[Federal Register Volume 66, Number 88 (Monday, May 7, 2001)]
[Notices]
[Pages 23062-23064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11354]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Annual Report on Discrimination in Foreign Government Procurement 
Pursuant to Executive Order 13116 (``Title VII'')

AGENCY: Office of the United States Trade Representative.

ACTION: Notice.

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SUMMARY: Notice is hereby given that the United States Trade 
Representative (``USTR'') has submitted the annual report on 
discrimination in foreign government procurement, published herein, to 
the Committees on Finance and on Governmental Affairs of the United 
States Senate and the Committees on Ways and Means and on Government 
Reform and Oversight of the United States House of Representatives, 
pursuant to Executive Order No. 13116 of March 31, 1999.

DATES: The report was submitted on April 30, 2001.

FOR FURTHER INFORMATION CONTACT: Melida Hodgson, Associate General 
Counsel, Office of the US Trade Representative, 600 17th Street, N.W., 
Washington, DC 20508, 202-395-3582.

SUPPLEMENTARY INFORMATION: The text of the USTR report is as follows:

Annual Report on Discrimination in Foreign Government Procurement

April 30, 2001.

I. Introduction

    A longstanding objective of U.S. trade policy has been to open 
opportunities for U.S. suppliers to compete on a level playing field 
for foreign government contracts. The first major breakthrough in 
this area was the 1979 conclusion of the Government Procurement 
Agreement (GPA), followed by the ten-fold expansion of that 
Agreement during the Uruguay Round negotiations that led to the 
creation of the World Trade Organization (WTO). The WTO estimates 
that, under the GPA, the United States and the 26 other GPA Parties 
provide their suppliers with non-discriminatory access to government 
tendering procedures worth more that $300 billion annually. In 1995, 
Mexico agreed to provide comparable access to its government 
procurement markets under the North American Free Trade Agreement 
(NAFTA).
    The Administration continues to push for the reciprocal removal 
of discriminatory government procurement practices in a wide range 
of multilateral, regional and bilateral fora. As a result of our 
efforts, the 34 countries of North, South and Central America that 
are participating in negotiations to create a Free Trade Area of the 
Americas (FTAA) have agreed that the FTAA will provide for openness 
and transparency of government procurement processes and non-
discrimination in tendering procedures within a scope to be 
negotiated. The Administration is also urging the early conclusion 
of an Agreement on Transparency in Government Procurement that would 
apply to all 140 Members of the WTO. Within the Asia-Pacific 
Economic Cooperation (APEC) forum, the United States and other 
economies in the region are pushing for concrete steps that will 
build on the progress APEC has made in developing non-binding 
principles on government procurement.
    The ``Title VII'' process, initially established under Title VII 
of the Omnibus

[[Page 23063]]

Trade and Competitiveness Act of 1988 (``Title VII''), as amended, 
provides a vehicle for identifying priorities for international 
negotiations that may address discriminatory foreign government 
procurement practices and for monitoring and enforcing existing 
international agreements. After the Title VII legislation expired in 
1996, the process was re-instituted by Executive Order 13116 on 
March 31, 1999.

II. Summary

    The Executive Order mandates that the United States Trade 
Representative (``USTR'') submit a report to the Congressional 
committees of jurisdiction within 30 days of the submission of the 
National Trade Estimate Report for the years 1999, 2000, and 2001, 
and publish these reports in the Federal Register. This is the third 
of the three annual reports required by the Executive Order.
    USTR's 1992 identification of the European Union (``EU'') for 
discriminatory procurement practices applied by government-owned 
telecommunications entities in certain member states, as well as the 
resulting sanctions, remains outstanding. There are no other 
outstanding Title VII identifications.
    As in previous years, however, this report describes a number of 
foreign procurement practices that are of significant concern to 
U.S. exporters and that the United States is monitoring closely. 
Those practices, discussed in detail below, are:

<bullet> Japan: Various discriminatory practices relating to 
procurement for public works.
<bullet> Taiwan: Certain discriminatory practices and procedural 
barriers.
<bullet> Canada: Provincial governments' discriminatory procurement 
practices.
<bullet> Germany: Exclusion of certain suppliers affected by 
discriminatory ``sect filters.''

    The United States is working actively in a range of bilateral 
and multilateral fora to resolve these issues. As a result of recent 
bilateral consultations with Germany, this report announces that our 
concerns relating to the use of ``sect filters'' appear to have been 
resolved.

III. Provisions of the Executive Order

    Under Executive Order 13116, USTR is required to submit to the 
Congress each year a report identifying foreign countries that:
    (1) have failed to comply with their obligations under the WTO 
Agreement on Government Procurement (``GPA''), Chapter 10 of the 
North American Free Trade Agreement, or other agreements relating to 
government procurement to which that country and the United States 
are parties; or
    (2) maintain, in government procurement, a significant pattern 
or practice of discrimination against U.S. products or services 
which results in identifiable harm to U.S. businesses, when those 
countries' products or services are acquired in significant amounts 
by the U.S. Government.
    If any country is identified under one or both of these 
criteria, the Executive Order requires USTR to initiate an 
investigation under section 302 of the Trade Act of 1974. If the 
matter is not resolved within 90 days of the submission of the 
report and USTR determines that the rights of the United States 
under an international procurement agreement are being violated or 
that a significant pattern or practice of discrimination exists, the 
Executive Order permits USTR, inter alia, to initiate formal dispute 
settlement proceedings under relevant international agreements or 
withdraw any waivers of U.S. purchasing requirements that have been 
granted to the discriminating foreign country.
    International dispute settlement procedures are available to 
address discriminatory government procurement practices covered by 
the WTO Government Procurement Agreement (GPA) and the North 
American Free Trade Agreement (NAFTA). Under authority provided in 
the Trade Agreements Act of 1979, as amended, the United States 
waives domestic purchasing requirements for countries that are 
Parties to the GPA and the NAFTA, for certain Caribbean Basin 
Initiative countries; and for countries included on the United 
Nations' list of ``least developed countries.''

IV. Identification of Specific Discriminatory Foreign Procurement 
Practices

    EU--Telecommunications: In 1992, USTR identified EU 
telecommunications entities that have ``special and exclusive 
rights'' in certain member state markets as engaging in 
discriminatory procurement practices. Those entities were required 
to apply discriminatory practices under the 1990 EU ``Utilities 
Directive.'' After bilateral negotiations did not resolve this 
issue, the United States imposed sanctions in May 1993. Those 
sanctions remain in place today.
    In 1999, the European Commission informed the United States that 
it considered telecommunications operators in most EU member states 
to be no longer bound by the procurement requirements in the 
Utilities Directive, and requested that the United States remove the 
sanctions imposed in 1993. The Administration has asked the 
Commission for clarification of the legal requirements currently in 
effect in the EU and what further steps the Commission is taking to 
revise Utilities Directive requirements. Once agencies have 
evaluated the information received from the Commission, the 
Administration will review the overall market access conditions in 
the EU telecommunications market, with a view toward deciding 
whether the 1993 sanctions are still warranted.
    In developing this report, USTR has given careful consideration 
to a wide range of views and information, including the 
recommendations of other executive agencies and U.S. embassies and 
consulates overseas, private sector responses to USTR's request for 
comments for this year's Title VII report (published in the Federal 
Register on February 28, 2001), and information on foreign 
government procurement practices reported in the 2001 National Trade 
Estimates Report.
    On the basis of this information, and after consultation with 
other agencies, USTR has determined that no practices meet the 
criteria for Title VII identification this year. As in previous 
years, however, there remain a number of foreign government 
procurement practices of concern which the Administration is 
pursuing in bilateral and multilateral fora, or that require 
continued monitoring and study.

V. Other Foreign Government Procurement Practices of Concern to the 
United States

Japan--Public Works

    U.S. companies are well-known around the world for their 
excellence in design/consulting and construction. Yet the U.S. share 
of Japan's $300 billion public works market was only $50 million in 
1999 (the most recent year for which data are available).
    The United States has repeatedly expressed concern to Japan that 
Japanese procuring entities continue to engage in discriminatory 
procurement practices that impede American design/consulting and 
construction companies from participating in Japan's public works 
sector. These practices include: failure to address rampant bid-
rigging; unreasonable restrictions on the formation of joint 
ventures, including the three-company joint venture rule; the use of 
discriminatory qualification and evaluation criteria; and the 
structuring of individual procurements so they fall below thresholds 
established in international agreements.
    The United States is seriously disappointed by the lack of 
progress in addressing these practices, and also is concerned that 
Japan has repeatedly refused the U.S.'s request to continue regular 
bilateral consultations since the consultative mechanism set forth 
in the 1994 U.S.-Japan Public Works Agreement expired last year. The 
United States will continue to monitor Japan's public works sector 
and urges Japan to take immediate, concrete steps to address these 
concerns, strengthen the integrity of its system for procurement of 
public works, and eliminate discriminatory practices which prevent 
U.S. suppliers and workers from participating in this market.
    Taiwan--Discriminatory Practices and Procedural Barriers: Taiwan 
is in the process of acceding to the World Trade Organization (WTO), 
and has committed to join the WTO Government Procurement Agreement 
(GPA) as soon as it enters the WTO. Taiwan's accession to the GPA 
will allow U.S. exporters to compete on a level playing field for 
major projects worth billions of dollars, including in the power 
generation, transport, environmental, and other infrastructure 
sectors.
    The 2000 Title VII report noted a number of U.S. concerns with 
existing discriminatory practices and other barriers to Taiwan's 
government procurement market. As a result of ongoing bilateral 
consultations intended to clarify the terms of Taiwan's GPA 
accession and address other bilateral concerns, significant progress 
has been made on these issues. However, the United States continues 
to have serious concerns relating to the following:
    <bullet> restrictions on the ability of suppliers to joint 
tender, based on market considerations;
    <bullet> the need for appropriate and predictable contract 
provisions relating to contingent liabilities, consistent with 
international norms.

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    The Administration continues to urge the Taiwan authorities to 
take concrete steps to bring these practices into conformity with 
GPA requirements and ensure that they do not constitute an 
unnecessary barrier to fair and open competition in Taiwan's 
government procurement market.
    Canada--Provincial Government Restrictions: A number of Canadian 
provinces apply price preferences and other significant restrictions 
that discriminate against U.S. suppliers interested in bidding on 
provincial government procurement contracts. To date, the 
Administration has identified particular concerns with respect to 
procurement restrictions applied by the provinces of Ontario, Quebec 
and British Colombia. The Administration is concerned that the 
application of such restrictions may result in a significant 
imbalance of bilateral market access opportunities in government 
procurement. Canada is the only GPA Party that has yet to open its 
sub-Federal procurement markets. Working closely with interested 
U.S. states, the Administration continues to urge Canada to bring 
provincial governments and other government-owned entities within 
the scope of NAFTA and GPA procurement rules.
    Germany--``Sect Filters'': In September 1998, the German 
Ministry of Economics promulgated a ``protection clause'' (commonly 
referred to as a ``sect filter'') meant to be incorporated into 
government contracts for certain training and consultation services. 
Among other elements, the clause would have prohibited firms from 
bidding on German government contracts if they have employees that 
attend or participate in Scientology seminars. Following the 
promulgation of this ``protection clause,'' the United States 
expressed concern in bilateral consultations and in the 2000 Title 
VII report about the clause's potentially discriminatory effects on 
government procurement. In subsequent consultations with German 
government and industry representatives, the Administration urged 
Germany to rescind the sect filter requirements.
    In response, the German government has revised its ``protection 
clause'' in a manner that no longer prohibits firms from competing 
for government contracts on the basis of the affiliation of its 
management or employees with the Church of Scientology. This 
decision represents significant progress in addressing U.S. concerns 
relating to the use of ``sect filters.'' The Administration will 
continue to monitor the implementation of the revised policy to 
ensure that U.S. firms and workers are not discriminated against in 
procurement by German Federal and sub-Federal governments.

A. Jane Bradley,
Assistant U.S. Trade Representative for Monitoring and Enforcement.
[FR Doc. 01-11354 Filed 5-4-01; 8:45 am]
BILLING CODE 3190-01-P