualification processes; (5) unfair selection 

decisions; and (6) sole source selection and tendering. 

It also sought to bridge differences over the 

quantitative criteria used to measure market openness, 

bidding procedures, and coverage of the agreement, 

including whether the agreement would be extended to 

include Japanese telecommunications giant Nippon 

Telephone and Telegraph Corp. (NTT) and its 

subsidiaries. 123 

The United States and Japan failed to make any 

meaningful progress during the initial weeks of 1994. 

At the February 11 summit, talks on 

telecommunication equipment and services broke 

down over Japan's resistance to U.S. demands that 

numerical indicators be included, that bids be granted 

based on technical quality as well as price, and that all 

new policies apply to both subcontracts and prime 

contracts. 124 

After a 2-month hiatus, bilateral negotiations 

resumed in April when Ambassador Kantor and 

Japanese Foreign Minister Tsutomu Hata met in 

Marrakesh, Morocco, to sign the Uruguay Round 

Agreements. Enough progress was made to persuade 

U.S. negotiators to continue the talks rather than cite 

Japan under title VII of the 1988 Omnibus Trade and 

Competitiveness Act "for its discriminatory 

government procurement practices in the 

telecommunications sector." 125However, on April 30, 

Ambassador Kantor announced that he would review 

progress in the telecommunications procurement talks 

in 60 days to determine if Japan should be cited under 

title VII. 126On June 30, Ambassador Kantor 

postponed this decision until July 31, pointing to the 

political confusion resulting from the resignation of 

Prime Minister Hata and his cabinet and the formation 

of a new government headed by Prime Minister 

Murayama. 127On July 31, Ambassador Kantor 

initiated a "consultation and negotiation period" under 

title VII that gave Japan 60 days to address established 

patterns of discrimination against U.S. firms or face 

possible trade sanctions. 128Ambassador Kantor stated 

that if an agreement was not reached by the September 

30 deadline, the United States would cite Japan under 

the Super 301 provision of the 1988 Trade Act and 

impose sanctions under a title VII finding. 129 

On October 1, 1994, the United States and Japan 

announced two verbal agreements in the area of 

government procurement of telecommunication 

equipment and services. The first agreement pertained 

to the procurement of telecommunication equipment 

and services by Japanese Government agencies, and 

the second pertained to purchases by NTT, which is 

majority owned (65 percent) by the Japanese 

Government. 130 

Japanese Government agencies annually consume 

more than $2 billion in telecommunication equipment 

and historically have purchased nearly all of their 

equipment and services from domestic Japanese 

companies. In recent years, imports have increased to 5 

percent of Japan's total telecommunications market. 

Under the terms of the agreement, the Japanese 

Government reportedly pledged to1. Provide more detailed information on 

procurement earlier in the process for 

each year's procurement; 

2. Invite suppliers to comment on all aspects 

of the planned purchases, including 

technical specifications, technology, and 

budgets for the systems to be purchased 

all before the request for proposals is 

finalized; 

3. Institute modern 'overall best-value' or 

`overall greatest-value' bid evaluation 

systems to ensure that contracts are 

awarded to the best suppliers and 

products, as opposed to the current 

system that is based on lowest price 

regardless of the technological innovation 

inherent in the product; and 

4. Reduce the number of sole-source 

contracts, that is, contracts provided in 

`sweetheart' deals without the benefit of 

open public bidding which in the past 

tended to go only to Japanese firms. 131 

Deputy USTR Charlene Barshefsky praised the 

accord, indicating that now foreign companies 

supplying competitive products will be able to compete 

for public-sector procurement contracts in a "fair, 

non-discriminatory, transparent, competitive, and open 

83 
manner." 132The agreement covers a wide range of 

equipment and systems including data communication 

systems, computer network equipment, mobile 

communication systems, and private network systems. 

NTT is Japan's largest telephone company and its 

largest single purchaser of telecommunication 

equipment and services, representing roughly half of 

the total annual domestic market for 

telecommunication equipment and services ($9 

billion). The United States and NTT have had an 

agreement since 1980 that provides foreign 

manufacturers with an opportunity to sell their 

products to NTT in a competitive and open manner. 

The 1980 procurement agreement was signed for a 

3-year period and has been extended, with 

modification, four times. The current agreement is 

scheduled to expire on December 31, 1995. 133 

The Framework Agreement further requires NTT 

and its three subsidiaries to adopt practically all the 

important procedural changes agreed to in the 

public-sector procurement agreement. NTT will also 

provide better information sooner in the process, grant 

foreign suppliers a number of opportunities to 

comment on the technical specifications of the 

proposal before a bid is issued, and will not use 

technical specifications that discriminate against U.S. 

firms. 134The Japanese Government and NTT also 

agreed to extend the latest agreement by another 3 

years. 135The NTT agreement covers a broad range of 

equipment such as switching equipment, telephone 

transmission equipment, networking equipment, and 

cellular phone and PCS equipment. 136 

The administration delayed signing the October 1 

agreement until Japan agreed to include NTT 

subsidiaries and to provide an annual evaluation of 

NTT foreign purchases of telecommunication 

equipment and services. On November 1, the 

agreement on government procurement of 

telecommunication equipment and services was 

formally implemented through an exchange of letters 

between the Governments of the United States and 

Japan. 137The agreement requires NTT subsidiaries to 

pledge that their procurement procedures will be fair, 

open, and nondiscriminatory. The two countries also 

agreed to meet in June of 1995 and annually thereafter 

until the end of March 2001. Subsequent to the 

agreement, Ambassador Kantor suspended pending 

sanctions against Japan under title VII for its 

discrimination in government procurement of 

telecommunication equipment and services. 138 

Attached as appendixes to the agreement are two 

initiatives implemented by the Government of Japan 

with the aim of ensuring greater market access and 

increased sales of competitive foreign products. The 

two initiatives enumerate the quantitative and 

qualitative criteria to be used to measure the success of 

the agreement and specify what data will be collected 

and monitored. 139Data to be gathered include "the 

total number and value of contracts awarded by all 

covered entities for both goods and services; the total 

number and value of contracts awarded to foreign 

products and services; the number, percentage and 

value of contracts that were single tender contracts, and 

the foreign share of these; and direct comparison of 

contract awards in cases where both Japanese and 

foreign firms were bidders." 140 

Medical Equipment 

Bilateral framework talks on increasing Japanese 

Government procurement of medical equipment and 

services began on January 6 in Washington, DC. The 

United States initially urged Japan to implement 

procedural reforms, including increasing transparency 

in its government procurement practices. The United 

States suggested that the new tendering procedures be 

applied to all government procurement contracts with a 

value greater than 5,000 Special Drawing Rights 

(SDRs) ($3,600). 141 The United States also requested 

Japan to encourage both public and private hospitals to 

increase their purchases of foreign medical equipment 

and to monitor progress by having the institutions 

submit regular reports. At the final working level 

meeting in mid-January, questions relating to the 

threshold level for open tenders and procedural reform 

were resolved; however, the issue of quantitative 

criteria had yet to be addressed. 

As in telecommunications, on April 30, 

Ambassador Kantor announced that he would review 

progress in the government procurement talks on 

medical equipment and services in 60 days to 

determine if Japan should be cited under title VII of the 

1988 Omnibus Trade and Competitiveness Act. 

Working level talks resumed in June with discussions 

centering on possible qualitative indicators and a 

review of Japan's March proposals. Deputy USTR 

Barshefsky and Japanese Deputy Foreign Minister 

Sadayuki Hayashi met unsuccessfully on several 

occasions in July. Although Japan's proposals moved 

closer to U.S. demands, U.S. negotiators continued to 

reject them because they lacked specific provisions 

requiring Japan to substantially increase its imports. 142 

On July 31, Ambassador Kantor gave Japan 60 

days to end its discriminatory procurement practices in 

this area, as well as in telecommunications, or face 

trade sanctions under title VII. 143Although U.S. 

manufacturers are highly competitive internationally, 

84 
controlling approximately 50 percent of the world total 

of public and private market for medical equipment, 

they command less than 20 percent of Japan's total. 144 

 U.S. negotiators indicated that competitive foreign 

producers are prevented from competing fairly in the 

Japanese market because of "limited access to early 

information on upcoming purchases; government 

agencies' reliance on an informal network of domestic 

suppliers in Japan that leads to predetermined and 

noncompetitive procurements; and insufficient 

consideration of the technical merits of a tender." 145 

 On October 1, a verbal agreement was announced that 

would significantly expand the ability of foreign 

manufacturers to market their medical technology 

products in Japan's public sector. 

A formal agreement on government procurement 

of medical equipment and services was implemented 

on November 1 through an exchange of letters between 

the Governments of the United States and Japan. 146 

 The agreement calls for open, nondiscriminatory, fair, 

transparent, and competitive procedures for all 

procurement above an initial threshold of 800,000 

SDRs ($1 million), which is to be reduced to 385,000 

SDRs over a 4-year period; more detailed information 

earlier in the process; and a reduction in the number of 

sole-source contracts. The agreement also commits the 

Ministers of each Japanese Government institution to 

direct their purchasing agents to give positive 

consideration to foreign medical technology and 

services, which tend to be more expensive than Made 

In Japan products because they incorporate 

state-of-the-art technology. Yet another provision calls 

for medical technology procurement decisions for 

purchases above the agreement threshold to be made 

on the basis of "overall best-value" or "overall greatest 

value," instead of the current minimum price 

system. 147 

Japanese Government hospitals, which annually 

consume more than $3 billion in medical equipment 

and services and account for approximately 20 percent 

of Japan's total market, are required to publicly 

announce their future procurement plans regardless of 

value, including a list of their top 10 priority medical 

technology items for the coming year. In addition, the 

agreement contains extensive complaint procedures 

and a process for dealing with unfair tenders. The 

Japanese Government has promised to provide ample 

budgets for government hospitals and other public 

institutions to ensure that they give proper 

consideration to more expensive foreign equipment. It 

will also urge private hospitals and medical facilities to 

buy more foreign equipment. 148 

Attached as appendixes to the agreement are two 

Japanese Government initiatives designed to 

significantly increase access and sales of competitive 

foreign medical technology products and services in 

Japan's public-sector procurement market. 149The 

public sector agreement for medical equipment and 

services also includes language on the use of objective 

criteria that is essentially identical to that in the 

telecommunications agreement. Data collection under 

the agreement will include "the total number and value 

of contracts awarded by all covered entities; the total 

number and value of contracts awarded for foreign 

products and services by all covered entities; and the 

number and percentage of contracts that were single 

tender contracts, the value of such contracts, and the 

number and value of those contracts awarded for 

foreign products and services." 150 

Mexico 

As a developing country participating in a 

free-trade agreement with advanced industrial nations 

(NAFTA), and as NAFTA's expected major 

beneficiary, Mexico was in the world spotlight 

throughout the first year of the accord. Numerous 

studies estimated the probable positive effects of 

NAFTA on signatories even before it entered into 

effect on January 1, 1994, and intermittent reports on 

the accord's promising beginnings appeared throughout 

the year. Therefore, the world was stunned by the 

financial crisis that hit Mexico in December, almost a 

year after NAFTA entered into force. 151 

The Peso Crisis 

Mexico's prospects for the year were already 

clouded at the beginning of 1994, following the 

January uprising in Chiapas of the Zapatista National 

Liberation Army (EXLN) in protest of the country's 

social and political conditions. The Chiapas conflict, 

which remains unresolved, was followed in March by 

the assassination of Luis Donaldo Colosio, a 

Presidential candidate to succeed Carlos Salinas de 

Gortari, and by subsequent violent acts against 

prominent individuals. The uneasy sociopolitical 

climate combined with a rapidly expanding current 

account deficit to cast a shadow on expectations for the 

country's overall economic performance. 

For years, Mexico had restricted the peso to float 

within a specified trading range vis-a-vis the dollar. 152 

 However, pegging the currency to the dollar in order to 

assure cheap imports and control inflation led to a 

strong peso, whose strength was justified neither by 

85 
Mexico's domestic purchasing power nor by the 

balance of Mexico's current payments' account. 

Mexico's current account deficit has expanded steadily 

since 1988 and sustaining the peso above its real value 

proved increasingly difficult during 1994. New 

investors in Mexican securities perceived a higher level 

of risk than before, due to social tensions and an 

upcoming change of administration. In addition, the 

lesser currency risk combined with rising interest rates 

in advanced industrial countries caused an outward 

flow of portfolio capital from Mexico. 153Meanwhile, 

Mexico's merchandise trade deficit continued to widen, 

as growth in imports, especially from Europe and East 

Asia, far outpaced gains in Mexico's exports to the 

United States and other countries. 

As investors became increasingly cautious in 

purchasing peso-denominated securities, including 

peso-denominated government notes (Cetes), Mexico 

was prompted to issue Treasury certificates indexed to 

the U.S. dollar (Tesobonos) to attract foreign funds. 

This act shifted the burden of currency risk from 

private foreign investors to the Mexican Government, 

adding to Mexico's liquidity difficulties. 154A crisis 

erupted on December 20, when the then new 

Government of Ernesto Zedillo Ponce de Leon 155 

 devalued the peso by widening the dollar/peso 

exchange rate band. Two days later market pressures 

forced the Government to float the peso freely against 

the dollar. 

Some U.S. and Mexican economists and officials 

advocated the devaluation of the peso earlier in the 

year. Notable among the U.S. advocates was Dr. 

Rudiger Dornbusch, professor at the Massachusetts 

Institute of Technology (MIT), who argued for a 

20-percent devaluation to a private business group in 

Guadalajara on June 17, 1994. 156U.S. officials of the 

Treasury and Federal Reserve Bank also 

communicated to Mexican authorities the belief that 

their policies were unsustainable. 157A notable 

Mexican advocate of devaluation was Guillermo Ortiz, 

Mexico's current Secretary of Finance. 

Despite growing investor distrust, the outgoing 

Salinas Government continued to maintain the value of 

the peso throughout its last months in power, and 

neglected to make other necessary policy adjustments 

while relying increasingly on short-term foreign 

credit. 158By December, when renewed political 

tension in Chiapas precipitated capital flight from 

Mexico and a severe drop in security values, a further 

defense of the strength of the peso would have led to 

the depletion of Mexico's foreign reserves. As a result, 

the 3-weeks-old Zedillo Government first decided to 

widen the peso's trading range by 15.2 percent; then, in 

the face of a strong speculative attack against the peso, 

allowed it to float freely on December 22. The 

resulting depreciation of the peso interrupted 7 years of 

exchange-rate predictability in Mexico. 

The manner in which the devaluation was handled 

was widely criticized. 159The new Government's 

sudden action, which immediately followed prior 

assurances that such action would not take place, 160 

 had the apparent effect of undermining the remaining 

confidence of foreign and domestic holders of Mexican 

securities, who rushed to unload their holdings. 

Combined with a precipitous fall of security values on 

the Mexican stock exchange, the withdrawal of foreign 

funds caused the peso to plummet still further, instead 

of adjusting in an orderly fashion as the Zedillo 

Government apparently intended. 

The peso depreciated from 3.5 pesos to the dollar 

on December 20 to 5.7 pesos to the dollar, or by 38 

percent at its lowest point in January. Subsequently, 

following the international loan package to Mexico 

announced on January 31, 1995, 161the peso 

strengthened. However, it weakened further to exceed 

7 pesos to the dollar in the middle of March. 

Many U.S. economists agree on the principal 

causes of the peso crisis. In the words of Robert D. 

Hormats before the House Banking Committee on 

February 10, 1995: 

The peso was devalued due to unsustainable 

selling pressures which developed as market 

participants concluded that Mexico's capital 

inflows and foreign exchange reserves were 

insufficient to finance a growing current 

account deficit and that Mexican authorities 

were reluctant to defend the currency through 

significantly tighter monetary policy. 162 

Elsewhere in his testimony, Mr. Hormats criticized 

Mexico's excessive reliance on short-term debt, what 

Mr. C. Fred Bergsten, another witness, called "faulty 

debt management." 163The three Committee 

witnesses, Hormats, Bergsten, and Dornbusch, 164and 

still others thus concluded that Mexico's large current 

account deficit, and faulty exchange rate and debt 

management are the principal factors responsible for 

the peso crisis. 

Assistance to Mexico 

Mexico's financial crisis prompted the U.S. 

Government to assemble a rescue package jointly with 

other foreign governments and international 

organizations. On January 31, 1995, President Clinton 

abandoned his proposal made earlier in the month to 

extend $40 billion in U.S. loan guarantees to Mexico, 

86 
due to building congressional opposition. 165Instead, 

on January 31, 1995, the U.S. President, in conjunction 

with the International Monetary Fund (IMF) and the 

Bank of International Settlements (BIS), 166 proposed a 

$50-billion loan package for Mexico. 

As to the U.S. portion of this package, President 

Clinton resorted to executive authority, committing up 

to $20 billion in short-term and midterm loans and loan 

guarantees of long-term Mexican bonds, over a period 

of 18 months from the Exchange Stabilization Fund. 167 

 This fund, which currently amounts to some $25 

billion, was established in 1934 for the purpose of 

maintaining orderly exchange arrangements and has 

been used to enter into swap arrangements with foreign 

governments to finance exchange market interventions. 

As a condition of using these loans, Mexico was 

required to propose and implement an IMF-approved 

comprehensive financial and economic program and 

provide assurances for repayment, including the use of 

proceeds from petroleum, oil products, and 

petrochemicals exports. 168On February 21, 1995, the 

United States and Mexico signed four agreements 

covering the support package and setting out Mexico's 

obligations to the United States under its terms. 169On 

March 9, as Mexico announced monetary and fiscal 

policy measures that would strengthen its economic 

program released on January 3, 170the U.S. Treasury 

authorized Mexico to draw down $3 billion under the 

terms of the February 21 agreements. 171 

As to the international portion of the package, the 

IMF established an Exchange Stabilization Fund of 

$17.8 billion172in stand-by credits "to underpin the 

program [of Mexico] 173 and to ensure orderly 

conditions in foreign exchange markets under the 

floating exchange rate regime." 174In addition, BIS 

committed $10 billion in direct loans; Canada, $1 

billion; and Brazil, Argentina, Chile, and Columbia 

another $1 billion combined, all in short-term loans. 

Mexico's First Year Under 

NAFTA 

The peso crisis is widely viewed in the NAFTA 

context, even though only a small and indirect causal 

relationship has been suggested. 175The principal 

reason for associating the crisis with NAFTA is that the 

crisis coincided with the first NAFTA year and, U.S. 

and international emergency assistance notwithstanding, is bound to affect originally projected 

NAFTA benefits to Mexico, 176the United States, and 

Canada. 

Because virtually a full year of NAFTA 

implementation preceded the crisis, Mexico's first 

NAFTA year lends itself to an independent discussion. 

Towards the end of 1994 but prior to the crisis, 

NAFTA appears to have justified neither overly 

optimistic expectations for Mexico nor the warnings of 

the accord's opponents. Instead, in 1994, Mexico 

recorded small but positive economic growth, 

controlled inflation, surging trade with NAFTA 

partners, a fast-growing overall trade deficit, but a 

declining trade deficit with the United States. In 

addition, Mexico continued to receive substantial direct 

foreign investment and, in the first 2 months of 1994, 

major inflows of portfolio investment as well. 

Economic Performance and 

Policies 

When Mexico began considering a free-trade 

accord with the United States in the summer of 1990, 

the Mexican economy was in a position of relative 

strength. 177However, by the time Mexico actually 

joined the United States and Canada in NAFTA, the 

vitality of its economy had already weakened. The 

Salinas Government began to address the problem of 

economic stagnation in October 1993 in its economic 

plan (pacto) for 1994 178by introducing various 

economic stimuli. These included boosting 

consumption through wage increases and tax 

reductions, providing business with corporate tax 

relief, and allowing interest rates to decline. 

During the first NAFTA year, these measures and 

vigorous public and private direct investment activity 

in certain areas revived the economy somewhat, 

especially in the last two quarters. Toward the end of 

the year, annual real growth of the 1994 GDP was 

estimated at 3.5 percent. 179The expansion was led by 

construction and electrical capacity (both propelled by 

government spending), and the transport, 

communications, and financial services sectors. 

Agricultural output continued to be stagnant, and 

output in the textile and clothing sector declined. 180 

Inflation control under Mexico's two prior 

administrations—the de la Madrid and Salinas 

administrations—had been quite impressive. From 

triple-digit rates in 1987, these administrations lowered 

the annual rise of consumer prices to single digits, 

reaching an 8.0-percent rate in 1993. The estimated 

annual inflation rate, as measured by a consumer 

products' basket, was 8.1 percent during the first 

NAFTA year. 181Assisted by large-scale sales of 

Government property to the private sector, the Salinas 

administration was also successful in turning the 

87 
Federal budget deficit into a surplus in 1992 and 1993. 

Increased spending on social and rural development 

projects generated a minor budget deficit in 1994. 182 

At the same time, the rapid pace of trade 

liberalization and the overvalued peso that contributed 

to soaring Mexican demand for imports resulted in 

growing merchandise trade deficits. These translated 

into large current account deficits, as shown below (in 

billions of dollars): 183 

Year Current Account Balance 

1987 +4.0 

1988 -2.4 

1989 -5.8 

1990 -7.4 

1991 -14.9 

1992 -24.8 

1993 -23.4 

1994 -28.0 

Mexico's current account deficit grew to almost 8 

percent of the GDP in 1994. 184The Salinas 

administration tried to alleviate the problem by raising 

interest rates on peso-denominated securities and 

issuing bonds called "Tesobonos" indexed to the dollar 

to attract foreign funds. Another attempt to narrow the 

current account deficit in recent years was the gradual 

depreciation of the exchange rate within the established 

range to make exports more competitive and imports 

more expensive. 185Yet, these measures proved to be 

inadequate to maintain investor confidence or to attain 

a meaningful improvement in the merchandise trade 

balance. 

Ultimately, efforts to sustain the value of the peso 

proved futile and drained the country's foreign 

exchange reserves. Reserves still amounted to almost 

$30 billion in February 1994; they dropped to between 

$17 and $18 billion by October 1994, then plummeted 

to little over $6 billion by the end of the year. Reserves 

continued to fall to $3.4 billion by January 31, 1995. 

After obtaining $7.6 billion in credits granted by the 

IMF, reserves recovered to $8.9 billion by March 1. 186 

On January 3, 1995, President Zedillo unveiled a 

plan to overcome Mexico's economic emergency in 

agreement with the Bank of Mexico, business 

representatives, labor unions, and rural 

organizations. 187The principal objectives of the plan 

were to—(1) avoid a new inflationary spiral that might 

be triggered by the devaluation of the peso; (2) 

stabilize the financial market and reestablish investor 

confidence; and (3) stimulate structural reforms to 

enable the economy to grow and become more 

competitive. 188 

These objectives were to be met through wage and 

price restraints (except for the lowest paid workers, 

whose wages would increase), government spending 

cuts, tax increases, rate and price increases for publicly 

provided goods, and sharply higher interest rates. The 

emergency program also promised new privatizations, 

especially in infrastructure areas, including railroads, 

ports, and telecommunication facilities, and greater 

opportunities for foreign financial companies. 

The program included numeric goals for 1995, but 

most of these were subsequently found unattainable in 

view of the indifferent financial market response to the 

steps taken and further deteriorating conditions in 

1995. On March 9, Mexico's Ministry of Finance 

announced more realistic macroeconomic targets and 

specific austerity measures to restore financial 

stability. 189The new package foresaw very high rates 

of inflation for the first two quarters of 1995, and 

projected an inflation rate of 42 percent for the year as 

a whole. Mexican GDP is expected to decline steeply 

in the first half of the year and to decline by 2 percent 

on an annual basis for 1995. 

The March package specifies an increase in 

Mexico's value-added tax from 10 percent to 15 

percent, and steeply raises the price of gasoline (by 35 

percent) and electricity to final consumers (by 20 

percent). In addition, the new measures include 

specific incentives for new privatizations; they specify 

budget cuts, reserve requirements for banks, and limits 

for domestic credit creation. The program also 

provides for restructuring of short-term debt with the 

help of U.S. and international loans. 19° According to 

the package, the floating exchange rate regime would 

continue for an undetermined time, as Mexico's 

reserves are currently insufficient to sustain any 

exchange rate controls. 191 

Foreign Trade 

A continued rapid rise in imports, aided by the 

overvalued peso and a liberal trade policy, pushed 

Mexico's merchandise trade balance from a $2 billion 

surplus in 1988 to a $12.1 billion deficit in 1993. 192 

 Imports surged again in 1994, by 21.4 percent 

compared with a 17.2-percent growth of exports, and 

Mexico's trade deficit continued to widen, reaching 

$18.5 billion. 193 

The United States plays a dominant role in 

Mexico's foreign trade, both as an export market and 

as a source of imports. During the first NAFTA year, 

Mexico depended on the U.S. market for an estimated 

83.5 percent of its exports and sourced an estimated 

71.3 percent of its imports from U.S. suppliers. 194 

 Despite such a commanding U.S. role, the United 

88 
States played virtually no part in Mexico's 1994 trade 

imbalance, which is blamed in large measure for the 

peso crisis. The 1994 trade deficit Mexico registered 

with Canada was equally negligible. In the words of 

Commerce Under Secretary Jeffrey E. Garten, "In fact, 

I find it remarkable how balanced NAFTA trade was in 

its first year of operation." 195 

Mexico's 1994 trade deficit resulted from trade 

with countries other than NAFTA partners. According 

to Bank of Mexico data, the EU was responsible for 

more than one-third and Asian countries accounted for 

about one-third of Mexico's January-November trade 

deficit. The large increase in Mexico's 1994 trade 

deficit is attributable predominantly to these two 

trading regions. 196 

According to official U.S. statistics, U.S.-Mexican 

two-way trade reached a record level of $97.7 billion 

in 1994, compared with $78.9 billion in 1993. During 

the first NAFTA year, Mexico continued to rank as the 

third-largest U.S. trading partner, after Canada and 

Japan, on both the export and import side, accounting 

for 10.2 percent of overall U.S. exports and 7.4 percent 

of total U.S. imports. The broad composition of 

bilateral trade repeated established patterns of recent 

years (table A-10). 

The U.S. bilateral trade surplus, attained as 

recently as in 1991 for the first time in years, reached 

Figure 4-1 

U.S. trade with Mexico: Exports, imports, and trade balance, 1990-94 

Billion dollars 

$5.7 billion in 1992, but shrank considerably in 1993, 

and virtually disappeared in 1994 (figure 4-1). U.S. 

Census data, with imports calculated on a customs 

value basis, show a U.S. merchandise trade surplus of 

only $531 million for the first NAFTA year (table 

A-10). 

U.S. exports 

U.S. merchandise exports to Mexico surged 22.0 

percent in 1994 to $49.1 billion from $40.3 billion in 

1993. This compares with a similar surge of exports in 

1992 (22.7 percent), but contrasts with only a 

1.7-percent increase in 1993 (table A-10). Machinery 

and transportation equipment, which accounted for 

almost half of total U.S. exports to Mexico (table A-10, 

figure 4-2) were responsible for much of the increase, 

even though U.S. exports were up in virtually all major 

Standard Industrial Trade Classification (SITC) 

product categories. 

The machinery product class includes automotive 

equipment and parts which, as in pre-NAFTA years, 

topped the list of U.S. exports as well as export growth 

to Mexico. A large portion of automobile parts is 

destined for U.S.-owned production facilities located in 

Mexico. (The Mexican automobile industry consists 

60 

50 

40 

30 

20 

10 

0 

-10 

1990 1991 1992 1993 1994 

Exports $27.5 $32.3 $39.6 $40.3 $49.1 

Imports $29.5 $30.4 $33.9 $38.7 $48.6 

k,, 1 Balance -$2.0 $1.9 $5.7 $1.6 $.5 

Source: Official U.S.Census data. 

89 
Mfg. goods 

classified by material 

$6.7 

13.7% 

11112•11111111 NM MN 1•111■11111 

MIMI MOE MU it MOM NM MB 

IIIIMIHM11 NM MN NM =I NM 

11■111EIMIt RE MN NM AM= UM 

INN WO 01111 INN MB NO NM MN 

Min= ittil MI= 

IRE MEI 

NV KIM1111111 

1111115111 MI MI 

INN KU MIMS NM 

IIIM1111 

MI MI= 

NM= 

MIN 

All other goods 

$2.2 

Chemicals 4.5% 

$4.4 

8.9% 

U.S. Exports 

(billion dollars and percent) 

Misc. mfg. 

articles 

$6.5 Food Mfg. goods 

13.4% $3.2 classified by material 

6.6% $3.6 

7.4% 

U.S. Imports 

(billion dollars and percent) 

Chemicals 

$1.0 

2.1% 

Fuel/raw 

materials 

$5.7 

11.8% 

Figure 4-2 

U.S. trade with Mexico, by product sectors, 1994 

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

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

90 
principally of subsidiaries of the Big Three U.S. 

automakers, as well as Volkswagen and Nissan.) 

Notable is the jump in 1994 U.S. exports of passenger 

vehicles from $123 million in 1993 to $589 million, in 

response to NAFTA provisions. 

As before, office machinery (computers and 

accessories, for example) and telecommunications 

equipment (sold mainly to TELMEX, Mexico's 

privatized telephone monopoly) were among leading 

U.S. exports in the first NAFTA year (table 

A-11). In addition to passenger vehicles, consumer 

durable goods such as microwave ovens and washing 

machines contributed significantly to the rise of U.S. 

exports to Mexico in 1994. 

Soybeans and grain sorghum were leading U.S. 

agricultural exports, both up considerably from their 

1993 level. Certain agricultural exports surged in direct 

response to the removal of trade barriers under 

NAFTA. These included fresh and frozen cuts of beef, 

which benefited from the elimination by Mexico of 20-

to 25-percent duties, 197and apples, which benefited 

from the elimination of tariffs on a specified quantity 

of Mexican imports and import licenses under NAFTA. 

In fact, U.S. exports of apples exceeded the tariff-rate 

quota before year's end. 

U.S. imports 

The surge of U.S. imports from Mexico even 

surpassed growth on the U.S. export side, which 

explains the virtual disappearance of the U.S. bilateral 

trade surplus during the first NAFTA year. Despite the 

overvalued peso, which made Mexican exports 

relatively expensive, growth in U.S. imports from 

Mexico has accelerated in recent years. Imports rose 

11.5 percent in 1992 and 13.9 percent in 1993, but by 

25.7 percent in 1994. Imports amounted to $48.6 

billion during the first NAFTA year, compared with 

$38.7 billion in 1993 (table A-10). 

Crude petroleum continued to be the leading U.S. 

import item from Mexico (table A-12) but more than 

half of the value of total U.S. imports consisted of 

machinery and transportation equipment (figure 4-2 or 

table A-10). As on the export side, this dominant 

product category was principally responsible for the 

accelerated growth of U.S. imports from Mexico in 

1994. 

Automotive goods accounted for a major part of 

the machinery group, as on the export side. 

U.S.-Mexican trade within the automotive industry can 

be characterized as largely "intra-industry trade," 

because a considerable portion takes place in both 

directions. The entire machinery category and still 

other areas of manufacturing, such as textiles and 

apparel, can be similarly characterized. 

A significant portion of intra-industry trade (47.5 

percent of all U.S. imports and 23.6 percent of all U.S. 

exports in 1994) is generated by production-sharing 

between U.S. and Mexican plants. U.S. imports from 

Mexico resulting from production sharing enter the 

United States at reduced duty rates, because the United 

States levies duties only on that part of imports that 

represent value added in Mexico, and U.S. inputs 

return free of duty. 

Having U.S. materials processed or U.S. 

components assembled in Mexico increases the 

competitiveness of U.S. producers of labor-intensive 

articles with Asian producers on the U.S. market. At 

the same time, this arrangement benefits Mexico by 

creating jobs for Mexicans, and transferring U.S. 

managerial and technological know-how to local 

establishments. The facilities involved in production 

sharing on the Mexican side are generally 

"maquiladoras;" i.e. in-bond production units 

established since 1965 under Mexico's Border 

Industrialization Program. 

Products of production sharing reenter the United 

States at special duty rates under chapter 98 of the 

Harmonized Tariff System (HTS). Half of these 

imports (which, as mentioned, constituted 47.5 percent 

of total 1994 imports from Mexico) were accounted for 

by U.S. content returned after further processing or 

assembly. Therefore, U.S. content returned accounted 

for 23.8 percent of all U.S. imports 198from Mexico. 199 

Production sharing with Mexico did not change 

materially in the first NAFTA year. The share of U.S. 

exports to Mexico going into production sharing, and 

of imports resulting from it, was negligibly lower in 

1994 than in 1993, when these ratios were 24.5 percent 

and 49.1 percent, respectively." 

Foreign Investment 

In recent years, the shift to a more open economic 

system made Mexico, as some other emerging markets, 

more attractive to foreign investors. By the same token, 

the promise of a substantial inflow of foreign 

investment was the most persuasive argument for 

Mexico to pursue NAFTA. Table 4-1 shows flows of 

foreign investment to Mexico over the last 6 years. 

Portfolio investment, which is volatile and 

speculative, surged in 1993, apparently in search of the 

high returns available in Mexico. The share of portfolio 

investment jumped from less than one-third of total 

annual foreign investment, as was typical in prior 

years, to more than two-thirds of the total. According 

91 
Table 4-1 

Annual Foreign Investment in Mexico, 1989-94 

Percent Percent 

Direct of Portfolio of Total 

Year investment total investment total investment 

(Millions 

of dollars) 

(Millions 

of dollars) 

(Millions 

of dollars) 

1989 2,499.7 85.8 414.0 14.2 2,913.7 

1990 3,722.4 74.8 1,256.0 25.2 4,978.4 

1991 7,015.2 70.9 2,881.8 29.1 9,897.0 

1992 5,705.1 68.5 2,629.7 31.5 8,334.8 

1993 4,900.7 31.4 10,716.3 68.6 15,617.0 

1994 8,026.2 66.1 4,123.4 33.9 12,149.6 

Source: Directorate General of Foreign Investment in the Secretariat of Commerce (SECOFI). 

to official monthly data of the Ministry of Commerce 

(SECOFI), the flow of portfolio investment was still 

high in January and February 1994, but dropped to a 

fraction during the following months (March through 

August)201in response to political and economic 

tensions that preceded the yearend crisis. 

The data above also show that this sudden plunge 

in portfolio investment significantly reduced total 

foreign investment during the first NAFTA year 

compared with 1993, although it remained 

considerably above levels recorded prior to 1993. 

Despite this decline, direct investment, which is less 

flexible in reacting to changes in the political and 

business environment, continued to surge from $4.9 

billion in 1993 to $8.0 billion in 1994, reflecting to a 

large extent the investments from the EU and Japan. 

Mexico was still the leading developing-country 

recipient of foreign investment in 1994. 

Implications of the Peso Crisis 

The peso crisis has been referred to as a problem of 

"illiquidity, not insolvency" by President Zedillo, 202 

 and as a "liquidity squeeze" by IMF Managing 

Director Michel Camdessus. 203In proposing his first 

version of a U.S. financial support package, President 

Clinton stated he would 

[flake appropriate steps to help Mexico get 

through these short-term financial pressures 

and build on the sound foundation for 

economic growth created in recent years. 2°4 

Nonetheless, even though Mexico's problems are seen 

as short-term and correctable, and the country benefits 

from the largest financial assistance ever approved for 

an IMF member, 205its economic outlook remains 

clouded. 

Recession 

The adverse effects on Mexican economic vitality 

of the devaluation itself and of the severe austerity 

measures taken by the Zedillo administration are 

already being felt. 2°6Business failures and rising 

unemployment are expected to continue for an 

undetermined time. According to Dornbusch: "In this 

year Mexico will, of course, suffer a serious 

recession—no growth must be taken for granted and a 

decline of only 5 percent in output is even 

optimistic."207 

Because Mexican banks have become more 

vulnerable, a temporary recapitalization program 

(PROCAPTE) was announced on their behalf on 

February 24, 1995. 208In the second week of January 

1995, concerned about the Mexican banks' poor asset 

quality and high level of nonperforming loans, Moody 

Investor Services and other credit-rating agencies 

downgraded the debt and deposits of these banks, 

including those of BANAMEX and BANCOMER, the 

two largest. The banks are, in part, affected by their 

increased foreign debt burden as the now cheaper peso 

sharply raises the cost of repaying foreign debt 

denominated in dollars. 209Another problem for the 

banks is the multitude of nonperforming domestic 

commercial loans, home mortgages, and credit card 

debts. Some banks also have faced a run on their 

deposits. 

Not only businesses but also the population at large 

is going through a most difficult period. Growing 

unemployment and wage restraints, high inflation and 

interest rates,21 ° and rising value-added taxes and 

prices for publicly provided goods, are sharply 

lowering Mexican living standards. 

92 
Foreign Investment and 

Privatization 

Restoring investor confidence after the January 

emergency program failed to do so was apparently the 

chief goal of the harsh measures President Zedillo 

announced on March 9, 1995. However, the expected 

reversal in financial markets has yet to materialize, 

indicating that Mexico may not be able to count on 

portfolio investment and short-term private credit for a 

while. 

If so, direct investment is bound to be the dominant 

form of foreign financing in the foreseeable future. 

According to Herminio Blanco, minister of SECOFI, 

Mexico's new drive for privatizations and business 

partnerships with foreign investors in the areas of 

capital goods, infrastructure, banking, and 

petrochemicals will be attracting the kind of direct 

foreign investment that would lead to sustainable 

productive growth in Mexico. 211Although the peso's 

devaluation will likely reduce some production costs, 

attaining high levels of direct foreign investment will 

depend crucially on a restoration of stability in 

Mexico.212 

Trade and Current Account Deficit 

Bolstered by the now cheaper peso, Mexico's 

merchandise exports are projected to grow by 26.4 

percent in 1995. In contrast, imports are expected to 

rise by only 5.5 percent, due to the decline in 

purchasing power of the peso and a policy of credit 

restraints to which the Zedillo administration is 

committed. Mexico's trade deficits of recent years, the 

root cause of the peso crisis, are thus bound to shrink 

considerably, registering a projected $6.9-billion level 

for 1995.213Already in February 1995, Mexico 

registered its first monthly trade surplus in more than 4 

years, a sign that the anticipated trade benefits of the 

peso devaluation may already be emerging. 

Furthermore, there are indications that the Zedillo 

government may reinforce the cheap peso and tight 

credit with new trade measures to control the effect on 

imports. On March 1, Mexican representatives notified 

the WTO that Mexico would seek temporary tariff 

increases on certain imports involving footwear, 

leather goods, and apparel from countries with which it 

has no free-trade agreements. 214In addition, Mexico 

reportedly notified the WTO on March 6, 1995, that its 

Government intends to negotiate temporary bilateral 

quotas on textile and apparel imports with trading 

partners, as allowed under the safeguard mechanism 

contained in the WTO's Agreement on Textiles and 

Clothing.215Leading Mexican officials have 

reportedly emphasized that these actions do not signal 

a return to protectionism, pointing out that the 

measures are temporary and consistent with Mexico's 

international trade obligations. Officials also 

emphasized that these measures are designed to protect 

small and medium-sized establishments in Mexico that 

suffer from imports originating in third countries that 

disregard the desirable goal of attaining some measure 

of reciprocity in foreign trade. 216 

Even though the new protective measures are 

directed principally against non-NAFTA countries, the 

United States, as Mexico's dominant trading partner, 

could be affected by the peso crisis and its aftermath. 

The U.S. export surges taken for granted before the 

crisis in many areas will not materialize in the near 

future. In assessing 1995 U.S. export prospects to 

Mexico of 27 promising production and service 

sectors, U.S. Embassy officials in Mexico found that 

"All best prospects will show outright declines in both 

the overall market and imports."217 

On the U.S. import side, U.S. firms that import 

parts and supplies from Mexico (for example the Big 

Three automakers) will benefit from the cheaper dollar 

prices of Mexican exports. 218However, U.S. 

industries that compete with Mexican products on the 

U.S. market will face more competition. An early 1995 

indication may be the dumping complaint of Florida's 

tomato fanners to the U.S. Government concerning 

massive tomato shipments from Mexico.219 

The expected decline in U.S. exports and a likely 

continued surge in U.S. imports stands to reintroduce a 

U.S. trade deficit with Mexico for the first time since 

1990. 

Other 

In addition to Mexico and its NAFTA partners, the 

peso crisis has affected emerging markets throughout 

the world as their stock prices suffered steep declines. 

Currency devaluations in some countries (Brazil, 

Spain, Portugal, Hungary) and other economic policy 

actions such as interest rate hikes early this year in 

countries such as Argentina are likely efforts by 

governments to avoid a crisis similar to the one Mexico 

is experiencing. Although the U.S. administration has 

indicated that it intends to proceed with plans for 

free-trade areas in Latin America and Asia, activities 

leading to the establishment of new free-trade areas 

may also slow down while the depth of the peso crisis 

and its implications for other countries are examined 

carefully. 

93 
China 

Negotiations on China's accession to the GATT 

were a major forum for the discussion of issues in 

U.S.-China trade relations during 1994. Although 

much progress was made in an almost continual series 

of bilateral and multilateral meetings, inadequate 

market access and other unresolved issues kept China 

from attaining its goal of GATT membership by 

yearend. The United States also held bilateral 

negotiations on China's inadequate and ineffective 

protection of intellectual property rights. A 6-month 

"Special 301" investigation of its intellectual property 

rights (IPR) enforcement practices was initiated in June 

and subsequently extended into 1995 when an 

acceptable settlement could not be reached. President 

Clinton's decision to delink the issue of China's human 

rights record from the annual renewal of its 

most-favored-nation (MFN) tariff status removed a 

leading source of trade friction between the two 

countries since 1989. 

Bilateral negotiations on two other major issues 

were successfully concluded. A new agreement 

controlling imports of Chinese textiles and apparel, 

signed in January 1994, contains a mechanism for 

curbing China's allegedly massive transshipments of 

U.S.-bound merchandise through third countries to 

avoid import quotas. The second agreement on the 

issue of China's weapons proliferation, reached in 

October, cleared the way for lifting a ban on U.S. 

exports of communications satellites for launching in 

China. However, the 5-year implementation of another 

bilateral agreement, the 1992 market access accord, 

was suspended in 1994 when China decided not to lift 

certain nontariff import restrictions that were 

scheduled to be eliminated at yearend. 

GATT/WTO Application 

Negotiations on China's application for GATT 

membership moved to an advanced stage in 1994, 

following a year during which almost no progress was 

made. The primary policy issue that had stalled 

negotiations—the extent to which China would be 

willing to commit itself to an economy and foreign 

trade system based on GATT principles—was 

essentially resolved in theory if not in practice in 

November 1993. At that time, the Central Committee 

of the Chinese Communist Party released a decision 

paper stating that the "socialist market economy" it 

envisions "aims at enabling the market to play the 

fundamental role in resource allocation under 

macroeconomic control by the State." 220The stated 

objectives also point to a "multidirectional" opening of 

the Chinese economy and to further reform of the 

foreign trade and investment regimes. 

A series of policy reforms were subsequently 

adopted at the beginning of 1994. These reforms 

included the introduction of sweeping changes in 

China's fiscal and monetary systems; the abolition of 

the multiple foreign-exchange rate system in favor of a 

unified, essentially market-determined rate, 

representing the first step toward eventual currency 

convertibility; the implementation of further tariff 

reductions; and the lifting of additional nontariff 

import barriers. 221As a result, China's bid for GATT 

membership had been considerably strengthened when 

negotiations resumed. 

At the year's first meeting of the GATT Working 

Party on China's Status as a Contracting Party, which 

was held in March, the Chinese delegation declared 

that completion of its accession by the end of 1994 was 

an important political objective. The reason China was 

pressing to achieve this goal was to qualify for 

founding membership in the WTO, which would 

supersede the GATT as the world's trade forum on 

January 1, 1995. Although most member countries 

were at that time receptive to meeting this deadline, 222 

 the United States refused to support an arbitrary date 

for completing negotiations. 223 

Since original membership will neither expand nor 

diminish a country's WTO rights and obligations, the 

United States has continued to maintain that the 

objective of the GATT Working Party must be to 

conclude the negotiations on terms that provide for 

bringing China's trade regime and economic system 

into compliance with both the GATT and the WTO. 

Following the successful completion of the Uruguay 

Round in December 1993, the GATT negotiations with 

China were broadened to also cover WTO obligations. 

During 1994 the negotiations included schedules of 

tariff and nontariff market access commitments for 

both agricultural and industrial goods that went well 

beyond the traditional GATT tariff-schedule 

negotiations, plus such new issues as trade in services, 

trade-related intellectual property rights (TRIPS), and 

trade-related investment measures (TRIMS). 

At the July meetings of the Working Party, a broad 

range of substantive issues remained to be resolved. 

The issues described below include those that were 

among the main areas of concern to the United States 

at that time and, despite the progress made in 

subsequent bilateral and multilateral negotiations with 

China, that were still outstanding at the end of 1994. 224 

For many countries, including the United States, 

the leading problems that remained in drafting China's 

protocol of accession to the GATT/WTO concerned 

94 
market access. As a result of earlier GATT negotiations 

and the 1992 bilateral market access agreement with 

the United States, 225the Chinese Government had 

already eliminated a significant number of quotas, 

licensing requirements, and other import controls that 

had applied to specific industrial products; however, 

about 400 GATT-inconsistent nontariff barriers had not 

been removed. 226China's trading partners have 

proposed the elimination of all nonconforming 

nontariff measures upon the entry into force of China's 

protocol, except for a list of exemptions to be phased 

out within a specified time period. A midyear review 

also showed that tariffs on many industrial goods were 

still prohibitively high. 227 

Another market access issue is China's system of 

standards and testing requirements for imported goods. 

Since the Chinese do not apply the same standards and 

technical regulations to domestic products, the system 

appears to serve mainly as a form of surreptitious 

protectionism. For many manufactured goods, China 

will not accept the producer's certification of product 

quality and instead requires that its own quality license 

be issued before the merchandise can be imported, 

which often involves a time-consuming and expensive 

process.228Also, the sanitary and phytosanitary (SPS) 

standards that China applies to foreign agricultural 

products are often overly strict, unevenly applied, and 

not based on modern laboratory techniques. 229These 

SPS practices are of particular concern to the United 

States since China has used them to ban or restrict its 

imports of such U.S. products as fruit, wheat, and 

tobacco. Although some steps have been taken to 

eliminate such abuses,23° compliance with 

GATT/WTO rules regarding technical barriers to trade 

will require China to adopt additional liberalizing 

measures, such as using international inspection and 

testing criteria, ensuring that imports and domestic 

products are treated identically, and applying scientific 

principles as the rationale for its SPS standards. 

Many countries have also expressed concern with 

respect to China's inadequate offers to open its services 

markets.231Although foreign-funded enterprises have 

been allowed more access since 1992 and a variety of 

such ventures have been started as limited experiments, 

the services sector is still largely closed. 232The 

United States is seeking, in particular, greater access 

for such industries as banks, telecommunications, 

information technology, insurance, and travel and 

tourism. For China to accede to the WTO, its protocol 

package must include a schedule of initial 

market-opening commitments in services that is 

acceptable to all parties, as well as schedules of 

market-access tariff and nontariff measures. 233 

Other protocol issues that remained unresolved in 

1994 relate to China's administration of its trade 

regime. The issue in this area most emphasized by U.S. 

officials is lack of transparency. The basic 

commitments sought from China would require that all 

laws, regulations, rules, decrees, administrative 

guidance, and other measures affecting trade be 

published and made easily accessible before they were 

enforced. However, even though China issued a 

directive in 1993 mandating that only published trade 

regulations could be enforced, 234businessmen have 

continued to be regularly hampered by rules that they 

are told exist but cannot identify. China's trading 

partners have therefore proposed that its protocol 

include additional disciplines to ensure transparency; 

for example, that China should be required to make 

trade documents available for comment by all 

interested parties prior to implementation and to 

specify in advance the types of information that might 

be withheld on grounds of confidentiality. 

Another administrative concern is that China will 

not be able to uniformly apply its GATT/WTO 

commitments throughout its entire customs territory. 

The United States and other member countries want to 

include language in the protocol that would require the 

central Government of China to ensure uniform 

administration of the rules by all government entities 

below the national level. The matter is further 

complicated by the existence of the five Special 

Economics Zones (SEZs) in China's southern coastal 

region, the Pudong New Area of Shanghai, and a 

number of additional designated zones allowed by the 

Chinese Government to offer tariff and other trade 

preferences in order to attract foreign investment. 

Although China has accepted the objective of unifying 

its customs territory and bringing the various special 

economic areas that currently exist within a single 

policy framework, it has not yet accepted a 

commitment to a specific time frame for doing so. 

Such a commitment is considered essential to ensure 

China's compliance with GATT/WTO rules. 

The trading rights of enterprises also remained an 

issue at the end of 1994. Since China still has state 

enterprises with exclusive or special trading rights, the 

United States and other GATT/WTO member countries 

want commitments that would limit traded products of 

the state to a specified number by a given date and that 

would progressively liberalize the trading rights of all 

enterprises, both domestic and foreign. A very broad 

definition of the trading rights of enterprises is also 

envisioned, one that includes the right to import and/or 

export goods and services and, in addition, the right to 

trade, invest in, produce, sell, and distribute goods and 

services in China. Yet another proposal would require 

95 
China to ensure the nondiscriminatory pricing, as 

between national and foreign purchasers, of 

domestically produced goods and services. The United 

States has made the national treatment issue a top 

priority, insisting that foreign companies operating in 

China also receive the same legal and tax treatment as 

Chinese companies. 

Until China completes the transition from a 

nonmarket to a full market economy, its trading 

partners maintain that a special safeguard system is 

needed to remedy or prevent market disruption owing 

to possible surges in exports from China. If 

consultations with China about such effects do not lead 

to its taking appropriate remedial action, the special 

safeguard mechanism would enable the affected 

country to take action against imports from China. The 

proposed system would also allow third countries that 

consider themselves threatened by the diversion of 

China's exports following initial action by another 

country to have the same recourse. With both the 

United States and the EU pressing the issue, China has 

finally agreed in principle to include such a provision 

in its protocol of accession but insists on negotiating a 

strict time frame for its application and limits on its 

use.235 

Perhaps the most contentious unresolved issue is 

the question of country status. China considers itself a 

developing country and wants this status explicitly 

acknowledged in its protocol. However, even though 

China may qualify as a developing country in terms of 

per-capita income, its major trading partners are not 

willing to accept that it will be able to benefit fully in 

all respects from developing country status and the 

associated special treatment it offers. They contend that 

the developing country provisions of the GATT/WTO 

are meant for new members that need more time in 

opening their markets to global competition and that 

China does not have this problem; by 1994 it had 

already become the world's eleventh-largest exporter 

and the volume leader in such exports as textiles and 

apparel, footwear, and toys. 236 

The main benefit to be derived from developing, 

rather than developed, country status is the much 

longer time that China would be allowed to adapt its 

trade system and bring its various policies and 

practices into conformity with GATT/WTO 

requirements. For example, it would have 5 years to 

bring its trade-related investment measures into line 

with the new WTO rules, rather than the 2-year limit 

placed upon developed countries, and 5 years, instead 

of 1 year, to comply with WTO requirements on 

trade-related intellectual property rights. 237The 

United States has indicated that it favors a flexible 

approach that would not "label" China either a 

developing or developed country but would instead 

allow its country status in each trade or trade-related 

area to be decided on a case-by-case basis. 238 

Following the multilateral negotiations of the 

Working Party in July, which dealt almost entirely with 

the proposed elements of China's protocol of 

accession, bilateral talks were held between China and 

more than 20 of its major trading partners. Although 

these bilateral meetings covered the whole range of 

protocol issues, their primary purpose was to draft the 

schedules of market access concessions that would also 

make up part of the protocol package. From November 

28 to December 20, 1994, the GATT member countries 

participating in the accession negotiations met 

separately with China in a last attempt to resolve 

bilateral issues before yearend and with both China and 

one another to discuss revisions in the protocol. The 

series of meetings concluded with a session of the 

Working Party on December 20. 

Despite this strong effort to bring the negotiations 

to a successful conclusion, the completion of China's 

accession before the end of 1994 was made impossible, 

in the view of the United States and other major 

member countries, by its "unwillingness to address 

protocol concerns in detail and its inadequate offers on 

goods and services."239In summing up the progress 

made in 1994, U.S. officials noted that China has yet to 

complete bilateral negotiations on market access with 

many of its trading partners, including the United 

States, and will have to show "greater flexibility and 

greater willingness to make substantive commitments 

in all areas." 240 

As the 1994 negotiations ended, China indicated 

that it would be willing to continue in 1995 and 

informally asked for founding membership in the WTO 

even though it would miss the deadline on January 1, 

1995, when the new WTO would replace the GATT. 241 

 Designation as a founding member is politically 

important to China because it was one of the original 

Contracting Parties to the GATT in 1947. It withdrew, 

however, in 1950 and did not reapply for membership 

until 1986.242Members of the Working Party on 

China's WTO accession have indicated that they "will 

have to explore ways to address this interest." 243 

Enforcement of Intellectual 

Property Rights 

During the 2 years after the United States and 

China signed a Memorandum of Understanding on 

Intellectual Property Rights (IPR) in January 1992, the 

Chinese Government made the required changes in its 

96 
laws and regulations to lay the foundation for an IPR 

system that could meet international standards. 2' It 

failed, however, in the view of the U.S. Government, to 

meet its commitments under the agreement to establish 

an adequate and effective mechanism for IPR 

enforcement. Mounting evidence indicated that the 

piracy of intellectual property was rampant in China 

and was continuing to grow. At the same time, China 

maintained hidden quotas and nontransparent 

regulations that effectively kept U.S. intellectualproperty-based products and industries out of its 

market. 

On June 30, 1994, USTR Michael Kantor 

identified China as a "priority foreign country" under 

the Special 301 provisions of the Trade Act of 1974 

and immediately initiated an investigation into its IPR 

enforcement practices. 245In accordance with the 

statute, the investigation was scheduled to run 6 

months, to December 31, 1994, with the possibility of 

an extension of up to 9 months During the Special 301 

investigation, negotiations were held on both the 

enforcement and market access issues, extending a 

series of bilateral IPR talks that began in June 1993. 

Eight rounds of talks were held at the negotiating level 

in 1994, including four after the investigation was 

initiated. 

U.S. industries have estimated that the piracy in 

China of copyrighted works reached at least $1 billion 

annually by 1994 and that the piracy of trademarks and 

patented products added "significantly" to that tota1. 246 

 Chinese piracy of computer software was running as 

high as 94 percent, and that of U.S.-copyrighted CDs, 

laser discs, cassette tapes, books, video games, videos, 

and movies was close to 100 percent in many parts of 

China.247According to the USTR, 29 factories 

producing U.S. CDs, laser discs, and CD-ROMs were 

among the largest offenders in China. Since these 

factories were alleged to have an annual production 

capacity exceeding 75 million in a domestic market 

with a capacity to absorb only 5 million annually, most 

of their output was destined for export. During the past 

2 years, a rapidly increasing number of the pirated 

products of Chinese companies have been found 

mainly in Hong Kong and throughout Southeast Asia, 

but have also reached Latin America, Canada, and the 

United States. 248 

Inadequate legislation appears to have been only 

part of the problem. China's trademark law, which it 

revised in July 1993 in response to the 1992 

Memorandum of Understanding, contains tough 

enforcement provisions, including criminal penalties 

for infringement. However, effective enforcement has 

been sporadic at best, and trademark violations have 

increased, especially in Southern China. 249The 1992 

revision of China's patent law also includes 

enforcement provisions, but the piracy of patented 

products has continued. Although China's revised 

copyright law did not provide for criminal proceedings 

against piracy, its criminal code was amended on July 

5, 1994, to include criminal penalties for copyright 

infringement. Nevertheless, despite strong pressure 

from the United States, China did not initiate 

prosecutions against any obvious offenders during the 

remainder of 1994. 250 

On December 31, 1994, USTR Kantor issued a 

proposed determination that China's IPR enforcement 

practices are unreasonable and burden or restrict U.S. 

commerce.251The investigation was extended until 

February 4, 1995, to allow negotiators time to pursue 

an acceptable settlement, but the USTR also 

simultaneously published a list of $2.8 billion in annual 

imports from China being considered for retaliation in 

the event agreement could not be reached by that 

time.252A final retaliation list of $1.08 billion in 

annual imports from China was published on February 

4, 1995.253Tariffs applying to the 35 product 

categories on this list were scheduled to be increased to 

100 percent ad valorem on February 26, 1995, but the 

United States and China reached agreement on that 

date.254 

MFN Status and Human Rights 

On May 26, 1994, President Clinton announced 

that he would renew the MFN tariff treatment of 

imports from China for another year and would delink 

China's MFN trade status from human rights issues. 255 

 He acknowledged that China had not made the 

improvements in human rights set forth in 1993 as 

conditions for renewal in 1994. 256He explained, 

however, that he was basing his decision on the belief 

that increased contact with China, rather than the 

denial of its MFN status, "offers us the best 

opportunity to lay the basis for long-term sustainable 

progress in human rights and the advancement of our 

other interests in China." 257In taking this position, 

President Clinton essentially brought to a close an 

issue that had adversely affected trade relations 

between the United States and China since the Chinese 

Government's military suppression of the student-led 

prodemocracy movement in June 1989. 

In view of China's continuing human rights abuses, 

however, President Clinton announced that certain 

sanctions imposed by President Bush following the 

1989 massacre in Beijing's Tiananmen Square would 

remain in force.258These sanctions were (1) the 

suspension of weapons deliveries under both U.S. 

97 
Government and commercial programs; (2) the denial 

of export licenses for dual-use civilian technology 

items for the Chinese police or military; (3) the 

suspension of consideration of export licenses for U.S. 

Munitions List items; (4) the suspension of China's 

participation in the grant programs for project 

feasibility studies under the Trade and Development 

Agency and in the insurance and loan programs of the 

Overseas Private Investment Corp.; and (5) the 

withholding of U.S. support for World Bank and other 

multilateral development bank lending to China except 

for projects meeting basic human needs. 259In addition 

to continuing these sanctions, the President imposed a 

ban on imports of Chinese munitions, consisting 

principally of guns and ammunition. 26° 

President Clinton also announced that he would 

keep human rights prominently on the bilateral agenda 

and that he planned to use a variety of instruments to 

encourage human rights in China. The instruments he 

proposed included (1) intensified dialogue with 

Chinese Government officials on human rights issues; 

(2) consultation with the U.S. private sector to 

establish a voluntary statement of principles for U.S. 

business firms operating in China; (3) stepped-up use 

of such media as Voice of America and Radio Free 

Asia; and (4) closer cooperation with other nations, 

especially through the United Nations, to monitor and 

draw attention to the Chinese human rights 

situation.261 

On June 2, 1994, the President issued his official 

determination to renew China's MFN status for another 

year.262 MFN tariff treatment, the nondiscriminatory 

rates of duty that the United States applies 

unconditionally to imports from most countries, is 

extended to imports from China under the President's 

authority to waive full compliance with the 

freedom-of-emigration requirements (Jackson-Vanik 

Amendment) imposed on nonmarket economy 

countries by section 402 of the Trade Act of 1974. The 

waiver for China, which has been in effect since 

February 1980, expires on July 3 of each year unless 

the President issues a determination to extend it at least 

30 days before the scheduled expiration date. In his 

report to Congress accompanying the 1994 waiver 

extension, President Clinton explained that, despite its 

lack of "overall significant progress" on other human 

rights concerns specified in the 1993 Executive Order, 

China had satisfied the emigration criteria for a waiver 

extension under the Trade Act of 1974. 263Moreover, 

he noted, it had satisfied additional emigration 

requirements set forth in the 1993 Executive Order by 

keeping its promise to resolve certain pending 

"blocked passport" cases, including some that involved 

the relatives of prominent dissidents. 2M In 1994, as in 

each previous year since 1989, legislation was 

introduced in the Congress to disapprove the 

President's waiver extension for China or to subject its 

continuation to human rights conditions in addition to 

freedom of emigration. A measure that would have 

terminated China's MFN status was defeated in the 

House on August 9, 1994, and one that would have 

prohibited the application of MFN treatment to certain 

imports from China was amended to approve the 

President's policy and passed in the House on the same 

day.265Neither bill saw action in the Senate. 

Other Bilateral Developments 

New Textile Agreement 

On January 17, 1994, the United States and China 

reached a new agreement on trade in Chinese textiles 

and apparel. The 3-year accord addresses two major 

bilateral issues in this trade: China's transshipments of 

textiles and apparel through third countries to evade 

U.S. import quotas, a practice that the United States 

alleged had reached massive proportions, and overshipments, or shipments exceeding China's annual textile 

and apparel quotas. The latter, although considered a 

less serious problem by U.S. officials, can cause 

significant market disruption since all merchandise 

entering the United States in excess of the annual limit 

for a textile or apparel category must be held in bond at 

Customs warehouses until it can be included in next 

year's quota.266To address the problem of fraudulent 

transshipments, the agreement provides for charging 

such shipments against the relevant quotas and 

contains penalties for repeated violations, including the 

right to reduce a specific quota by as much as three 

times the amount transshipped. The overshipments 

issue is also addressed by committing China to 

strengthen its enforcement procedures. The problem 

was believed to have been largely the result of an 

inadequate control mechanism, rather than direct action 

on the part of the Chinese Government, since much of 

the overshipment reportedly resulted from the use of 

fraudulent export visas. 

The annual quota increases allowed in the new 

3-year agreement are substantially less than those in 

the previous agreement. No increases were provided 

for in 1994, and the overall increase in the quantity of 

textiles and apparel that China can export to the United 

States in 1995 and 1996 is limited to 1 percent each 

year. The previous agreement permitted China to 

increase its shipments to the U.S. market by an average 

4.4 percent annually. For the first time, the new 

agreement also imposes a limit on imports of silk and 

mostly silk-blend apparel from China. Such shipments 

98 
from China had been rising rapidly in recent years and 

were alleged to be seriously affecting the sales of U.S. 

manufacturers of similar cotton and manmade-fiber 

apparel. The new quotas on the silk and silk-blend 

apparel categories allow for an overall 1-percent 

increase in quantity during each year of the agreement. 

Agreement Lifting Export 

Sanctions on Satellites 

On October 4, 1994, the United States and China 

signed a Joint Statement on Missile Proliferation, in 

which the two countries agreed to a step-by-step 

approach to resolve issues concerning China's 

adherence to the principles of the Missile Technology 

Control Regime (MTCR). 267This agreement paved 

the way for the United States to lift a ban it had 

imposed on exports of communications satellites and 

satellite components to China. 

After determining that China had sold M-11 

missile components to Pakistan in violation of the 

MTCR, the United States imposed a 2-year ban on 

specified high-technology exports to China in August 

1993.268 The items affected, which are mandated by 

U.S. law covering administration of the MTCR 

guidelines, were mainly communications satellites and 

satellite components that U.S. manufacturers had 

planned to export for launching in China. At the time 

of the ban, the potential loss of U.S. exports was 

estimated to be $400 million to $500 million annually 

during the 2-year period. 269However, the ban was in 

effect partially lifted in January 1994, as a result of a 

reinterpretation of U.S. law to exclude items that were 

not militarily sensitive from coverage under the MTCR 

guidelines. This change permitted satellites to be 

licensed for export to China following the removal of 

any components on the State Department's munitions 

list.27° 

In the Joint Statement, the United States agreed to 

take the first step and lift the ban on satellite exports. 

China agreed that once the sanctions were lifted, it 

would make a commitment not to export missiles and 

missile components covered by the MTCR 

agreement.271The United States lifted the ban on 

November 1, 1994,272and China simultaneously 

announced a commitment to adhere to the guidelines of 

the MTCR.273 

The original 6-year agreement providing for 

U.S.-built satellites to be launched on Chinese rockets 

expired on December 31, 1994. 274Although nine 

launches were permitted under that agreement, China 

conducted only four as a result of restrictions that the 

United States imposed on satellite exports to China 

following the June 1989 massacre in Tiananmen 

Square and the ban imposed in 1993. 275At the time of 

its expiration, negotiations were underway on a new 

bilateral agreement that would allow up to 11 launches 

over a 7-year period. 276 

Market Access Agreement 

The 1992 Memorandum of Understanding on 

Market Access signed by the United States and China 

committed the Chinese Government to lift import 

quotas, licensing requirements, and controls at the end 

of each year for a 5-year period. 277Although it 

eliminated import barriers on some product groups 

ahead of schedule in 1993, the first full year of the 

agreement, it did not lift the restrictions scheduled to 

be eliminated on December 31, 1994. 278Among the 

product categories affected were wood products, 

agricultural products, beer and wine, tobacco, textile 

and apparel products, computers, textile machinery, air 

conditioners, and refrigerators. 279 

China's decision to not implement its 1994 

commitments under the market access agreement 

apparently stemmed from its failure to accede to the 

GATT by yearend, for which it largely blamed the 

United States. 280In addition, the breakdown of IPR 

negotiations in December further strained relations 

between the United States and China. 281In 

mid-March 1995, however, during USTR Kantor's trip 

to China to sign and launch the IPR enforcement 

agreement, the Chinese pledged to lift the restrictions 

scheduled for yearend 1994 by no later than March 31, 

1995. 

Taiwan 

The application of Taiwan to join the GATT/WTO 

was the main focus of bilateral trade discussions in 

1994. In particular, the United States, along with other 

current GATT/WTO members, sought to bring the 

Taiwan trade regime into conformity with GATT/WTO 

rules, and to expand market access into areas currently 

restricted from imports. Bilateral tensions about 

protection of IPR in Taiwan eased somewhat in 1994 

as the number of complaints about IPR infringement 

reportedly declined. On another issue, however, the 

Taiwan inability to halt trade in parts of endangered 

species led to U.S. import sanctions against certain 

imports from Taiwan. The action was the first time the 

United States imposed trade sanctions against a 

country that was found to be in violation of an 

international agreement designed to protect endangered 

species. 

99 
GATT/WTO Application 

A Working Party was established in September 

1992 to consider Taiwan's application to join the 

GATT and to negotiate terms for Taiwan 

membership.282The Working Party held two meetings 

in 1994, bringing to seven the total number of times the 

Working Party had met. In 1994, the Working Party 

continued to focus on how to make Taiwan's trade 

policies and import regime consistent with 

GATT/WTO requirements. In particular, the accession 

talks centered on technical aspects of Taiwan's market 

access restrictions, protection of IPR, tariffs, 

import-licensing requirements, and agricultural import 

restrictions. 283 

Part of the accession process, in addition to the 

work of a Working Party, includes bilateral 

negotiations between the prospective member and 

interested Contracting Parties. In November 1993, as 

part of the bilateral negotiations process, the United 

States presented a detailed market access request to 

Taiwan. In the request, the United States asked Taiwan 

to reduce tariffs on 2,800 products; reduce tariff peaks 

on items protected by particularly high tariffs; maintain 

previously established low tariffs; and eliminate import 

bans, quotas, and other nontariff restrictions, largely on 

agricultural products, which are prohibited by WTO 

rules.284 

To complete the application process, Taiwan must 

conclude negotiations with current members on 

bilateral tariff reductions and must conform its 

regulatory regime to GATT/WTO standards. During 

1994, the United States and Taiwan held several 

bilateral consultations about the Taiwan accession. 

Both sides reportedly made progress in addressing the 

most difficult aspects of the negotiations, namely 

restrictions by Taiwan on alcohol, autos, agriculture, 

and aviation. 285 

Taiwan had hoped to complete all negotiations and 

to join the GATT by December 31, 1994, thereby 

becoming a founding member of the WTO, which 

came into existence on January 1, 1995286 (founding 

members and parties joining the organization after its 

establishment receive the same rights and benefits). 287 

 At the end of 1994, the Working Party indicated that 

although the pace of the Taiwan accession continues to 

depend on the pace of China's accession, 288the WTO 

should begin preparations for presenting a protocol of 

accession for some time in 1995. 289 

As part of the GATT/WTO application process, 

Taiwan is opening many aspects of its economy to 

foreign competition to conform its regulatory climate 

to GATT/WTO standards. In 1994, for example, 

Taiwan announced that it was going to take several 

steps to make the government procurement process 

more transparent and correspond to GATT/WTO rules. 

Taiwan also announced that it will permit foreign 

ownership in the banking sector. Banking analysts 

expect that foreign investors, instead of starting up new 

banks, will enter the Taiwan banking sector by buying 

existing domestic banks. 29° 

The Taiwan GATT/WTO entry will mean some 

U.S. exporters will face increased competition in the 

Taiwan market. In some sectors, U.S. suppliers are the 

only foreign source allowed to export to Taiwan. For 

example, the United States is currently the only 

country that can export apples, peaches, and grapes to 

Taiwan without limitation. After accession, however, 

Taiwan will allow imports of such fruit from all 

sources.291Certain beef imports from countries such 

as Australia and New Zealand will receive the same 

tariff treatment U.S. suppliers currently receive. 292 

Protection of Intellectual 

Property Rights 

A frequent topic of bilateral friction between the 

United States and Taiwan is protection of IPR in 

Taiwan.293In recent years, however, Taiwan has taken 

several steps to improve protection of IPR. 294 

 Improving the legal protection and enforcement of IPR 

is also a key topic of discussions in the Taiwan 

GATT/WTO accession negotiations. 

During 1994, the American Institute in Taiwan 

(AIT) received markedly fewer complaints about IPR 

infringement or related problems than in previous 

years. AIT cited two likely reasons for the decline in 

IPR-related complaints: fewer IPR infringement 

activities taking place in Taiwan and confidence by the 

business community in Taiwan's ability to handle 

complaints.295By the end of the year, the Taiwan 

legislature was considering a draft law to protect 

integrated circuit layout designs and trade secrets. In 

addition, recent changes to copyright, patent, and 

trademark laws bring Taiwan closer to GATT/WTO 

requirements regarding IPR protection. 296 

On April 30, 1994, pursuant to Special 301 

provisions of the Trade Act of 1974, USTR Michael 

Kantor placed Taiwan on the "watch list" of countries 

that do not provide adequate and effective protection of 

IPR. In making the announcement, Ambassador Kantor 

said that Taiwan had made "considerable progress" in 

"reducing or eliminating longstanding problems" in 

IPR protection and "undertook significant enforcement 

efforts over the past year" to prosecute violators of IPR 

laws.297 

100 
As part of the Special 301 process, USTR solicited 

public comments about the level of IPR protection 

afforded by foreign governments. Regarding Taiwan, 

the Software Publishers Association (SPA) stated that 

software piracy in Taiwan caused total losses of $142 

million based on estimates that only 13 percent of the 

software in use in Taiwan was legally purchased. 

Nintendo identified Taiwan as the primary source for 

counterfeit Nintendo video game products in 1994. 

Other comments about inadequate IPR protection in 

Taiwan included inadequate enforcement, insufficient 

criminal penalties for infringement, and a lack of 

"pipeline" protection for pharmaceuticals. 298 

Wildlife Trade Sanctions 

On April 11, 1994, President Clinton announced 

that the United States would ban the importation of 

certain wildlife specimens and products from Taiwan. 

The sanctions were imposed in response to a finding by 

the Clinton administration that Taiwan had not taken 

sufficient measures to stop illegal trade in products of 

endangered species. In particular, the administration 

said that Taiwan had not shown measurable, verifiable, 

and substantial progress in ending trade in rhinoceros 

horn and tiger bones. The action marks the first time 

that the United States has imposed sanctions under the 

Pelly Amendment, which authorizes trade sanctions 

against countries that violate the Convention on 

International Trade in Endangered Species of Wild 

Fauna and Flora (CITES) or other international 

agreements designed to protect endangered species. 299 

 Trade in endangered species is banned by CITES. 

Rhinoceros and tiger parts are used in traditional 

medicine and as aphrodisiacs in Taiwan and China. 

Demand for the items has fueled poaching of the 

animals in their native habitats. According to Clinton 

administration estimates, the world rhinoceros 

population has suffered a 90-percent decline since 

1971, to its current level of about 10,000, in large part 

due to illegal poaching. Similarly, the world's tiger 

population has fallen by 95 percent since 1900, to 

about 5,000. The administration stated that both 

populations will likely be extinct within 2-5 years if the 

illegal trade is not eliminated. 3m 

The ban, which does not apply to products for 

human consumption, prohibits importation from 

Taiwan of certain items classified as fish, wildlife, or 

products of fish or wildlife. After a period of public 

comment on the specific products on the sanction list, 

the ban went into effect in August. Products banned by 

the action include- 

• Reptile leather shoes, handbags, and 

other reptile leather articles and products; 

• Jewelry made from coral, mussel shells, 

and bone; 

• Edible frogs' legs; 

• Live goldfish and tropical fish for the 

aquarium trade; and 

• Bird feathers, down, and specimens. 301 

When the sanctions were imposed, the United 

States announced that the sanctions would remain in 

place until Taiwan enacts and enforces adequate laws 

to deter the illegal trade in rhino and tiger parts. 

According to the most recent estimates by the U.S. 

Fish and Wildlife Service, U.S. imports of these 

products from Taiwan were about $22 million in 1994, 

or one-tenth of one percent of the total value of U.S. 

imports from Taiwan that year. 302 

In response to the sanctions, Taiwan authorities 

requested that exporters of the affected products switch 

their sales efforts to other markets. 303In addition, 

Taiwan authorities proposed to strengthen wildlife 

conservation through the following efforts: 

• Enforce consolidation of stockpiles of 

rhino horn and tiger parts; 

• Strengthen the crackdown on the illegal 

trade and smuggling of endangered 

species; 

• Increase conservation education; 

• Increase international conservation 

cooperation; 

• Establish an identification system for 

wildlife and wildlife products; 

• Establish a wildlife data bank; 

• Train conservation specialists; 

• Increase conservation experiments and 

research; and 

• Manage and protect wildlife habitats. 3°4 

In early April 1994, the CITES Standing 

Committee reaffirmed an earlier recommendation that 

Taiwan and China need to consider stricter measures to 

stem trade in wildlife. The Standing Committee did 

note "with satisfaction" the progress made by China in 

prohibiting trade in wildlife species, but expressed 

101 
"concern that the actions agreed by the authorities in 

Taiwan . . . towards meeting the minimum 

requirements have not yet been implemented." 305 

The administration's April 1994 decision was 

based on a September 1993, certification by the 

Secretary of the Interior that nationals of China and 

Taiwan were engaging in trade of rhinoceros and tiger 

parts that diminishes the effectiveness of CITES. 306 

 CITES, with over 120 member countries, is an 

international agreement designed to control trade in 

endangered species. 307CITES identifies the tiger and 

five species of rhinoceros as threatened with extinction 

and therefore prohibited from commercial trade. 308 

 The Secretary's determination constituted a 

certification pursuant to the Pelly Amendment to the 

Fishermen's Protective Act of 1967. 309The Pelly 

Amendment directs that the Secretary shall make such 

a certification to the President if he determines that 

foreign nationals are engaged in trade that diminishes 

the effectiveness of an international program, such as 

CITES, for the conservation of endangered or 

threatened species. 310 

In November 1993, the Clinton administration 

determined that, although both China and Taiwan had 

"made good faith efforts to stop the trade . . . these 

efforts, however, have yet to yield effective reductions 

in trade."311The United States said that Taiwan and 

China could demonstrate their commitment to 

elimination of the trade by, at a minimum, taking the 

following actions: 

• Consolidation and control of stockpiles; 

• Formation of a permanent wildlife or 

conservation law enforcement unit with 

specialized training; 

• Development and implementation of a 

comprehensive law enforcement and 

education action plan; 

• Increased enforcement penalties; 

• Prompt termination of amnesty periods 

for illegal holding and commercialization; and 

• Establishment of regional law 

enforcement arrangements. 

The United States threatened sanctions if the parties 

made no progress by March 1994. 312 

The Clinton administration cited Taiwan in April 

1994 for its insufficient effort to identify, register, and 

mark stocks of tiger and rhinoceros parts and products; 

failure to amend its Wildlife Conservation Law making 

such registration mandatory; inadequate prosecution of 

individuals selling rhinoceros and tiger parts; and its 

need to strengthen and then enforce the Wildlife 

Conservation Law to address the illegal trade. 313The 

administration also announced that it might provide 

technical and law enforcement assistance to Taiwan 

and would monitor Taiwan's actions regarding trade in 

endangered species. Finally, the administration noted 

that enactment of adequate laws followed by 

enforcement actions that reduce illegal trade in 

rhinoceros and tiger parts would "be grounds for an 

immediate reconsideration of the decision." 314 

When sanctions were imposed against Taiwan, the 

Clinton administration decided that sanctions against 

China were not warranted because China had made 

progress in its efforts to stop trade in the endangered 

species. The administration noted that China had 

recently consolidated stocks of rhinoceros and tiger 

parts, engaged in a public education campaign on new 

laws to protect wildlife, seized stocks of wildlife parts, 

and prosecuted violators of the ban in wildlife trade. 

The administration instructed the Departments of State, 

Justice, and Treasury to explore technical and law 

enforcement assistance with China and to ensure 

continued progress on eliminating the trade. 315 

Republic of Korea 

In 1994, bilateral discussions between the United 

States and Korea largely took place in the context of 

the Dialogue for Economic Cooperation (DEC). DEC 

discussions concentrated on major aspects of Korea's 

ambitious economic reform initiative, dubbed the 

"New Economy." Introduced in 1993 by President 

Kim Young Sam, the plan includes a wide range of 

initiatives designed to reform Korea's political and 

economic activity. The main goals of the plan are 

liberalization of foreign direct investment and financial 

regulations, and strengthening protection of IPR. 

Korea's market access for foreign suppliers of beef, 

pork, and automobiles were also the subject of bilateral 

negotiations in 1994. 

Dialogue for Economic 

Cooperation 

During President Clinton's July 1993 visit to South 

Korea, the two countries agreed to establish a 1-year 

DEC. The DEC was designed to strengthen bilateral 

economic cooperation, advance deregulation in Korea, 

and provide an avenue for regular economic 

consultation. In light of Korea's ambitious 5-year plan 

for a "New Economy," DEC discussions provided an 

102 
opportunity for the bilateral talks to focus on the 

substance of Korea's proposed economic reforms. 

Improving Korea's foreign investment climate was the 

main focus of the DEC. Discussions also extended to 

areas of taxation, competition policy, administrative 

procedures, import clearance, as well as U.S. 

implementation of trade measures. 316 

The DEC concluded in June 1994 when both sides 

issued a joint report on progress that had been achieved 

through the dialogue. In the report, both sides agreed 

that "the DEC sought to reduce the likelihood of future 

problems by addressing and improving the structure of 

our economic relations in a limited number of 

important areas. In this, we have achieved modest 

success."317 

In the final report of the DEC, the Government of 

Korea committed itself to—(1) identify sectors that 

could be opened to foreign investment; (2) streamline 

the investment approval process and increase its 

transparency; and (3) improve the climate for foreign 

investors in areas such as land acquisition, financing, 

and IPR protection. 318Although foreign access to the 

Korean market has been facilitated by the DEC and 

Korea's economic reforms, U.S. firms operating in 

Korea continue to perceive the Korean economy as 

highly regulated and difficult to penetrate. 319 

Korea's "New Economy" 

In 1994, Korea took several steps designed to 

internationalize its economy, attract foreign 

investment, and bring the country's investment regime 

into conformity with international standards. The 

measures grew out of President Kim Young-Sam's 

5-year program to liberalize and internationalize the 

Korean economy. 320By so doing, the Government of 

Korea intends to reduce its role in economic activity 

and increase individual autonomy in economic affairs. 

The plan, called the "New Economy," is designed to 

promote autonomy, consistency, and transparency in 

economic activity by implementing widespread 

institutional changes. 321 

The plan, together with commitments Korea made 

in the DEC final report, is part of a wider effort by the 

Government of Korea to open the Korean economy to 

international competition and to bring Korea's 

investment regime closer to the standards of the 

Organization for Economic Cooperation and 

Development (OECD), which Korea hopes to join in 

1996.322The OECD, whose 24 member countries are 

the advanced economies of Europe, North America, 

and the Pacific, requires that its members abide by, 

among other things, the Code of Liberalization of 

Capital Movements. The code mandates that members 

minimize restrictions on capital movements as a way to 

advance economic growth and cooperation. 323 

The following sections summarize the main 

reforms initiated by the Government of Korea: 

strengthening protection of IPR, changing the foreign 

investment approval process, expanding the number of 

sectors open to foreign investment, and financial 

deregulation. Other parts of the "New Economy" 

initiative include easing the ability of foreign firms to 

acquire land in Korea, cutting regulations on 

businesses, and improving the climate for 

labor-management relations. 

IPR Protection 

Insufficient protection of IPR in Korea has been 

the source of bilateral tension for several years. 324 

 Korea's goals in strengthening IPR protection as part 

of the "New Economy" initiative include prosecution 

of individuals who violate IPR laws and regulations, 

strengthening legal protection of IPR, and increasing 

public awareness of the IPR protection and penalties 

for violators. 325 

In April 1994, the United States placed Korea on 

the "priority watch list" pursuant to Special 301 

provisions of the Trade Act of 1974 in light of Korea's 

lack of "adequate and effective protection" of IPR. 326 

 By the end of the year, the climate for IPR protection 

in Korea improved somewhat. For example, Korea 

took steps to enforce its existing laws and bilateral 

commitments designed to protect IPR. These actions 

included removing pirated and counterfeit goods from 

the domestic market and undertaking "special 

enforcement periods" when raids, prosecutions, and 

other actions against violators were increased. 

Although Korea has stepped up prosecution against 

audio and video piracy, widespread infringement 

against U.S. computer software producers reportedly 

continues. 327 

The final report of the DEC emphasized the 

importance of effective IPR protection for fostering 

technological development and attracting high-tech 

investment to Korea. Korea noted the steps, discussed 

above, that it had taken recently to improve IPR 

protection. In addition, Korea committed itself to 

improve legal protection for IPR offered by its 

Semiconductor Chip Protection Law, Patent Law, 

Copyright Law, Trademark Law, and Industrial Design 

Law. Korea also said that it plans to bring these laws 

into conformity with the Uruguay Round TRIPs 

agreement as soon as possible. 328 

103 
Foreign Investment Notification 

and Approval Process 

In 1994, Korea announced several measures to 

streamline its foreign investment notification and 

approval process. Korea's Foreign Capital Inducement 

Act (FCIA) categorizes economic sectors as either 

open, conditionally restricted, or closed to foreign 

investment. Foreign investors who seek to start or 

expand investment in Korea must either notify the 

government of the proposed investment or, if the 

investment is to take place in a conditionally restricted 

sector, seek approval with the Ministry of Finance. 329 

The 1994 changes in Korea's notification/approval 

process, as enumerated in the final DEC report, codify 

some of Korea's goals to simplify investment rules as 

part of the 5-year "New Economy" plan. The process 

for notification of new investment plans was cut from 

20-30 days to 3 hours. The procedure for foreign 

investment projects that require government approval 

was revised to be shorter, simpler, and more 

predictable than the previous process. For example, the 

government's approval period for foreign investment 

applications is reduced from 30 days to 15 days. The 

government will undertake an initial review of 

investment documentation at the time of its 

submission. Smaller investments, those below 300 

million won ($375,000) in the service sector and 1 

billion won ($1.25 million) in manufacturing, are to be 

processed in 5 days. 33° 

The Government of Korea also simplified the 

process for expanding foreign invested businesses. In 

addition, rules pertaining to stock sales by foreigners 

were somewhat relaxed. Rules that required foreign 

holders of stocks to notify the Government of Korea of 

pending stock sales were eased, and the requirement 

that the government verify the sale price of the 

foreign-owned stocks was eliminated 331 

Korea also stated in the final DEC report that it 

planned several additional measures designed to 

simplify the foreign investment notification/approval 

process. These steps included amending the FCIA to 

(1) authorize an additional 27 banks to accept foreign 

investment notifications, (2) abolish ministerial review 

for projects on the notification list and for smaller 

projects on the approval list, (3) approve foreign direct 

investment in certain sectors as long as the investor 

meets specific criteria, and (4) waive the notification 

requirement for established foreign investors making 

new investments in Korea if the new business falls in a 

category on the "notification list." 332 

Korea is trying to reduce restrictions on investment 

to attract more foreign investment. In recent years, 

Korea has received a relatively low amount of 

investment compared with other developing countries 

in the region. During 1988-92, Korea received $5.5 

billion in foreign investment compared with $87.6 

billion for China, $30.4 billion for Thailand, $24.7 

billion for Malaysia, and $9.1 billion for Taiwan. The 

Government of Korea is concerned that, if recent 

trends continue, Korea's international competitiveness 

vis-a-vis China, Taiwan, and Southeast Asia will suffer 

as the benefits of job creation and technology transfer 

fall to those areas. 333 

Liberalization of Restricted Sectors 

The 1994 changes in foreign investment 

regulations follow earlier efforts to reduce 

sector-specific restrictions on foreign investment. As 

discussed above, Korea's FCIA categorizes economic 

sectors as either open, conditionally restricted, or 

closed to foreign investment. 334In June 1993, Korea 

announced that it would phase out restrictions on 

foreign investment in 132 of 224 sectors by 1997. 

After 1997, Korea will retain restrictions on foreign 

investment in 92 sectors. The remaining justifications 

for limiting foreign investment include protection of 

national security, public order and morals, international 

peace and security, and national health and the 

environment. Previous restrictions on foreign 

investment in Korea excluded foreign investment that 

the Government of Korea judged could cause 

monopolistic or predatory practices or violate the 

Monopoly Regulation and Fair Trade Act. 335 

In the final DEC report, Korea said it would open 

an additional 25 sectors to foreign investment. In 

addition, it will speed up opening of 32 of the sectors 

announced in the June 1993 plan, most of which are to 

be open to foreign investment when Korea joins the 

OECD.336 

Financial Liberalization 

Korea has traditionally maintained a high degree of 

control over its financial sector. 337This control has 

limited the ability of foreign firms to operate in Korea. 

The Government of Korea is implementing financial 

liberalization measures designed to facilitate foreign 

businesses operations in Korea and bring Korea's 

financial system in line with that of other OECD 

countries. To that end, Korea is deregulating interest 

rates, liberalizing foreign exchange rules, and easing 

other government involvement in other financial 

areas. 338 

Korea plans to deregulate interest rates over a 

period of several years. In 1993, the first step of 

104 
interest rate deregulation was taken when Korea began 

to liberalize interest rates for commercial loans, 

long-term deposits (those with a maturity greater than 

2 years), and issue rates for bonds. In 1994, Korea 

began relaxing restrictions on interest rates for 

certificates of deposit. Further steps in interest-rate 

deregulation are planned through 1997. 339 

In the area of foreign-exchange regulations, in 

November 1994, Korea widened the allowable band of 

daily exchange rate fluctuation from +I- 1.0 percent to 

+1- 1.5 percent. 34° The question of whether Korea uses 

capital controls to manipulate its currency and thereby 

obtain an unfair trade advantage has been a bilateral 

concern for several years. In its semiannual reports to 

Congress on exchange rate policy, the Treasury 

Department in July concluded that Korea had not been 

manipulating its exchange rate for unfair trade 

advantage. The Treasury report did, however, express 

concern about capital controls in Korea which, it said, 

"discourage investment and impede the operation of 

market forces in exchange rate determination." 341In 

its December report, Treasury reiterated its concern 

that Korea's use of foreign exchange and capital 

controls "reduces market demand for the won and 

thereby tends to deter upward pressure on the won." 342 

 Korea has stated that it plans to abolish the band in 

1997 and allow a free floating exchange rate. 343 

Other targets for financial liberalization in Korea 

include phasing out policy-directed loans and 

liberalizing rules pertaining to stock ownership and 

offshore borrowing. Korea is taking steps to end 

policy-directed loans, such as loans for farmers, small 

and medium-sized firms, and housing, by 1998. In 

1994, Korea increased the total share of an individual 

firm's stock that may be held by foreigners from 10 

percent to 15 percent. The ceiling is scheduled to be 

further relaxed by 1997. Finally, Korea is easing 

restrictions on access to offshore capital for foreign 

firms in Korea. 3' 

Beef and Pork 

In November 1994, the USTR initiated a section 

301 investigation of Korea's practices regarding the 

importation of U.S. beef and pork. At the same time, 

the United States requested consultations with Korea 

on the subject. The investigation was the latest in a 

series of bilateral disputes that date back to 1988 and 

center on foreign access to Korea's market for 

imported meat. Since that time, the United States has 

held numerous bilateral negotiations—and reached 

three separate market access agreements—designed to 

expand foreign access for beef and pork products in 

Korea. 345 

The petition, filed by the National Pork Producers 

Council, the American Meat Institute, and the National 

Cattlemen's Association, alleges that actions by the 

Government of Korea regarding the importation of 

U.S. beef and pork products violate the three previous 

market opening agreements and are unreasonable and 

burden or restrict U.S. commerce. 346In particular, the 

petitioners allege that the Government of Korea has 

established barriers that deny the U.S. products access 

to the Korean market in violation of the agreements or 

in a manner that is otherwise unreasonable. The 

barriers alleged by the petitioners include- 347 

• Outdated, scientifically unsupported, and 

discriminatory shelf-life standards; 

• Excessively long inspection procedures; 

• Contract tender procedures that prevent 

U.S. producers from meaningfully 

participating in the bidding process; 

• Local processing and repackaging 

requirements; 

• Discriminatory fixed-weight 

requirements; 

• Dual standards for residue testing; and 

• Short pork temperature reduction 

requirements. 

Meat industry officials pointed out that, compared 

with other countries, Korea has set relatively short 

shelf-life requirements for processed, frozen, and 

fresh-chilled meat. For example, Korea established 

shelf-life requirements of 10 days for fresh chilled pork 

and 14 days for fresh chilled beef; shorter than the time 

necessary to ship the product to Korea. U.S. industry 

officials point out that shelf-life requirements for 

countries such as Mexico and Japan are 40 days for 

pork and 100 days for beef. 

Other areas of concern to the meat industry include 

tendering requirements, residue testing, and customs 

delays. Although the Korean Government agreed to 

provide 1-week notice when offering tenders for the 

purchase of pork products, in practice the notices are 

reportedly published 1 or 2 days in advance. Regarding 

residue testing, the meat industry maintains that Korea 

imposes onerous testing requirements on imported 

meat and not on domestic meat Finally, the meat 

industry reports that imports of meat from the United 

States are routinely held up at customs for 2 to 3 weeks 

105 
but imports from countries that supply smaller 

quantities of beef are cleared quickly. 348 

The three agreements that the petitioners allege 

Korea has violated are a 1989 exchange of letters on 

agricultural products, a 1990 record of understanding 

on beef, and a 1993 record of understanding on market 

access for beef. Meat industry officials estimate that 

because of the barriers, U.S. producers of beef and 

pork may lose $215 million in 1994 and $1 billion a 

year by the end of the decade. USTR has up to 12 

months to conduct the investigation. 349If the dispute 

is not settled satisfactorily, USTR may begin the 

process of imposing sanctions on Korea. 

Automobile Market Access 

In 1994, the United States intensified efforts to 

open the Korean automobile market to imported 

vehicles. The Korean automobile market is virtually 

closed to imports; in 1993, 2,328 U.S.-made vehicles 

were sold in Korea. These vehicles accounted for about 

one-tenth of 1 percent of the 1 million autos sold in 

Korea. Imports of automobiles from all sources 

accounted for two-tenths of 1 percent, in 1993. 350In 

1994, U.S. automakers sold 3,152 vehicles in Korea. 

The United States is seeking improved market 

access for foreign cars in Korea. 351The main concern 

of the U.S. Government and industry is the Korean 

public perception that purchasing an imported 

automobile will trigger tax audits and other 

government scrutiny. Korean tax authorities have often 

used ownership of a foreign automobile as the basis for 

conducting tax audits of individuals. 352In February 

1994, Korea announced that ownership of a foreign 

automobile would no longer trigger a tax audit. Korea 

also announced that it plans to phase out government 

forms that require taxpayers to disclose the make of 

their vehicle. 353The United States, however, is 

concerned that Korean consumers continue to fear the 

arbitrary tax audits or other government discrimination 

if they purchase a foreign automobile. 

U.S. automakers, who are targeting the small but 

growing market for large autos in Korea, must counter 

other difficulties in the Korean market. The Korean 

Government, for example, discourages Korean 

consumers from buying automobiles with large engines 

for the stated reason of promoting energy conservation 

and reducing pollution. 354Korean consumers often 

identify imported vehicles and other imported products 

as luxuries. 355Finally, motor vehicles are subject to 

several taxes or fees in Korea. Although applied to 

both foreign and domestic vehicles, the taxes, which 

are calculated based on engine size, in effect 

discriminate against large U.S. vehicles, such as those 

U.S. automakers are seeking to sell. U.S. officials 

estimate that Korea's taxes and other charges increase 

the price of imported autos by 150 percent. 356 

In June 1994, Andrew Card, President of the 

American Automobile Manufacturer's Association 

(AAMA), visited Seoul along with other U.S. auto 

industry officials in an effort to improve market access 

in Korea. The visit included a mini-auto show and 

reception at the Ambassador's residence attended by 

high-level Korean Government officials. Each of the 

Big Three U.S. automakers displayed three vehicles at 

the residence. At the reception, Kim Chul-Su, Minister 

of Trade, Industry, and Energy, acknowledged the 

severe trade imbalance in automobiles and pledged to 

address the "perception problem," namely that the 

Government of Korea will not discriminate against 

Korean owners of foreign cars. 357 

In the wake of Card's visit and the mini auto show, 

the Government of Korea took several steps designed 

to ease entry for foreign automobiles in Korea. As part 

of a 1989 agreement, the import duty applied to 

automobiles had been reduced in stages from 25 

percent to 10 percent. In June, Korea announced that it 

would lower the tariff to 8 percent. It also authorized 

U.S. companies to advertize on prime time television, 

opened the automobile retail distribution sector to 

foreign investors, and relaxed approval and inspection 

procedures for imported vehicles. In addition, the 

government reiterated its insistence that owners of 

foreign cars will not be subject to tax audits or other 

discriminatory treatment. The Korean authorities also 

permitted establishment of car-financing companies 

and increased space allowances for automobile 

showrooms. 358 

The Korean auto market is the second-largest in 

Asia after that of Japan, and has been estimated to be 

the fastest growing auto market in the world. Korean 

industry forecasts 1994 sales at about 1 1 million units, 

up 12.1 percent over 1993. Current U.S. marketing 

efforts in Korea are concentrating on large autos 

(2-liter engines and above). The Korean Government 

projects that automobile imports into Korea will rise 

from the current level of about 2,000 units per year to 

4,000 in 1995, 31,000 in 1998, and 82,000 in 2001. 

Sales of large automobiles are expected to reach 

16,000 units this year. However, even if U.S. 

automakers captured this entire segment of the market, 

they would account for only 1.5 percent of the 

passenger vehicle market in Korea. 359A small but fast 

growing segment of the market with potential for U.S. 

exports is sport utility vehicles. Sales of these vehicles 

are projected to reach 90,000 units in 1994, although 

imports are expected to account for less than 700 units. 

106 
In order to develop a significant market share in 

Korea, U.S. officials point out that U.S. automakers 

will have to export smaller cars to Korea and expand 

marketing and other cooperative relationships with 

Korean firms. 36° For example, Ford has such a 

relationship with Kia Motors Corp. Ford owns 10 

percent of Kia, and Mazda (which is affiliated with 

Ford) owns another 8 percent. In addition, Ford 

imports the Kia-built Aspire into the United States and 

Kia sells some Ford automobiles in South Korea. 361 

107 
ENDNOTES 

1For a complete discussion of developments in 

1993 between the United States and Canada 

concerning the wheat issue, see U.S. International 

Trade Commission (USITC), The Year in Trade: 

Operation of the Trade Agreements Program, 45th 

Report, 1993, USITC publication 2769, 1994, pp. 

87-9. 

2The CWB controls wheat produced in Manitoba, 

Saskatchewan, and Alberta, and in a portion of 

British Columbia, that is sold domestically for human 

consumption or which is exported. Wheat, such as 

white wheat, grown outside of these areas and 

constituting less than 5 percent of Canadian wheat 

production, is marketed privately or by other 

non-CWB grain marketing associations. The 

domestic feed wheat market is also outside of CWB 

control. 

3According to the United States Trade 

Representative (USTR), "The CWB [has]... authority 

to control imports of wheat and barley by issuing 

import permits or licenses. Under the CFTA, Canada 

agreed to eliminate import licenses for wheat, barley 

and oats when U.S. support levels for these products 

are equal to or less than those of Canada. In 

accordance with these provisions, Canada has 

discontinued its import license requirements for U.S. 

shipments of oats and oat products and wheat and 

wheat products. Licensing requirements remain on 

barley." USTR, 1995 National Trade Estimate Report 

on Foreign Trade Barriers, p. 34. 

4The WGTA rail subsidies are allowable under 

the bilateral CFTA for grain moving to Eastern 

Canadian ports, according to a February 8, 1993 

decision handed down by a binational dispute 

resolution panel created under chapter 18 of the 

CFTA. The panel distinguished between export and 

domestic subsidies and found ". . .the WGTA subsidy 

payments through Thunder Bay are clearly domestic 

subsidies. Subsidy payments, as pointed out earlier, 

are prohibited only when they are export subsidy 

payments and occur in connection with export 

shipments to the United States through Canada's 

western ports. . ." See the final report by the 

binational panel, In the Matter of: The Interpretation 

of and Canada's Compliance With Article 701.3 With 

Respect to Durum Wheat Sales, Secretariat Case 

No. CDA-92-1807-01, Feb. 8, 1993, par. 101, p. 43. 

5On February 27, 1995, the Canadian 

Government announced that WGTA subsidies would 

be eliminated on August 1, 1995. 

6President Clinton, letter to Don E. Newquist, 

chairman, USITC, Nov. 16, 1993. 

7Article XXVIII permits one country to raise the 

tariff to another country as long as it also initiates 

talks to compensate for the tariff increase by means 

of other trade actions. 

8Leo Ryan, "Canada Preparing to Retaliate if US 

Curbs Wheat Exports," Journal of Commerce, Apr. 4, 

1994, p. XX. 

9These are supply-managed products protected 

by Canada from more price-competitive imports. 

Under Uruguay Round commitments, Canada has 

replaced import quotas in this area with tariff-rate 

quotas. In February 1995, the United States 

requested dispute settlement consultations with 

Canada (under chapter 20 of the NAFTA) on the 

issue of possible contradictions between Uruguay 

Round implementation and NAFTA obligations. The 

consultations were held in Ottawa on March 1, 1995. 

See USTR, 1995 National Trade Estimate, p. 34. 

10USTR, "Joint Release from Secretary Espy 

and U.S. Trade Representative Kantor," press release 

94-25, Apr. 22, 1994. 

11Government of Canada, Department of Foreign 

Affairs and International Trade, news release, 

"Ministers Regret U.S. Action on Wheat and Barley," 

Apr. 22, 1994. 

12USITC, Wheat, Wheat Flour, and Semolina 

(investigation No. 22-54), USITC publication 2794, 

July 1994, p. 3. 

13Trade Reports International Group, "Final 

Round to Wheat Talks with Canada Set for Next 

Week," Washington Trade Daily, July 21, 1994, p. 7. 

Article XXVIII of GATT establishes a 90-day 

negotiation period, which set the expiration date at 

August 1, 1994. During this time the countries 

attempted to resolve the dispute. After the period 

expired, the United States was permitted to impose 

tariffs or quotas. In addition, under the same GATT 

rules, Canada was allowed to retaliate 30 days after 

the imposition of measures. 

14USDA, "Joint Release from Secretary Espy 

and U.S. Trade Representative Kantor on 

U.S./Canada Wheat Trade," news release No. 

0586.94, Aug. 2, 1994. The agreement expires 

midnight Sept. 11, 1995. 

15Ibid. 

16 Ibid. 

17The Joint Commission submitted initial findings 

to both governments on June 12, and will conclude 

its work on September 11 when the MOU expires. 

The June preliminary report by the Joint Commission 

on Grains is likely to lead to additional bilateral talks 

on outstanding grain-trade issues. Both countries 

hope the Commission's recommendations will be 

helpful in developing a mutually acceptable resolution 

of concerns over bilateral trade in grains. 

18USDA, "Joint Release from Secretary Espy 

and U.S. Trade Representative Kantor on 

U.S./Canada Wheat Trade," news release No. 

0586.94, Aug. 2, 1994. 

19Earlier reports in this series have chronicled 

the major trade actions affecting lumber over the 

years. See USITC, Operation of the Trade 

Agreements Program (OTAP), 38th Report, 1986, 

USITC publication 1995, July 1987, pp. 4-17 to 4-20; 

USITC, OTAP, 39th Report, 1987, USITC publication 

2095, July 1988, p. 5-9; USITC, The Year in Trade: 

OTAP, 43d Report, 1991, USITC publication 2554, 

1992, pp. 151-2; USITC, The Year in Trade: OTAP, 

44th Report, 1992, USITC publication 2640, 1993, 

pp. 56-7. For a detailed discussion of developments 

108 
in the softwood lumber case during 1993, see 

USITC, The Year in Trade: OTAP, 45th Report, 1993, 

USITC publication 2769, pp. 89-90. 

20See In the Matter of: Certain Softwood 

Lumber Products from Canada, Decision of the Panel 

on Remand, Binational Secretariat Case No. 

USA-92-1904-01, Dec. 17, 1993. 

21". . . we must now remand to Commerce for a 

determination that provincial stumpage programs do 

not distort normal competitive markets for softwood 

lumber and therefore are not countervailable." Ibid., 

p. 65. The panel was similarly direct on the issue of 

log export restrictions. See pp. 76-7. 

22See In the Matter of: Certain Softwood 

Lumber Products from Canada, Final Results of 

Redetermination Pursuant to Binational Panel 

Remand, Secretariat File No. USA-92-1904-01, Jan. 

6, 1994. 

23See discussion on the extraordinary challenge, 

below. 

24USITC, Softwood Lumber From Canada 

(investigation No. 701-TA-312 (Remand)), USITC 

publication 2689, Oct. 1993. 

25 See In the Matter of: Softwood Lumber from 

Canada, Decision of the Panel on Review of the 

Remand Determination of the U.S. International 

Trade Commission, Binational Secretariat Case No. 

USA-92-1904-02, Jan. 28, 1994. 

26Ibid. p. 36. 

27USITC, Softwood Lumber From Canada 

(investigation No. 701-TA-312 (Views on Second 

Remand)), USITC publication 27532, Mar. 1994. 

28See In the Matter of: Softwood Lumber From 

Canada, Decision of the Panel on Review of the 

U.S. International Trade Commission's Second 

Remand Determination, Binational Secretariat Case 

No. USA-92-1904-02, July 6, 1994. 

29Ibid., p. 14. 

30 "In light of the potential ramifications of that 

decision on the Commission's obligation to the 

Binational Panel from which it received the remand 

order, the Commission decided to postpone its 

vote..." USITC, "ITC Defers Vote on Softwood 

Lumber From Canada," USITC press release OPA 

94-090, Aug. 4, 1994. 

31See USTR, "Statement of Ira. S. Shapiro, 

USTR General Counsel, Concerning the U.S.-Canada 

Softwood Lumber Case," press release 94-10, Feb. 

24, 1994. 

32Ibid. 

33Under the terms of the NAFTA, ch. 19, art. 

1904.13, the extraordinary challenge procedure can 

be invoked when any of three conditions exist—(1) a 

member of the panel was guilty of gross misconduct, 

bias, or a serious conflict of interest, or otherwise 

materially violated the rules of conduct; (2) the panel 

seriously departed from a fundamental rule of 

procedure; or (3) the panel manifestly exceeded its 

powers, authority or jurisdiction by failing to apply the 

appropriate standard of review. 

34See In the Matter of: Certain Softwood 

Lumber Products From Canada, 

ECC-94-1904-01USA, Memorandum Opinions and 

Order, Aug. 3, 1994. 

36In the 5 and 1/2 years of the 

CFTA/NAFTA-crafted bilateral dispute settlement 

process, only three such challenges have been 

mounted—all at the request of the United States. 

None of the challenges has been successful. 

36 USTR, "U.S. and Canada Establish 

Consultative Process on Softwood Lumber," press 

release 94-69, Dec. 15, 1994. 

37A motion to dismiss the challenge was filed 

with the court on Dec. 19, 1994. 

38USTR, "Softwood Lumber," press release 

94-69, Dec. 15, 1994. 

39The first meeting under the consultative 

process was held on March 2, 1995. Meetings were 

also scheduled for May, July, and September. 

40For example, see European Commission, "An 

American View of the Transatlantic 

Relationship—Ambassador Eizenstat Addresses 

Conference in Versailles," Progress Report on EU-US 

Relations, July 1994, p. 3; U.S. Department of State, 

"December 19 EU General Affairs Council: U.S.-EU 

Relations, Working Groups," message reference No. 

13957, prepared by U.S. Mission to the EU, 

Brussels, Dec. 21, 1994. 

41Dries Van Agt, EU Ambassador to the United 

States, reiterated this proposal in February 1995. 

See Foreign Broadcast Information Service, "EU 

Ambassador to U.S. Views Free Trade Issues," 

Western Europe, Feb. 9, 1995, p. 1. 

42 Council Regulation No. 404/93 on the 

Common Organization of the Market in Bananas, 

Official Journal of the European Communities (0J) 

No. L 47 (Feb. 25, 1993), pp. 1-11. 

43In 1992, these same five countries challenged 

the nationally based import regime. The GATT panel 

ruled in May 1993 that the national restrictions as 

well as the tariff preference accorded to ACP 

bananas were inconsistent with the GATT 

nondiscrimination principle and prohibition on the use 

of quantitative restraints. The EU blocked adoption 

of the panel report. 

44For more details about the panel report, see 

GATT, "Panel Report on EC Banana Import Regime 

Presented," Focus, No. 108, June 1994, p. 5. 

46European Commission, Framework Agreement 

on Bananas. 

46On January 9, 1995, the USTR initiated 

investigations of the banana policies and practices of 

Colombia and Costa Rica, which implemented the 

Framework Agreement on January 1, 1995. 

Although Nicaragua and Venezuela have signed the 

Framework Agreement, they have not yet 

implemented it. USTR, "USTR Kantor Makes 

Preliminary Decision that EU Banana Regime Harms 

U.S. Interests; Initiates Section 301 Investigation of 

Colombian and Costa Rican Banana Export 

Practices," press release 95-04, Jan. 9, 1995. 

47GATT, "Chairman Pays Tribute to the GAIT on 

the Eve of the WTO," Focus, No. 113, Dec. 1994, p. 

3. 

48On January 9, 1995 the USTR made a 

preliminary decision in the section 301 investigation 

109 
"that the regime is adversely affecting U.S. economic 

interests." The USTR claimed that the EU regime 

has cost U.S. banana marketing and distribution 

firms "hundreds of millions of dollars at a minimum." 

USTR, "USTR Kantor Makes Preliminary Decision 

that EU Banana Regime Harms U.S. Interests; 

Initiates Section 301 Investigation of Colombian and 

Costa Rican Banana Export Practices," press release 

95-04, Jan. 9, 1995. 

4959 F.R. 41593. 

50Compensation is negotiated under articles 

XXIV:6 and XXVIII of the GATT 1994 and articles V 

and XXI under the General Agreement on Trade in 

Services (GATS). 

51U.S. Department of State telegram, "EU GATT 

Negotiator Paemen on Uruguay Round Ratification 

and Implementation, Enlargement Compensation, 

China," message reference No. 13270, prepared by 

U.S. Mission to the EU, Brussels, Dec. 5, 1994. 

52Ibid. 

53U.S. Department of State telegram, "Impact of 

Enlargement on EU External Tariff: Commission 

Press Briefing," message reference No. 13698, 

prepared by U.S. Mission to the EU, Brussels, Dec. 

14, 1994. 

54Ibid. 

55For a description of the tariffs and quotas in 

effect from Jan. 1-June 30, 1995 see Council 

Regulation No. 3361/94 on Opening Tariff Quotas 

With Respect to Austria, Finland and Sweden, OJ 

No. L 356 (Dec. 31, 1994), pp. 5-12. 

56USTR, "USTR Kantor Announces Interim 

Agreement on EU Enlargement," press release 

95-03, Jan. 4, 1995. 

57The temporary settlement has been extended 

through the end of 1995. Negotiations on a final 

compensation package are ongoing. 

58USTR, press release 95-03, Jan. 4, 1995. 

59For more background on the BST dispute, see 

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

publication 2554, p. 92; and USITC, The Year in 

Trade: OTAP, 1993, USITC publication 2769, p. 87. 

60For more background, see USITC, The Year in 

Trade: OTAP, 1992, USITC publication 2640, pp. 

49-50. 

61U.S. Department of State telegram, "USEU 

Suggested Revision of the EU Chapter of the 1995 

National Trade Estimate Report," message reference 

No. 01270, prepared by U.S. Mission to the EU, 

Brussels, Jan. 31, 1995; and U.S. Department of 

State, Country Reports on Economic Policy and 

Trade Practices, 1994. 

62For background on these and other directives 

under the EU 1992 internal market program, see the 

USITC's series of reports on EU 1992, for example, 

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, April 1993. 

63However, on April 15, 1994, the United States 

and EU reached an agreement concurrent with the 

conclusion of the Uruguay Round that expanded a 

1993 agreement on government procurement in other 

sectors. For more background and a description of 

the 1994 agreement, see USITC, The Year in Trade: 

OTAP, 1993, USITC publication 2769, pp. 28-30, 

81-82. 

64For more background, see USITC, The Year 

in Trade: OTAP, 1993, USITC publication 2769, p. 

83. 

65For example, see "Broadcasting: European 

Commission Postpones Draft TV Directive to January 

11," European Report, No. 2005 (Jan. 6, 1995), 

Internal Market, p. 5. 

66U.S. Department of State, "The European 

Court of Justice Ruling on WTO Competence—Brief 

Analysis," message reference No. 12569, prepared 

by U.S. Mission to the EU, Brussels, Nov. 16, 1994. 

67For background information on the Framework 

Agreement, see USITC, The Year In Trade: OTAP, 

1993, USITC publication 2769, pp. 92-93. 

68President William Clinton and Prime Minister 

Hosokawa, press conference, The White House, Feb. 

11, 1994, LEGI-SLATE, Federal Information Systems 

Corp., No. 1041654. 

69Ibid. 

70Hiroshi Nakame, "Environment, Technology an 

Agenda for Japan-U.S. Trade Talks," Nikkei Weekly, 

Sept. 6, 1994, p. 3. 

71Letter to President Clinton transmitted by the 

Economic Strategy Institute, Feb. 1994. 

72See for example, Gary Saxonhouse, 

"Confrontation is the Wrong Way to Deal with 

Japanese Trade Dispute," Detroit Free Press, or 

letter of September 30, 1993 from Jagdish Bhagwati, 

Hugh Patrick, and Gary Saxonhouse to Prime 

Minister Hosokawa, reprinted in Inside U.S. Trade, 

Oct. 8, 1993, p. 18. 

73Raymond Ahearn, "U.S.-Japan: Again on the 

Edge," Journal of Commerce, Sept. 22, 1994, p. A10. 

74Jimmy Carter, "Bring Back the Wise Man," 

New York Times, Feb. 18, 1994, p. A27. 

75Susan MacKnight, "U.S.-Japan Economic 

Relations In 1994: A Look Back," Japan Economic 

Institute, Feb. 10, 1995, p. A3. 

76Ibid. 

77USTR Michael Kantor, press conference on 

Executive Order reinstating Super 301, Washington, 

DC, Mar. 3, 1994. LEGI-SLATE, Federal Information 

Systems Corp., No. 1050516. 

78Maya Maruko, "MITI Sees Ultimate Victory," 

Japan Times Weekly International, Oct. 24-Oct. 30, 

1994, p. 13. 

79"Comments on 'Endeavor Targets'," Kyodo, 

Foreign Broadcast Information Service, Feb. 23, 

1994, p. 2. 

80Susan MacKnight, "U.S.-Japan Economic 

Relations in 1994: A Look Back," Japan Economic 

Institute, Feb. 10, 1995, p. A6. 

81U.S. Secretary of State Warren Christopher, 

"The Responsibility of Change, United 

States-Japanese Relations," speech before the Keizai 

Doyukai/The Japan Association of Corporate 

Executives, Tokyo, Japan, Mar. 11, 1994. 

110 
82MacKnight, p. A6. 

83Nigel Holloway, "So Near Yet So Far," Far 

Eastern Economic Review, Aug. 11, 1994, p. 69. 

84"Negotiators Vow Not To Yield This Time," 

Nikkei Weekly, Aug. 8, 1994, p. 3. 

85Kazumori Ishiguro, "Too Much Pressure," Look 

Japan, Feb. 1995, p. 12. 

86The agreement, in principle, was an oral 

understanding between Ambassador Kantor and the 

MITI Minister, Ryutaro Hashimoto. 

87USTR, "Statement by Ambassador Michael 

Kantor," Oct. 1, 1994. 

88Susan MacKnight, "Washington, Tokyo Strike 

Partial Deal on Framework's Priority Issues," Japan 

Economic Institute, Oct. 7, 1994, p. 19. 

89USTR, "Statement by Ambassador Michael 

Kantor," Oct. 1, 1994. 

90A last minute agreement on June 28 averted 

U.S. sanctions on Japanese luxury cars. The 

agreement gives U.S. automakers access to Japan's 

dealership networks and calls for Japanese 

automobile manufacturers to "voluntarily" increase 

their production in North America and to increase 

their purchases of U.S.-made auto parts. The 

Japanese Government also agreed to deregulate the 

replacement parts market. 

91USTR, "Submission by the Government of the 

United States to the Government of Japan Regarding 

Deregulation and Administrative Reform in Japan," 

press release 94-60, Nov. 17, 1994. 

92Ibid. 

93Nobuyuki Oishi, "U.S. Shifts From Sector to 

Deregulation, Competition," Nikkei Weekly, Oct. 24, 

1994, p. 2. 

94On January 10, 1995, an agreement on 

financial services was announced. U.S. firms will 

now have access to Japan's $1 trillion pension 

market and its $500 billion corporate securities 

market. Ambassador Charlene Barshefsky, Deputy 

USTR, testimony before the House Committee on 

International Relations, Subcommittees on Asia and 

the Pacific and on International Economic Policy and 

Trade, Feb. 2, 1995. 

95Susan MacKnight, "Washington, Tokyo 

Announce Market Access Pact For Flat Glass," 

Japan Economic Institute, Dec. 16, 1994, pp. 10-12. 

96USTR, Ambassador Michael Kantor, press 

conference, Washington, DC, Oct. 1, 1994, 

LEGI-SLATE, Federal Information Systems, Corp., 

No. 1120017. 

97Ibid. 

98Michiyo Nakamoto and Nancy Dunne, "U.S., 

Japan Extend Deadline on Glass Talks," Financial 

Times, Nov. 2, 1994, p. 14. 

99USTR, "Agreement Finalized With Japan on 

Flat Glass," press release 94-67, Dec. 12, 1994. 

100USITC, Flat Glass and Certain Flat Glass 

Products, USITC publication 2694, Nov. 1993, p. 12. 

101 USTR, "Statement by Ambassador Michael 

Kantor," Oct. 1, 1994. 

102According to the JFTC, "in the Japanese 

market for flat glass, highly concentrated with three 

manufacturers practically dominating the market, all 

three of them have adopted a parallel marketing 

setup mostly composed of de facto exclusive agents. 

This would seem to be one of the factors that 

discourages suppliers other than these three 

manufacturers to access the market. At the same 

time, it would seem to have the aspect of facilitating 

oligopolistic concerted conduct among the three 

manufacturers." The JFTC has also reported that 

many glass distributors are unwilling to carry either 

foreign glass or the glass of other Japanese 

manufacturers. USTR, "Statement by Ambassador 

Michael Kantor," Oct. 1, 1994. 

103MacKnight, "Washington, Tokyo Announce 

Market," p. 11. 

104 Ibid. 

105USTR, press release 94-67, Dec. 12, 1994. 

106 Ibid. 

107Ibid. 

108David E. Sanger, "U.S. Glass Makers In 

Tokyo Accord," New York Times, Dec. 13, 1994, 

p. 1 

109Includes both specialized life and nonlife 

coverage such as personal accident, travel, medical, 

hospital, and nursing care insurance. The Third 

Sector, an area where foreign firms are dominant, 

accounts for approximately 53 percent of the 

business available to foreign insurers in Japan, but 

only 3 percent for domestic insurers. According to 

industry sources, the Japanese have shown little 

interest in this area. Gavin Souter, "U.S. Insurance 

Gains Stronger Foothold in Japan," Business 

Insurance, Oct. 3, 1994, p. 3. 

110 Deputy USTR Barshefsky, "Status of 

U.S.-Japan Trade Relations," testimony before the 

House Committee on Government Operations, 

Subcommittee on Commerce, Consumer, and 

Monetary Affairs, Mar. 23, 1994. 

111Kohei Murayama, "U.S., Japan Hope 

Insurance Talks Are Bellwether for Framework," 

Journal of Commerce, June 2, 1994, p. 19. 

112 Deputy USTR Barshefsky, testimony, Mar. 23, 

1994. 

113USTR, "Statement by Ambassador Michael 

Kantor," Oct. 1, 1994. 

114 Ibid. 

115USTR, Ambassador Michael Kantor, press 

conference, Washington, DC, Oct. 1, 1994, 

LEGI-SLATE, Federal Information Systems, Corp., 

No. 1120017. 

116USTR, "Measures by the Government of the 

United States and the Government of Japan 

Regarding Insurance," Oct. 11, 1994. 

117 Deputy USTR Barshefsky, remarks at Japan 

Information Access Project Conference, Washington, 

DC, Oct. 14, 1994, LEGI-SLATE, Federal Information 

Systems Corp., No. 1121766. 

118 Ibid. 

119USTR, "Statement by Ambassador Michael 

Kantor," Oct. 1, 1994. 

111 
120 Ibid. 

121 Ibid. 

122 Ibid. 

123For further background see, Diane Manifold, 

"U.S.-Japan relations after the summit," International 

Economic Review, Washington, DC: USITC, Apr. 

1994, pp. 16-20. 

124 "Kantor Lays Out Reasons For U.S.-Japan 

Summit Failure," Inside U.S. Trade, Feb. 18, 1994, p. 

8. 

125USTR, "Statement by Ambassador Kantor on 

Title VII," press release 94-37, June 30, 1994. 

126USTR, "U.S. and Japan to Resume Flat 

Glass Negotiations," press release 94-36, June 15, 

1994. 

127USTR, "Statement by Ambassador Kantor on 

Title VII," press release 94-37, June 30, 1994. 

128USTR, "Ambassador Kantor Identifies Japan 

Under Title VII for Discrimination in Government 

Procurement of Telecommunications and Medical 

Technology Goods and Services," press release 

94-42, July 31, 1994. 

128Douglas Harbrecht, "Why it's time for a 

showdown with Japan," Business Week, Oct. 3, 

1994, p. 53. 

130U.S. negotiators acceded to a Japanese 

request that NTT be considered separately because 

the Government of Japan considers NTT to be a 

private company and, as such, outside the scope of 

a public-sector procurement agreement. USTR, 

"Statement by Ambassador Michael Kantor," Oct. 1, 

1994. 

131Deputy USTR Barshefsky, remarks, Oct. 14, 

1994. 

132 Ibid. 

133For information on the agreement and 

progress under it, see USITC, Operation of the Trade 

Agreements Program, 41st Report, 1989, USITC 

publication 2317, 1990, pp. 107-108. 

134Deputy USTR Barshefsky, remarks, Oct. 14, 

1994. 

135Yohei Kono, Minister of Foreign Affairs, 

Tokyo, letter to USTR Michael Kantor, Nov. 1, 1994. 

136Deputy USTR Barshefsky, remarks, Oct. 14, 

1994. 

137USTR Michael Kantor, letter to Ambassador 

Takakazu Kuriyama, Nov. 1, 1994. 

138USTR, "Ambassador Kantor Identifies Japan 

Under Title VII," press release 94-42, July 31, 1994. 

138The two initiatives are entitled "Measures on 

Japanese Public Sector Procurement of 

Telecommunications Products and Services" and 

"Operational Guidelines with Respect to Measures on 

Japanese Public Sector Procurement of 

Telecommunications Products and Services." 

Embassy of Japan, Washington, DC, Ambassador 

Takakazu Kuriyama, letter to Ambassador Michael 

Kantor, Nov. 1, 1994. 

140Embassy of Japan, Ambassador Takakazu 

Kuriyama, letter to Ambassador Michael Kantor, Nov. 

1, 1994, Washington, DC, appendix C. 

141Special Drawing rights are a monetary unit of 

account calculated by the International Monetary 

Fund (IMF) based upon a basket of currencies. The 

value of the SDR, in terms of U.S. dollars, is 

determined as the sum of the dollar values based on 

market exchange rates of specified quantities of the 

Deutsche mark, French franc, Japanese yen, British 

pound, and the U.S. dollar. In 1994, the average 

value of the SDR was US$1.4321. 

142 "Japan Tables Detailed Proposal on Objective 

Criteria in Framework," Inside U.S. Trade, July 29, 

1994, p. 27. 

143USTR, press release 94-42. 

144USTR, 1994 National Trade Estimate, Mar. 

31, 1994. 

145USTR, press release 94-42. 

146Embassy of Japan, Washington, DC, 

Ambassador Takakazu Kuriyama, letter to U.S. 

Secretary of Commerce Ronald Brown, Nov. 1, 1994. 

147Deputy USTR Barshefsky, remarks, Oct. 14, 

1994. 

148USTR, press release 94-42. 

148The two initiatives are entitled "Measures on 

Japanese Public Sector Procurement of Medical 

Technology Products" and "Operational Guidelines 

with Respect to Measures Related to Japanese 

Public Sector Procurement of Medical Technology 

Products and Services." Embassy of Japan, 

Washington, DC, Ambassador Takakazu Kuriyama, 

letter to U.S. Secretary of Commerce Ronald Brown, 

Nov. 1, 1994. 

158Embassy of Japan, Washington, DC, 

Ambassador Takakazu Kuriyama, letter to U.S. 

Secretary of Commerce Ronald Brown, Nov. 1, 1994, 

appendix C Data Collection (Medical Technology). 

151For a complete discussion of the NAFTA, see 

chapter 2 of this report. 

152The bottom of this band was fixed at 3.0512 

pesos per dollar, and the top was subject to a 

0.0004 pesos per day devaluation. For a discussion 

of Mexico's earlier exchange rate system, see 

Operation of the Trade Agreements Program, 1990, 

USITC publication 2403, p. 132, and The Year in 

Trade: OTAP, 1991, USITC publication 2554, p. 115. 

153Sidney Weintraub, "Business Alert: Mexico," 

CSIS Watch, Jan. 6, 1995. This view was also 

advanced by John H. Makin at a January 30, 1995 

conference of the American Enterprise Institute (AEI) 

in Washington DC, "Did Nafta kill the Peso?" Mr. 

Makin is resident scholar and director of fiscal policy 

studies at the AEI. 

154Lawrence H. Summers, Under Secretary of 

the Treasury, testimony before the Senate Banking 

Committee, Mar. 10, 1995, Treasury News, Mar. 10, 

1995, p. 5. 

155Ernesto Zedillo took office on December 1, 

1994. 

156U.S. Department of State telegram, "Peso 

Devaluation urged by MIT's Rudy Dornbusch," 

112 
message reference No. 12356, prepared by U.S. 

Embassy, Mexico City, June 20, 1994. Dornbusch 

told a group of economists at the Brookings Institute 

about his concerns over the Mexican peso even 

earlier (February 1994). 

157As pointed out in the "Testimony of Treasury 

Secretary Robert E. Rubin" before the Senate 

Banking Committee, Mar. 10, 1995, Treasury News, 

Mar. 10, 1995. 

158Summers, testimony, Senate Banking 

Committee, Treasury News, Mar. 10, 1995. 

159Sidney Weintraub, "Business Alert: Mexico," 

CSIS Watch, Jan. 6, 1995. 

160On December 14, 1994, former Finance 

Secretary, Jaime Serra Puche, assured investors that 

Mexico would not devalue its currency. On 

December 21, he assured investors again that the 

widening of the peso/dollar exchange band the 

previous day by 15.2 percent would be the last 

action affecting currency relationships. Nonetheless, 

the following day he announced the removal of all 

exchange-rate controls. 

161To be discussed below. 

162Robert D. Hormats, Vice Chairman of 

Goldman Sachs International, testimony before the 

House Banking Committee, Feb. 10, 1995. 

163C. Fred Bergsten, director, Institute for 

International Economics, "Lessons of the Peso 

Crisis," testimony before the House Banking 

Committee, Feb. 10, 1995. 

164Dornbusch, MIT, "The Mexican Crisis and 

U.S. Support," testimony before the House Banking 

Committee, Feb. 10, 1995. 

165For details, see Glennon J. Harrison, "The 

Mexican Economic Crisis: U.S. Jobs, Illegal 

Immigrants, and Systemic Risk," Congressional 

Research Service (CRS) Report for Congress, Feb. 

1, 1995. 

166BIS, based in Basel, Switzerland, usually 

serves as a clearinghouse for international 

transactions—a central bank to central banks. 

167"Report on United States Support for Mexico," 

Message from the President, The White House, Mar. 

9, 1995, in Congressional Record, S 3743. 

168U.S. Department of the Treasury, The 

Multilateral Program to Restore Financial Stability to 

Mexico, Jan. 31, 1995. 

169The four agreements were—(1) a framework 

or "umbrella" agreement; (2) a medium-term 

exchange stabilization agreement; (3) a debt 

guarantee agreement; and (4) an oil proceeds facility 

agreement. 

170To be discussed later in this section. 

171"Treasury Statement on Mexico," Treasury 

News, Mar. 10, 1995. 

172Equal to SDR 12,070.2 million. (Source: IMF 

press release, as reported in the IMF Survey, Feb. 6, 

1995, p. 43.) The original IMF commitment 

immediately after the crisis amounted to only $7.8 

billion. 

173The citation refers to Mexico's emergency 

economic program that followed the peso crisis, 

discussed later in this section. 

174 IMF, "IMF Management Welcomes Mexico's 

Comprehensive Economic Program," News Brief, No. 

95/2, Jan. 3, 1995, and "IMF to lend up to $17.8 

billion to Mexico," IMF Survey, Feb. 6, 1995, p. 33. 

175At a January 30, 1995 Washington DC 

conference of the American Enterprise Institute (AEI) 

"Did NAFTA kill the Peso?" Professor Jagdish 

Bhagwati of Columbia University argued that NAFTA 

responsibility in Mexico's plight, if any, had been 

mostly indirect. He asserted that NAFTA may share 

some of the blame by generating overconfidence. 

Others agreed that NAFTA impact was mostly 

"psychological." 

176See section on "Implications of the peso 

crisis" below. 

177See USITC, OTAP, 1990, USITC publication 

2403, p. 126. 

178Since the end of 1987, a series of annual 

accords ("pacto") between the government, business, 

and labor have constituted the framework of Mexico's 

economic policies. Such an accord, the "Pact for 

Stability, Competitiveness, and Employment," signed 

in October 1993, was in effect through the end of the 

first NAFTA year. 

179U.S. Department of State telegram, "Mexican 

Economic Growth in 1994," message reference No. 

03785, prepared by U.S. Embassy, Mexico City, Feb. 

17, 1995. 

180 Ibid. 

181U.S. Department of State telegram, "Mexican 

Inflation for 1994," message reference No. 00745, 

prepared by U.S. Embassy, Mexico City, Jan. 25, 

1995, citing Bank of Mexico data. 

182SECOFI data, as reported in "Mexico: 1994 

Deficit Equivalent to 0.3 Percent of GDP," 1995 

Knight-Ridder/Tribune Business News, 

NewsEDGE/LAN, Feb. 16, 1995. 

183Data for years 1987-93 are from IMF, 

International Financial Statistics (IFS), April 1995. 

The figure for 1994 was cited by Guillermo Ortiz 

Martinez, Mexico's new Secretary of Finance, in his 

article "How We Are Handling the Peso Crisis," Wall 

Street Journal, Jan. 5, 1995, p. 3. 

184Guillermo Ortiz Martinez, Secretary of 

Finance, Wall Street Journal "How We Are Handling 

the Peso Crisis," Jan. 5, 1995, p. 3. 

185Ibid. 

186Banco de Mexico data, as reported in U.S. 

Department of State telegram, "Mexico's International 

Reserves at USD 8.9 billion," message reference No. 

04651, prepared by U.S. Embassy, Mexico City, Mar. 

2, 1995. 

187This plan is called "The Agreement on Unity 

to Overcome the Economic Emergency." 

188Statement issued by the Mexican Investment 

Board on Jan. 3, 1995. 

189Press release, Secretaria de Hacienda Y 

Credito Publico, Mar. 9, 1995. 

190Herminio Blanco (Mexico's minister of 

Commerce and Industrial Development), "Getting 

113 
Mexico Back on Track," Washington Post, Mar. 20, 

1995, P. 7. 

191Press release, Secretaria de Hacienda Y 

Credito Publico, Mar. 9, 1995 and statement of 

Finance Secretary Guillermo Ortiz on Mar. 10, 1995, 

as reported by Tribune Business News, 

NewsEDGE/LAN, Mar. 10, 1995. 

192Official statistics of the Banco de Mexico. 

193Ibid. 

194"Mexico: Economic and Financial Report, 

Summer 1994," U.S. Embassy, Mexico City. 

195Jeffrey E. Garten, Under Secretary of 

Commerce for International Trade, "The North 

American Free Trade Area," remarks to The 

Americas Society, New York City, NY, Mar. 10, 1995, 

p. 13. 

196For more details on Mexico's trade with third 

countries, see Ruben Mata, "NAFTA Update: Steady 

U.S. Bilateral Trade Growth with Mexico Faces Mixed 

Prospects in 1995," Industry, Trade, and Technology 

Review, Washington, DC: USITC, Mar. 1995, pp. 1-4. 

197However, Mexican officials imposed new 

inspection and labeling requirements for these 

imports, which the U.S. packing industry saw as new 

barriers to trade. 

198U.S. Census data. 

199In contrast, U.S. imports from East Asia are 

made largely from components produced in Asia; for 

example, in 1993, the share of U.S. imports from 

Korea and China containing U.S.-made components 

was only 10 percent and 1 percent, respectively. 

See Mata, "NAFTA Update," p. 1. 

208U.S. Census data. 

281At this writing, no official monthly investment 

data are available beyond August 1994. 

202His address of February 1, 1995. 

203Michel Camdessus, IMF Managing Director, 

"IMF Takes Exceptional Action to Support Mexican 

Program," press briefing, Feb. 2, 1995, reproduced in 

IMF Survey, Feb. 20, 1995, p. 53. 

204 The White House, Statement by the 

President, Jan. 11, 1995. 

205 Camdessus, "IMF Takes Exceptional Action," 

press briefing, Feb. 2, 1995, IMF Survey, Feb. 20, 

1995, p. 53. 

206 Christopher Whalen, of Legal Research 

International, "South of the Bailout," Washington Post, 

Feb. 5, 1995, p. C2. 

287Dornbush, testimony, Feb. 10, 1995. 

208 Michael Tangeman, "Belly Up?," El Financiero, 

International Edition, Mar. 6-12, 1995, p. 8. 

209According to Mr. Hormats' testimony to the 

House Banking Committee on Mar. 9, 1995, Mexico's 

foreign debt stood at $162 billion, i.e., over 40 

percent of Mexico's GDP at the end of 1994. 

218Interest and mortgage rates reportedly are 

already in the 50- to 100-percent range. 

211 Herminio Blanco, "Getting Mexico Back on 

Track," Washington Post, Mar. 20, 1995, p. 7. 

212Dornbush, testimony, Feb. 10, 1995. 

213U.S. Department of State telegram, "Mexico's 

1995 Trade Balance; an Educated Guess Says Six 

Billion Deficit," message reference No. 05398, 

prepared by U.S. Embassy, Mexico City, Mar. 10, 

1995. 

214Although U.S. exports are not directly 

affected, U.S. retailers operating in Mexico and 

drawing resources from a wide array of Asian 

suppliers have criticized this announcement. 

215"Mexico Announces it Will Hike Tariffs on 

Non-NAFTA Consumer Goods," Inside NAFTA, Mar. 

8, 1995, p. 1. 

216 Ibid. 

217U.S. Department of State telegram, "Negative 

Effects of Mexican Peso Devaluation and Economic 

Situation on Best Export Prospects to Mexico: Sharp 

Declines in Most Sectors," message reference No. 

004135, prepared by U.S. Embassy, Mexico City, 

Feb. 23, 1995. 

218 Ibid. 

219See petition to the USITC on behalf of the 

Florida Tomato Exchange, Orlando, FI, filed on March 

29, 1995. This petition triggered investigation No. 

TA-201-64 under section 202 of the Trade Act of 

1974. 

220 For an English translation of this paper, see 

"Decision of the CPC Central Committee on Issues 

Concerning the Establishment of a Socialist Market 

Economic Structure," China Economic News, 

supplement No. 12, Nov. 29, 1993. China's 

leaders adopted the term "socialist market economy" 

in October 1992 but did not clearly define this 

concept prior to issuing the decision paper. 

221 For more background, see James Tsao and 

Janet Whisler, China, USITC Office of Economics 

working paper, June 1995. 

222U.S. Department of State telegram, "China's 

Press Hails Working Party Support for GATT 

Membership," message reference No. 008790, 

prepared by U.S. Embassy, Beijing, Mar. 1994. 

223U.S. Department of State telegram, "Vice 

Premier Criticizes Obstruction of China's GATT 

Effort," message reference No. 008978, prepared by 

U.S. Embassy, Beijing, Mar. 1994. 

224Unless otherwise indicated, the information on 

protocol issues presented in this section was 

supplied and/or verified by a USTR analyst 

participating in the negotiations on China's 

GATT/WTO accession. 

225For a description of the provisions of the 

1992 market access agreement, see USITC, The 

Year in Trade: OTAP, 1992, USITC publication 2640, 

pp. 68-69. 

226 Deputy USTR Barshefsky, testimony before 

the House Ways and Means Committee, 

Subcommittee on Trade, July 28, 1994, LEGI-SLATE, 

Federal Information Systems Corp., No. 1100117. 

227Ibid. 

228USTR, 1995 National Trade Estimate, Mar. 

1995, p. 52. 

229Ibid. 

114 
230See, for example, USITC, The Year in Trade: 

OTAP, 1993, USITC publication 2769, p. 106. 

231 U.S. Department of State telegram, "China's 

WTO Accession: Background Information," message 

reference No. 019254, Washington, DC, Jan. 1995. 

232 Deputy USTR Barshefsky, testimony before 

the House Committee on Foreign Economic 

Relations, Subcommittees on Asia and the Pacific 

and on International Economic Policy and Trade, 

Feb. 2, 1995. 

233 U.S. Department of State telegram, "China's 

WTO Accession: Background Information," message 

reference No. 019254, Washington, DC, Jan. 1995. 

234 State Council General Affairs Office Notice 

No. 63, Sept. 23, 1993, as cited in USTR, 1994 

Trade Policy, Mar. 1994, p. 58. 

235USTR official, telephone conversation with 

USITC staff, June 5, 1995. 

238In terms of the value of two-way merchandise 

trade, China was the world's sixth-largest trader in 

1994 if the EU is considered as a single entity. 

Economist Intelligence Unit, Country Report: China, 

Mongolia, 1st quarter 1995, p. 27. 

237 The phase-in period for China to comply with 

WTO rules under the TRIPS agreement was virtually 

the only issue in the area of IPR addressed by the 

Working Party. Other major IPR issues between 

China and its trading partners were left for the United 

States to resolve in bilateral negotiations. See 

"Enforcement of Intellectual Property Rights" in this 

section. 

238 Dorothy Dwoskin, Assistant USTR, remarks 

to the Washington International Trade Association on 

China's accession to GATT, Washington, DC, Nov. 3, 

1994, LEGI-SLATE, Federal Information Systems 

Corp., No. 1130247. 

239USTR, 1995 Trade Policy, Mar. 1995, p. 61. 

240U.S. Department of State telegram, "China's 

WTO Accession: Background Information," message 

reference No. 019254, Washington, DC, Jan. 1995. 

241Informal talks on the modalities of formally 

bringing China into the WTO started in May 1995. 

Formal negotiations are scheduled to resume in late 

July. 

242For more detailed information, see USITC, 

The Year in Trade: OTAP, 1993, USITC publication 

2769, p. 106. 

243U.S. Department of State telegram, "China's 

WTO Accession: Background Information," message 

reference No. 019254, Washington, DC, Jan. 1995. 

244For information on the commitments China 

made in the 1992 bilateral IPR agreement and the 

steps it took to meet them, see USITC, The Year in 

Trade: OTAP, 1992, USITC publication 2640, pp. 

67-68, and USITC, The Year in Trade: OTAP, 1993, 

USITC publication 2769, pp. 104-05. 

245USTR, "USTR Announces Special 301 

Decision," press release 94-38, June 30, 1994. The 

Special 301 provisions were added to the section 

301 authority of the 1974 Trade Act by the Omnibus 

Trade and Competitiveness Act of 1988. 

248USTR, "Fact Sheet: Special 301 

Investigation," Dec. 31, 1994, p. 1. The source of 

the industry estimates on the piracy of copyrighted 

works is the Washington-based International 

Intellectual Property Alliance (IIPA), consisting of 

eight major U.S. commercial associations. IIPA 

estimates that the annual trade loss from such piracy 

in China increased from $415 million in 1991. 

247USTR, "Fact Sheet: Special 301 

Investigation," Dec. 31, 1994, p. 2. 

248USTR, "United States and China Reach 

Accord on Protection of Intellectual Property Rights, 

Market Access," press release 95-12, Feb. 26, 1995, 

p. 4. 

249USTR, "China IPR Fact Sheet: Special 301 

Investigation," Feb. 4, 1995, p. 3. 

250USTR, "Fact Sheet: Special 301 

Investigation," Dec. 31, 1994, p. 2. 

25160 F.R. 1829. 

252Ibid. 

25360 F.R. 7230. 

254USTR, "United States and China Reach 

Accord on Protection of Intellectual Property Rights, 

Market Access," press release 95-12, Feb. 26, 1995. 

255President Clinton, White House press 

conference, Washington, DC, May 26, 1994, 

LEGI-SLATE, Federal Information Systems Corp., No. 

1073290. 

258Executive Order 12850, issued May 28, 1993. 

For information on the conditions for MFN renewal 

set forth in this Executive Order, see USITC, The 

Year in Trade: OTAP, 1993, USITC publication 2769, 

pp. 101-02. 

257President Clinton, White House press 

conference, Washington, DC, May 26, 1994, 

LEGI-SLATE, Federal Information Systems Corp., No. 

1073290. 

258Ibid. 

259U.S. Department of State, Dispatch, vol. 5, 

No. 22 (May 30, 1994), pp. 346-47. 

260President Clinton, White House Press 

conference, Washington, DC, May 26, 1994, 

LEGI-SLATE, Federal Information Systems Corp., No. 

1073290. 

261 Ibid. 

28259 F.R. 31103. 

283U.S. President, "Report to Congress 

Concerning Extension of Waiver Authority for the 

People's Republic of China," Washington, DC, June 

2, 1994, pp. 4-5. 

264 Ibid., p. 4. 

285Library of Congress, CRS, 

Most-Favored-Nation Status of the People's Republic 

of China, CRS Issue Brief IB92094, Dec. 7, 1994, pp. 

1, 4. 

288For more information on these issues, see 

USITC, The Year in Trade: OTAP, 1993, USITC 

publication 2769, pp. 102-03. 

287U.S. Department of State, Dispatch, vol. 5, 

No. 42 (Oct. 17, 1994), p. 701. 

115 
268 For more detailed information, see USITC, 

The Year in Trade: OTAP, 1993, USITC publication 

2769, pp. 103-04. 

269 Lynne Davis, Undersecretary of State for 

International Security Affairs, State Department 

special briefing on sanctions against China, 

Washington, DC, Aug. 25, 1993, LEGI-SLATE, 

Federal Information Systems Corp., No. 981592. 

270 U.S. Department of Commerce, Bureau of 

Export Administration, press release, Jan. 6, 1994. 

271 However, although China admitted to 

providing Pakistan with "a small number of 

short-range tactical missiles," it continued to deny 

that it had violated MTCR principles. Vice Premier 

and Foreign Minister Qian Qichen, press conference, 

Washington, DC, Oct. 4, 1994, LEGI-SLATE, Federal 

Information Systems Corp., No. 11210417. 

272 59 F.R. 55522. 

273 U.S. Department of State analyst, telephone 

conversation with USITC staff, Apr. 27, 1995. 

274 For a brief description of this agreement, see 

USITC, The Year in Trade: OTAP, 1993, USITC 

publication 2769, p. 104. 

275 For more detailed information on U.S. satellite 

exports to China under the original agreement, ibid., 

pp. 103-04. 

276 The new agreement was initialed by the 

United States and China on January 30, 1995. 

USTR, "U.S. and China Conclude New Commercial 

Space Launch Agreement," press release 95-07, Jan. 

30, 1995. The two countries signed the agreement 

on March 13, 1995. 

277 For a description of the provisions of the 

market access agreement, see USTR, The Year in 

Trade: OTAP, 1992, USITC publication 2640, pp. 

68-69. 

278 USTR, 1995 Trade Policy, p. 60. 

279 USTR, 1995 National Trade Estimate, Mar. 

1995, p. 51. 

280U.S. Department of State telegram, "China's 

GATT/WTO Accession: Press Coverage Picks Up," 

message reference No. 056994, prepared by U.S. 

Embassy, Beijing, Dec. 1994. 

281 U.S. Department of State telegram, "China 

Goes Public on Break Off of IPR Talks," message 

reference No. 058215, prepared by U.S. Embassy, 

Beijing, Dec. 1994. 

282 Taiwan applied for GATT membership in 

1990. Taiwan is seeking membership as the 

"Separate Customs Territory of Taiwan, Penghu, 

Kinmen, and Matsu" under provisions of article 

XXXIII. By electing this application method, Taiwan 

sought to deflect political controversy over the 

question of sovereignty as China is also applying for 

GATT membership. The Republic of China was a 

founding member of GAIT in 1946, but left the 

organization in 1950 after the People's Republic of 

China was established. Taiwan held GATT observer 

status from 1965-71. Taiwan, Penghu, Kinmen, and 

Matsu are the four main islands under Taiwan's 

jurisdiction. After accession, Taiwan will formally be 

referred to using the shorthand moniker "Chinese 

Taipei." For background on the effort of Taiwan to 

join the GATT, see USITC, The Year in Trade: 

OTAP, 1992, USITC publication 2640, pp. 71-72; and 

USITC, The Year in Trade: OTAP, 1993, USITC 

publication 2769, pp. 107-108. 

283 U.S. Department of State telegram, "Press 

Guidance for Taiwan GATT Bilaterals," message 

reference No. 10013, prepared by the U.S. Mission 

to the United Nations, Geneva, Nov. 21, 1994, and 

U.S. Department of State telegram, "Taiwan 

Liberalizes for GATT Accession," message reference 

No. 7382, prepared by American Institute in Taiwan 

(AIT), Taipei, Nov. 10, 1994. 

284 USTR, "U.S. Tables GATT Accession Goods 

Market Access Request of Taiwan," press release 

93-69, Nov. 24, 1993. 

285 U.S. Department of State telegram, "Press 

Guidance for Taiwan GATT Bilaterals," message 

reference No. 10013, prepared by the U.S. Mission 

to the United Nations, Geneva, Nov. 21, 1994. See 

also, U.S. Department of State telegram, 'Taiwan and 

the GATT: Information for Use in U.S.-Taiwan 

Bilateral," message reference No. 6011, prepared by 

AIT, Taipei, Sept. 12, 1994. 

286 For a discussion of the WTO, see chapter 1. 

287 U.S. Department of State telegram, "Press 

Guidance for Taiwan GATT Bilaterals," message 

reference No. 10013, prepared by the U.S. Mission 

to the United Nations, Geneva, Nov. 21, 1994. 

288 For details on China's accession to the 

GATT/WTO, see the China section in this chapter. 

289 'Taiwan Gets Cautious Approval to Join WTO 

Sometime in 1995," International Trade Reporter, Jan. 

4, 1995, p. 20. 

290U.S. Department of State telegram, "Taiwan 

Liberalizes for GATT Accession," message reference 

No. 7382, prepared by AIT, Taipei, Nov. 10, 1994. 

291 U.S. Department of State telegram, 'Taiwan 

Will Liberalize Imports of Apples, Peaches, and 

Grapes Within 6 years," message reference No. 

2992, prepared by AIT, Taipei, May 10, 1004. 

292 U.S. Department of State telegram, 

"Agricultural Issues Discussed in Taiwan's GATT 

Accession Talks With Canada," message reference 

No. 6158, prepared by AIT, Taipei, Sep. 16, 1994. 

293 For background on bilateral IPR negotiations 

in 1993, see USITC, The Year in Trade: OTAP, 45th 

Report, 1993, USITC publication 2769, pp. 108-110; 

and USITC, The Year in Trade: OTAP, 1992, USITC 

publication 2640, pp. 70-71. 

294 U.S. Department of State telegram, "Revision 

of the 1994 National Trade Estimate Report - AIT 

Taipei," message reference No.6148, Washington, 

DC, Jan. 10, 1995. 

295 U.S. Department of State telegram, 

"IPR-Related Complaints to AIT Drop in 1994," 

message reference No. 1216, prepared by the AIT, 

Taipei, Mar. 2, 1995. 

296 U.S. Department of State telegram, "Revision 

of the National Trade Estimate Report," message 

reference No. 501, prepared by the AIT, Taipei, Jan. 

24, 1995. 

297 U.S. Department of State telegram, "Special 

301 Announcement Press Release," message 

reference No. 115514, Washington, DC, May 3, 1994. 

116 
298U.S. Department of State telegram, "Special 

301: Industry Submissions," message reference No. 

72109, Washington, DC, Mar. 19, 1994. 

299"Sanctions Announced Against Taiwan for 

Trade in Endangered Species," U.S. Department of 

State Dispatch, Apr. 18, 1994, p. 222. 

300"Letter to Congressional Leaders on 

Rhinoceros and Tiger Trade by China and Taiwan," 

Weekly Compilation of Presidential Documents, Apr. 

11, 1994, pp. 781-783. 

301 Import prohibitions are detailed in 

"Memorandum of August 2, 1994: Imposition of 

Prohibitions Pursuant to Section 8(a)(4) of the 

Fishermen's Protective Act of 1967, as Amended," 59 

F.R. 40463. The ban went into effect August 19, 

1994. 

302See 59 F.R. 22045. According to the U.S. 

Fish and Wildlife Service, sanctions will be applied to 

"wildlife specimens and parts and products" of 

Taiwan as defined pursuant to definitions of "fish or 

wildlife" set forth in the Lacey Act, 16 U.S.C. 3371. 

The Lacey Act defines "fish or wildlife" as "any wild 

animal, whether alive or dead, including without 

limitation any wild mammal, bird, reptile, amphibian, 

fish, mollusk, crustacean, arthropod, coelenterate, or 

other invertebrate, whether or not bred, hatched, or 

born in captivity, and includes any part, product, egg, 

or offspring thereof." 

303U.S. Department of State telegram, "Taiwan 

Reaction to Trade Sanctions under the Pelly 

Amendment—August 11, 1994," message reference 

No. 5253, prepared by the AIT, Taipei, Aug. 11, 

1994. 

304 U.S. Department of State telegram, "Taiwan 

Reaction to Trade Sanctions under the Pelly 

Amendment," message reference No. 2673, prepared 

by the AIT, Taipei, Apr. 26, 1994. 

305"Letter on Rhinoceros and Tiger Trade," pp. 

781-783. 

306"Message to the Congress on Rhinoceros 

and Tiger Trade by China and Taiwan," Weekly 

Compilation of Presidential Documents, Nov. 8, 1993, 

pp. 2300-2301. 

307 "Sanctions Announced Against Taiwan for 

Trade in Endangered Species," p. 222. 

308"Letter on Rhinoceros and Tiger Trade," pp. 

781-783. 

30922 U.S.C. 1978(a)(2). 

310 For a summary of the Pelly Amendment 

certification of China and Taiwan, see 59 F.R. 8998. 

311"Message on Rhinoceros and Tiger Trade," 

pp. 2300-2301. 

312Ibid. 

313Ibid. 

314"Letter on Rhinoceros and Tiger Trade," pp. 

781-783. On June 30, 1995, President Clinton 

announced that he was lifting the trade sanctions 

against Taiwan because Taiwan had taken 

"substantial steps to halt commercial trade in 

rhinoceros and tiger parts and products." The 

Department of the Interior will monitor Taiwan's 

enforcement of the recently-amended wildlife 

conservation law and report back to the President 

within 1 year. U.S. Department of State telegram, 

"President Lifts Pelly Sanctions Against Taiwan," 

message reference No. 158753, prepared by the 

U.S. Department of State, Washington, DC, July 1, 

1995. 

315"Letter on Rhinoceros and Tiger Trade," pp. 

781-783. 

316"Dialogue for Economic Cooperation: Report 

to the U.S.-Korea Economic Consultation," June 22, 

1994. 

317Ibid. 

318Ibid. 

319CRS, "South Korea's Economy and Trade," 

CRS Report to Congress No. 94-624-E, July 15, 

1994, p. 14. 

329Korea Development Institute, "Summary of 

the Five-Year Plan for the New Economy: 

1993-1997," Republic of Korea: Economic Bulletin, 

July 1993, pp. 3-20. 

321Korea Development Institute, "Korea's New 

Initiatives to Attract Foreign Direct Investment," 

Republic of Korea: Economic Bulletin, Feb. 1994, 

pp. 2-9. 

322Korea has participated in a variety of OECD 

bodies since 1989, becoming a full member in five, 

and an observer in eight others. U.S. Department of 

State telegram, "Government of Korea Announces 

Progress on OECD Membership," message reference 

No. 6034, prepared by U.S. Embassy, Seoul, July 

18, 1994. 

323The OECD codes of liberalization have 

provided investors with common investment 

guidelines since 1961 as well as a framework for 

discussion of problems and further liberalization. For 

a discussion of recent activities related to the OECD 

codes, see chapter 3 and USITC, The Year in Trade: 

OTAP, 1993, USITC publication 2769, pp. 74-6. 

324See, for example, USITC, The Year in Trade: 

OTAP, 1993, USITC publication 2769, p. 110. 

325Korea Development Institute, "Improvements 

in Korea's Environment for Foreign Direct 

Investment," Republic of Korea: Economic Bulletin, 

Nov. 1994, pp. 9-10. 

326USTR, "USTR Announces Three Decisions: 

Title VII, Japan Supercomputer Review, Special 301," 

Apr. 30, 1994, p. 2. 

327U.S. Department of State telegram, "Revision 

of the 1994 National Trade Estimate Report—Seoul," 

message reference No. 13609, Washington, DC, Jan. 

19, 1995. 

328"Dialogue for Economic Cooperation: Report 

to the U.S.-Korea Economic Consultation," June 22, 

1994, p. 10. 

329U.S. Department of State telegram, 

"Investment Climate in Korea," message reference 

No. 5704, prepared by U.S. Embassy, Seoul, July 6, 

1994. 

330U.S. Department of State telegram, "Ministry 

of Finance Press Announcement on Changes to 

Korea's Investment Regime," message reference No. 

117 
1769, prepared by U.S. Embassy, Seoul, Mar. 5, 

1994. 

331For a detailed discussion of Korea's 

investment climate and recent efforts by the 

Government of Korea to liberalize investment rules, 

see U.S. Department of State telegram, "Investment 

Climate in Korea," message reference No. 5704, 

prepared by U.S. Embassy, Seoul, July 6, 1994. 

332"Dialogue for Economic Cooperation: Report 

to the U.S.-Korea Economic Consultation," June 22, 

1994, p. 5. 

333Korea Development Institute, "Korea's New 

Initiatives to Attract Foreign Direct Investment," 

Republic of Korea: Economic Bulletin, Feb. 1994, 

pp. 2-3. 

334U.S. Department of State telegram, 

"Investment Climate in Korea," message reference 

No. 5704, prepared by U.S. Embassy, Seoul, July 6, 

1994. 

335Ibid. 

336"Dialogue for Economic Cooperation: Report 

to the U.S.-Korea Economic Consultation," June 22, 

1994, p. 4. Korea plans to join the OECD in 1996. 

337U.S. Department of State telegram, "Revision 

of the 1994 National Trade Estimate Report—Seoul," 

message reference No. 13609, Washington, DC, Jan. 

19, 1995. 

338Korea Development Insitute, "The Policy 

Direction for Korea's Liberalization of Foreign 

Exchange and Capital Transactions," Republic of 

Korea: Economic Bulletin, Feb. 1995, pp. 20-27. 

339Korea Development Institute, "Improvements 

in Korea's Environment for Foreign Direct 

Investment," Republic of Korea: Economic Bulletin, 

Nov. 1994, p. 4. 

349Ibid., p. 5. 

341U.S. Department of the Treasury, "Interim 

Report to Congress on International Economic and 

Exchange Rate Policy," July 1994, p. 20. 

342U.S. Department of the Treasury, "Interim 

Report to Congress on International Economic and 

Exchange Rate Policy," Dec. 1994, p. 17. 

343See also, U.S. Department of State telegram, 

"Summary of Recent Changes to Korea's Foreign 

Exchange Regime," message reference No. 719, 

prepared by U.S. Embassy, Seoul, Feb. 3, 1995. 

344For a summary of Korea's financial 

liberalization program, see Korea Development 

Institute, "The Policy Direction of Korea's 

Liberalization of Foreign Exchange and Capital 

Transactions," Republic of Korea: Economic Bulletin, 

Feb. 1995, pp. 20-27. 

345For background on the beef dispute, including 

developments in 1993, see USITC, The Year in 

Trade: OTAP, 1993, USITC publication 2769, p. 111. 

In June 1993, the United States and Korea reached 

an agreement designed to widen access for foreign 

beef in the Korean market. Under the terms of the 

agreement, minimum beef import quotas would rise 

from the 1992 level of 66,000 metric tons to 113,000 

metric tons in 1995. The 1993 agreement grew out 

of a 1988 dispute initiated when the American Meat 

Institute filed a section 301 petition with USTR 

alleging that Korea's licensing system on imported 

beef violated GATT article XI (prohibition on 

quantitative restrictions). 

346USTR, "Fact Sheet: Initiation of Korea Beef 

and Pork 301," Nov. 28, 1994. 

34759 F.R. 61006. 

348"USTR Initiates Trade investigation of South 

Korean Meat Import Barriers," International Trade 

Reporter, Nov. 30, 1994, vol. 11, pp. 1837-38. 

349USTR, "Fact Sheet: Initiation of Korea Beef 

and Pork 301," Nov. 28, 1994. 

359U.S. Department of State telegram, "American 

Automobile Manufacturer's Association (AAMA) 

President Card's Visit to Seoul: Scenesetter," 

message reference No. 4690, prepared by U.S. 

Embassy, Seoul, June 3, 1994. 

351U.S. Department of State telegram, 

"Advocacy Progress Report: Korean Automobile 

Market Opening Initiative," message reference No. 

4802, June 9, 1994. 

352Korea Development Institute, "Recent 

Economic Relations Between Korea and the U.S.," 

Republic of Korea: Economic Bulletin, July 1994, p. 

5. 

353U.S. Department of State telegram, "Assistant 

Minister Park Statement on Auto Imports," message 

reference No. 1335, prepared by U.S. Embassy, 

Seoul, Feb. 18, 1994. 

354Korea Development Institute, "Recent 

Economic Relations Between Korea and the U.S.," 

Republic of Korea: Economic Bulletin, July 1994, p. 

5. 

355U.S. Department of State telegram, "Press 

Takes Aim at 'Luxury Imports,' Including Cars," 

message reference No. 8130, prepared by U.S. 

Embassy, Seoul, Sept. 28, 1994. 

356U.S. Department of State telegram, "AAMA 

President Card's Visit to Seoul: Scenesetter," 

message reference No. 4690, prepared by U.S. 

Embassy, Seoul, June 3, 1994. 

357U.S. Department of State telegram, 

"Advocacy Progress Report: AAMA President Card's 

Visit to Seoul Pries Open Korean's Hermetically 

Sealed Market for U.S. Autos," message reference 

No. 5379, prepared by U.S. Embassy, Seoul, June 

27, 1994. 

358Ibid. 

359U.S. Department of State telegram, "AAMA 

President Card's Visit to Seoul: Scenesetter," 

message reference No. 4690, prepared by U.S. 

Embassy, Seoul, June 3, 1994. 

360Ibid. 

361Ward's Automotive International, How the 

World's Automakers Are Related, 1995, pp. 12-15. 

118 
CHAPTER 5 

Administration of U.S. Trade Laws 

and Regulations 

This chapter surveys activities related to the 

administration of U.S. trade laws during 1994. It has 

sections on (1) import-relief laws, (2) unfair trade laws, 

and (3) certain other trade provisions, including the 

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

Caribbean Basin Economic Recovery Act (CBERA), 

the Andean Trade Preference Act (ATPA), section 232 

of the Trade Expansion Act of 1962 (impairment of 

national security), the Agricultural Adjustment Act 

(interference with programs of the U.S. Department of 

Agriculture), the Meat Import Act of 1979, and 

programs affecting textile and apparel imports. 

Import Relief Laws 

The United States administers several safeguard 

laws as well as a trade adjustment assistance program. 

There is one general safeguard provision under 

sections 201-204 of the Trade Act of 1974 1and several 

bilateral provisions, including those defined under 

section 406 of the Trade Act of 1974 (market 

disruption by imports from Communist countries) 2and 

sections 301-304 of the North American Free-Trade 

Agreement (NAFTA) Implementation Act. 3The 

adjustment assistance under the Trade Adjustment 

Assistance (TAA) program is included under title II of 

the Trade Act of 1974. 

Safeguard Actions 

There were no remedies under sections 201-204 or 

406 of the Trade Act of 1974 or sections 301-304 of 

the NAFTA Implementation Act in effect at yearend 

1994, nor did the Commission conduct any new or 

followup investigations under any of those provisions 

in 1994. 

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 when 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 October 1993, the Commission commenced an 

investigation under section 406 concerning honey from 

the People's Republic of China, 5following receipt of a 

request from the United States Trade Representative 

(USTR). In December 1993, the Commission found 

that market disruption exists with respect to honey 

imports from China. 6The Commission transmitted its 

report to the President in January 1994. In April 1994, 

the President determined that import relief involving 

honey from China was not in the national interest of 

the United States.? The President found that relief 

would impose substantial costs on consumers that 

outweighed any possible benefits. The President 

directed the USTR, in consultation with appropriate 

agencies, to develop a plan to monitor imports of 

honey from China. 

Adjustment Assistance 

The TAA program, set forth in title II of the Trade 

Act of 1974, authorizes the Secretaries of Commerce 

and Labor to provide trade adjustment assistance to 

firms and workers, respectively, that are adversely 

affected by increased imports. Initially authorized 

under the Trade Expansion Act of 1962, the current 

program is scheduled to expire on September 30, 

1998.8In 1993, a new subchapter was added to title II 

of the Trade Act to provide transitional assistance to 

workers separated or threatened to be separated from 

their employment as a result of increased imports from 

Canada or Mexico under the NAFTA. 9 

119 
The TAA system of readjustment allowances to 

individual workers is administered by the U.S. 

Department of Labor through its Employment and 

Training Administration (ETA) in the form of 

monetary benefits for direct trade readjustment 

allowances and service benefits that include allocations 

for job search, relocation, and training. Industrywide 

technical consultation provided through Commercesponsored programs is designed to restore the 

economic viability of U.S. industries adversely 

affected by international import competition. 1 ° 

Assistance to Workers 

The Department of Labor instituted 1,274 

investigations during fiscal year 1994 (October 1, 

1993, through September 30, 1994) on the basis of 

petitions filed for trade adjustment assistance. This 

figure represents an increase from the 1,221 petitions 

instituted in fiscal 1993. The results of investigations 

completed or terminated in fiscal 1994, including those 

in process from the previous fiscal year, are shown in 

the following tabulation: 11 

Item 

Number of 

investigations 

or petitions 

Estimated 

number of 

workers 

Completed 

certifications 602 60,057 

Partial certifications 8 4,066 

Petitions denied 607 57,550 

Petitions terminated 

or withdrawn 28 1,176 

Total 1,245 122,849 

The number of completed and partial certifications 

in fiscal 1994 increased to 610, up slightly from 590 in 

fiscal 1993. Figures for fiscal 1994 indicate that Labor 

expenditures for direct Trade Readjustment 

Allowances (TRA) to certified workers increased to 

$120.1 million, a 138-percent increase from the $50.5 

million expenditures in fiscal 1993. 

In addition, Labor provided training, job search, 

and relocation services valued at a preliminary estimate 

of $98.9 million in fiscal 1994. Data for fiscal 1994 

indicated that an estimated 29,250 workers used 

available service benefits, representing an increase of 

31 percent from the number of workers receiving such 

services in the previous fiscal year, as shown in the 

following tabulation: 12 

Estimated 

number of 

Item participants 

Training 26,300 

Job search 650 

Relocation allowances 2,300 

Total 29,250 

NAFTA-Related Assistance to 

Workers 

The NAFTA Implementation Act 13includes 

establishment of a Transitional Adjustment Assistance 

program. The program, which began operation January 

1, 1994, provides job search, training, and relocation 

assistance to workers in companies affected by imports 

from Canada or Mexico or by shifts of U.S. production 

to those countries. Preliminary data for fiscal 1994 

(January 1, 1994 through September 30, 1994) from 

the Department of Labor indicate that 250 petitions 

were filed for assistance under the program. Petition 

activity under the program in fiscal 1994 is 

summarized in the following tabulation: 14 

Number of 

investigations 

Item or petitions 

Petitions filed 250 

Worker groups certified 103 

Petitions denied 113 

Petitions terminated 5 

The number of completed certifications in fiscal 

1994 was 103, covering approximately 10,345 

workers. Fiscal 1994 figures indicate that Labor 

expenditures for direct TRA to certified workers were 

$105,000. 15 

The Department of Labor also provided training, 

job search, and relocation services valued at an 

estimated $174,200 in fiscal 1994. Data for fiscal 1994 

indicated that 650 workers used available service 

benefits, as shown in the following tabulation: 16 

Item 

Estimated number 

of participants 

Cost 

(dollars) 

Training 643 159,000 

Job search 3 700 

Relocations 4 14,500 

Total 650 174,200 

120 
Assistance to Firms and Industries 

Through its Trade Adjustment Assistance Division 

(TAAD), the U.S. Department of Commerce's 

Economic Development Administration (EDA) 

certified 153 firms as eligible to apply for trade 

adjustment assistance during fiscal year 1994. This 

figure represents a 40-percent decrease from the 253 

firms certified in the previous fiscal year. The TAAD 

administers its firm assistance programs through 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 1994 

totaled $13.4 million for provision of technical services 

to 118 firms adversely affected by international import 

competition. 

In addition to technical assistance for firms, under 

another component of the TAAD program, Commerce 

funded two industry development projects valued at 

$350,000. The projects receiving such funding 

included gear research by the Gear Research Institute 

and defense-related research by the University of Texas 

at San Antonio. 

Laws Against 

Unfair Trade Practices 

The U.S. Department of Commerce issued 17 new 

antidumping orders during 1994, following completion 

of investigations by Commerce and the U.S. 

International Trade Commission (the Commission or 

the USITC). 17In addition, Commerce issued one new 

countervailing duty order, following completion of 

investigations by Commerce and the Commission. 

There were no countervailing duty orders issued in 

1994, based on an investigation by Commerce alone. 

During 1994, the Commission completed 14 

investigations under section 337 of the Tariff Act of 

1930, as amended, involving allegations of patent, 

trademark, or copyright infringement or other unfair 

methods of competition. In two of the section 337 

investigations, the Commission issued general 

exclusion orders prohibiting the importation of 

merchandise, and in another investigation the 

Commission issued a temporary limited exclusion 

order barring the importation of accused products 

during the course of the investigation. 

In 1994, USTR initiated four new section 301 

investigations. A fifth petition seeking a 301 

investigation was filed in 1994. USTR initiated the 

investigation in 1995. Further developments occurred 

in two investigations initiated prior to 1994. Table 5-1 

summarizes USTR activities on section 301 

investigations during 1994. 18 

Antidumping Investigations 

The present antidumping law is contained in title 

VII of the Tariff Act of 1930. 19The 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 United States price (i.e., the purchase 

price or the exporter's sales price, as adjusted) 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, calculated as 

set out by statute. 2° The antidumping duty is designed 

to equal the difference between the U.S. price and the 

foreign-market value. The duty specified in an 

antidumping order reflects the dumping margin found 

by Commerce during its period of investigation. This 

rate of duty wil be applied to subsequent imports if no 

request for annual reviews is received by Commerce. If 

a request is received, Commerce will calculate the 

antidumping duties for that year for each entry. 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. 21In 1994, the 

Commission completed 49 preliminary and 27 final 

antidumping injury investigations. 22Antidumping 

orders were imposed as a result of affirmative 

Commission and Commerce determinations in 17 of 

the 27 final investigations on products imported from 9 

different countries. Details of antidumping actions and 

orders, including suspension agreements, 23in effect in 

1994, are presented in tables A-24 and A-25. The 

tabulation on page 124 summarizes the number of 

antidumping investigations during 1992-94. 24 

121 
Country Music Television, Canada 

Meat, Korea 

0 

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Z 0 Z 

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O O O Intellectual Property,China 

Statusatyearend 1994 

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Petitions filed or investigationsself-initiated in1994: 

g 

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Auto Parts,Japan 

See footnoteatend of table. 

122 
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O 

Other investigationsacted upon in 1994: 

Inte llectual Property,Brazil 

Softwood lu

mber, Canada 

123 
Antidumping duty investigations 1992 1993 1994 

Petitions filed 99 42 43 

Preliminary Commission determinations: 

Negative 13 5 3 

Affirmative(includes partial affirmatives) 72 30 46 

Terminated25 11 8 1 

Final Commerce determinations: 

Negative 2 1 2 

Affirmative 24 76 33 

Terminated 2 0 0 

Suspended 7 0 2 

Final Commission determinations: 

Negative 4 32 10 

Affirmative (includes partial affirmatives) 16 41 17 

Terminated 1 0 2 

Countervailing Duty 

Investigations 

The United States 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. 26In general, procedures for 

such investigations are similar to those under the 

antidumping law. Petitions are filed with Commerce 

(the administering authority) and with the Commission. 

Before a countervailing duty order can be issued, 

Commerce must find a countervailable subsidy. 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. 

During 1994, investigations were conducted under 

section 701 of the Tariff Act if the subject article was 

imported from a country that had signed the General 

Agreement on Tariffs and Trade (GATT) Code on 

Subsidies and Countervailing Duties 27or had 

otherwise been designated a "country under the 

agreement."28Investigations with respect to imports 

from other countries were conducted under section 303 

of the Tariff Act. Such imports were subject to an 

injury investigation by the Commission only if (1) they 

normally enter free of duty and (2) international 

obligations of the United States require an injury 

investigation. 29For imports not falling under this 

category or under section 701, a countervailing duty 

order could be issued under section 303 on the basis of 

an affirmative subsidy determination by Commerce 

alone.30 

One new countervailing duty order was imposed in 

1994 as a result of investigations involving both 

Commerce and the Commission. No new 

countervailing duty orders were imposed on products 

following investigation by Commerce alone under 

section 303 of the Tariff Act. In 1994, the Commission 

completed 7 preliminary and 1 final injury 

investigations. 31Details of countervailing duty actions 

and outstanding orders, including suspension 

agreements32in effect in 1994, are presented in tables 

A-26 and A-27. The following tabulation summarizes 

the number of countervailing duty investigations 

during 1992-94: 33 

Countervailing duty investigations 1992 1993 1994 

Petitions filed 43 5 7 

Preliminary Commission determinations: 

Negative 6 2 1 

Affirmative (includes partial affirmatives) 43 2 6 

Final Commerce determinations: 

Negative 2 0 0 

Affirmative 4 36 1 

Suspended 0 0 0 

Final Commission determinations: 

Negative 0 18 

Affirmative (includes partial affirmatives) 2 18 

Terminated 3 0 

124 
Reviews of Outstanding 

Antidumping and 

Countervailing Duty Orders 

Section 751 of the Tariff Act of 1930, as amended 

(19 U.S.C. 1675), requires Commerce (the 

administering authority), if requested, to conduct 

annual reviews of outstanding antidumping and 

countervailing duty orders to determine the amount of 

any net subsidy or dumping margin and to determine 

compliance with suspension agreements. 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. In these circumstances, the party 

seeking revocation or modification of an antidumping 

or countervailing duty order or suspension agreement 

has the burden of persuading Commerce and 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 or terminate or resume a suspended 

investigation. Neither Commerce nor the Commission 

instituted an investigation under section 751 in 1994. 

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 practices in 

import trade. Section 337 declares unlawful the 

importation into the United States, the sale for 

importation, or the sale within the United States 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. 34 

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. 35The President may 

disapprove a Commission order within 60 days of its 

issuance for "policy reasons." 

In 1994, 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 14 

investigations under section 337 (including 1 ancillary 

candor proceeding) in 1994, compared with 15 in 

1993. As in recent years, the section 337 caseload in 

1994 was highlighted by investigations involving 

several high-technology products. Significant among 

these were computer-related investigations involving 

semiconductor devices, multitasking memory 

management, connecting devices for local area 

networks, computer disk drives, and facsimile 

machines In addition, several section 337 

investigations involved other sophisticated technology, 

including pharmaceuticals (a widely used 

cardiovascular medication and recombinantly produced 

human growth hormones), microwave filters used in 

satellites, industrial polymer products, and chemical 

adhesives. During 1994, the Commission also 

instituted a formal enforcement proceeding based on 

allegations of violations of a cease and desist order 

issued by the Commission in a section 337 

investigation involving plastic-encapsulated integrated 

circuits. 

General exclusion orders were issued in two 

investigations. One temporary limited exclusion order 

was also issued. 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. At the close of 1994, there were 10 

section 337 investigations, including an advisory 

opinion proceeding and a formal enforcement 

proceeding, pending at the Commission. Commission 

activities involving section 337 actions in 1994 are 

presented in table A-28. 

As of December 31, 1994, a total of 46 outstanding 

exclusion orders based on violations of section 337 

were in effect. Twenty-eight of these orders involved 

patent violations. Table A-29 lists the investigations in 

which these exclusion orders were issued. 

Other Import 

Administration Laws 

and Programs 

The United States now administers three unilateral 

tariff preference programs as part of its overall 

program of import administration: the GSP, the 

CBERA, and the ATPA. More than 44 percent of 

overall imports entering the United States in 1994 

($656 billion) entered free of duty, the same percentage 

as in 1993. Of that amount, 3.2 percent of total U.S. 

imports for consumption benefited from the duty-free 

privileges of the three programs described in this 

section. GSP duty-free imports accounted for 2.8 

percent, CBERA duty-free imports accounted for 0.3 

125 
percent, and ATPA duty-free imports accounted for 0.1 

percent of total U.S. imports for consumption. The 

following tabulation shows total U.S. imports from the 

world as well as total duty-free imports for the 

programs described in this section (in millions of 

dollars): 36 

U.S. imports 1993 1994 

Total 574,863 655,767 

Duty-free imports: 

GSP 19,520 18,379 

CBERA 1,904 2,050 

ATPA 401 684 

This section will also cover four other U.S. import 

laws and programs—national security import 

restrictions, the Agricultural Adjustment Act, the Meat 

Import Act of 1979, and programs affecting textile and 

apparel imports, including the Arrangement Regarding 

International Trade in Textiles. 

Tariff Preference Programs 

Generalized System of Preferences 

During the 1960s, the United Nations Conference 

on Trade and Development suggested that developed 

countries offer unilateral preferential tariff treatment to 

developing countries. The underlying rationale was 

that free trade would promote economic development 

and diversification more effectively than foreign aid. 

The U.S. GSP program was enacted in the Trade Act of 

1974 and renewed in the Trade and Tariff Act of 

1984. 37Pursuant to the latter statute, the U.S. GSP 

expired on July 4, 1993; it was renewed retroactively 

through September 30, 1994, by the Omnibus Budget 

Reconciliation Act of 1993, and again renewed 

retroactively through July 31, 1995, by the Uruguay 

Round Agreements Act. Under this program, the 

President is authorized, subject to various conditions 

and requirements, to grant duty-free treatment to 

selected imports from designated developing countries. 

In 1994, under the GSP program, the United States 

granted duty-free entry to eligible imports from over 

150 beneficiary countries. 38Such imports are 

classified in nearly 4600 Harmonized Tariff Schedule 

(HTS) tariff categories. 39As shown in table 5-2, $18.4 

billion in imports from GSP-beneficiary countries 

actually received duty-free entry under the GSP 

program in 1994, out of $29.2 billion in goods from 

GSP beneficiaries that were classified in 

GSP-designated HTS provisions. These figures 

compare with $104 billion in total imports from GSP 

beneficiaries in 1994 and $656 billion in total imports 

from the world. Table 5-3 shows the 10 beneficiary 

countries of the GSP program in 1994. Table A-30 

shows the top 20 GSP products or product categories in 

1994, and table A-31 shows the overall sectoral 

distribution of GSP benefits. 

Table 5-2 

U.S. imports for consumptions from GSP beneficiaries and the world, 1994 

(Million dollars) 

Item 

All GSP 

beneficiaries World 

Total 103,974 655,7672 

GSP eligible products 3 29,221 255,294 

Duty-free under GSP4 18,379 18,379 

GSP program exclusion 4,674 4,674 

All other 6,168 232,241 

Noneligible product imports 74,753 400,473 

1 Customs-value basis. 

2 Excludes imports into the U.S. Virgin Islands. 

3 The import data show total imports from all beneficiary countries and from the world that are eligible for 

duty-free entry under GSP. For a variety of reasons, all imports from beneficiary countries under HTS provisions that 

appear to be eligible for GSP treatment do not always and necessarily receive duty-free entry under the GSP. Such 

eligible goods may not actually receive duty-free entry under GSP for at least four types of reasons: (1) the importer 

fails to claim GSP benefits affirmatively, (2) the goods are from a beneficiary country that has lost GSP benefits on 

that product for exceeding the so-called "competitive need" limits, (3) the goods are from a beneficiary country that 

has lost GSP on that product because of a petition to remove that country from GSP benefits for that product, and 

(4) the goods fail to meet the rule-of-origin or direct-shipment requirements in the GSP statute. 

4 These data show total imports from all GSP beneficiary countries that actually received duty-free entry under 

the GSP. 

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

126 
Table 5-3 

U.S. imports for consumption under the GSP from leading beneficiaries, 1and total, 1994 

(Million dollars) 

Rank Beneficiary 

Total 

imports 

Imports of GSP articles 

GSP-eligible GSP duty-free2 

1 Malaysia 13,877 6,985 5,033 

2 Thailand 10,273 3,938 2,487 

3 Brazil 8,813 3,007 2,185 

4 Philippines 5,711 1,819 1,450 

5 Indonesia 6,400 2,040 1,241 

6 India 5,284 1,155 851 

7 Argentina 1,651 828 491 

8 Venezuela 7,951 493 473 

9 Israel 5,216 1,952 423 

10 Russia 3,215 430 359 

Top 10 68,391 22,647 14,992 

Total 103,974 29,221 18,379 

1 These import data show total imports from the top 10 beneficiary countries that fall in HTS provisions that are 

eligible for duty-free entry under GSP. For a variety of reasons, all imports from beneficiary countries under HTS 

provisions that appear to be eligible for GSP do not always and necessarily receive duty-free entry under the GSP. 

See note 3 to table 5-2. 

2These import data show the total imports from the top 10 GSP beneficiary countries that actually received 

duty-free entry 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), an interagency coordinating committee 

chaired by USTR, conducts a review that leads to 

modifications in product eligibility and country 

eligibility. In 1994, the TPSC completed the 1993 

annual GSP review. As a result of the 1993 GSP 

review, 10 new products were added to the GSP 

program, 1 article (extruded rubber thread) was 

removed from the program and 1 other article (steel 

grating from Venezuela) was removed with respect to 

that country. Designations of the following countries as 

beneficiary developing countries under the GSP 

program were issued and became effective in 1994: 

Kazakhstan, Romania, Ukraine, South Africa, Belarus, 

and Uzbekistan. As required in the NAFTA 

Implementation Act, the President withdrew 

beneficiary status under the GSP program from Mexico 

effective on January 1, 1994. 

In 1994, the TPSC did not accept any petitions to 

begin or conduct a 1994 annual GSP review although it 

did continue to review several countries' GSP 

eligibility, because of petitions accepted in prior annual 

reviews concerning a country's providing for worker's 

rights or protection of intellectual property rights. On 

August 12, 1994, USTR announced an initiation of a 

review of certain GSP benefits that Thailand lost in 

1989, following a determination that Thailand did not 

provide adequate and effective intellectual property 

rights protection. Also on December 20, 1994, USTR 

announced the initiation of a review of "reverse 

preferences" (a review to determine whether any 

GSP-beneficiary country affords preferential treatment, 

as a result of an economic association agreement or 

otherwise, to the products of a developed country, 

other than the United States, that has, or is likely to 

have, an adverse effect on U.S. commerce). This 

review will consider reverse preferences granted by 

any GSP beneficiary, but will focus mostly on the 

countries of Central and Eastern Europe that have 

association agreements with the European Union. 4° 

As noted above, the U.S. GSP program was 

extended through July 31, 1995, as part of the Uruguay 

Round Agreements Act signed in December 1994. 

During 1994, the administration continued its 

consideration of possible proposals for the long-term 

renewal of the GSP program. The administration had 

prepared a draft bill which provided for minor 

modifications to the program and renewed the program 

for 10 years. It originally was included in the Uruguay 

Round Agreements implementing bill, but was deleted 

before the final bill was presented to Congress and 

ultimately enacted. 

127 
Caribbean Basin Economic 

Recovery Act 

Eligible imports from 24 Caribbean Basin 

countries entered the United States duty-free or at 

reduced duties under the CBERA during 1994. 41 

 CBERA has been operative since January 1, 1984, and, 

as amended, the act currently has no statutory 

expiration date. 42CBERA is the trade-related 

component of the Caribbean Basin Initiative (CBI). 43 

 President Reagan launched CBI in 1982 to promote 

export-led economic growth and economic 

diversification in the countries in the Caribbean 

B asin.44 

A wide range of Caribbean products are eligible for 

duty-free entry under CBERA. 45Excluded from 

duty-free entry, however, are canned tuna, petroleum 

and petroleum derivatives, certain footwear, some 

watches and watch parts, sugar from any "Communist" 

country, and most textiles and apparel. Certain 

agricultural products (including sugar, dairy products, 

cotton, peanuts, and beef) may receive duty-free entry, 

subject to U.S. quotas and/or health requirements. 

Other restrictions apply to ethyl alcohol produced from 

non-Caribbean feedstock. Handbags, luggage, flat 

goods (such as wallets, change purses, and eyeglass 

cases), work gloves, and leather wearing apparel are 

not eligible for CBERA duty-free entry; however, 

duties on these articles are being reduced by a total of 

20 percent beginning January 1, 1992, in five equal 

annual installments. 

Certain Caribbean textile and apparel products are 

eligible for preferential tariff treatment under the 

special Guaranteed Access Levels (GAL) program. 

While separate from the statutes governing CBERA, 

the GAL program is open only to countries that receive 

CBERA benefits. The GAL program was established 

in 1986 to improve access for Caribbean 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 Caribbean Basin countries that 

have signed GAL agreements. Costa Rica, the 

Dominican Republic, Guatemala, Haiti, 46and Jamaica 

benefited from such agreements during 1994. 47An 

agreement with Panama expired on March 31, 1994. 

GAL imports, which must be made from fabric formed 

and cut to pattern in the United States, receive the tariff 

treatment accorded to other imports under HTS 

subheadings 9802.00.60 and 9802.00.80. 48 

Total U.S. imports from CBERA countries in 1994 

were $11.2 billion, or 1.7 percent of all U.S. imports. 

Imports under CBERA provisions accounted for 18.3 

percent of all imports from CBERA countries, 

approximately the same as in 1993 (table 5-4). 

The leading items afforded duty-free entry under 

CBERA in 1994 were leather footwear uppers; 

precious-metal jewelry; frozen, chilled and fresh 

boneless beef; medical instruments and appliances; and 

sugar (table A-32). In 1994, five CBERA 

countries—the Dominican Republic, Costa Rica, 

Guatemala, Trinidad and Tobago, and 

Honduras—accounted for over four-fifths of all U.S. 

imports under CBERA provisions (table A-33). 

Andean Trade Preference Act 

Designated imports from Bolivia, Colombia, 

Ecuador, and Peru entered the United States duty-free 

under ATPA during 1994. 49ATPA has been operative 

since December 4, 1991, and is scheduled to expire on 

December 4, 2001. 50ATPA is the trade-related 

component of the Andean Trade Initiative. President 

Bush launched the initiative in 1990 to combat the 

production of illegal narcotics by helping beneficiaries 

with economic development projects and programs. 51 

Table 5-4 

U.S. imports for consumption from CBERA countries, 1992-94 

Item 1992 1993 1994 

Total imports (1,000 dollars) 9,425,616 10,094,033 11,200,280 

Imports under CBERA 1 

1,000 dollars 1,498,556 1,903,613 2,050,158 

Percent of total 15.9 18.9 18.3 

1 Value of imports under CBERA has been reduced by the value of most-favored-nation (MFN) duty-free imports 

and ineligible items that were misreported as entering under the program. 

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

128 
ATPA benefits were modeled after CBERA. A 

wide range of Andean products is eligible for duty-free 

entry. 52ATPA excludes from duty-free entry the same 

list of articles excluded under CBERA. Rum also is 

excluded.53As under CBERA, handbags, luggage, flat 

goods (such as wallets, change purses, and eyeglass 

cases), work gloves, and leather wearing apparel are 

not eligible for ATPA duty-free entry; however, duties 

on these articles are being reduced by a total of 20 

percent beginning January 1, 1992, in five equal annual 

installments. Unlike CBERA beneficiaries, the four 

Andean countries are not eligible for GALs. 

Imports from Colombia and Bolivia have been 

eligible for duty-free entry under ATPA since 1992. 

Imports from Ecuador and Peru became eligible for 

ATPA benefits during 1993. 54U.S. imports from the 

four Andean countries totaled $5.9 billion in 1994, or 

0.9 percent of all U.S. imports. Table 5-5 shows that 

imports under ATPA provisions totaled $683.8 million 

in 1994 or 11.6 percent of all U.S. imports from the 

four Andean countries (shown by country in table 

A-34). 

The leading items afforded duty-free entry under 

ATPA in 1994 were fresh cut flowers, including 

chrysanthemums, standard carnations, anthuriums, 

orchids, roses, and other cut flowers and flower buds; 

precious metal jewelry, including ropes and chains; and 

nonadhesive plates, sheets, and foils (table A-35). 

National Security Import 

Restrictions 

Section 232 of the Trade Expansion Act of 1962 

authorizes the President, on the basis of a formal 

investigation and report by the Secretary of Commerce, 

to impose restrictions on imports that threaten to 

impair the national security of the United States. 

Among the most important criteria considered by 

Commerce are- 

• Requirements of the defense and essential 

civilian sectors; 

• Maximum domestic production capacity; 

• Quantity, quality, and availability of 

imports; 

• Impact of foreign competition on the 

economic welfare of the essential 

domestic industry; and 

• Other factors relevant to the unique 

circumstances of the specific case. 

The President has 90 days to decide on appropriate 

action after receipt of the Secretary's findings. The 

section 232 authority to adjust imports has been used 

sparingly in the past. It has most notably been 

employed in connection with the imposition of quotas, 

fees, or economic sanctions on imports of petroleum 

products. 

On March 11, 1994, Commerce received a petition 

from the Independent Petroleum Association of 

America (IPAA) requesting an investigation to 

determine the impact of imports of crude oil and 

refined petroleum products on national security. 55 

 Commerce accepted the petition and instituted an 

investigation on April 5, 1994. The petitioners alleged 

that "U.S. energy security worsened since the 

Department's last section 232 oil import investigation 

in 1988 because oil imports grew both in absolute 

terms and as a percentage of U.S. oil consumption, 

leaving the United States further subject to an oil 

supply disruption with the resultant economic costs." 

The IPAA also maintained that imports of low-priced 

oil adversely affected the domestic petroleum industry 

such that it would not be able to meet the needs of the 

U.S. military in the event of a major conventional war. 

In December 1994, Commerce issued a report 

finding that crude oil and refined petroleum products 

were being imported into the United States in such 

quantities or under such circumstances as to threaten to 

impair the national security. However, Commerce 

recommended that the President not use his authority 

to adjust imports because, on balance, the costs of such 

an action would outweigh the potential benefits. 

Table 5-5 

U.S. imports for consumption from Andean countries, 1992-94 

Item 1992 1993 1994 

Total imports (1,000 dollars) 3,049,595 5,282,292 5,879,505 

Imports under ATPA1 

1,000 dollars 97,117 401,421 683,817 

Percent of total 3.2 7.6 11.6 

1Value of imports under ATPA has been reduced by the value of most-favored-nation (MFN) duty-free imports 

and ineligible items that were misreported as entering under the program. 

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

129 
The Coors Electronic Package Co. and Ceramic 

Process Systems Corp. filed a petition on November 

10, 1992, with Commerce requesting an investigation 

to determine the impact of imports of ceramic 

semiconductor packages on national security. The 

petitioners alleged that imports from Japan were 

having an adverse impact on the domestic ceramic 

semiconductor industry. Coors and Ceramic Process 

Systems also alleged that one Japanese company 

enjoyed a near monopoly of supply to the U.S. 

market. 56In August 1993 Commerce issued a report 

finding that ceramic semiconductor packages were not 

being imported into the United States in quantities and 

under such circumstances as to threaten to impair 

national security. Commerce made several 

recommendations to the domestic industry and the 

Department of Defense on how to assist and support 

this industry. Commerce forwarded its findings to the 

President in February 1994. No further action was 

taken during 1994. 

Agricultural Adjustment Act 

Under section 22 of the Agricultural Adjustment 

Act (7 U.S.C. 624), the President may take action to 

restrict imports that render, or tend to render, 

ineffective or materially interfere with the operation of 

any U.S. Department of Agriculture (USDA) program. 

The President acts on the basis of an investigation and 

report by the USITC, although he may take emergency 

action pending receipt of that report. Following advice 

of the Secretary of Agriculture and the investigation of 

the USITC, the President may modify, suspend, or 

terminate import restrictions because of changed 

circumstances. 

As directed by the President, on January 18, 1994, 

the Commission instituted investigation No. 22-54 

under section 22 to determine whether wheat, wheat 

flour, and semolina are being or are practically certain 

to be imported into the United States under such 

conditions and in such quantities as to render or tend to 

render ineffective, or materially interfere with the price 

support, payment, and production adjustment program 

conducted by the U.S. Department of Agriculture for 

wheat. On July 15, 1994, the USITC reported its split 

findings: (1) three Commissioners found that wheat, 

wheat flour, and semolina are not being imported under 

such conditions and in such quantities as to "render, or 

tend to render, ineffective" the USDA wheat program 

but that the evidence of regional impact of increased 

wheat imports could support the President finding 

either "material interference" or "no material 

interference"; and (2) three Commissioners found (in 

two separate opinions) that wheat, wheat flour, and 

semolina are being imported into the United States 

under such conditions and in such quantities as to 

materially interfere with certain USDA programs for 

wheat. 57 

Following transmittal of the Commission's report 

to the President, the U.S. Government reached an 

agreement with the Government of Canada on August 

2, 1994.58On that day, the President established 

separate tariff-rate quotas on durum and nondurum 

wheat that totaled 1.5 million metric tons. 59The 

tariff-rate quotas applied to wheat imports from all 

countries and would last for 1 year or through 

September 11, 1995. However, virtually all U.S. wheat 

imports during the past 5 years have come from 

Canada. The section 22 restrictions did not affect U.S. 

imports of semolina, wheat flour, or white wheat. 60 

In addition to the U.S. tariff-rate quota on wheat of 

1 5 million metric tons, the United States and Canada 

established a Joint Commission on Grains to examine 

the countries' marketing and support systems for all 

grains, and agreed to a "peace clause" for 1 year to 

assure that there would be no additional restrictions or 

countermeasures. This Joint Commission is to be 

composed of U.S. and Canadian private-sector experts 

who will provide nonbinding recommendations to help 

the two countries find solutions to bilateral grain trade 

problems.61 

On January 19, 1994, as directed by the President, 

the Commission instituted investigation No. 22-55 

under section 22 to determine whether peanut butter 

and peanut paste are being or are practically certain to 

be imported into the United States under such 

conditions and in such quantities as to render or tend to 

render ineffective, or materially interfere with the price 

support and production adjustment program conducted 

by the U.S. Department of Agriculture for peanuts. On 

June 29, 1994, the Commission suspended the 

investigation on peanut butter and peanut paste in 

response to a letter from the President requesting the 

suspension. 

Section 22 quantitative import restrictions 

continued in effect through the end of 1994 on cotton 

products of certain specified staple lengths; cotton 

waste; peanuts; specified dairy products; and certain 

products containing added sugar, such as sweetened 

cocoa, imported pancake flours, and iced-tea mixes. 

Import fees also remained in effect on refined sugar. 

In 1995, section 22 authority will be markedly 

different. With the completion of the Uruguay Round 

Agreements,62the Uruguay Round Agreements Act 

(URAA)63amended section 22 to limit its application 

to imports from non-WTO countries after December 

31, 1994. Under a process known as "tariffication," 

130 
section 22 quotas and fees on agricultural products 

were converted to bound tariffs. The URAA also 

provided minimum import access to the U.S. market 

for these products through tariff-rate quotas 64and 

established special safeguard provisions. 

Meat Import Act of 1979 

The U.S. Meat Import Act of 1979 65requires the 

President to impose quotas on imports of bovine 

meat—primarily fresh, chilled, or frozen beef 66—if the 

projected aggregate quantity of the subject meats for 

the calendar year, as estimated by the USDA, is 

expected to exceed a specified "trigger" leve1. 67The 

trigger level, equivalent to 110 percent of the 

applicable quota for meat imports in a given year, is 

calculated on the basis of a formula outlined in the law. 

Meat imports subject to the law are reviewed 

quarterly by the Secretary of Agriculture for 

conformance to the trigger levels, at which time an 

estimate is made of total imports for the year. If the 

annual unrestrained meat import level is projected to 

exceed the trigger level, attempts are made to negotiate 

voluntary restraint agreements (VRAs) with major 

suppliers. To date, VRAs have reduced the need for 

unilateral Presidential action, such as the imposition of 

quotas. 

On January 6, 1994, the USDA announced that the 

quota level for meat imports in 1994 was 1,108.1 

million pounds, which translated into a 

1,218.9-million-pound trigger leve1. 68Actual imports 

of meat subject to the act totaled 1,214.3 million 

pounds in 1994, as shown in the following tabulation: 

Country Quantity 

Australia 662.8 

New Zealand 392.2 

Costa Rica 49.9 

Nicaragua 44.8 

Honduras 35.5 

Guatemala 12.1 

Dominican Republic 11.4 

Sweden 3.0 

Finland 2.0 

EU .5 

Israel .1 

Japan (1) 

Total 1,214.3 

1Less than 100,000 pounds. 

In 1993, Australia and New Zealand agreed to limit 

voluntarily exports of quota meat to 664.9 million 

pounds and 406 6 million pounds, respectively, for 

calendar year 1994. 69 On the basis of these 

agreements, the USDA estimated that 1,218.8 million 

pounds of meat would be imported during 1994, nearly 

equal to the trigger level. As a result, the United States 

imposed no quota limitations in 1994. 

On January 6, 1995, the USDA released its initial 

estimate of 1995 meat imports in the absence of the 

restraint. Meat imports subject to the law were 

projected to total 1,250 million pounds-17.9 million 

pounds below the 1995 trigger level of 1,267.9 million 

pounds that would mandate quantitative restrictions. 7° 

However, with the passage of the URAA, the Meat 

Import Act was terminated; instead, meat imports are 

subject to a bound tariff of 31.1 percent ad valorem. 

The URAA also established a tariff-rate quota of 

656,621 metric tons (1,448 million pounds). Amounts 

exceeding the quota are subject to a tariff of 31.1 

percent ad valorem in 1995, to be reduced in equal 

annual installments over 6 years to 26.4 percent ad 

valorem, a 15-percent reduction from the original rate. 

In-quota amounts are subject to a duty equal to 

4.40/kg. 

U.S. Trade Programs Affecting 

Textile and Apparel Imports 

The Multifiber Arrangement 

World trade in textiles and apparel during the past 

20 years has been largely governed by quotas 

negotiated under the Arrangement Regarding 

International Trade in Textiles, known as the Multifiber 

Arrangement (MFA). The MFA was intended to deal 

with market disruption in importing developed 

countries, while allowing exporting developing 

countries to expand their share of world trade in these 

goods. Under the MFA, developed countries negotiated 

bilateral agreements with exporting developing 

countries for the purpose of setting quotas and quota 

growth rates. These quotas were a departure from the 

GATT in that they were 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. 

On December 9, 1993, the MFA was extended for a 

sixth time, to December 31, 1994. The last three 

extensions of the MFA were intended to bridge its 

expiration with the adoption of the Uruguay Round 

Agreement on Textiles and Clothing (ATC). On 

January 1, 1995, all agreements negotiated under the 

MFA with WTO members were superseded by the 

ATC (table 5-6). Under the ATC, textile and apparel 

131 
Table 5-6 

Countries with which the United States has textile and apparel quotas, as of March 1995: 1U.S. 

general imports under the Multifiber Arrangement in 1994 

(1,000 dollars) 

Country Imports 

Subject to the World Trade Organization (WTO) Agreement on Textiles and Clothing 

Bahrain 66,079 

Bangladesh 927,394 

Brazil 320,471 

Costa Rica 693,795 

Czech Republic 37,669 

Dominican Republic 1,618,031 

Hong Kong 4,405,426 

Hungary 64,435 

India 1,520,315 

Indonesia 1,170,247 

Jamaica 455,066 

Kenya 37,432 

Kuwait 24,206 

Macau 606,967 

Malaysia 703,968 

Mauritius 187,192 

Pakistan 767,906 

Philippines 1,457,012 

Republic of Korea 2,448,814 

Romania 41,131 

Singapore 473,804 

Slovakia 15,329 

Sri Lanka 892,403 

Thailand 1,233,960 

Turkey 688,240 

Uruguay 16,999 

Subject to bilateral agreements (non -WTO members) 

Bulgaria 43,194 

China 4,930,599 

Colombia 384,030 

Egypt 254,461 

El Salvador 420,915 

Fiji 55,150 

Guatemala 612,101 

Haiti 30,232 

Laos 6,884 

Macedonia2 32,902 

Myanmar (Burma) 2 46,715 

Nepal 112,536 

Oman 102,280 

Poland 70,436 

Qatar 58,406 

Taiwan 2,829,705 

Ukraine 45,517 

United Arab Emirates 184,029 

Subject to North American Free -Trade Agreement 

Mexico 1,897,351 

1The United States also has visa arrangements with Japan, Lebanon, Maldives, Panama, Peru, and Trinidad and 

Tobago. The arrangement with Panama also includes anticircumvention language. 

2Subject to unilateral restraints. 

Source: Trade data compiled from official statistics of the U.S. Department of Commerce, Bureau of the Census. 

Information on quota status from the U.S. Department of Commerce, International Trade Administration, Office of 

Textiles and Apparel. 

132 
quotas will be phased out over 10 years. 71Quotas for 

countries that are currently not WTO members are 

subject to section 204 of the Agricultural Act of 1956 

(7 U.S.C. 1854). The United States is not obligated 

under the ATC to phase out quotas for non-WTO 

members. 

Bilateral quota agreements negotiated under the 

MFA governed most U.S. imports of textiles and 

apparel during 1994. The MFA covered textiles and 

apparel of cotton, other vegetable fibers, wool, 

manmade fibers, and silk blends. The United States 

had quotas on MFA-product imports from about 45 

countries during 1994, which supplied 78 percent of 

total MFA imports that year (table 5-6). 

Transshipments of textiles and apparel through 

third countries to evade quotas continued to be a 

problem during 1994. Textile and apparel 

transshipments from China, the country involved in the 

most significant amount of illegal transshipments, 

totaled an estimated $2 billion annually in recent 

years.72In an effort to curtail this practice and other 

types of fraud, the United States continued to negotiate 

stronger fraud and anticircumvention language in 

bilateral agreements that were extended or renegotiated 

in 1994.73 The new language clarifies the right of the 

United States to charge illegal transshipments against 

quota, gives it the right to make plant visits to verify 

production capacity of a foreign manufacturer, and 

permits it to charge up to three times the amount of the 

transshipments against quotas in instances of repeated 

violations involving a particular country. 74By the end 

of 1994, bilateral agreements with 31 countries 

contained the stronger anticircumvention language. 

After a series of negotiations with China in 1993 

and early 1994, the USTR announced on January 17, 

1994, that the two countries concluded a 3-year textile 

agreement. The new agreement called for zero growth 

in China's quotas in 1994 and for 1-percent annual 

growth for 1995-96.75China also agreed to 

anticircumvention language similar to that included in 

bilateral agreements renegotiated with other countries. 

For the first time, the two countries also negotiated an 

agreement to bring chiefly silk apparel from China 

under quota. This agreement limits China's shipments 

of such silk apparel, which was not covered by the 

MFA, to annual quota growth of 1 percent. 76 

The United States also extended or renegotiated 

bilateral agreements in 1994 with India, Pakistan, 

Macau, Thailand, the Philippines, Indonesia, Hungary, 

Poland, Romania, Nepal, Jamaica, Costa Rica, Brazil, 

Bangladesh, and Uruguay. 77New bilateral agreements 

were negotiated with Kuwait, El Salvador, and Kenya 

during 1994.78 

The bilateral textile and apparel agreement with 

Mexico expired on December 31, 1993. Schedule 3.1.2 

of annex 300-B of NAFTA, which entered into force 

on January 1, 1994, provides for limits on 

nonoriginating textile and apparel products imported 

from Mexico and sets forth a schedule for the 

progressive elimination of such limits by the year 

2004. When NAFTA entered into force, the United 

States immediately lifted quotas on slightly more than 

90 percent of U.S. apparel imports and 65 percent of 

textile imports from Mexico (based on 1991 trade, the 

base year for NAFTA negotiations). Also during the 

first year, about 30 percent of U.S. apparel imports and 

17 percent of textile imports became eligible for 

duty-free treatment (also based on 1991 trade). All 

other quotas on Mexican textiles and apparel are being 

phased out over a 10-year period, and almost all other 

U.S. tariffs on Mexican garments that meet NAFTA 

rules of origin will be removed within 6 years and the 

remainder, within 10 years. 79 

Also during 1994, the United States sought 

market-access commitments from signatories to the 

Uruguay Round Agreements that are significant 

exporters of textiles and apparel to the United States. 

This was done in preparation for the passage of the 

ATC, which requires both developed and developing 

countries to reduce trade barriers on textiles and 

apparel in their home markets. Developing countries 

such as Egypt, India, Pakistan, the Philippines, 

Thailand, and Turkey agreed to open their markets to 

U.S. textile and apparel exports. 80 

U.S. Trade in 1994 

U.S. imports of MFA products in 1994 rose by 9 

percent over the 1993 level to a record 17.3 billion 

square meter equivalents (SMEs) valued at almost $40 

billion (see figure 5-1). This growth was equal to the 

gain in MFA imports in 1993, but smaller than the 

1992 gain of 13 percent Import growth averaged 11 

percent a year during the 1980s, before slowing to less 

than 1 percent in 1990 and to 5 percent in 1991. Most 

of the gain in 1994 came in apparel, imports of which 

grew almost twice as fast as they had in 1993, or by 12 

percent compared with an annual rate of 7 percent in 

1993. By contrast, the annual growth rate for imports 

of nonapparel products slowed to 7 percent in 1994 

compared with annual growth of 12 percent in 1993. 

Mexico was the fastest growing major supplier of 

textiles and apparel to the U.S. market in 1994. 

Mexico's shipments of these products, which consist 

mostly of apparel, escalated by 31 percent in quantity 

and by 38 percent in value over 1993 levels to 977.0 

million SMEs valued at $1.9 billion. Mexico's 

133 
38BM1* MOM 

Mt MI 40g M 

*NM NeM411018 

WM= RN Mg 

Satt MI MS 

#11* MN NO 

ES MN 

Other 

Asia 9.4% 

OECD 

19.5% 

1989 

Total 12.1 billion square meter equivalents 

OECD 

20.0% 

Total 17.3 billion square meter equivalents 

China 

13.9% 

China 

11.8% 

1994 

Figure 5-1 

U.S. imports of textiles and apparel covered by the MFA, by major suppliers, 1989 and 1994 

Note.—The Big Three refers to Hong Kong, Korea, and Taiwan. Other Asia consists of the following countries: 

Bangladesh, India, Pakistan, Sri Lanka, and Macau. In addition, OECD does not include Mexico, a member country. 

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

shipments of apparel alone grew by 50 percent in 

quantity and by 42 percent in value, reaching 482.1 

million SMEs, valued at $1.6 billion in 1994. The 

growth in apparel imports in 1994 was more than 

double the 1993 growth in these imports. Much of the 

1994 increase can be attributed to the quota elimination 

and duty reductions under the NAFTA. The majority of 

the imports from Mexico (52 percent of the total 

quantity of textile and apparel imports and 90 percent 

of the total quantity of apparel imports alone) consisted 

of apparel assembled in Mexico of U.S. formed and cut 

fabrics that were classified under HTS item number 

9802—formerly tariff item 807. The rapid growth in 

Mexico's shipments of these products in 1994 enabled 

Mexico to surpass Korea as the fifth-largest 

supplier to the United States of textiles and apparel, 

trailing only China, Canada, Taiwan, and Hong Kong. 

Growth in textile and apparel imports from the 

Caribbean countries slowed in 1994 from annual 

growth rates of 19 percent in 1993, 21 percent in 1992, 

and 23 percent in 1991. U.S. textile and apparel 

imports from the Caribbean countries grew by 15 

percent in quantity and by 13 percent in value in 1994 

over 1993 levels to 1.8 billion SMEs valued at $4.6 

billion. Apparel imports from the Caribbean countries 

accounted for 91 percent of the total quantity and 98 

percent of the total value of textile and apparel imports 

from the region in 1994. Approximately 82 percent of 

the total quantity of apparel imports in 1994 consisted 

of apparel assembled from U.S. components, whose 

duties are assessed only on the value added offshore 

and which enter under the 807 tariff provision. 

Garments assembled in the region from fabrics formed 

and cut in the United States additionally benefit from 

preferential quota access to the U.S. market. The 

slowdown in growth of 1994 imports from this region 

reflects a shift in some U.S. trade from Caribbean 

countries to Mexico as Caribbean nations usually 

compete with Mexico for assembly work from U.S. 

apparel firms. During 1994, Mexico benefited from 

liberalized textile and apparel trade under the NAFTA 

as approximately 90 percent of the apparel imports 

from Mexico (based on 1991 trade) became quota free 

in 1994 and about one-third of apparel imports from 

134 
Mexico became eligible for duty-free treatment in 

1994. The Caribbean countries have expressed concern 

over losing apparel investment and market share to 

Mexico because of the benefits Mexico receives. 

Responding to this concern, the Clinton administration 

in May 1994 proposed an "Interim Trade Program for 

the Caribbean Basin" that would give the Caribbean 

countries almost the same access to the U.S. apparel 

market as Mexico receives under NAFTA. Although 

the administration had expressed a desire to include 

this trade program in the Uruguay Round 

implementing legislation, the program was not 

included. Legislation introduced in the 104th Congress, 

the Caribbean Basin Trade Security Act (H.R. 553 and 

S. 529), would temporarily provide CBERA countries 

tariff and quota treatment equivalent to that accorded 

products from Mexico under NAFTA. 

China remained the largest U.S. foreign supplier of 

textiles and apparel in 1994, accounting for 12 percent 

of total imports. However, during 1994, imports from 

China fell by 3 percent in quantity terms from the 1993 

level, to 2.0 billion SMEs. At the same time, the value 

of China's shipments rose by 3 percent to $4.9 billion. 

This was the first decline in textile and apparel 

shipments from China in quantity terms in 5 years. 

U.S. imports of textiles and apparel from the 

traditional Big Three Asian suppliers—Hong Kong, 

Korea, and Taiwan—increased for the first time in 5 

years, by 3 percent, to 3.1 billion SMEs valued at $9.7 

billion. The increase came almost entirely from Hong 

Kong, whose shipments, primarily apparel, increased 

by 9 percent in 1994 to 1.0 billion SMEs ($4.4 billion). 

Imports from Taiwan in 1994 remained unchanged at 

1.2 billion SMEs ($2.8 billion) and those from Korea 

fell by 1 percent to 864.1 million SMEs ($2.4 billion). 

Growth in imports from the Association of 

Southeast Asian Nations (ASEAN) continued to slow 

in 1994 when their shipments rose by only 3 percent, 

after having increased by 8 percent in 1993, and by 25 

percent in 1992. The Philippines was the only ASEAN 

country whose shipments to the United States grew at a 

faster rate in 1994 than the previous year-11-percent 

growth compared with 8-percent growth in 1993. 

Shipments from Indonesia slowed to an annual growth 

rate of 8 percent in 1994 compared with an annual 

growth rate of 20 percent in 1993. Imports from 

Singapore continued to decline in 1994, dropping by 

17 percent in 1994, compared with a 22-percent drop 

in 1993. 

New Rules of Origin for Textiles 

and Apparel 

Significant changes in trade patterns, particularly 

for apparel, will likely result from a provision in the 

URAA, the U.S. legislation implementing the Uruguay 

Round Agreements, which establishes for the first time 

by statute specific principles for rules of origin for U.S. 

imports of textiles and apparel. This provision, section 

334 of the act, which is not required by the GATT 

Uruguay Round Agreements, requires that the 

Secretary of the Treasury issue new rules of origin for 

public comment not later than July 1, 1995. The rules, 

subject to exceptions for existing contracts at the time 

the law was enacted, are required to become effective 

July 1, 1996. The principles set forth in the act as 

guidelines for the new rules generally conform with 

current practices with respect to fibers, yarns, and 

fabrics. However, with respect to apparel assembled in 

one country from parts cut elsewhere, the act requires 

that the rules be based on the country of assembly 

rather than that of cutting. 81 

The new rules would change the current U.S. 

practice that allows apparel manufacturers in relatively 

high-labor-cost countries with available quota, such as 

Hong Kong, Korea, Taiwan, and Singapore, to cut 

fabric into parts and have the parts sewn together in 

nearby low-cost countries, such as China, Thailand, or 

Vietnam. The finished garments can be exported to the 

United States, and the country where the parts were cut 

is considered to be the country of origin. U.S. industry 

sources contend that the current rules essentially allow 

low-labor-cost countries, particularly China, legally to 

circumvent quotas by producing garments that are 

charged to quotas of other countries. 82 

As the President and Congress were drafting the 

URAA, U.S. textile and apparel manufacturers lobbied 

for a change in rules of origin for textile products. 83 

 Representatives of the U.S. textile and apparel industry 

argued that "cutting should not subordinate the entire 

assembly process merely because cutting causes a 

change from a fabric to an assemblage of components. 

It is the assembly process that turns these components 

into a useable garment." 84They further stated that 

with high-tech, electronically controlled cutting 

systems, cutting contributes a minor part (roughly 5 

percent) to the costs of garment construction. 85 

 Finally, they added that origin rules were being used to 

"legally circumvent" quotas by permitting greater and 

greater amounts of assembly work to be done in 

low-wage countries while the finished garments were 

135 
being charged to quotas of the higher wage country in 

which the garment parts were cut or were considered to 

originate in a cutting country without quota. 86During 

House-Senate conferences to reconcile differences 

between the draft language advocated by each body of 

Congress, the specific principle that assembly confers 

origin for apparel was included in the final text of the 

URAA later passed by Congress and signed into law 

by President Clinton. 

Textile and apparel importers expressed concern 

about the impact of the proposed rules of origin insofar 

as they conflict with many origin rulings previously 

issued by Customs." Investment decisions often are 

made based on these rulings. On the other hand, some 

importers have stated that the proposed rules are more 

transparent than the current rules and thus are likely to 

result in fewer inconsistent rulings by Customs. 88 

 Importer advocates also raise the point that establishing 

the new rules of origin as prescribed by the URAA is 

counterproductive because the Uruguay Round 

Agreements provide for a 3-year program to harmonize 

rules of origin. 89They contend that the new U.S. rules 

would prejudice this work, to be undertaken under the 

Customs Cooperation Council and the WTO. The 

Clinton administration has stated that it believes the 

proposed new U.S. rules of origin for apparel based on 

assembly are not inconsistent with this effort because 

"conferring origin on the basis of cutting in certain 

circumstances was a departure from the practice 

applied in other major importing countries...."90 

136 
ENDNOTES 

1 19 U.S.C. 2251 et seq. 

219 U.S.C. 2436. 

319 U.S.C. 3351. 

4Ibid. 

558 F.R. 54169, instituting investigation No. 

TA-406-13. 

6USITC, Honey From China (investigation No. 

TA-406-13), USITC publication 2715, Jan. 1994, pp. 

1-3 and 1-4. The honey products covered by the 

investigation included natural honey, artificial honey 

containing natural honey, and preparations of honey 

from China. 

7USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 103. 

8The program and certain eligibility standards 

were modified by the Deficit Reduction Act of 1984 

and by the Omnibus Budget Reconciliation Acts of 

1981 and 1985. Additional modifications, primarily in 

job-training assistance and in coverage of certain 

workers in the oil and gas industries, were made 

through provisions of the Omnibus Trade and 

Competitiveness Act of 1988. Public Law 100-418, 

sec. 1421-1430. 

9NAFTA Implementation Act, title V, NAFTA 

Transitional Adjustment Assistance and Other 

Provisions, Public Law No. 103-182, 107 Stat. 2057, 

sec. 501-507 (Dec. 8, 1993). 

10 Sections 251 through 264 of the TAA. 

11 Derived from official statistics of the U.S. 

Department of Labor, Employment and Training 

Administration, Office of Trade Adjustment Assistance 

Management Information System. 

12Ibid. 

13NAFTA Implementation Act, Title V, NAFTA 

Transitional Adjustment Assistance and Other 

Provisions, Public Law No. 103-182, 107 Stat. 2057, 

sec. 501-507 (Dec. 8, 1993). 

14U.S. Department of Labor, "NAFTA Transitional 

Adjustment Assistance Program," U.S. Department of 

Labor Program Highlights, Fact Sheet No. ETA 

94-17. 

15During fiscal 1994, 1,019 workers filed for TRA 

and 81 workers received at least their first payment. 

16U.S. Department of Labor, "NAFTA Transitional 

Adjustment Assistance Program," U.S. Department of 

Labor Program Highlights, Fact Sheet No. ETA 

94-17. 

17Three of the orders were issued in response 

to reviews of outstanding antidumping orders and 

suspension agreements. 

18Information contained in this table was 

compiled from USTR, Report to Congress on Section 

301 Developments Required by Section 309(a)(3) of 

the Trade Act of 1974. 

19See 19 U.S.C. 1673 et seq. 

2019 U.S.C. 1677b; 19 CFR part 353, subpart D. 

21Upon the filing of a petition, the Commission 

has 45 days to make a preliminary determination of 

whether there is a reasonable indication of material 

injury or threat of material injury to an industry or of 

a material retardation of the establishment of an 

industry. If this determination is affirmative, 

Commerce continues its investigation and makes 

preliminary and final determinations concerning 

whether the imported article is being, or is likely to 

be, sold at LTFV. If Commerce reaches a final 

affirmative dumping determination, the Commission 

has 45 days thereafter to make its final injury 

determination. If the Commission's preliminary 

determination is negative, by contrast, both the 

Commission and Commerce terminate further 

investigation. 

22The 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. 

23An antidumping investigation may be 

suspended through an agreement before 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 

should LTFV sales recur. See 19 U.S.C. 1673c. 

24When a petition alleges dumping (or subsidies) 

with respect to more than one like product and/or by 

more than one country, separate investigations 

generally are instituted for imports of each product 

from each country and each such investigation may 

be given a separate number. 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 1 calendar year may not be 

completed until the next year. Thus, the number of 

petitions filed may not correspond closely to the 

number of determinations made. Additionally, the 

numbers set forth in this tabulation do not include 

determinations made following court-ordered 

remands. 

25These figures include petitions withdrawn 

voluntarily by petitioners. 

26A 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. See 19 U.S.C. 1303(a)(1), 1677(5), and 

1677-1(a). 

27Agreement on Interpretation and Application of 

Articles VI, XVI, and XXIII of the General Agreement 

on Tariffs and Trade. 

28See 19 U.S.C. 1671. 

29Section 303(a)(2) provides that "[On the case 

of any imported article or merchandise which is free 

137 
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). 

30Section 303 was repealed by the URAA, 

effective Jan. 1, 1995. 

31The figures set forth in this section do not 

include court-remanded cases on which new votes 

were taken or investigations terminated before a 

determination was reached. 

32A countervailing duty investigation may be 

suspended through an agreement before 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. See 19 U.S.C. 

1671C. 

33The numbers of investigations instituted and 

determinations made generally exceed the number of 

petitions filed. 

34Also unlawful under section 337 are other 

unfair methods of competition or unfair acts in 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. Examples of "other" unfair acts 

are misappropriation of trade secrets, common law 

trademark infringement, misappropriation of trade 

dress, false advertising, and false designation of 

origin. Unfair practices that involve the importation of 

dumped or subsidized merchandise must be pursued 

under antidumping and countervailing duty provisions 

and not under section 337. 

36Section 337 proceedings at the Commission 

are conducted before an administrative law judge in 

accordance with the Administrative Procedure Act, 5 

U.S.C. 551 et seq. 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. 

36The figures reported as duty-free imports 

under CBERA and ATPA include reduced-duty 

imports. However, in 1994 these reduced-duty 

imports accounted for less than 0.5 percent of total 

imports from designated countries. 

37Title V of the Trade Act of 1974 (Public Law 

93-618, 88 stat. 2066 and following), and title V of 

the Trade and Tariff Act of 1984 (Public 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. 91); and U.S. Congress, 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, DC, 

1990). 

38The countries that are designated as 

"beneficiary developing countries" for purposes of the 

GSP program are listed in general note 4(a) to the 

Harmonized Tariff Schedule of the United States 

(HTS). 

36For purposes of the U.S. GSP program, HTS 

provisions that have the letter "A" or "A*" in the 

special subcolumn of rates of duty column 1 

encompass the designated "eligible articles." The "A" 

indicates that all goods classifiable in that provision 

from all beneficiary countries are eligible for duty-free 

entry. The "A" indicates that all goods classifiable in 

that provision are eligible for duty-free entry, but that 

goods from at least one beneficiary country are not 

eligible for duty-free entry. General note 4(d) to the 

HTS lists those HTS provisions and the beneficiary 

countries whose goods are not eligible for duty-free 

entry. 

40 59 F.R. 65547. 

41CBERA countries are listed in table A-33. 

42Public Law 98-67, title II, 97 Stat. 384, 19 

U.S.C. 2701 et seq. Relatively minor amendments 

were made to CBERA by Public Laws 98-573, 

99-514, 99-570, and 100-418. CBERA was 

significantly expanded by the Caribbean Basin 

Economic Recovery Expansion Act of 1990, Public 

Law 101-382, title II, 104 Stat. 629, 19 U.S.C. 2101 

note. 

43For a more detailed description of the CBERA, 

including country and product eligibility, see USITC, 

The First Ten Years of CBERA: Impact of the 

Caribbean Basin Economic Recovery Act on U.S. 

Industries and Consumers: Ninth Report, 1993 

(investigation No. 332-227), USITC publication 2813, 

Sept. 1994. 

44President, "Address Before the Permanent 

Council of the Organization of American States," 

Weekly Compilation of Presidential Documents, Mar. 

1, 1982, pp. 217-223. 

46Section 213(a) of CBERA (19 U.S.C. 2703(a)) 

establishes criteria, or rules of origin, to determine 

which articles are eligible for duty-free treatment 

under the act. 

46Haiti was reinstated on October 21, 1994. 

47An agreement with El Salvador became 

effective on January 11, 1995, and on March 27, 

1995, the United States requested consultations with 

Honduras for a bilateral agreement to include GALs. 

48U.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 

138 
U.S. content is duty-free. Both the dutiable and the 

duty-free components of GAL imports are reported 

under HTS statistical reporting number 9802.00.8015. 

49 For more background on ATPA, see USITC, 

Annual Report on the Impact of the Andean Trade 

Preference Act on U.S. Industries and Consumers 

and on Drug Crop Eradication and Crop Substitution 

(investigation No. 332-352), USITC publication No. 

2814, Sept. 1994. 

50 Public Law 102-182, title II, 105 Stat. 1236, 19 

U.S.C. 3202. 

51 President, "Remarks Following Discussions 

With President Rodrigo Borja Cevallos of Ecuador," 

Weekly Compilation of Presidential Documents, July 

23, 1990, pp. 1140-1143. 

52 Section 204(a) of ATPA (19 U.S.C. 3203(a)) 

establishes rules of origin to determine which articles 

are eligible for duty-free treatment under the act. 

53 ATPA sec. 204(b), 19 U.S.C. 3203(b). 

54 President, "Proclamation 6544—To Modify the 

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. 14, 

1993, pp. 583-586; and "Proclamation 6585—To 

Designate Peru as a Beneficiary Country for 

Purposes of the Andean Trade Preference Act," 

Weekly Compilation of Presidential Documents, Aug. 

12, 1993, pp. 1608-1609. 

55 U.S. Department of Commerce, Bureau of 

Export Administration, The Effect of Imports of Crude 

Oil and Refined Petroleum Products on the National 

Security Dec. 1994. 

56 U.S. Department of Commerce, Bureau of 

Export Administration, Office of Industrial Resource 

Administration, Strategic Analysis Division, The Effect 

Of Imports of Ceramic Semiconductor Packages on 

the National Security, Aug. 1993. 

57 USITC, Wheat, Wheat Flour, and Semolina 

(investigation No. 22-54), USITC publication 2794, 

July 1994, p. 3. 

58 USDA, "Joint Release from Secretary Espy 

and U.S. Trade Representative Kantor on 

U.S./Canada Wheat Trade," news release No. 

0586.94, Aug. 2, 1994. 

59 Presidential Proclamation 6740 (To Establish 

Tariff Rate Quotas on Certain Wheat), effective Sept. 

12, 1994. 

8° This bilateral dispute is explained in further 

detail in the chapter 4 section on Canada. 

61 U.S. farmers were particularly concerned about 

the trade practices of the Canadian Wheat Board 

and Canadian subsidy programs, such as those 

authorized by the Western Grain Transportation Act. 

These complaints are addressed in the chapter 4 

section on Canada. 

62 For a description of the URA provisions for 

agricultural products receiving Government 

assistance, see USITC, Potential Impact on the U.S. 

Economy and Industries of the GATT Uruguay Round 

Agreements (investigation No. 332-353), USITC 

publication 2790, June 1994, pp. 11-1 to 11-7. 

63 Uruguay Round Agreements Act, Public Law 

103-465, Dec. 8, 1994. 

64 A tariff-rate quota applies one tariff to imports 

up to a particular amount and a different, higher tariff 

rate to imports in excess of that amount. 

65 The U.S. Meat Import Act of 1979 (Pub. Law 

88-482) became law on January 1, 1980, and 

amends the original statute, the Meat Import Act of 

1964. 

66 The law, which also encompasses imports of 

certain veal, mutton, and goat meat, does not apply 

to imports of pork, lamb, fish, or poultry meat. 

67 U.S. imports from Canada became exempt 

from the law on Jan. 1, 1989, with the 

implementation of the U.S.-Canada Free-Trade 

Agreement (Public Law 100-499). U.S. imports from 

Mexico became exempt from the law on January 1, 

1994, with the implementation of the NAFTA, (Pres. 

Proc. 6641). 

68 See 59 F.R. 727. 

69 Letter to the USTR, Dec. 23, 1993. 

70 See 60 F.R. 2074. 

71 For more information on the ATC, see USITC, 

Potential Impact on the U.S. Economy and Industries 

of the GATT Uruguay Round Agreements 

(investigation No. 332-353), USITC publication 2790, 

June 1994, pp. IV-5 to IV-7. 

72 USTR, "USTR Mickey Kantor Announces 

Chinese Textile Import Quotas to be Lowered," press 

release 93-80, Jan. 4, 1994. 

73 USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 105. 

74 Jennifer Hillman, chief textile negotiator, USTR, 

in testimony before the Commerce, Consumer, and 

Monetary Affairs Subcommittee of the Committee on 

Government Operations, U.S. House of 

Representatives, Oct. 5, 1993. 

75 The previous bilateral agreement with China 

allowed an overall average growth rate of 4.4 percent 

annually. 

76 For more information, see China section in 

chapter 4. 

77 USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 105. 

78 Ibid. 

79 For more information on the NAFTA provisions 

affecting the textile and apparel sector, see USITC, 

Potential Impact on the U.S. Economy and Selected 

Industries of the North American Free-Trade 

Agreement (investigation No. 332-337), USITC 

publication 2596, Jan. 1993, pp. 8-2 and 8-3. 

80USTR, 1995 Trade Policy Agenda and 1994 

Annual Report, p. 105. 

81 H.R. 450, 104th Congress, The Regulatory 

Transition Act of 1995, if enacted, would suspend 

these and certain other new regulations. Although 

the bill would exempt regulations required to 

implement trade agreements, these regulations would 

likely fall outside the exemption because they are not 

"required" to implement a trade agreement. Bill 

Archer, letter to William F. Clinger, Jr., Chairman, 

139 
Committee on Government Reform and Oversight, 

U.S. House of Representatives (Washington, DC: 

Feb. 13, 1995). 

82American Textile Manufacturers Institute, press 

release, "Textile and Apparel Trade Figures Show 

Need to Pass Rules of Origin Amendment" 

(Washington, DC: Aug. 18, 1994). Labor costs for 

apparel production workers in 1993 averaged $3.77 

per hour in Hong Kong and $0.25 in China. Data for 

Hong Kong from U.S. Bureau of Labor Statistics, 

"International Comparisons of Hourly Compensation 

Costs for Production Workers in Manufacturing, 

1975-1993" (Washington, DC: Nov. 1994), p. 14; data 

for China from "Hourly Labor Costs in the Apparel 

Industry," Werner Associates, New York, NY, fax 

dated Sept. 6, 1994. 

83Robin Bulman, "US Lawmakers Expected to 

Propose Tying Country of Origin to Assembly," 

Journal of Commerce, July 20, 1994, p. 1A. 

84Ibid. 

85American Textile Manufacturers Institute, press 

release, "Statement by William J. Armfield, IV, 

President, American Textile Manufacturers Institute 

regarding the Uruguay Round implementing 

legislation submitted to Congress by the 

administration" (Washington, DC: Sept. 28, 1994). 

86U.S. Department of State telegram, "Textiles: 

Australian Concern Regarding Rule of Origin 

Amendment," message reference No. 217892, 

prepared by U.S. Department of State, Washington, 

DC, Aug. 13, 1994. The referenced telegram was 

written in response to Australian concerns that 

garment parts cut in Australia and sent to countries 

with quotas for assembly and subsequent importation 

into the United States would be subject to the 

assembly country's quotas under the proposed rules. 

Under current rules, they are considered to be of 

Australian origin and free of quota. 

87Robin Bulman, "Some Textile Importers Fear 

Conflicts, Hidden Changes," Journal of Commerce, 

July 5, 1994. 

88Ibid. 

89Mudge Rose Guthrie Alexander & Ferndon, 

"Response to the Domestic Textile and Apparel 

Industry Initiative to Revise the Rules of Origin for 

Textiles and Apparel" (Washington, DC: July 18, 

1994), p. 9. 

90U.S. Department of State telegram, 'Textiles: 

Australian Concern Regarding Rule of Origin 

Amendment," message reference No. 217892, 

prepared by U.S. Department of State, Washington, 

DC, Aug. 13, 1994. 

140 
APPENDIX 

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Total all commodities 

0) 

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6--cs 

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Total all commodities Total al l commodities 

Sou rce: Compi led fromofficial statisticsof the U.S. Departmentof Co

mmerce. 

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a 

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• 

'0 '0 o E o as C 

2 5 

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8 CO 

v 8 c • c 

as C Cli .0 = 0 0 0) 03 0) ,„ C 

N 0 Zr) = 0) t CI) c E c -E "0 0 

= 8 = c 0)- - w Iii id CO G) c 0 M a) m m = - -'1 a Z-0 - 0 02 C 

▪ 

w7D- E = = E E co c EE iam = .2 

O 

9 _ 

a ,- c 1.-- , o CI) .- 0 0 03a E E ci) 9 y = a a) :P o - z 

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E S 0_ as 

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c -M-0 

W ..0 CL CD W W > MCI- Y 3 2 48.SW b .1--- - 0 c 0 

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0.) w P 0 ,_ .c -..- c:2 0 P >"0.000.C10,_.0 

C -- Oz Co ' W 04-. 00-Warn 5 0 C c) 8 FiL 5:§ -8 0) m '5 F2.- as 0, c 0) m +- ca ca 0) 

_,JEa5(4:2is.7105 _cis car

o 

I0lisoncc s ..cp "0wmc0 - 0 c as -c,c a >,,-- CA 'a "0 oc c wo . a 

moTc.c=2 m- m w' _ 7:5 

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0 41 EW CC WC 

a8d-Etliga - Cii.la 8.2 -CD 

°a 

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MCmooM-viC =. ,_ a- w= 

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w f .... 

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(3.d.ca..E ..45 -0." 

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--cz w ..- co .- ..-= w 0 w .... c $. ow 0a 9 c).- , @ cm; > g_- 8:e u, 0 

212.8WWWE 

T:, a, . _,... -„ , . cp. 2‘,„ . 

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= .0-..,. - E ., .8..„2 . 0.0_00,_... ,

wt4 w. . . „

° 

.., . > 0 .0-0. >,...A> 0 6o•-""co -' ---c -m" 

6,-:.00-G122 O w11. 6 g al5 OSV:2- cll aorga-S 4-+-Emwo '-' 12w"-"-- w-m (1)."(5 • K-0 -cts- o w.:2-:.0=. 0,0..._Eo- 0 =2.c›: 0 w=m0 , = E>ow=0.4cE5.0sEwoo.m2-otwa m c2c2c0 

C 0, -0 =as -E 0 ,.. oc, „ 8 asl,=-0 .20 ass ,1'.5 w -0 0 CO . -9.7. 

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t 0.= 

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0 a b< ail) a Ha aw 2 a 52D M2wHw 

rN OM V' ON MN'

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U) cl- Nt N ON NO N 0 000 ONFMONt 

CO WM WW CO CO) WM W M MWM WWMW(0 

co. 

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150 
0 

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co 

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Total al l commodities 

Source : Compiled fromofficial statisticsof the U.S. Departmentof Commerce. 

NI- COMst MTJ

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✓ mcOMWrr MN-0 

- MCN000)0)tF 0 

C6 COO O)00' 16 

NN000.ct ONNtNit N ✓ r 00N COCOMON 

• c.1,- .47(.6 (NI <15 C\I 

NI' CONt MCONOMM 

MCOV

MMNOOntNt MO 1-i)NMI'.- M01(000 

J0,06dr,aosaao0 

NrMvt ON%r W 

CO 

r 

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r 

N -- vitriod In r 

COMMet 00r 00r 

NCONCONCOM0 

COV, M0r00000

,-- 

Ti 16 C6 C6 ci c6c5,- ONMMCONMr NM 

0 CON.- rd

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C‘i 

0) 

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WWMNCOvt NMWN 

MCOrM,tNWWMr 

C■i. ci 1.6 ci a a c9 0) 

CO CONN rN WW

,w,r 

MCONM 00.4

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ceiccida 

NMONNCONNCO.t 

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coadocritric 

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N v7 ado-: 

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MNNCOrNWCOMN 

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it) 

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CD 

CO 

CO 

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CO 

CO 

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CO QS o Ete Lu C

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83 m .5 cLast,,tt 

wob- wz  cm .E° Ma m row-mm=(0 c cuas c „t o . x ..- o ococot.t. 

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0) -0 0).0 aCs 

W 91 ,7iTC

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CIW .?-:7,Cliwro W EMOW 

co,

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11.0302<020 

Or NMNFLOONCOM 

CC a) 

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co E 3 

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C CIE W OW 

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apomatmoax_- 2:; 

ws.5761a

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Total all commodities 

N 

0 

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151 
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O 

O 

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(4, 

0) 

E 

2 

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8 

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2 

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co. 

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CO 

0) 

CO,- M 0 COOWNN OCOMMN MOM 0,- M 

0 741. W ON52,--03 1,132r7 NOM NW CO W M si,CON CO OW ,- 

U50 

0 cONFLoNo0 

NO OS d d4,-7d4 K,.:asad 

m

61.66 oci4 mi: OM 7- momm,- op4v 4 N.N. 4 N. oc0000 4 m mo om o 

mom mm Co 

T 7- 

LOW M 0 0)

MM 0 N- ,-

,-030301 MCONMO 0)O0 NN 

,- NFcrW rcOOn•O 0 ,4' ,- OW COO) N 1■ 0000W 00,-0 ,- NFMW NC) 

a- a 'ji N.0)-ON ridold Kda dd. C) o ,- 0) ,-co ,-c.im Moo CO NCO N- Nr■ M N TT: cm - CO NMONt ct 00,- M 01M,- MN 

M ,-,- ,- 

,- 

CO CO 

CO 

ON 03 M 030 .q'NFO NOM,-01 NNO1 00 NS' 

OW CO CO NN000 •ckNI- NNW Ocor Nct N 

NN N Co NFONYNO "-CONC..-. 001■ ,* MM 0 

airs' _ (0 cou5,--dd dddNei N:N.76 Rd 4 

N 03N. 0 OMNION NtNr,-MN ,4•003 OM Co 

m N M m Co WMckV'M NN ,- 030 M0,- MN 

M ,-,- 

1- 

,- 

• • 6 

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. . To 

U) C 

CD N.w W 

c ai co 0 c 

CO rrt C COla -OW Ct til Lti 

L 

0- o TIS .co 

_c 2 7, -w- 0 m CL 

al a 2 a 

'8 COS a) Lo >... _c o_ co 0 '._. 0 CO 0) c Lo us ui a c N 0 -13 IP so .s. w a) O a) 4:1: co w g w o cw.-- 

n 

03 U 75 O. z ; U3 -0 0 

CO CU as 0 a) m .c .c 0 a) co 0) m .F. w 0 . . .. 0. 

_ > > 0 o '5 N .c 

c

a) a ",E, 8 

O 8 .c 0. 7-_- 0 0 ,.. 0 E°m - 

N O ,_ „. R c 00 13 13 Cr) = 2. 0 

w E 0 1•54 E5 o 

us ti co 2'6 t, = 

c c= a1 vw C0 w 0 m 

_c c 0 t

o 

s, E .° ' 0o_ L8 - v a: '7" 13"-^ ZEE 

aS C = c 1 aroP :0‘gwW o 2 

m"-• 0 0 C*0 Fi.2 E i5 a O as 43 asoN,-- 

- 

 .c oasw 88 

M m =NI' 0.c 5 2 .g.-5 I:1_ _ 

0 as 0 0 co c co 

13 0.2 o) CL w ot-w RS aS 

co 00) 2= m2 

V 

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C 

.0 a) a CA wm— .•-• La..c.,_ 731 -es C cm ,,. 5 713t 6`) to El ca "O Q) 0 — 0 '''' 0 0, ca= 3-) .-. a '5 0 a) mas Ns- tm 2Am c.c 03CLC W m 0 .0 ._ ivi-c 5:0 . 0 c w w a) 130-,=4-eM cop -lam wo m uz . 

8 .... 

0 3 so +-co 

0 

w"— 

c ›,tww w—w 

Ta...-51 

000 = -...c 

me 

0c 

O CA .:1 

.., a) a) .9-EPaliW 

-0 o as cl.0. 

E a) = o c - a- ra-I 

m 

.c .c 2 0 

'E 

w 45 tr. ..r.o (v..= , 6. 0 cm.cil. w c O a..._ .5 n., cptcz >. 2 a. 0 40 Ocowwactg o -casm ,_(,,, 

co = wE.-i‘-ata.-co 75 1g2g 8-.0 

E 

w 0 0 so .-00 4 E — CD '- a)Ca C . .c "0 i 8 

m 

2 Cf.E.E -Zo.2.; -2 "I

0 

c13"6 a) 

mr, ozcmo m6w — wm ww m - ..,c... al> ,_ c ...._o colsk, 

.(1) -0,0 ww t-c w:gwEO 81E8 - ccob°w°— *- ww..-.- :c A co— ew 00.1"- cw—ww ( v a) 3 v ,-.-....,c w w oa6z— C>. C mOW c,- .c 

as (),(2.5"D-2.2 al 

t :Eww: m IT:T.) 

N '..(71.8 w r8:-SE m(1.) 8a=mwom asm

- -- 0 0 m wsioxE8 id ..w ..o m w was =, , co w _,.co ,_ 

v-9,v0-was 

c -0 

75vw0,--00,8 ‘ =v-88 04-, 7,1 

w ._= -sw0-e;co- iii° 0w0 10 0 0 as ,-...--c w. spas m O=-0 ow' at.u — coccc o o as ta — Ca a) o o ora c 0.Ca r: -co w w =I- ns,2ar.)-a.2.2

u)

x.c4=--5.....2t.2LorT o s>. 1.-1 co 04-c— a) - 0) as o a) co - as co as w a) r as as as as. as w as al w m 

111.00. E 0_ <C1-000_0_ 08. 110fr 0_110_ 00_ 

mom o o 00000 000 04* mocm Co o mmomm m0)0)

MciM 4 O 66,-46 cic\i, c

H C 0

.kfica 66 mm 4 NNooN st•t000 0100M 

NCON 0N- Ocl- N00 oo404 moo coN. =Z mmm Co N McOrc0C0 WWM ,-00 00300 ct00 

6

a) 

V 

C 

O 

V 

a) 

a 

U) 

a) 

To' 

O 

O 

cts 

0 

as 

as GS 2 N a) 

E 

O 

0 

t, 

U) t 

CA 

E 

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a) W . 

0 Cri 

73- 

w 

E.2 17; 

2 as 

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a.g 0= i3 0 

00 

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"6"ow 

Sa 

CIS 0 

0 • 

I W 

a, 

g 0) 

Total,U.S.exportsto Mexico 

152 
NN 

OW 

Mr 

!-6 

NO 

MM 

n 

r M. 

N 

V 

U) 

N 

V 

M 

M 

M 

01 

00 

CO 

WON 

MC002 

MV1.0 

N0D 

CONM 

MN 

MO 

MO via CON 

NN 

N 

CO 

M 

0 

V 

CO 

N 

Nf 

N 

r 

N 

CO 

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155 
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156 
Wr LOCtNr 0000 

ct Mr OctNr OWO 

r N MOOMM1`, 

oiusui.eddKaLri 

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1.6 

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0. 

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0 

6 

6 

Total all commodities 

0 

C 

To 

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(13 

Ta .0 

C1)

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a) 

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a) C013 2-0 • a) -Ewa) zacic m02 a-lIsmui° E fm 

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a ;6 

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Total all commodities 

O

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157 
0 

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8 

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177 
Table A-25 

Antidumping orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original actions 

Argentina: 

Silicon metal Sept. 26, 1991 

Rectangular tubing May 26, 1989 

Barbed wire Nov. 13, 1985 

Carbon steel wire rods Nov. 23, 1984 

Armenia: Urea July 14, 1987 

Australia: 

Corrosion-resistant carbon steel flat products Aug. 19, 1993 

Canned Bartlett pears Mar. 23, 1973 

Austria: Railway track equipment Feb. 17, 1978 

Azerbaijan: Urea July 14, 1987 

Bangladesh: Shop towels Mar. 20, 1992 

Belarus-Baltic: Urea July 14, 1987 

Belgium: 

Cut-to-length carbon steel plate Aug. 19, 1993 

Phosphoric acid Aug. 20, 1987 

Sugar June 13, 1979 

Brazil: 

Silicomanganese Dec. 22, 1994 

Ferrosilicon Mar. 14, 1994 

Stainless steel wire rods Jan. 28, 1994 

Cut-to-length carbon steel plate Aug. 19, 1993 

Lead and bismuth steel Mar. 22, 1993 

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: 

Corrosion-resistant carbon steel flat products Aug. 19, 1993 

Cut-to-length carbon steel plate Aug. 19, 1993 

Magnesium Aug. 31, 1992 

Steel rail Sept. 15, 1989 

Color picture tubes Jan. 7, 1988 

Brass sheet and strip Jan. 12, 1987 

Oil country tubular goods June 16, 1986 

Construction castings Mar. 5, 1986 

Raspberries June 24, 1985 

Sugar and syrups Apr. 9, 1980 

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 

Ecuador: Fresh cut flowers Mar. 18, 1987 

Estonia: Urea July 14, 1987 

Finland: Cut-to-length carbon steel plate Aug. 19, 1993 

France: 

Calcium aluminate flux June 13, 1994 

Stainless steel wire rods Jan. 28, 1994 

Corrosion-resistant carbon steel flat products Aug. 19, 1993 

Lead and bismuth steel Mar. 22, 1993 

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 

See footnote at end of table. 

178 
Table A-25-Continued 

Antidumping orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original action1 

Georgia: 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

Germany: 

Cold-rolled carbon steel flat products Aug. 19, 1993 

Corrosion-resistant carbon steel flat products Aug. 19, 1993 

Cut-to-length carbon steel plate Aug. 19, 1993 

Lead and bismuth steel Mar. 22, 1993 

Rayon yarn June 30, 1992 

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 

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. 8, 1972 

Greece: Electrolytic manganese dioxide Apr. 17, 1989 

Hungary: Tapered roller bearings June 19, 1987 

India: 

Forged stainless steel flanges Feb. 9, 1994 

Stainless steel wire rod Dec. 1, 1993 

Sulfanilic acid Mar. 2, 1993 

Pipes and tubes May 12, 1986 

Iran: Pistachio nuts July 17, 1986 

Israel: 

Phosphoric acid Aug. 19, 1987 

Oil country tubular goods Mar. 6, 1987 

Italy: 

Grain-oriented electric steel Aug. 12, 1994 

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 

Pressure sensitive tape Oct. 21, 1977 

Large power transformers June 14, 1972 

Japan: 

Grain-oriented electric steel June 10, 1994 

Defrost timers Mar. 2, 1994 

Corrosion-resistant carbon steel flat products Aug. 19, 1993 

Electric cutting tools July 12, 1993 

Lenses Apr. 15, 1992 

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 

See footnote at end of table. 

179 
Table A-25-Continued 

Antidumping orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original action1 

Japan:-Continued 

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 March 25, 1988 

Color picture tubes Jan. 7, 1988 

Tapered roller bearings over 4 inches Oct. 6, 1987 

Filament fabric Sept. 23, 1987 

Cast-iron pipe fittings July 6, 1987 

Butt-weld pipe fittings Feb. 10, 1987 

Cellular mobile telephones Dec. 19, 1985 

Neoprene laminate July 19, 1985 

Calcium hypochlorite Apr. 18, 1985 

Titanium sponge Nov. 30, 1984 

Cyanuric acid Apr. 27, 1984 

Pagers Aug. 16, 1983 

High powered amplifiers July 20, 1982 

Large electric motors Dec. 24, 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. 8, 1976 

Polychloroprene rubber Dec. 6, 1973 

Steel wire rope Oct. 15, 1973 

Synthetic methionine July 10, 1973 

Roller chain Apr. 12, 1973 

Bicycle speedometers Nov. 22, 1972 

Large power transformers June 14, 1972 

Fishnetting June 9, 1972 

Television receiving sets Mar. 10, 1971 

Kazakhstan: 

Titanium sponge Aug. 28, 1994 

Ferrosilicon Apr. 7, 1993 

Urea July 14, 1987 

Kenya: Standard carnations Apr. 23, 1987 

Kyrgyzstan: Urea July 14, 1987 

Latvia-Baltic: Urea July 14, 1987 

Lithuania: Urea July 14, 1987 

Malaysia: Extruded rubber thread Oct. 7, 1992 

Mexico: 

Cut-to-length carbon steel plate Aug. 19, 1993 

Steel wire rope Mar. 25, 1993 

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 

Netherlands: 

Aramid fiber June 24, 1994 

Cold-rolled carbon steel flat products Aug. 19, 1993 

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 

People's Republic of China: 

Cased pencils Dec. 28, 1994 

Silicomanganese Dec. 22, 1994 

Paper clips Nov. 25, 1994 

Garlic Nov. 16, 1994 

Sebacic acid July 14, 1994 

Lock washers Oct. 19, 1993 

Ductile iron fittings Sept 7, 1993 

See footnote at end of table. 

180 
Table A-25-Continued 

Antidumping orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original actions 

People's Republic of China:-Continued 

Ferrosilicon Mar. 11, 1993 

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 

Poland: Cut-to-length carbon steel plate Aug. 19, 1993 

Romania: 

Cut-to-length carbon steel plate Aug. 19, 1993 

Ball bearings May 15, 1989 

Urea July 14, 1987 

Tapered roller bearings June 19, 1987 

Russia: 

Ferrosilicon June 24, 1993 

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 

South Korea: 

Cold-rolled carbon steel flat products Aug. 19, 1993 

Corrosion-resistant carbon steel flat products Aug. 19, 1993 

DRAMS May 10, 1993 

Steel wire rope Mar. 26, 1993 

Stainless steel butt-weld pipe fittings Feb. 23, 1993 

Welded stainless steel pipes Dec. 30, 1992 

Circular welded non-alloy pipe Nov. 2, 1992 

PET film June 5, 1991 

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 

Spain: 

Cut-to-length carbon steel plate Aug. 19, 1993 

Potassium permanganate Jan. 19, 1984 

See footnote at end of table. 

181 
Table A-25-Continued 

Antidumping orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original actions 

Sweden: 

Cut-to-length carbon steel plate Aug. 19, 1993 

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 

Stainless steel plate June 8, 1973 

Taiwan: 

Forged stainless steel flanges Feb. 9, 1994 

Lockwashers June 28, 1993 

Stainless steel butt-weld pipe fittings June 16, 1993 

Welded stainless steel pipes Dec. 30, 1992 

Circular welded non-alloy pipe Nov. 2, 1992 

Lug nuts Sept. 20, 1991 

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 

Tajikistan: Urea July 14, 1987 

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: 

Uranium Aug. 30, 1993 

Ferrosilicon Apr. 7, 1993 

Urea July 14, 1987 

Titanium sponge Aug. 28, 1968 

United Kingdom: 

Cut-to-length carbon steel plate Aug. 19, 1993 

Lead and bismuth steel Mar. 22, 1993 

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 

Venezuela: 

Ferrosilicon June 24, 1993 

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 

See footnote at end of table. 

182 
Table A-25—Continued 

Antidumping orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original actions 

Japan:—Continued 

Color negative photo paper Aug. 12, 1994 

Erasable programmable read-only memory chips Aug. 16, 1986 

Small motors Nov. 6, 1980 

Kazakhstan: Uranium Oct. 26, 1992 

Kyrgyzstan: Uranium Oct. 26, 1992 

Netherlands: Color negative photo paper Aug. 12, 1994 

Russia: Uranium Oct. 26, 1992 

Urkraine: Silicomanganese Nov. 25, 1994 

Uzbekistan: Uranium Oct. 26, 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. 

183 
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184 
Table A-27 

Countervailing-duty orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original action1 

Argentina: 

Leather Oct. 2, 1990 

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 

Heavy-walled rectangular tubing Sept. 27, 1988 

Light-walled rectangular tubing Sept. 27, 1988 

Standard pipe Sept. 27, 1988 

Line pipe Sept. 27, 1988 

Belgium: Cut-to-length carbon steel plate Aug. 17, 1993 

Brazil: 

Cut-to-length carbon steel plate Aug. 17, 1993 

Lead and bismuth steel , Mar. 22, 1993 

Brass sheet and strip Jan. 8, 1987 

Construction 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 

Steel rails Sept. 22, 1989 

Live swine Aug. 15, 1985 

Chile: Standard carnations Mar. 19, 1987 

Ecuador: Fresh cut flowers Jan. 13, 1987 

European Union:2Sugar July 31, 1978 

France: 

Corrosion-resistant carbon steel flat products Aug. 17, 1993 

Lead and bismuth steel Mar. 22, 1993 

Brass sheet and strip Mar. 6, 1987 

Germany: 

Cold-rolled carbon steel flat products Aug. 17, 1993 

Corrosion-resistant carbon steel flat products Aug. 17, 1993 

Cut-to-length carbon steel flat products Aug. 17, 1993 

Lead and bismuth steel Mar. 22, 1993 

India: 

Sulfanilic acid Mar. 2, 1993 

Certain iron-metal castings Oct. 16, 1980 

Iran: 

Roasted pistachios Oct. 7, 1986 

Raw pistachios Mar. 11, 1986 

Israel: 

Industrial phosphoric acid Aug. 19, 1987 

Oil country tubular goods Mar. 6, 1987 

Fresh cut roses Sept. 4, 1980 

Italy: 

Grain-oriented electric steel June 7, 1994 

Malaysia: 

Extruded rubber thread Aug. 25, 1992 

Carbon steel wire rod Apr. 22, 1988 

Mexico: 

Cut-to-length carbon steel flat products Aug. 17, 1993 

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 

See footnotes at end of table. 

185 
Table A-27-Continued 

Countervailing-duty orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original actions 

New Zealand:-Continued 

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: Shop towels Mar. 9, 1984 

Peru: 

Pompon chrysanthemums Apr. 23, 1987 

Rebar Nov. 27, 1985 

Apparel Mar. 12, 1985 

Textiles Mar. 12, 1985 

Cotton sheeting and sateen Feb. 1, 1983 

Cotton yarn Feb. 1, 1983 

Singapore: 

Ball bearings May 3, 1989 

Cylindrical roller bearings May 3, 1989 

Needle roller bearings May 3, 1989 

Spherical plane bearings May 3, 1989 

Spherical roller bearings May 3, 1989 

South Africa: Ferrochrome Mar. 11, 1981 

South Korea: 

Cold-rolled carbon steel flat products Aug. 17, 1993 

Corrosion-resistant carbon steel flat products Aug. 17, 1993 

Stainless steel cookware Jan. 20, 1987 

Spain: 

Cut-to-length carbon steel flat products Aug. 17, 1993 

Stainless steel wire rod Jan. 3, 1983 

Sri Lanka: Textiles Mar. 12, 1985 

Sweden: 

Cut-to-length carbon steel flat products Aug. 17, 1993 

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, 1987 

Rice Apr. 10, 1986 

Pipes and tubes Aug. 14, 1985 

Certain apparel Mar. 12, 1985 

Turkey: Pipes and tubes Mar. 7, 1986 

United Kingdom: 

Cut-to-length carbon steel flat products Aug. 17, 1993 

Lead and bismuth steel Mar. 22, 1993 

Venezuela: 

Ferrosilicon May 10, 1993 

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 

Suspension agreements in effect: 

Argentina: Wire rod Sept. 27, 1982 

Brazil: 

Crankshafts July 28, 1987 

Orange juice Mar. 2, 1983 

Colombia: 

Miniature carnations Jan. 13, 1987 

Cut flowers Jan. 9, 1986 

Textiles Mar. 12, 1985 

See footnotes at end of table. 

186 
Table A-27—Continued 

Countervailing-duty orders and findings in effect as of Dec. 31, 1994 

Effective date of 

Country and commodity original actions 

Costa Rica: Cut flowers Jan. 13, 1987 

Peru: Shop Towels Sept. 12, 1984 

Singapore: Compressors Nov. 7, 1983 

Thailand: Textiles Mar. 12, 1985 

1The 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. 

2 Includes Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, and the 

United Kingdom. 

Source: U.S. Department of Commerce, International Trade Administration. 

187 
Table A-28 

Sec. 337 investigations completed by the U.S. International Trade Commission during 1994 and those 

pending on Dec. 31, 1994 

Article Commission Determination 

Woodworking 

Accessories 

Anisotropically 

Etched One 

Megabit and Greater 

DRAMs, Components 

Thereof, and Products 

Containing Such DRAMs 

Anti-Theft 

Deactivatable 

Resonant Tags 

and Components 

Thereof 

Sputtered Carbon 

Coated Computer 

Disks and Products 

Containing Same, 

Including Disk 

Drives 

Removable Hard 

Disk Cartridges 

and Products 

Containing Same 

Personal Computers 

With Memory 

Management 

Information 

Stored In 

External 

Memory and 

Related Materials 

Tape Dispensers 

Vehicle Security 

Systems and 

Components 

Thereof 

Integrated Circuit 

Devices, Processes 

For Making Same, 

Components Thereof, 

and Products 

Containing Same 

Sports Sandals and 

Components 

Thereof 

Status of 

Investigation 

Completed: 

337-TA-333 

337-TA-345 

337-TA-347 

337-TA-350 

337-TA-351 

337-TA-352 

337-TA-354 

337-TA-355 

337-TA-356 

337-TA-357 

Country' 

Taiwan 

Korea 

Bermuda, Canada, 

Japan, 

Switzerland 

Japan, Taiwan 

France 

Taiwan 

Hong Kong, Taiwan 

Taiwan 

Japan 

Peoples Republic 

of China 

Ancillary candor proceeding 

completed. 

Terminated based on a settlement 

agreement. 

Terminated based on a finding of 

no violation. 

Terminated based on a settlement 

agreement. 

Terminated based on a settlement 

agreement. 

Terminated based on summary 

determination of no violation. 

Issued a general exclusion order. 

Terminated based on summary 

determination of no violation. 

Termination based on a settlement 

agreement. 

Terminated based on a settlement 

agreement and consent order. 

See footnotes at end of table. 

188 
Table A-28—Continued 

Sec. 337 investigations completed by the U.S. International Trade Commission during 1994 and those 

pending on Dec. 31, 1994 

Status of 

Investigation Article Countryi Commission Determination 

Completed:—Continued 

337-TA-359 Dielectric Miniature 

Microwave Filters and 

Multiplexers Containing 

Same 

Canada Terminated based on a settlement 

agreement. (Note: Outstanding 

temporary limited exclusion order 

expired with the termination of the 

investigation.) 

337-TA-360 Devices for Taiwan Issued a general exclusion order. 

Connecting 

Computers Via 

Telephone Lines 

337-TA-362 Methods of 

Assembling Plastic 

Ball Valves and 

Components 

Germany Terminated as to two respondents 

based on a settlement agreement 

and as to the remaining respondents 

based on withdrawal of complaint. 

337-TA-363 Multibrand Infrared 

Remote Control 

Hong Kong Terminated based on withdrawal 

of complaint. 

Transmitters 

Pending: 

337-TA-228 Fans with Brushless 

DC Motors 

Japan Advisory opinion proceeding 

pending before the AU. 

337-TA-315 Plastic Encapsulated No foreign Enforcement proceeding pending 

Integrated Circuits respondents before the AU. 

337-TA-349 Diltiazem 

Hydrochloride 

and Diltiazem 

Finland, Israel, 

Italy 

Pending before the AU. 

Preparations 

337-TA-358 Recombinantly Denmark, Israel Pending before the Commission. 

Produced Human 

Growth Hormones2 

337-TA-361 Portable On-Car Germany Pending before the Commission. 

Disc Brake Lathes 

and Components Thereof 

337-TA-364 Curable Fluorelastomer Italy Pending before the Commission. 

Compositions and 

Precursor Thereof 

337-TA-365 Audible Alarm Taiwan Pending before the AU. 

Devices for 

Divers 

337-TA-366 Microsphere Taiwan Pending before the AU. 

Adhesives, Process 

For Making Same, 

and Products 

Containing Same, 

Including SelfStick Repositionable 

Notes 

337-TA-367 Facsimile Machines 

and Components Thereof 

Korea Pending before the AU. 

See footnotes at end of table. 

189 
Table A-28—Continued 

Sec. 337 investigations completed by the U.S. International Trade Commission during 1994 and those 

pending on Dec. 31, 1994 

Status of 

Investigation Article Countryl Commission Determination 

Pending:—Continued 

337-TA-368 Rechargeable Nickel Japan Pending before the AU. 

Metal Hydride Anode 

Materials and 

Batteries, and 

Products Containing 

Same 

1 This column lists the countries of the foreign respondents named in the investigation. 

2 Subsequent to the filing of this Sec. 337 complaint, the Commission initiated a related Sec. 603 investigation. 

The Sec. 337 investigation was instituted upon termination of the Sec. 603 investigation. 

Source: U.S. International Trade Commission, Office of Unfair Import Investigations. 

190 
Table A-29 

Outstanding sec. 337 exclusion orders as of Dec. 31, 1994 

Investigation 

No. Article Countryl 

Date patent 

expires2 

337-TA-55 Certain Novelty Glasses Hong Kong Non-patent 

337-TA-59 Certain Pump-Top Insulated Containers Korea, Taiwan Sept. 12, 1995 

337-TA-69 Certain Airtight Cast-Iron Stoves Taiwan, Korea Non-patent 

337-TA-74 Certain Rotatable Photograph and Card 

Display Units and Components Thereof Hong Kong Non-patent 

337-TA-87 Certain Coin-Operated Audio-Visual Games 

and Components Thereof Japan, Taiwan Non-patent 

337-TA-105 Certain Coin-Operated Audio-Visual Games 

and Components Thereof Japan, Taiwan Non-patent 

337-TA-112 Certain Cube Puzzles Canada, Japan, Taiwan Non-patent 

337-TA-114 Certain Miniature Plug-In Blade Fuses Taiwan Non-patent 

Dec. 26, 1995 

337-TA-118 Certain Sneakers With Fabric Uppers and 

Rubber Soles Korea Non-patent 

337-TA-137 .... Certain Heavy-Duty Staple Gun Tackers Korea, Hong Kong, Taiwan Non-patent 

337-TA-139 ... Certain Caulking Guns Korea, Taiwan Mar. 28, 1995 

337-TA-140 .... Certain Personal Computers and 

Components Thereof Hong Kong, Singapore, 

Switzerland, Taiwan Jan. 23, 1996 

July 14, 1998 

337-TA-143 ... Certain Amorphous Metal Alloys and 

Amorphous Metal Articles Japan, West Germany Sept. 9, 1997 

337-TA-146 .... Certain Canape Makers No foreign respondents Mar. 22, 1997 

337-TA-152 .... Certain Plastic Food Storage Containers Hong Kong, Taiwan Non-patent 

337-TA-161 ... Certain Trolley Wheel Assemblies Korea Aug. 29, 1995 

337-TA-167 ... Certain Single Handle Faucets Taiwan Non-patent 

337-TA-170 ... Certain Bag Closure Clips Israel Nov. 2, 1999 

July 26, 2000 

337-TA-174 ... Certain Woodworking Machines South Africa, Taiwan Non-patent 

Nov. 13, 1996 

Mar. 13, 2001 

337-TA-195 Certain Cloisonne Jewelry Taiwan Non-patent 

337-TA-197 Certain Compound Action Metal Cutting 

Snips and Components Thereof Taiwan Non-patent 

337-TA-228 Certain Fans With Brushless DC Motors Japan Jan. 15, 2002 

337-TA-229 Certain Nut Jewelry and Parts Thereof Philippines, Taiwan Non-patent 

337-TA-231 Certain Soft Sculpture Dolls, Popularly 

known as "Cabbage Patch Kids," Related 

Literature, and Packaging Therefor No foreign respondents Non-patent 

337-TA-240 Certain Laser Inscribed Diamonds and 

the Method of Inscription Thereof Israel July 12, 2000 

337-TA-242 Certain Dynamic Random Access 

Memories, Components Thereof, and 

Products Containing Same Japan, Korea Mar. 28, 1995 

Aug. 26, 2002 

Sept. 24, 2002 

337-TA-254 ... Certain Small Aluminum Flashlights 

and Components Thereof Hong Kong, Taiwan Mar. 18, 2003 

337-TA-266 .... Certain Reclosable Plastic Bags and Tubing .... Singapore, Taiwan, 

Korea, Thailand, 

Hong Kong Non-patent 

337-TA-267 .... Certain Minoxidil Powder, Salts and 

Compositions for Use in Hair Treatment Austria, Canada, 

Finland, Italy, Mexico, 

Switzerland Feb. 13, 1996 

Feb. 13, 1996 

337-TA-276 .... Certain Erasable Programmable Read Only 

Memories, Components Thereof, Products 

Containing Such Memories, and Processes 

for Making Such Memories Korea July 25, 1995 

Sept. 16, 1997 

July 12, 2000 

May 21, 2002 

Aug. 4, 2004 

337-TA-279 ... Certain Plastic Light Duty Screw Anchors Taiwan Non-patent 

See footnotes at end of table. 

191 
Table A-29—Continued 

Outstanding sec. 337 exclusion orders as of Dec. 31, 1994 

Investigation 

No. Article Countryl 

Date patent 

expires2 

337-TA-285 ... Certain Chemiluminescent Compositions and 

Components Thereof and Methods of Using, 

and Products Incorporating, the Same France Non-patent 

Feb. 28, 1995 

Feb. 2, 1999 

Non-patent 

Mar. 15, 2000 

337-TA-287 ... Certain Strip Lights Taiwan 

337-TA-293 ... Certain Crystalline Cefadroxil Monohydrate Italy, Spain, 

Switzerland 

337-TA-295 ... Certain Novelty Teleidoscopes Hong Kong 

337-TA-308 ... Certain Key Blanks For Keys of High Security 

Cylinder Locks Korea Jan. 13, 2004 

Jan. 13, 2004 

337-TA-314 ... Certain Battery-Powered Ride-On Toy 

Vehicles and Components Thereof Taiwan Sept. 22, 2001 

Dec. 10, 2002 

Jan. 31, 2003 

Jan. 27, 2004 

Dec. 01, 2004 

Mar. 12, 2002 

 Non-patent 

337-TA-319 .... Certain Automotive Fuel Caps and Radiator 

Caps and Related Packaging and 

Promotional Materials Taiwan Non-patent 

Apr. 11, 1995 

May 30, 1995 

Dec. 11, 1996 

June 30, 2004 

Aug. 23, 2005 

337-TA-320 .... Certain Rotary Printing Apparatus Using 

Heated Composition, omponents Thereof, 

and Systems Containing Said Apparatus and 

Components 

337-TA-321 .... Certain Soft Drinks and Their Containers 

337-TA-324 ... Certain Acid-Washed Denim Garments and 

Accessories 

337-TA-333 ... Certain Woodworking Accessories 

337-TA-337 ... Certain Integrated Circuit Telecommunication 

Chips and Products Containing Same, 

Including Dialing Apparatus 

337-TA-344 ... Certain Cutting Tools For Flexible Plastic 

Conduit and Components Thereof 

337-TA-354 .... Certain Tape Dispensers 

337-TA-360 .... Certain Devices For Connecting Computers 

Via Telephone Lines 

France, Spain Dec. 24, 2002 

Colombia Non-patent 

Brazil, Chile, 

Hong Kong, Taiwan Apr. 26, 2005 

Taiwan Feb. 21, 2006 

Taiwan May 1, 2001 

Taiwan June 29, 1999 

Hong Kong, Taiwan Apr. 7, 2001 

Taiwan Feb. 13, 2007 

1 This column lists the countries of the foreign respondents named in the investigation. 

2Multiple dates indicate the expiration dates of separate patents within the investigation. 

Source: U.S. International Trade Commission, Office of Unfair Import Investigations. 

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Table A-33 

U.S. imports for consumption under CBERA, by country, 1990-94 

(1,000 dollars) 

Rank Country 1980 1991 1992 1993 1994 

1 Dominican Republic 311,075 402,507 543,124 657,673 751,028 

2 Costa Rica 218,380 249,553 294,803 388,251 478,109 

3 Guatemala 154,205 137,157 189,649 208,262 171,381 

4 Trinidad and Tobago 38,274 26,542 44,695 44,602 142,901 

5 Honduras 67,891 80,464 112,511 127,399 139,838 

6 Nicaragua 174 16,849 40,018 74,408 80,554 

7 Jamaica 60,689 60,080 48,154 76,496 69,316 

8 Bahamas 8,578 10,652 93,324 167,110 45,062 

9 El Salvador 28,313 30,041 27,075 26,530 41,126 

10 Panama 12,344 17,417 23,753 38,523 35,141 

11 Barbados 15,198 15,728 15,478 20,176 21,313 

12 St. Kitts and Nevis 10,136 5,857 14,172 15,985 17,220 

13 Haiti 63,793 50,053 17,277 33,378 15,770 

14 Belize 18,566 5,445 23,733 12,526 13,112 

15 Guyana 521 506 1,202 1,246 13,100 

16 St. Lucia 3,552 3,195 3,935 4,463 6,077 

17 Netherlands Antilles 4,518 5,241 2,964 3,489 3,214 

18 Dominica 1,330 1,365 1,008 1,293 2,112 

19 St. Vincent and 

Grenadines 1,517 140 165 233 1,299 

20 Montserrat 0 0 41 271 886 

21 Antigua 675 548 324 1,110 809 

22 Grenada 2,809 1,307 1,081 144 768 

23 Aruba 4 0 10 21 12 

24 British Virgin Islands 157 52 68 17 11 

Total 1,022,686 1,120,697 1,498,556 1,903,613 2,050,158 

Note.-Figures may not add to the totals given due to rounding. 

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

196 
Table A-34 

U.S. imports for consumption under ATPA, by country, 1993-94 

(1,000 dollars) 

Rank Country 1993 1994 

1 Colombia 323,369 411,642 

2 Peru 11,594 107,430 

3 Bolivia 32,124 91,840 

4 Ecuador 34,335 72,905 

Total 401,421 683,817 

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

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

197 
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198 
INDEX 

Agricultural Adjustment Act: 

description of, 130; section 22 actions on wheat, flour, 

and semolina imports, 130, 71-73; on peanut butter and 

peanut paste imports, 130; quantitative import 

restrictions in effect, 130; URAA-mandated changes to 

section 22, 130-31; USITC authority under section 22, 

130. 

Agricultural standards (Sanitary and Phytosanitary 

standards): 

and China, 95; and Mexico, 45. 

Andean Trade Preference Act (ATPA): 

overview, 128-29; U.S. imports from ATPA countries, 

129. 

Antidumping law: 

adjustments for startup production costs, 5; description 

of, 121; panel review under NAFTA, 47; provisions for 

captive production, 5; review of outstanding dumping 

orders, 125; summary of recent antidumping orders, 

121, 124; sunset review process, 4; URAA changes to, 

4-5. 

Apparel: 

see Textiles and Arrangement Regarding International 

Trade in Textiles. 

Arrangement Regarding International Trade in 

Textiles (Multifiber Arrangement): 

bilateral quotas negotiated in 1994, 132-33; 

description of, 131,133; NAFTA and Mexican textiles, 

133; transshipments and circumvention, 133; U.S. 

textile and apparel trade summary, 133-35. 

Asia-Pacific Economic Cooperation (APEC): 

Bogor Declaration of Common Resolve, 37-38; 

Committee on Trade and Investment, 36; member 

countries, 35; eminent persons group (EPG), 37; 

moratorium on membership, 38; 1994 priorities and 

objectives, 36; sixth annual ministerial meeting, 38; 

working group activities, 36. 

Automobiles: 

access to the Korean market, 106-107; negotiations 

with Japan, 78. 

Automobile Parts: 

dispute with Japan, 80, 122. 

Beef: 

See meat imports. 

Bilateral Investment Treaty Program: 

see U.S. Bilateral Investment Treaty Program. 

Canada: 

dairy, poultry, and egg dispute (NAFTA), 45; dispute 

over softwood lumber, 73-75, 123; economic overview, 

xix, xxiii; merchandise trade with the United States, 

xxiii; sec. 301 on country music television, 122; wheat 

dispute (sec. 22 of the Agricultural Adjustment Act), 

71-73, 130; U.S. treatment of sugar, 45; see also 

NAFTA. 

Caribbean Basin Economic Recovery Act 

(CBERA): 

efforts to secure NAFTA benefits, 51; Guaranteed 

Access Level program (GAL), 128; overview, 128; 

textiles trade with U.S., 134-35; U.S. imports from 

CBERA countries, 128. 

CFTA: 

see United States-Canada Free-Trade Agreement. 

Chile: 

accession to Mercosur, 59; accession to NAFTA, 50; 

Recommendations of Future Free Trade Area 

Negotiations, 40; Report to the President and the 

Congress on Significant Market Opening, 40; see also 

Summit of the Americas. 

China: 

efforts to join GATT/WTO, 94-96; economic overview, 

xix, xxiv; intellectual property rights issues, 96-97; 

human rights issues, 97-98; Joint Statement on Missile 

Proliferation, 99; merchandise trade with the United 

States, xxiv; military goods exports, 99; Missile 

Technology Control Regime, 99; Most-Favored-Nation 

trade status, 97-98; special 301 investigation on 

intellectual property rights, 97, 122-123; textile 

agreement on transshipments and quotas (Jan. 17, 

1994), 98-99, 133; textile exports to U.S., 135. 

Cocoa: 

See International Cocoa Agreement. 

199 
Coffee: 

See International Coffee Agreement. 

Copyright: 

See intellectual property. 

Countervailing-duty law: 

description of, 124; review of outstanding 

countervailing orders, 125; Subsidies Agreement and 

"green light," "yellow light," "red light," and "dark 

amber light," subsidies, 5; Subsidies Agreement's 

definitions of "countervailable subsidy" and 

"specificity," 5; URAA changes to, 5-7. 

Environment: 

GATT and environmental issues, 18; NAFTA and 

environmental issues, 48-49. 

European Union (EU): 

ban on livestock growth hormones, 77; ban on BST, 

77; Broadcast Directive, 78; dispute over bananas, 

75-76, 122; economic overview, xix, xxiii; Lome 

Convention and banana dispute, 75; merchandise trade 

with the United States, xxii; new membership (Austria, 

Finland, and Sweden) and "compensation," 76-77; 

ratification of URA, 10, 11, 78; Third Country Meat 

Directive, 77; utilities directive, 78. 

General Agreement on Tariffs and Trade (GATT): 

50th council meeting, 16; committee activities (tariff 

concessions, trade and development, balance of 

payments, trade and environment), 18; Committee on 

Trade and the Environment, 18; dispute settlement 

activities (U.S. tobacco, EU bananas, U.S. tuna, U.S. 

gasoline standards, U.S. automobile standards, Polish 

car imports, U.S. footwear), 16-18; review of regional 

trade arrangements, 18-19; Special Unit for Least 

Developed Countries, 18; Working Group on 

Environmental Measures and International Trade, 18. 

GATT Dairy Arrangement: 

27. 

GATT Government Procurement Code: 

26. 

GATT Membership: 

accessions in 1994, 19; China, 19, 94-96; Taiwan, 100. 

GATT Review of Regional Trade Arrangements: 

Central European Free Trade Agreement (CFTA), 18; 

"Treaty of the Group of Three," 18; Mercosur, 19. 

GATT Subsidies and Countervailing Duties Code: 

activities in 1994, 26. 

GATT Uruguay Round Agreements, URA (see also 

World Trade Organization): 

Agreement Establishing the World Trade Organization, 

1; Final Act Embodying the Results of the Uruguay 

Round of Multilateral Trade Negotiations (Final Act), 

Marrakesh, April 15, 1994, 1; Quad Countries and 

URA ratification, 10; Transitional Co-existence of the 

GATT and the WTO, 9-10. 

General Agreement on Trade in Services (GATS): 

Annex on Financial Services, 13; air transport annex, 

12; "conditional" MFN controversy, 14; description of 

"framework agreement," 12; financial services annex, 

13; Jones Act, 14; Negotiating Group on Basic 

Telecommunications, 15; Negotiating Group on 

Movement of Natural Persons, 13; maritime transport 

discussions, 14; Negotiating Group on Maritime 

Transport Services, 14; professional services 

negotiations, 15; scheduled conclusion for financial 

services talks, 13; scheduled conclusion for movement 

of personnel talks, 13; second financial services annex, 

13; telecommunications annex, 15; Understanding on 

Commitments in Financial Services, 13; Working Party 

on Professional Services, 15. 

Generalized System of Preferences (GSP): 

administration of, 126; GSP-eligible imports statistics, 

126; lost eligibility, 127; newly designated beneficiary 

countries, 127; reverse preferences review, 127; Trade 

Policy Staff Committee (TPSC), 127. 

Germany: 

disagreements with the EU over banana quotas, 75; 

economic overview, xix. 

Grain: 

See wheat. 

Import relief laws: 

description of section 201, 119; description of section 

406, 119; trade adjustment assistance (TAA) program 

— description of assistance to workers, to firms, and 

NAFTA assistance, 119-121. 

Insurance: 

Japanese Government procurement practices, 81-83. 

Intellectual property: 

and China, 96-97, 122-123; and EU, 78; and Korea, 

103; and Taiwan, 100-101. 

International Bovine Meat Agreement: 

U.S. acceptance of, 10, 27. 

200 
International Cocoa Agreement: 

activities in 1994, 64. 

International Coffee Agreement: 

activities in 1994, 64. 

International Jute Agreement: 

activities in 1994, 63-65. 

International Natural Rubber Agreement: 

activities in 1994, 64, 65. 

International Sugar Agreement: 

activities in 1994, 64. 

International Tropical Timber Agreement: 

activities in 1994, 64, 65. 

International Wheat Agreement: 

activities in 1994, 64, 65-66. 

Japan: 

autos and parts, 78, 80, 122; dispute over flat glass, 

80-81; dispute over insurance, 81-83; economic 

overview, xix, xxiv; Framework Agreement's four 

priority areas, 78; medical equipment discussions, 

84-85; merchandise trade with the United States, xxiv; 

telecommunications talks, 83-83; U.S.-Japan 

Framework for a New Economic Partnership 

(Framework Agreement, Framework Talks), 78-85. 

Jute: 

See International Jute Agreement. 

Korea: 

See Republic of Korea. 

Latin America: 

see Summit of the Americas. 

Lumber: 

softwood lumber dispute with Canada, 73-75, 123; see 

International Tropical Timber Agreement. 

Market disruption: 

See Section 406. 

Meat Import Act of 1979: 

description of, 131; URAA termination of, 131. 

Meat imports: 

EU ban on livestock growth hormones, 77; Korean 

beef agreement with the United States, 105-106, 122; 

Meat Import Act of 1979, 131. 

Medical equipment: 

Japanese government purchase of, 84-85. 

Mercosur: 

19. 

Mexico: 

accession to OECD, 51; administration of agricultural 

tariff rate quotas under NAFTA, 45; economic 

overview, xix, xxiv, 87-88; Chiapas uprising, 85; 

current account balance, 88; effects of peso 

devaluation, 42, 92-93; Exchange Stabilization Fund, 

87; loan package to, 86-87, 92; maquiladoras, 91; 

opening of banking system, 46; peso devaluation, 42, 

86, 88, 92; President Zedillo's 1995 "economic 

emergency plan," 88; production sharing, 91; 

restrictions on U.S. retailers, 43; technical barriers to 

trade, 45; tesebonos, 86, 88; textile and apparel exports 

to the U.S., 133-34; textile shipments, 51; trade 

agreements with Latin American partners, 51; 

treatment of U.S. package delivery firms, 46; treatment 

of U.S. truckers in border zone, 46; U.S.-Mexico 

bilateral trade summary, xxiv, 88-91; U.S. treatment of 

sugar under NAFTA, 45; see also NAFTA. 

Multifiber Arrangement (MFA): 

See Arrangement Regarding International Trade in 

Textiles. 

Natural rubber: 

See International Natural Rubber Agreement. 

North American Free-Trade Agreement (NAFTA): 

Agricultural tariff rate quotas, 45; antitrust 

cooperation, 48; Border Environmental Cooperation 

Commission (BECC), 48; certificates of origin, 43; 

Chapter 19 dispute settlement proceedings, 47; Free 

Trade Commission's initial meeting, 43; Commission 

for Labor Cooperation and National Administrative 

Office activity, 49; Commission on Environmental 

Cooperation, 48; Committee on Standards Related 

Measures, 45; compliance with rules of origin, 43; 

Financial Services Committee, 46; GATT review of 

NAFTA, 18; impact on U.S. employment, 43; Latin 

American Integration Association and Mexican 

compensation negotiations, 51; Mexican product 

standards and testing requirements, 46; Mexican "set 

aside" government procurement, 46; Mexico and 

CBERA textile issues, 51, 134-135; Mexico's other 

FTA activities, 51; NAFTA accession, 41, 50; NAFTA 

Coordinating Secretariat, 48; NAFTA parity, 51; North 

American Agreement on Environmental Cooperation, 

48-49; North American Development Bank, 48; OECD 

review of NAFTA, 51; retailer complaints, 44; tariff 

acceleration, 48; textiles, 133-135; transitional 

201 
adjustment assistance, 120; Uruguay Round agriculture 

commitments, 44-45; U.S. advisory panel to the 

NAFTA labor accord, 49-50; U.S. implementation of 

environmental accords, 49; U.S. package delivery 

service concerns, 46; see also Mexico. 

Organization for Economic Cooperation and 

Development (OECD): 

Agreement Respecting Normal Competitive 

Conditions in the Commercial Shipbuilding and Repair 

Industry, 61-63; Helsinki rules of the OECD Export 

Credit Arrangement, 62; injurious pricing discipline of 

shipbuilding agreement, 62; Jones Act and dispute 

provisions under shipbuilding agreement, 61, 62; 

Korean hopes to join, 103; Mexican accession, 51, 63; 

primary purpose of, 61; Recommendation on Bribery 

in International Business Transactions, 63; review of 

NAFTA, 51. 

Patents: 

See intellectual property. 

Phytosanitary standards: 

See agricultural standards. 

Public procurement: 

dispute with Japan, 78-80; EU utilities directive, 78; 

issues with Taiwan, 100; GATT Committee on 

Government Procurement, 26; GATT Government 

Procurement Code, 26; of medical equipment in Japan, 

84-85; NAFTA and, 46; and, of telecommunications in 

Japan, 83-84. 

Regional trade activities: 

See Asia-Pacific Economic Cooperation (APEC), 

European Union (EU), and North American Free-Trade 

Agreement (NAFTA). 

Republic of Korea: 

access to auto market, 106-107; "Dialogue of 

Economic Cooperation" and "New Economy," 

102-103; economic overview, xix, xxv; merchandise 

trade with the United States, xxv; section 301 

investigation on beef and pork imports, 105, 122; 

textiles trade, 135; U.S.-Korean bilateral discussions 

on foreign investment procedures, 104; on financial 

liberalization procedures, 104-105; on intellectual 

property rights, 103; on beef and pork imports, 

105-106, 122. 

Ruggerio, Renato: 

see World Trade Organization. 

Safeguard actions: 

See Section 201. 

Sanitary standards: 

see agricultural standards. 

Satellite technology: 

dispute issues with China, 99. 

Section 201: 

119; (no cases in 1994); URA-mandated changes, 7. 

Section 232: 

description of, 129; 1994 cases, 129-130. 

Section 301: 

cases in 1994, 121, 122-123; and China, 97; and EU, 

75-76; and Korea, 105-106, and Taiwan, 100-101. 

Section 303: 

description of, 124; (no cases in 1994). 

Section 337: 

description of, 125; 1994 cases, 125; URA-mandated 

changes, 7. 

Section 406: 

description of, 119; 1994 case, 119. 

Section 701: 

description of, 124; (no cases in 1994). 

Section 751: 

description of, 125; (no cases in 1994). 

Softwood lumber: 

see lumber. 

Subsidies: 

see countervailing-duty law. 

Sugar: 

NAFTA issues, 45; see also International Sugar 

Agreement. 

Summit of the Americas: 

announcement, 39; Declaration of Principles, 41; 

"open regionalism," 39; preparations for, 39; summary 

of U.S.-Latin America trade, 39. 

Taiwan: 

application process for GATT/WTO, 99-100; 

Convention on International Trade in Endangered 

Species of Wild Fauna and Flora (CITES), 101-102; 

economic overview, xix, xxv; intellectual property 

202 
rights (1PR) issues, 100-101; merchandise trade with 

the United States, xxv; Pelly Amendment, 102; special 

301 "watch list" for intellectual property rights abuses, 

100-101; textiles trade, 135; wildlife trade issues, 

101-102. 

Telecommunications: 

GATT/WTO issues, 15; Japan issues, 83-84. 

Tesebonos: 

see Mexico. 

Textiles: 

imports from China, 94, 98-99; URAA-mandated rules 

of origin, 135-136; see also Arrangement Regarding 

International Trade in Textiles. 

Trade Adjustment Assistance program (Title II of 

1974 Trade Act): 

assistance to firms and industries in 1994, 121; 

assistance to workers in 1994, 120; description of, 

119-121; and NAFTA, 15, 120; see also import relief 

laws. 

Trademarks: 

See intellectual property. 

Tropical timber: 

See International Tropical Timber Agreement. 

Unfair trade practices laws: 

summary of 1994 actions, 121-125; see also 

antidumping law, countervailing duty law, section 301, 

and section 337. 

United Kingdom: 

economic overview, xix. 

United Nations Conference on Trade and 

Development (UNCTAD): 

commodity agreements summary, 64; primary 

responsibilities, 63. 

United States: 

economic overview, xix, xx. 

U.S. Bilateral Investment Treaty program (BIT): 

1994 modifications of the prototype agreement, 66-67; 

International Center for Settlement of Investment 

Disputes, 66, 67; status of the program in 1994, 67. 

U.S.-Japan Framework Agreement: 

five major "baskets" of issues and four priority sectors, 

78; negotiations, 78-85; related to auto parts, 80; 

related to flat glass, 80-81; related to insurance, 81-83; 

related to telecommunications, 83-84; related to 

medical equipment, 84-85. 

Uruguay Round Agreements (URA): 

see GATT Uruguay Round Agreements. 

The Uruguay Round Agreements Act (URAA): 

Budget Enforcement Act of 1990, 9; budget waiver, 9; 

Congressional documents—Uruguay Round Trade 

Agreements, Texts of Agreements, Implementing Bill, 

and Required Supporting Statements, 103d Cong. 2d 

sess, 1994, H. Doc 103-316, S. Rept. 103-412, 2; 

dispute settlement understanding, 8; "Dole Plan" and 

the dispute settlement process, 8; Statement of 

Administration Action, 2, 8; U.S. implementing 

legislation—H.R. 5110, S. 2467, and Public Law 

103-465, 2; U.S. sovereignty and the WTO, 8; textiles 

rules of origin, 2, 135-136. 

United States-Canada Free-Trade Agreement: 

transition to NAFTA, 2:1. 

Wheat: 

dispute with Canada, 71-73, 130; see also International 

Wheat Agreement. 

World Trade Organization (WTO): 

application to, for China 94-96, and Taiwan 99-100; 

Director-General selection, 11-12; Interim Commission 

of the International Trade Organization, 10; ratification 

of, 10-11; Renato Ruggerio, 12; Trade Negotiating 

Committee, 11; Transitional issues, 9-10. 

203 

Other Recent ITC Publications 

Economic Effects of Antidumping and Countervailing Duty Orders and Suspension Agreements 

(Inv. 332-344, USITC Publication 2900, June 1995). Estimates the economic effects of unfair trade practices 

as transmitted through unfair imports and of the remedies imposed under U.S. antidumping and 

countervailing duty laws at an economy-wide level and at the industry level. (Also available on the ITC 

Internet server; see address below.) 

Global Competitiveness of U.S. Environmental Technology Industries: Municipal and Industrial 

Water and Wastewater (Inv. 332-347, USITC Publication 2867, March 1995). Examines the global 

competitiveness of U.S. industries that supply goods and services to facilities that treat water and wastewater; 

also examines such industries in Great Britain, France, Germany, and Japan. (Also available on the ITC 

Internet server; see address below.) 

Production Sharing: Use of U.S. Components and Materials in Foreign Assembly Operations, 

1990-1993 (Inv. 332-237, USITC Publication 2886, May 1995). PRINTED COPIES MUST BE PURCHASED FROM GPO. This report, updated each year, assesses by industry sector the products and countries that make use of the production sharing provisions of the Harmonized Tariff Schedule of the United 

States, which provide reduced tariff treatment for eligible goods that are processed in foreign locations but 

contain U.S. -made components. This year's report also compares production sharing in the Caribbean with 

assembly operations in Mexico and in selected East Asian countries. (To order from GPO, indicate stock 

number 049-000-00073-1 and send your check for $8.50 ($10.63 foreign) per copy or provide your VISA or 

MasterCard number and expiration date to: Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 

15250-7954 (FAX to 202-512-2250).) (Also available on the ITC Internet server; see address below.) 

U.S. Trade Shifts in Selected Industries: 1993 Annual Report (USITC Publication 2805, September 

1994). PRINTED COPIES MUST BE PURCHASED FROM GPO. Reviews U.S. trade performance in 

1993, focusing on changes in the imports, exports, and trade balances of services transactions and key 

agricultural and manufactured commodities that comprise the total 1993 U.S. trade deficit. The report also 

profiles the U.S industry and market for nearly 300 commodity groups, providing estimated data for 1989-93 

on domestic consumption, production, employment, trade, and import penetration. (To order from GPO, 

indicate stock number 049-000-00070-7 and send your check for $15.00 ($18.75 foreign) per copy or provide 

your VISA or MasterCard number and expiration date to: Superintendent of Documents, P.O. Box 371954, 

Pittsburgh, PA 15250-7954 (FAX to 202-512-2250).) (Also available on the ITC Internet server; see 

address below.) 

Effects of the Arab League Boycott of Israel on U.S. Businesses (Inv. 332-349, USITC Publication 

2827, November 1994). Examines the annual cost to U.S. businesses of lost export sales to the Middle East 

as a result of the Arab League boycott of Israel and the cost to U.S. businesses to comply with U.S. antiboycott laws. This study is the first to estimate the economic effects of the boycott on the U.S. (Also available 

on the ITC Internet server; see address below.) 

Impact of the Caribbean Basin Economic Recovery Act on U.S. Industries and Consumers, Ninth 

Report, 1993 (Inv. 332-227, USITC Publication 2813, September 1994). PRINTED COPIES MUST BE 

PURCHASED FROM GPO. The Caribbean Basin Economic Recovery Act (CBERA), which lowers duties 

for most products imported from designated Caribbean countries, marked its 10th year of operation in 1993. 

The first chapter of this publication offers a retrospective of the program's first decade. The remaining 

chapters focus on 1993 developments under the program. (To order from GPO, indicate stock number 049-

000-00072-3 and send your check for $5.50 ($6.25 foreign) or provide your VISA or MasterCard number and 

expiration date to: Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954 (FAX to 

202-512-2250).) (Also available on the ITC Internet server; see address below.) 

SEE NEXT PAGE FOR MORE ITC PUBLICATIONS 

AND ORDERING INFORMATION 
Annual Report on the Impact of the Andean Trade Preference Act on U.S. Industries and Consumers and on Drug Crop Eradication and Crop Substitution (Inv. 332-352, USITC Publication 2814, 

October 1994). PRINTED COPIES MUST BE PURCHASED FROM GPO. The Andean Trade Preference 

Act was signed into law in December 1991 as part of the United States' "war on drugs" to promote broadbased economic development, stimulate investment in nontraditional industries, and diversify the export base 

of the four countries in the Andean mountain region of South America -- Bolivia, Colombia, Ecuador, and 

Peru -- that cultivate the coca plants from which most of the world's cocaine is produced. ATPA reduces or 

eliminates tariffs for over 6,000 Andean products. This is the ITC's first annual report in this series. (To 

order from GPO, indicate stock number 049-000-00074-0 and send your check for $6.00 ($7.50 foreign) or 

provide your VISA or MasterCard number and expiration date to: Superintendent of Documents, P.O. Box 

371954, Pittsburgh, PA 15250-7954 (FAX to 202-512-2250).) (Also available on the ITC Internet server; 

see address below.) 

To order additional copies of The Year in Trade 1994: 

Additional printed copies of The Year in Trade 1994 must be purchased 

from GPO. To order, indicate stock number 049-000-00076-6 and 

send your check for $15.00 ($18.75 foreign) or provide your VISA or 

MasterCard number and expiration date to: Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954 (FAX to 202-

512-2250). The report will also be available at federal depository 

libraries in the United States, the offices of the U.S. Information 

Agency abroad, and on the ITC's Internet server. It is also expected to 

be available on a future edition of the Department of Commerce's 

National Trade Data Bank. 

Visit the ITC's Internet Server to download these and other ITC reports! 

http:/lwww.usitc.gov or ftp://ftp.usitc.gov 

For further information on how to order any of these publications, contact: 

The Office of the Secretary 

Publications Branch 

United States International Trade Commission 

500 E Street, SW 

Washington, DC 20436 

phone: 202-205-1806 

fax: 202-205-2104 

TDD Terminal: 202-205-1810