[Federal Register Volume 66, Number 88 (Monday, May 7, 2001)]
[Notices]
[Pages 23064-23073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11355]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Report on Trade Expansion Priorities Pursuant to Executive Order 
13116 (``Super 301'')

AGENCY: Office of the United States Trade Representative.

ACTION: Notice.

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SUMMARY: The United States Trade Representative (USTR) is providing 
notice that it submitted the report on U.S. trade expansion priorities 
published herein to the Committee on Finance of the United States 
Senate and Committee on Ways and Means of the United States House of 
Representatives pursuant to the provisions (commonly referred to as 
``Super 301'') set forth in Executive Order No. 13116 of March 31, 
1999.

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

FOR FURTHER INFORMATION CONTACT: Demetrios Marantis, Associate General 
Counsel, Office of the U.S. Trade Representative, 600 17th Street, NW., 
Washington, DC 20508, 202-395-9626.

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

Identification of Trade Expansion Priorities Pursuant to Executive 
Order 13116: April 30, 2001

    The Bush Administration has an ambitious trade agenda, 
reflecting the importance President Bush assigns to trade. This is 
an opportune moment to reassert America's leadership in setting 
trade policy and to build a post-Cold War world on the cornerstones 
of freedom, security, democratic values, open trade, and free 
markets.
    The Office of the United States Trade Representative (USTR) 
submits this ``Super 301'' report pursuant to Executive Order 13116 
of March 31, 1999. This report sets forth U.S. trade expansion 
priorities for 2001. The Administration intends to expand trade on 
multiple fronts, through negotiation of new agreements and by 
ensuring that existing agreements are fully implemented by U.S. 
trading partners. At the same time, the Administration intends to 
ensure that Americans are able to reap the benefits of market-
opening agreements by resolving problems that confront U.S. 
exporters. The USTR prepared this report in close consultation with 
U.S. Government agencies on the basis of the 2001 Trade Policy 
Agenda, the 2001 NTE Report, public comments submitted to USTR, and 
information received from U.S. Embassies abroad.

I. Trade Expansion Priorities for 2001

    President Bush spoke at the recent Summit of the Americas in 
Quebec City about the benefits of trade: ``Free and open trade 
creates new jobs and new income. It lifts the lives of all our 
people, applying the power of markets to the needs of the poor. It 
spurs the process of economic and legal reform. And open trade 
reinforces the habit of liberty that sustains democracy over the 
long haul.'' Trade policy is the bridge between the President's 
international and domestic agendas. As the former governor of a 
major border state, President Bush has seen that the free exchange 
of goods and services sparks economic growth, opportunity, dynamism, 
fresh ideas, and democratic values.
    To fulfill the President's vision, the Office of the U.S. Trade 
Representative sets forth the following two trade expansion 
priorities for 2001: (1) Reestablish a bipartisan consensus on free 
trade and (2) move on multiple fronts to expand trade.

A. Reestablishing a Bipartisan Consensus on Free Trade

    The United States faces key decisions about the future course of 
our trade policy. Just as the World War II generation forged a 
bipartisan consensus that sustained successful trade expansion 
throughout the Cold War, we must build a new consensus to promote 
open markets for trade in the decades to come.
    There have been some encouraging developments in the area of 
open trade in the past year. Congress enhanced the Caribbean Basin 
Initiative, passed the African Growth and Opportunity Act, and 
enacted legislation to grant permanent normal trading relations to 
China. More recently, the United States and the European Union (EU) 
have reached an agreement to resolve the long-standing dispute over 
bananas, and the United States and Chile have pledged to complete 
negotiations on a free trade agreement by the end of the year. On 
April 22, President Bush and the leaders of 33 other nations in the 
Western Hemisphere signed a declaration at the Summit of the 
Americas in Quebec City pledging their support for completing the 
negotiations on a Free Trade Area of the Americas (FTAA) no later 
than January 2005. The FTAA will be the world's largest free trade 
area, representing 800 million people.
    There has also been encouraging progress recently on resolving a 
number of trade disputes through the World Trade Organization (WTO) 
and the North American Free Trade Agreement (NAFTA). Greece has 
moved to counter the piracy of U.S. films and television programs, 
Mexico has agreed to allow dry beans from the United States to be 
imported in a more timely and predictable manner, and India has 
lifted its restrictions on U.S. agricultural, textile, and 
industrial products.
    But there also have been setbacks. When the House of 
Representatives voted in 1998 to deny the President trade 
negotiation authority, it marked the first time the Congress had 
ever rejected granting this authority. And the failure to launch the 
global trade talks in Seattle in December 1999 handed a high-profile 
victory to the opponents of free trade, global competition, and 
economic opportunity.
    The history books recount the economic, political, and indeed 
national dangers of a breakdown in America's trade policy. For the 
first 150 years of the United States, there were contentious 
Congressional debates over tariff bills, some even leading to 
movements for Nullification and Secession. Then the

[[Page 23065]]

disastrous experience of setting protectionist tariffs for over 
20,000 individual items in the Smoot-Hawley bill of 1930 led the 
Congress four years later to try a different approach: a partnership 
with the Executive to negotiate lower barriers to trade around the 
world. Launched by strong and innovative leaders, Franklin D. 
Roosevelt and Cordell Hull, this effort between the Congress and the 
Executive became a bipartisan partnership, and eventually produced 
prosperity, opportunity, and liberty beyond the greatest 
expectations of its supporters.
    Federal Reserve Chairman Alan Greenspan has put this success in 
historical perspective by pointing out that the growth in trade as a 
share of the world economy over the past 50 years has finally 
managed to reverse the losses from the calamities of the early 20th 
century, and now approximates the degree of globalization around 
1900. So today, just like Americans at the turn of the last century, 
we face critical decisions about the future course for our country, 
trade, and the world.

The Benefits of Trade

    There are three principal reasons why further trade 
liberalization is important to the American people. First, expanded 
trade--imports as well as exports--improves the well being of 
Americans. It leads to better jobs, with bigger paychecks, in more 
competitive businesses--as well as to more choices of goods and 
inputs, with lower prices, for hard-working families and hard-
driving entrepreneurs.
    Exports accounted for over one-quarter of U.S. economic growth 
over the last decade and support an estimated 12 million jobs. In 
the American agricultural sector, one in three acres are planted for 
export purposes, and last year American farmers sold more than $50 
billion worth of agricultural products in foreign markets. Imports 
helped keep prices down as jobs, compensation, and productivity 
increased.
    Votes for agreements like NAFTA and the Uruguay Round may not 
have been easy to cast. Yet those agreements contributed to the 
longest period of economic growth in U.S. history, with levels of 
full employment, and without inflationary pressures, beyond the 
forecasts of any economist. Conservative estimates of the higher 
income and lower prices stemming from the Uruguay Round and NAFTA 
indicate an annual benefit of between $1,260 and $2,040 for an 
average American family of four.
    The expanding global trade and the expanding economic growth in 
the United States are not coincidental; they are achieved in 
concert. One strengthens and reinforces the other. Moreover, 
restrictions on trade have victims: farmers, school teachers, 
factory and office workers, small business people, and many others 
who have to pay more for clothing or food or homes or equipment 
because of visible and invisible taxes on trade.
    Second, as President Bush has stated, free trade is about 
freedom: ``Economic freedom creates habits of liberty. And habits of 
liberty create expectations of democracy.'' During the Summit of the 
Americas in Quebec City, President Bush met with Mexico's President 
Fox, the first president elected from the opposition since the 
Mexican revolution. It is not an accident that after Mexico embraced 
the opening of its economic system, as embodied in NAFTA, it was 
drawn to a democratic opening as well.
    Free trade reduces government barriers and encourages vibrant 
private and civic societies governed by the rule of law. It opens 
societies to people, to ideas, to debate, to competition, and also 
to impartial transparent rules. That freedom creates openings for 
the free press and for NGOs, not just for businesses and 
entrepreneurs. And it creates openings to the outside world through 
the Internet, books, and a whole series of new networks.
    Third, expanded trade affects our nation's security. The crises 
of the first 45 years of the last century--the economic 
retrogression referred to by Chairman Greenspan--were inextricably 
linked with hostile protectionism and national socialism. Communism 
could not compete with democratic capitalism, because economic and 
political freedom creates energy, competition, opportunity, and 
independent thinking.
    Take an example from today. Colombia is waging a battle to 
defend the rule of law against those who finance their terror 
through complicity in drug trafficking. President Pastrana has said 
that one way to counter this threat would be for Congress to renew 
the Andean Trade Preferences Act (ATPA), which expires in December. 
Renewal, he says, would stimulate job creation, strengthen the 
democratically elected government, and diminish the appeal of the 
drug trade. With a renewed and robust ATPA, the United States and 
Colombia can broaden our efforts on behalf of freedom--from aid to 
trade.

Building Public Support for Trade

    These benefits of open trade can only be achieved if we build 
public support for trade at home. To do so, the Administration must 
enforce, vigorously and with dispatch, our trade laws against unfair 
practices. In the world of global economics, justice delayed can 
become justice lost.
    For the United States to maintain an effective trade policy and 
an open international trading system, Americans must have confidence 
that trade is fair and works for their benefit. That means ensuring 
that other countries live up to their obligations under the trade 
agreements they sign.
    Change, particularly rapid adjustments, can be very difficult--
even frightening--for many hard-working people. We need to help 
people adapt and benefit from change--whether prompted by trade, 
technology, e-commerce, new business models, or other causes. 
Therefore, a successful trade policy over the long term should be 
accompanied by better schools, worker adjustment assistance, tax 
policies that enable people to keep and save more of their 
paychecks, and reforms of Social Security and Medicare so older 
Americans have a safer retirement.
    In order to build continued support for free trade, the United 
States, and all nations, will need to be more adroit in aligning 
trade with our values. That means responding to concerns that trade 
undermines environmental protection and labor standards--while not 
permitting these issues to be used for protectionist ends. By 
tackling these issues today, we can help shape the thinking about 
how to address them.

Getting Back in the Trading Game

    To strengthen and speed America's trade and economic policy, we 
will need to reestablish the bipartisan Congressional-Executive 
negotiating partnership that has delivered so much. In President 
Bush's address at the Summit of the Americas, he made clear that 
achieving U.S. Trade Promotion Authority was one of his top 
priorities. This authority, as he has pointed out, has been granted 
to each of the previous five presidents. The Bush Administration is 
committed to attaining U.S. Trade Promotion Authority before the end 
of the year, and will be working with the Congress to build the 
broadest possible support.
    In the absence of this authority, other countries have been 
moving forward with trade agreements while America has stalled. We 
are in danger of being left behind. There was a time when U.S. 
involvement in international trade negotiations was a prerequisite 
for them to succeed. That is no longer true. Other countries are 
writing the rules of the international trading system as they 
negotiate without us.
    The EU has free trade or customs agreements with 27 countries, 
and 20 of these agreements have been signed since 1990. The EU is in 
the process of negotiating 15 more. Last year, the European Union 
and Mexico--the second-largest market for American exports--entered 
into a free trade agreement. The EU is also negotiating free-trade 
agreements with the Mercosur nations and the countries of the Gulf 
Cooperation Council. Japan is negotiating a free trade agreement 
with Singapore, and is exploring free trade agreements with Mexico, 
Korea, and Chile. There are approximately 130 free trade agreements 
in force globally, but the United States has only two agreements in 
force: one is with Canada and Mexico (NAFTA), and the other with 
Israel.
    In the long run, our deadlock hurts American businesses, 
workers, and farmers. They will find themselves shut out of the many 
preferential trade and investment agreements negotiated by our 
trading partners. To cite one example, while U.S. exports to Chile 
face an eight percent tariff, the Canada-Chile trade agreement will 
free Canadian imports of this duty. As a result, U.S. wheat farmers 
are losing markets in Chile to Canadian exports. To correct the 
disparity in tariffs, USTR is pursuing negotiations with Chile on a 
free trade agreement.
    We cannot afford to stand still--or be mired in partisan 
division--while other nations seize the mantle of leadership on 
trade from the United States. This would be a huge missed 
opportunity, indeed an historic mistake.

B. Moving on Multiple Fronts To Expand Trade

    In the 21st century, the economic and political future of the 
United States will be increasingly linked to those of our 
hemispheric neighbors. U.S. trade and investment with the hemisphere 
is projected to exceed that with Europe by the end of this decade. 
U.S. shipments to Latin America

[[Page 23066]]

have increased by 137% in the past decade, compared to a 96% 
increase for exports to the rest of the world.
    As Latin America grows, the United States benefits. In recent 
years, every one percent expansion in Latin America's GDP was 
associated with an additional $1.6 billion worth of U.S. exports to 
the region. In the months and years ahead, the Bush Administration 
will be negotiating the FTAA. A free trade area linking the Americas 
will provide incentives and rewards for governments pursuing 
difficult economic reforms. A hemispheric free trade agreement would 
also send a valuable signal--a signal of confidence--to potential 
investors that Latin American and Caribbean nations have agreed to 
abide by common rules governing trade, to create a truly hemispheric 
marketplace, and that this mutual effort offers not just stability, 
but opportunity. Even as we negotiate the FTAA, we are open to 
pursuing other complementary opportunities to foster free trade with 
our neighbors, for example, through bilateral free trade 
negotiations, such as the current negotiations with Chile.
    Of course, America's trade and economic interests extend far 
beyond this hemisphere. At the core of the WTO's agenda this year 
will be negotiations mandated by the Uruguay Round agreements to 
pursue further agricultural reform and liberalization in services. 
We also want to launch a new round of global trade negotiations in 
the WTO, emphasizing a key role for agriculture. We will also seek 
to negotiate regional and bilateral agreements to open markets 
around the world. There are opportunities in the Asia Pacific and 
with APEC. We will start with a free trade agreement with Singapore 
and will work with the Congress to pass the basic trade agreement 
with Vietnam negotiated by the Clinton Administration. We will urge 
Japan to deregulate, restructure and open its economy, which is long 
overdue.
    Further reforms in the Middle East and Africa need our 
encouragement. We are committed to working with the Congress to 
enact legislation for a free trade agreement with Jordan, and to 
implement the provisions of laws to help Africa and the Caribbean. 
Providing technical assistance to African and Caribbean countries 
will be a key part of the implementation process.
    As India reforms its economy and taps its great potential, we 
should explore ways to achieve mutual benefits. To help developing 
nations appreciate that globalization and open markets can assist 
their own efforts to reform and grow, we will need to extend the 
legislation authorizing the Generalized System of Preferences 
program.
    Of vital importance, we will seek to work closely with the EU 
and its candidate members in Central and Eastern Europe, both to 
fulfill the promise of a trans-Atlantic marketplace already being 
created by business investment and trade, as well as to 
reinvigorate, improve, and strengthen the WTO processes. The total 
amount of two-way investment in the EU and the United States amounts 
to over $1.1 trillion, with each partner employing about 3 million 
people in the other. We would be remiss to neglect our common 
interests while working to resolve more immediate disputes.
    Now that there is a fragile peace in the Balkans, we must secure 
it by pointing people toward economic hope and regional integration. 
Therefore, we would like to work with the Congress to follow through 
on the prior administration's proposal to offer trade preferences to 
countries in Southeast Europe.
    As we move on multiple fronts to expand trade, we will continue 
to emphasize WTO accessions. The accession process is an opportunity 
for reforming economies to adopt trade liberalizing policies and 
practices within the framework of WTO obligations. It also provides 
a context for the United States to expand market access 
opportunities for its exports of goods and services and to address 
outstanding trade issues. WTO accessions are based on full 
implementation of WTO obligations and the establishment of 
commercially meaningful market access for other Members' exports. 
This strengthens the international trading system.
    These principles have formed the basis for the completion of WTO 
accession negotiations with a number of countries, including 
Albania, Georgia, Estonia, Latvia, the Kyrgyz Republic, Jordan, and 
Oman. In other ongoing negotiations with countries such as Russia, 
Ukraine, and Saudi Arabia, U.S. participation in the accession 
process will enhance the rule of law in trade and enhanced market 
access, while demonstrating support for the reform agendas of these 
countries.
    The Administration will also continue efforts to complete 
China's accession to the WTO. Completing this process will provide 
substantially greater market access for industrial goods, services, 
and agricultural products. It will require China to comply with 
specific rules on import surges, anti-dumping and subsidies 
practices, while eliminating many of the conditions China requires 
for the approval of imports and investment. We will also work to 
ensure that Taiwan's accession to the WTO is approved at the same 
session of the WTO General Council.

The Opportunity Ahead

    The United States has an unparalleled opportunity to shape the 
international trading order. But we have to get back into this game 
and take the lead. We are certainly in a position to do so. The 
United States is prepared to pursue a number of bilateral and 
regional free trade agreements in the years ahead, as well as the 
global trade negotiations in the WTO. By moving on multiple fronts, 
we hope we can create a competition in trade liberalization. The 
message we are sending to other countries is that the United States 
is willing to negotiate. We are willing to open if they open. But if 
some countries are slow, we will move without them.

II. Monitoring Trade Agreements and Resolving Disputes

    The Bush Administration will continue to work with Congress and 
American businesses, farmers, workers and consumers to ensure 
effective monitoring of U.S. trade agreements and quick responses to 
non-compliance--including through the use of WTO and other dispute 
settlement procedures, WTO oversight committees, and U.S. trade 
laws. At the same time, the Administration will seek to prevent or 
reduce problems facing U.S. exporters by working with U.S. trading 
partners, including through technical assistance where appropriate, 
so that consultation and training will help head off problems before 
they arise. Likewise, together with the Departments of Agriculture, 
Commerce and State, and other agencies, USTR will continue to work 
bilaterally with our trading partners to resolve disputes quickly 
and expeditiously before these issues become serious problems.
    To ensure the enforcement of WTO agreements, the United States 
has been one of the world's most frequent users of WTO dispute 
settlement procedures. In enforcing the WTO agreements, the United 
States has focused in particular on foreign practices that could 
pose serious problems to the international trading system if they 
proliferated in many markets. Therefore, USTR aims not only at 
challenging existing barriers but also at preventing the future 
adoption of similar barriers around the world.

A. Ensuring Compliance

    Efforts to promote compliance with trade agreements have used 
three principal tools: (1) the WTO and NAFTA dispute settlement 
mechanisms; (2) the various WTO oversight bodies; and (3) 
enforcement of U.S. trade law. Vigorous enforcement enhances the 
ability of the United States to reap the benefits of trade 
agreements that USTR negotiates, ensures that we can continue to 
open markets, and builds confidence in the trading system.

1. WTO and NAFTA Dispute Settlement Results

    WTO and NAFTA dispute settlement procedures have enabled the 
United States to resolve problems arising from the failure of 
trading partners to implement their international obligations, and 
to resolve disputes over interpretation of various provisions in the 
WTO or NAFTA agreements. Our hope in filing cases is, of course, to 
secure U.S. benefits rather than to engage in prolonged litigation. 
Therefore, whenever possible we have sought to reach favorable 
settlements that address U.S. concerns without having to resort to 
panel proceedings. We have been able to achieve this preferred 
result in 14 of the 32 cases concluded so far, and have prevailed 
through litigation in 15 cases. During the past year, we have 
achieved the following results:
    <bullet> Argentina-Patents: In May 1999, the United States 
requested WTO consultations with Argentina regarding its failure to 
provide a system of exclusive marketing rights for pharmaceutical 
products and other issues relating to Argentina's obligations under 
the WTO Agreement on Trade-Related Aspects of Intellectual Property 
Rights (``TRIPS Agreement''). The United States expanded its claims 
last year to address Argentina's failure to fully implement its 
remaining TRIPS obligations that came due on January 1, 2000, such 
as Argentina's failure to protect confidential test data submitted 
to government regulatory authorities for pharmaceuticals and 
agricultural chemicals and its denial of certain exclusive rights 
for patents. We are pleased that recent consultations with the

[[Page 23067]]

Argentina have been constructive and are encouraged by the dialogue 
that has developed to possibly resolve certain claims in the case. 
However, there are still some outstanding issues that must be 
addressed before the dispute settlement case can be fully concluded.
    <bullet> Australia-Prohibited Export Subsidies on Leather: On 
June 21, 2000, the United States resolved its dispute with Australia 
regarding subsidization of Australia's sole exporter of automotive 
leather. Under a bilateral settlement agreement, the subsidy 
recipient agreed to a partial repayment of the prohibited export 
subsidy it received, and the Australian Government committed that it 
will exclude this industry from current and future subsidy programs 
and provide no other direct or indirect subsidies. This agreement 
resulted from a WTO case brought by the United States in 1998.
    <bullet> Canada-Patent Protection Term: The United States 
prevailed in its WTO challenge of Canada's failure to provide patent 
protection consistent with its obligations under the TRIPS 
Agreement. The United States initiated this dispute in its 1999 
``Special 301'' review of intellectual property protection abroad. 
On September 18, 2000, the WTO Appellate Body upheld a WTO panel 
ruling that Canada had not complied with its TRIPS obligation to 
provide to all Canadian patents in existence since January 1, 1996, 
a term of protection of at least twenty years from the date of 
filing the patent application. Canada is to comply with this ruling 
by August 12, 2001.
    <bullet> Denmark-Enforcement of Intellectual Property Rights: 
The United States used the dispute settlement procedures in this 
case to encourage legislative action by Denmark to implement its 
TRIPS obligations, particularly the requirement that WTO members 
make available ex parte search and seizure remedies to authorize ex 
parte searches and seizures in civil intellectual property rights 
enforcement proceedings. On March 28, 2001, the Danish Government 
enacted legislation that provides this provisional remedy.
    <bullet> European Union (EU)-Banana Regime: On April 11, 2001, 
the United States and the EU reached an Understanding on a way to 
resolve the bananas dispute, which originated in the early 1990s. 
Beginning in 1997, the United States obtained various WTO rulings 
against the EU's banana regime as well as the right to impose 
retaliatory duties on $191.4 million of EU trade due to the EU's 
failure to comply with WTO rulings. In 1999, the EU finally sought 
to change its regime in a way that would be consistent with WTO 
provisions and to consult actively with the United States on ways to 
construct a WTO-consistent regime. The U.S.-EU Understanding 
achieves fundamental U.S. objectives of reducing discrimination 
against U.S. companies, increasing market access for Latin American 
bananas, and securing Caribbean banana exports to the EU.
    <bullet> Greece-Television Piracy: Prior to resolving this 
dispute, a significant number of television stations in Greece 
regularly broadcasted copyrighted motion pictures and television 
programs without the authorization of the copyright owners, and 
effective remedies against such copyright infringements were not 
provided. Following WTO consultations, the Greek government enacted 
new legislation to crack down on pirate stations. In addition, the 
rate of television piracy in Greece fell significantly. On March 22, 
2001, in a notification to the WTO regarding the settlement of this 
dispute, Greece committed to provide effective deterrence against 
any increase in the level of television piracy, to continue its 
efforts in enforcing its intellectual property laws, and to prevent 
any recurrence of the television piracy problem.
    <bullet> India-Import Quotas on Agricultural, Textile and 
Industrial Products: On April 1, 2001, India completed its 
compliance with a WTO ruling obtained by the United States regarding 
India's import restrictions on over 2,700 tariff items. The United 
States and India agreed that India would implement the WTO rulings 
and recommendations by April 1, 2000 for approximately 73 percent of 
the tariff items at issue, and by April 1, 2001 for the remaining 
items. In announcing India's new export-import policy on March 31, 
2001, Indian Commerce and Industry Minister Maran explicitly cited 
the WTO ruling as the reason for removing these quantitative 
restrictions.
    <bullet> Ireland--Copyright and Neighboring Rights. The United 
States used WTO dispute settlement consultations to encourage 
Ireland to take further steps to implement its TRIPS obligations. As 
a result of these consultations, Ireland committed in February 1998 
to accelerate its implementation of comprehensive copyright reform 
legislation, and agreed to pass a separate bill, on an expedited 
basis, to address certain particularly pressing enforcement issues. 
Consistent with this agreement, Ireland enacted legislation in July 
1998 raising criminal penalties for copyright infringement. On July 
10, 2000, Ireland passed its comprehensive copyright legislation, 
and implemented this legislation on January 1, 2001. Based on these 
developments, the parties notified the WTO that a mutually 
satisfactory solution had been reached.
    <bullet> Korea--Beef Imports: The United States prevailed 
through litigation in this dispute, which challenged Korea's 
regulatory scheme that discriminates against imported beef by 
confining sales of imported beef to specialized stores, limiting the 
manner of its display, and otherwise constraining opportunities for 
the sale of imported beef. Korea is to comply with the adverse WTO 
rulings by September 10, 2001, and the United States will monitor 
Korea's implementation to ensure that it is consistent with these 
WTO rulings.
    <bullet> Mexico--Basic Telecommunications Services: The United 
States used WTO consultations to encourage Mexico to ensure 
competition in its $12 billion telecommunications market. The United 
States held two rounds of WTO consultations with Mexico and 
requested the establishment of a WTO panel on a variety of issues, 
including Mexico's failure to (1) prevent Telmex (Mexico's dominant 
telecom carrier) from engaging in anti-competitive practices, (2) 
ensure that Telmex offers its competitors cost-oriented 
interconnection rates, (3) require Telmex to interconnect with 
competitors at the local level, and (4) permit competitive 
international traffic arrangements at cost-oriented rates. Thus far, 
Mexico has taken positive steps to address the first three issues. 
The Government has issued dominant carrier rules to regulate Telmex; 
encouraged carriers to agree to substantial interconnection rate 
cuts for 2001; and ensured that competitors obtain local 
interconnection from Telmex. However, Mexico has not yet addressed 
the key issue of international traffic or enforced its dominant 
carrier rules. Absent progress on these issues by June 1, the United 
States will determine whether additional action is necessary, 
including moving the pending WTO case forward.
    <bullet> Mexico--Beans: For several years, Mexico had not 
permitted U.S. dry beans to enter Mexico in a timely and predictable 
manner under the NAFTA duty-free tariff-rate quota (TRQ). On 
November 30, 2000, the United States requested NAFTA consultations 
on this matter. As a result, on April 18, 2001, USTR reached an 
understanding with Mexico's Secretary of Economy on Mexico's 
allocation of the TRQ. Mexico will now allocate the NAFTA TRQ for 
beans on a regular schedule, with auctions to be held each March and 
June. In addition, Mexico has agreed to modify several 
administrative provisions that prevented effective use of the TRQ. 
Under the NAFTA, exports of dry beans to Mexico--one of our largest 
export markets--will be free of all duties in 2008.
    <bullet> Romania--Customs Valuation: Last May, the United States 
requested WTO consultations with Romania concerning its customs 
valuation regime, which established arbitrary minimum and maximum 
import prices for products such as meat, eggs, fruits and 
vegetables, clothing, footwear, and certain distilled spirits, as 
referenced in a database. Romania's customs valuation regime 
appeared to violate its obligations under the WTO Customs Valuation 
Agreement, the GATT, and the WTO Agreement on Agriculture. After 
fruitful consultations in July, Romania modified its customs 
valuation procedures so that, in practice, it no longer imposes 
minimum reference prices on most U.S. exports. USTR is working with 
Romania on the amendments to its laws and regulations necessary to 
finally bring its customs valuation regime into compliance with its 
WTO obligations.

2. WTO Oversight Bodies

    Through WTO oversight bodies, the United States works to secure 
implementation of WTO commitments. These oversight bodies monitor 
implementation of the various WTO agreements, review WTO Members' 
laws and regulations, identify potential problems, and offer 
technical assistance or other expertise when necessary to help 
ensure compliance and implementation of commitments. The United 
States actively asserts its rights and pursues its interests through 
these mechanisms.
    <bullet> The WTO Committee on Agriculture oversees the 
implementation of the Agreement on Agriculture and provides a forum 
for WTO Members to consult on

[[Page 23068]]

matters related to provisions of the Agreement. In many cases, the 
Committee resolves problems so that Members do not need to refer 
them to WTO dispute settlement. For example, U.S. pressure on 
Hungary regarding restrictive import policies for beef products 
resulted in Hungary's decision to open a special quota for high-
quality North American beef. Questions directed to Korea regarding 
its annual rice import requirements led to improvements in that 
country's administration of its tariff rate quota commitments. The 
Committee also provided a forum for the United States to raise 
questions concerning the agricultural practices in many of our 
trading partners, including elements of Canada's domestic support 
programs, the export subsidy amounts associated with the European 
Communities' inward processing arrangements for dairy products, and 
the amount of product entered under tariff-rate quotas in Norway. 
The United States also raised extensive questions on the EU's 
support regime for horticultural products.
    <bullet> The Committee on Customs Valuation has actively 
considered issues relating to individual deadlines of more than 50 
developing country members to implement the WTO Agreement on Customs 
Valuation. Some members have requested additional time to assume the 
Agreement's obligations in full. The United States and others, 
working through the Committee, have consulted with these members to 
craft individualized extension decisions which provide for 
benchmarked work programs toward full implementation, along with 
progress reporting requirements.
    <bullet> The Committee on Technical Barriers to Trade (TBT) has 
addressed specific technical regulations which might be perceived as 
creating unnecessary obstacles to trade. For example, in 2000, the 
United States continued to express concerns with draft EU directives 
on (1) waste from electrical and electronic equipment, (2) the 
restriction of the use of certain hazardous substances in electrical 
and electronic equipment, and (3) batteries and accumulators. In 
this Committee, the United States and other countries have also 
expressed concern that EU notifications of draft technical 
regulations are made too late to allow a meaningful opportunity for 
comment as foreseen under the TBT Agreement. Finally, the United 
States has raised questions and alerted other WTO members to issues 
relating to restrictive origin requirements in the Protocols to the 
Europe Agreements on Conformity Assessment under negotiation by the 
EU.
    <bullet> In the Committee on Balance of Payments (BOP) 
Restrictions, the effective use of consultation procedures resulted 
in the elimination by the end of 2000 of both Romania's and the 
Slovak Republic's import restrictions based on balance-of-payment 
concerns. Furthermore, as a result of consultations, both Pakistan 
and Bangladesh submitted plans to eliminate all of their balance-of-
payments restrictions, which means that all of the few remaining 
countries imposing such restrictions now have liberalization plans 
in place.
    <bullet> The United States actively uses the Committee of the 
Parties to the Government Procurement Agreement (GPA) for monitoring 
individual Parties' implementation of GPA commitments. In 
particular, the Agreement establishes a process for reviewing how 
each Party has implemented GPA requirements in its national 
legislation. In 2001, the Committee will be reviewing the 
implementing legislation of Israel, Japan and Korea.
    <bullet> The United States has used the Council for Trade in 
Services and its subsidiary bodies, especially the Committee on 
Trade in Financial Services, to help ensure full implementation of 
obligations under the General Agreement on Trade in Services (GATS). 
The United States has consistently and successfully pressed 
countries to fulfill their obligations to ratify and implement their 
commitments under the Financial Services and Basic 
Telecommunications Agreements. As a result, in 2000, three more 
countries--Ghana, Nigeria, and Kenya--brought their GATS financial 
services commitments into force under the GATS, and one more 
country--Dominica--brought its basic telecom commitments into force 
under the GATS. In the Council, the United States also promoted an 
agreement between the WTO and the International Telecommunications 
Union (ITU) to help ensure that ITU technical assistance assists in 
implementation of countries' basic telecom obligations, including 
those related to regulation.
    <bullet> The TRIPS Council monitors implementation of the TRIPS 
Agreement, provides a forum in which WTO Members can consult on 
intellectual property matters and carries out the specific 
responsibilities assigned to the Council in the TRIPS Agreement. 
During 2000, the TRIPS Council monitored the Agreement's 
implementation by developing country Members and newly-acceding 
Members; provided assistance to developing country Members so they 
can fully implement the provisions of TRIPS; and concentrated on 
institution-building, both internally and with the World 
Intellectual Property Organization (WIPO). The TRIPS Agreement has 
yielded significant benefits for U.S. industries and individuals, 
from those engaged in the pharmaceutical, agricultural chemical, and 
biotechnology industries to those producing motion pictures, sound 
recordings, software, books, magazines and consumer goods.
    <bullet> Finally, the Trade Policy Review Mechanism has been 
instrumental in the identification of potentially WTO-inconsistent 
practices in members' regimes, and provides a forum in which 
pressure can be brought to urge reform or elimination of such 
practices. The trade policy review of Brazil in November 2000 
provided an opportunity for the United States to question the 
Brazilian Government about its lack of notification to the WTO of 
its current import licensing system and the WTO consistency of this 
system. The United States was joined by several other delegations 
including the EU, India and Colombia in expressing dissatisfaction 
with the licensing system. In response to this criticism Brazil 
promised to review its import licensing system, reduce the products 
subject to licensing, and notify the revised system to the WTO.

3. U.S. Trade Laws

    U.S. trade laws are an important means of ensuring enforcement 
of U.S. rights and interests in trade. In the past year, use of 
Section 301, Section 1377, Super 301, Special 301, and Title VII has 
enabled the United States to challenge market access barriers to 
U.S. goods and services, protect U.S. intellectual property rights, 
ensure compliance with telecommunications agreements, and address 
discriminatory foreign government procurement practices. Through its 
trade preference programs, the United States also seeks to ensure 
that beneficiary countries meet the statutory conditions, which can 
include providing internationally recognized worker rights and 
adequate intellectual property protection.
    <bullet> Section 301: Section 301 of the Trade Act of 1974 is 
the principal U.S. statute for addressing foreign government 
practices affecting U.S. exports of goods or services. Section 301 
may be used to enforce U.S. rights under international trade 
agreements and may also be used to respond to unreasonable, 
unjustifiable, or discriminatory foreign government practices that 
burden or restrict U.S. commerce. In response to a petition from the 
North Dakota Wheat Commission regarding allegedly unreasonable trade 
practices of the Government of Canada and the Canadian Wheat Board, 
the USTR initiated an investigation of such practices on October 23, 
2000. This investigation is currently pending.
    <bullet> Special 301: Section 182 of the Trade Act of 1974 
(commonly known as ``Special 301'') requires USTR to identify 
annually those countries that deny adequate and effective 
intellectual property (IP) protection or that deny fair and 
equitable market access to U.S. IP products. Implementation of the 
law involves the placement of countries of concern into three 
separate categories--Priority Foreign Country, Priority Watch List, 
and Watch List. These designations are determined in terms of the 
seriousness of IP problems, with countries having the most serious 
IP problems designated as Priority Foreign Countries, which will 
result in the initiation of a section 301 investigation within 30 
days of designation. On March 13, 2001, the United States self-
initiated a section 301 investigation following the identification 
of Ukraine as a Priority Foreign Country under Special 301 for 
Ukraine's persistent failure to take effective action against 
significant levels of optical media piracy and to implement adequate 
and effective intellectual property laws.
    <bullet> Super 301: Super 301 (mandated by Executive Order 13116 
of March 31, 1999) provides a mechanism for the USTR annually to 
review U.S. trade expansion priorities and focus U.S. resources on 
eliminating significant trade impediments to U.S. exports. In the 
past year, the United States made important progress on issues 
raised in past Super 301 reports, including productive discussions 
with Japan concerning deregulation of Japan's insurance market and 
resolution of an outstanding textiles dispute with India concerning 
the establishment and notification to the WTO of India's tariff 
bindings on a wide range of textile and apparel products of 
importance to U.S. exporters.

[[Page 23069]]

    <bullet> Section 1377: In the past year, use of Section 1377 of 
the Omnibus Trade and Competitiveness Act of 1988 has led to the 
successful resolution of a number of key telecommunications trade 
barriers, including those in Canada, Germany, Japan, Mexico, and 
Peru. For instance, high interconnection rates in Japan were a 
subject of last year's Section 1377 review. On July 18, 2000, the 
United States and Japan reached agreement to substantially lower 
interconnection rates in Japan, saving competitive telecom carriers 
more than $2 billion in two years. In addition, in November 2000, 
the Canadian telecom regulator reformed Canada's contribution 
collection (universal service) regime, which was also subject to 
last year's Section 1377 review. These reforms are expected to save 
competitive service providers millions of dollars.
    <bullet> Title VII: The Title VII report (mandated by Executive 
Order 13116 of March 31, 1999) identifies trading partners engaging 
in discriminatory government procurement practices. The annual Title 
VII report highlights a number of foreign procurement practices that 
are of significant concern to the United States and that the 
Administration is pursuing in a range of international fora.
    <bullet> U.S. trade preference programs--including the 
Generalized System of Preferences (GSP), the African Growth and 
Opportunity Act (AGOA), the Caribbean Basin Initiative (CBI), and 
the Andean Trade Preferences Act (ATPA)--are designed to stimulate 
economic growth and alleviate poverty in developing countries 
through their integration into the international trading system. To 
be eligible for these preferences, a beneficiary country must meet 
certain statutory requirements. Though the requirements are not 
identical in the various programs, they include providing 
internationally recognized worker rights, intellectual property 
rights, market access, and having other laws and practices that will 
reinforce the incentives provided. Recently, Swaziland enacted a new 
labor law providing internationally recognized workers rights in 
order to retain GSP benefits and to become eligible for AGOA. 
Likewise, Bangladesh agreed to extend national labor laws to its 
export processing zones and establish a transition mechanism of 
worker elected councils. The Administration is carefully monitoring 
the situation to ensure full implementation of the commitments 
undertaken by the Bangladeshi authorities. Deficiencies in Moldova's 
intellectual property protection were remedied, and market access 
improved in India. The Administration is continuing to review 
Guatemala's continued eligibility for preferences under both the GSP 
and CBI programs based on serious concerns about labor practices in 
that country.
    While promoting free trade abroad, we vigorously enforce our 
trade laws in order to give Americans the confidence needed to keep 
markets open. The Administration is committed to aggressively 
enforcing U.S. trade laws to address the adverse impact that 
unfairly traded steel imports have on U.S. steel companies and U.S. 
jobs. There are currently more than 150 anti-dumping and 
countervailing duty actions in effect or under investigation 
relating to steel products. In addition, the steel industry is 
currently receiving import relief under Section 201 of the Trade Act 
of 1974 for line pipe and steel wire rod products. In addition to 
actively enforcing U.S. trade laws, the Administration will engage 
key steel producing countries to address bilaterally and 
multilaterally the underlying structural distortions that foster 
unfair trade in steel. Despite the trade remedies that are currently 
in place, the Administration is very concerned about the health of 
the steel industry. The Administration is monitoring closely the 
global steel market and steel trade practices and will take 
additional actions as needed.

B. Status of WTO Disputes

    In the April 2000 Super 301 Report, USTR announced its intention 
to resort to WTO dispute settlement procedures as a means of 
resolving concerns in seven instances. This section reports on the 
status of those disputes.
    <bullet> Argentina-Patents: As discussed above, progress has 
been made toward resolving this dispute.
    <bullet> Brazil-Customs Valuation: U.S. exporters of textile 
products have reported that Brazil uses officially-established 
minimum reference prices as a requirement to obtain import licenses 
and/or as a base requirement for import. In practice, this system 
works to prohibit the import of products with declared values below 
the established minimum prices. The Brazilian practice appears 
inconsistent with Brazil's WTO obligations, including those under 
the Agreement on Customs Valuation. The United States and Brazil 
held WTO consultations on this matter in July 2000. The United 
States is monitoring the operation of the Brazilian regime and 
consulting with U.S. exporters on possible next steps.
    <bullet> Brazil-Patent Protection: Although Brazil has a largely 
WTO-consistent patent regime, there remains one provision in 
Brazil's patent law that the United States considers inconsistent 
with the TRIPS Agreement. This provision requires all patent 
owners--regardless of the subject matter of the patent--to 
manufacture their products in Brazil in order to maintain full 
patent rights. Having been unable to resolve this issue for over 
five years, the United States resorted to WTO dispute settlement 
procedures and requested consultations with Brazil in May 2000. The 
parties held consultations in June and December 2000, but failed to 
reach a mutually agreed resolution to the dispute. As a result, the 
United States requested the establishment of a WTO panel to resolve 
this dispute. This panel was established in February 2001.
    <bullet> Denmark-Enforcement of Intellectual Property Rights: As 
discussed above, this dispute has been successfully resolved with 
the enactment of legislation in 2001 to implement Denmark's TRIPS 
obligations.
    <bullet> India-Measures Affecting Trade and Investment in the 
Motor Vehicle Sector: This dispute, which challenges the WTO 
consistency of Indian measures that apply to investment in the 
automotive industry, is currently before a WTO dispute settlement 
panel. The measures at issue require manufacturing firms in the 
motor vehicle sector to achieve specified levels of local content, 
neutralize foreign exchange by balancing the value of certain 
imports with the value of exports of cars and components over a 
stated period, and limit imports to a value based on the previous 
year's imports. These measures appear to violate the WTO Agreement 
on Trade Related Investment Measures (TRIMs) and GATT.
    <bullet> Philippines-Measures Affecting Trade and Investment in 
the Motor Vehicles Sector: On November 17, 2000, a WTO panel was 
established to examine a U.S. challenge to certain measures in the 
Philippines automotive sector. Among other things, the measures 
require producers to incorporate specified amounts of locally 
produced inputs, precluding the purchase of U.S. parts. There is 
also a requirement that imports be balanced in an amount related to 
a company's foreign exchange earnings. Under the WTO TRIMs 
Agreement, the Philippines was required to remove these measures by 
January 1, 2000, unless the Philippines received an extension. No 
such extension has been granted and therefore the Philippines 
appears to be in violation of its TRIMs obligations.
    <bullet> Romania--Customs Valuation: As discussed above, 
considerable progress was made in consultations, and this dispute is 
close to resolution.

C. New Requests for Consultations

    In addition to the disputes discussed above, the United States 
has invoked WTO dispute settlement procedures in three other 
disputes since last year's Super 301 report:
    <bullet> Mexico--Measures Affecting Trade in Live Swine: On July 
10, 2000, the United States requested consultations with Mexico 
regarding a Mexican antidumping measure on live swine from the 
United States as well as sanitary and other restrictions imposed by 
Mexico on imports of live swine weighing more than 110 kilograms. 
Consultations were held September 7, 2000. Following the 
consultations, Mexico issued a protocol which is designed to allow a 
resumption of U.S. shipments of live swine weighing 110 kilograms or 
more into Mexico. At about the same time, Mexico self-initiated a 
review of its threat of injury determination based on information, 
including a shortage of slaughter hogs, that suggests that market 
conditions have changed substantially in Mexico. The United States 
is closely monitoring this situation.
    <bullet> Belgium--Rice Imports: Belgian customs authorities have 
disregarded the actual transaction values of rice imported from the 
United States from July 1, 1997 to December 31, 1998, in computing 
the applicable customs duties. By not using transaction values to 
compute customs duties, Belgium has assessed duties on rice that are 
higher than the levels provided for in its WTO commitments. 
Belgium's administration of its tariff regime for rice, moreover, 
has contributed to substantial uncertainty regarding the rate of 
duty that will be applicable to shipments of imported rice. The 
United States requested WTO consultations in November 2000 with 
Belgium on these issues, and on March 12, 2001, a WTO panel was 
established to examine the matter.

[[Page 23070]]

    <bullet> EU--Import Surcharge on Corn Gluten Feed: This dispute 
involves a tariff-rate quota of 5 euros per metric ton imposed by 
the EU on the first 2,730,000 metric tons of corn gluten feed 
imported into the EU from the United States. The EU imposed this 
import surcharge in response to the U.S. import safeguard measure 
imposed on wheat gluten imported into the United States from the EU. 
The United States considers that the EU failed to satisfy the 
requirements of the WTO Safeguard Agreement for such suspension of 
concessions, and therefore the United States requested consultations 
with the EU on January 25, 2001.

III. Realizing the Benefits of Trade

    The Bush Administration is carefully monitoring practices a 
number of foreign practices, using all the available tools to 
address the concerns of U.S. exporters. These include measures that 
occur in many markets and across many sectors. The barriers 
discussed below are just some examples of the practices that the 
Administration is carefully monitoring.

A. Import Policies

    Restrictive or burdensome import policies can undermine the 
ability of U.S. exporters to realize the full benefits of market 
access commitments. Such policies occur in many forms. Provided 
below are examples of three types of import policies that currently 
represent serious barriers to U.S. exports.
    Reference Prices: The WTO Customs Valuation Agreement stipulates 
that the transaction price is the primary basis for customs 
valuation determinations. However, certain countries appear to rely 
on ``reference prices,'' which can artificially inflate the customs 
value of imported goods. The United States has actively pursued the 
issue of reference prices in the WTO Committee on Customs Valuation 
and has engaged in WTO dispute settlement consultations with Romania 
and Brazil regarding such practices. As discussed above, WTO 
consultations with Romania appear to have addressed many concerns, 
and the United States remains in WTO consultations with Brazil in an 
effort to resolve similar issues. India continues to maintain a 
minimum import price system for imports of primary and secondary 
steel products. In early 2000, the Government of India removed 
primary steel products from the regime. This action was challenged 
in the Indian courts, which reapplied the regime to primary steel 
products. The United States is considering appropriate steps to 
take, which could include WTO dispute settlement action.
    The continued existence of such practices in Mexico remains of 
serious concern. On October 1, 2000, Mexico significantly increased 
the costs associated with its reference price system by imposing a 
burdensome new cash deposit guarantee requirement for subject goods. 
Cash deposits based on reference prices are not returned for at 
least six months, and Mexican banks charge high fees to open and 
maintain customs accounts. Bilateral discussions with Mexico are 
planned for mid-2001. Based on these consultations, the United 
States will consider what additional steps are necessary, including 
WTO dispute settlement action.
    Dealer Protection Laws: Several Central American and Carribean 
countries (e.g., Honduras, Guatemala, Costa Rica, El Salvador, 
Dominican Republic and Haiti) have in place laws, regulations and 
other measures which appear to have the objective of preventing 
foreign exporters from terminating importation and distribution 
contracts with local companies except under very stringent 
conditions often requiring payments of large indemnities to the 
local company. To the extent that they apply only to imports, such 
laws may be inconsistent with GATT national treatment requirements. 
Application of these laws can have harmful effects on the economy as 
a whole and on consumers. U.S. exporters report that distributors' 
profit margins are extremely high in these countries and that 
distributors often refuse to service certain segments of the local 
market. Faced with such conditions, exporters are often prevented 
from bringing their products to the market most effectively, and 
consumers face high costs and limited choice of products. We will 
address this issue in a variety of contexts, notably in bilateral 
discussions with our trading partners.
    Motor Vehicle Policies: Certain of our trading partners maintain 
restrictive motor vehicle policies which limit market access for 
U.S. exporters. For instance, lack of foreign access to the motor 
vehicle market of Korea remains of significant concern. The United 
States and Korea concluded a Memorandum of Understanding (MOU) in 
October 1998 according to which Korea agreed to undertake a number 
of specific actions. Although Korea has taken steps to implement 
specific provisions of the MOU, foreign access remains severely 
restricted, as evidenced by the tiny foreign share of the Korean 
auto market, which totaled 0.3 percent in 2000. Korea's high tariffs 
and cascading tax structure on motor vehicles continue to impair the 
competitiveness of imported motor vehicles. Moreover, Korean 
consumers continue to believe they will face public opprobrium for 
purchasing a foreign car, the legacy of years of government-
sponsored anti-import campaigns. Although Korea recently acceded to 
the 1998 Global Agreement for the harmonization of world automotive 
standards, it continues to develop overly-burdensome standards that 
impede imports and are contrary to the spirit of global 
harmonization and the 1998 MOU. The United States will continue to 
push Korea to fulfill the objectives of the 1998 MOU and to develop 
a package of meaningful measures that will result in substantial 
increases in market access for foreign motor vehicles.
    U.S. exporters are experiencing related problems in Japan. The 
1995 U.S.-Japan Automotive Agreement, which sought to eliminate 
market access barriers and significantly expand sales opportunities 
in this sector, expired on December 31, 2000. Although some progress 
was made under the 1995 agreement, the overall objectives of the 
1995 agreement were not met. There are a number of factors 
contributing to the disappointing results, one of which has been the 
weakness of the domestic Japanese economy over the past three years. 
However, the effects of the Japanese recession have been 
disproportionately felt by foreign firms. In addition, the pace of 
deregulation has slowed significantly. Lack of transparency in both 
procurement and rule-making persists, and keiretsu ties continue to 
impede full and fair competition in this market. Further, while 
investment opportunities in the vehicle market have increased 
notably, opportunities for automotive parts makers remain largely 
unchanged. This situation, coupled with recent trends in bilateral 
automotive trade, has underscored the need for further market-
opening efforts by Japan. The United States hopes to work closely 
and cooperatively with Japan on this issue in the coming months.

B. Technical Regulations and Rule-Making

    WTO Members have developed disciplines--primarily through the 
Agreement on Technical Barriers to Trade (TBT)--to ensure that 
standards, testing, conformity assessment procedures, and related 
measures are developed and applied in a transparent and non-
discriminatory manner. These disciplines have served to prevent 
trading partners from using such technical requirements for 
protectionist purposes. Nevertheless, U.S. exporters continue to 
face adverse conditions in several important markets. Although there 
are many other such barriers around the world, we highlight the 
following two examples:
    Technical Regulations: Such regulations can impose onerous 
conditions on U.S. exports. For instance, in Mexico, certain 
regulations require the inspection and approval of manufacturing 
facilities in order to obtain a sanitary license to sell certain 
herbal and nutritional products in Mexico. However, Mexican 
authorities refuse to inspect U.S.-based manufacturing facilities. 
Denying U.S. exporters the ability to have their facilities 
inspected and approved on the same basis as their Mexican 
counterparts raises serious concerns about Mexico's adherence to its 
trade agreement obligations. The United States has raised these 
concerns with Mexico. Mexican authorities have advised us that they 
are looking at ways to address our concerns consistent with NAFTA 
and WTO obligations; however, to date, we have seen no progress. If 
this problem is not resolved in a timely manner that will allow U.S. 
companies without Mexican-based production facilities to resume 
exporting their products to Mexico, the United States will consider 
whether to request consultations under the NAFTA or the WTO to 
resolve this issue.
    Transparency in Rule-Making: An important aspect in the 
development of technical regulations is transparency in the 
regulatory process. Assuring transparency and effective 
participation in the rule-making process can be extremely useful in 
preventing trade problems associated with such measures. A growing 
number of U.S. trade concerns stem from the lack of transparency in 
the development of the technical regulations of the EU. EU 
procedures for the development of EU technical regulations appear to 
undermine multilateral provisions intended to provide an opportunity 
for meaningful comment on

[[Page 23071]]

draft regulations, because the EU notification to the WTO is only 
made after the European Commission has finalized its proposal (and 
forwarded it to other EU institutions for consideration/approval). 
As a result, the United States and other interested parties are 
unlikely to have a meaningful opportunity to have any input or 
concerns addressed or reflected in a directive's provisions. 
Furthermore, while European regional standards can be used to meet 
an EU directive's ``essential'' requirements, EU procedures do not 
provide a meaningful opportunity to provide comments on the 
relationship of these standards to the EU directive's requirements. 
The lack of transparency in EU rulemaking raises serious questions 
about EU compliance with obligations under the WTO TBT Agreement. 
The United States will closely monitor developments and will 
consider all options to ensure that these obligations are fully met.

C. Agricultural Practices and SPS Measures

    The WTO Agreement on Agriculture and on Sanitary and 
Phytosanitary (SPS) Measures have been instrumental to the ability 
of the U.S. agricultural sector to take advantage of its 
competitiveness and export its products abroad. The United States 
continues to be vigilant in its effort to prevent our trading 
partners from maintaining trade-distorting practices that 
disadvantage U.S. agricultural exports. For example, as discussed 
above, in response to a petition filed, the USTR is currently 
investigating practices of Canada and the Canadian Wheat Board under 
Section 301 of U.S. trade laws. We also are examining information 
gathered from U.S. agricultural exporters to assist us in our 
negotiations on agriculture in the WTO, the FTAA and bilateral 
negotiations, including public comments received in preparation for 
this year's Super 301 report.
    In addition, the United States has serious concerns that Japan, 
in an unprecedented manner, is taking actions affecting access to 
its markets for agricultural products. In early April 2001, Japan 
implemented a new quarantine inspection system for fresh vegetables, 
strawberries and melons, which limited the number of daily 
inspections at Japan's air and seaports. Japan took this action 
without prior consultation with trading partners or adequate 
explanation of a scientific rationale for the new system. Japan is 
also considering taking, for the first time, import safeguard 
actions on a wide range of agricultural and other products. It has 
announced that it will implement safeguard measures on three 
agricultural products--fresh shiitake mushrooms, stone leeks (i.e., 
welsh onions) and tatami mat reeds--beginning April 23, 2001. Among 
the other products Japan is investigating are lumber, onions, and 
tomatoes, which are of commercial interest to the United States. 
U.S. exports (CY 2000) of these products totaled over $240 million. 
The U.S. Government, at senior levels, has raised with the Japanese 
Government its serious concerns about these measures affecting 
imports. The United States will closely monitor Japan's import 
measures to ensure they comply with WTO obligations.
    The United States also has serious concerns regarding the 
process of import risk assessment for SPS measures in Australia. SPS 
measures protect against risks associated with plant or animal borne 
pests and diseases, additives, contaminants, toxins, and disease-
causing organisms in foods, beverages, or feedstuffs. The WTO SPS 
Agreement establishes rules and procedures to ensure that SPS 
measures address legitimate human, animal, and plant health 
concerns, do not arbitrarily or unjustifiably discriminate between 
Members' agricultural or food products, and are not disguised 
restrictions on international trade. Transparency is an integral 
aspect of the development of SPS measures and is often extremely 
useful in preventing trade problems associated with SPS measures. 
Although Australia revised and published its import risk assessment 
procedures in 2000, the process in Australia remains non-transparent 
and fraught with delays. Australia's continued ban on the 
importation of California table grapes illustrates problems 
encountered, and other countries have comparable complaints. The 
United States has been seeking entry into Australia's market, in 
some cases for more than a decade, for Florida citrus, pork, 
poultry, stone fruit, and apples in addition to California table 
grapes.

D. Government Procurement

    The 2001 ``Title VII'' report, which USTR releases 
simultaneously with the Super 301 report on April 30 (available on 
the USTR web site (www.ustr.gov)), addresses a number of 
discriminatory government procurement practices, including 
implementation of the EU ``Utilities Directive'' by government 
telecommunications utilities, various discriminatory practices in 
the public works sector of Japan, discriminatory practices and 
procedural barriers to trade in Taiwan, discrimination in Canada 
against U.S. suppliers in provincial government procurement 
procedures, and the potential discriminatory effects of ``sect 
filters'' in Germany. The ``Title VII'' report provides background 
on these issues and the steps the Administration is taking to 
address them.

E. Subsidy Practices

    Unfair government subsidies distort the free flow of goods and 
adversely affect U.S. business in the global marketplace. Rules 
covering industrial subsidies have evolved and are intended to 
prohibit or discourage the most distortive kinds of subsidies, and 
to allow governments to use less distortive subsidies in order to 
achieve the broader social or economic objectives of interest to 
them under certain circumstances. Provided below are representative 
examples of subsidy practices that the Administration is monitoring 
closely.
    The United States continues to be concerned about the prospect 
of further subsidization of the Airbus consortium by Member State 
governments of the EU. Since the inception of Airbus in 1967, Airbus 
member governments have provided massive subsidies to their 
respective member companies to aid in the development, production 
and marketing of the Airbus family of large civil aircraft. Airbus 
partner governments have borne 75 to 100 percent of the development 
costs for all major lines of Airbus aircraft and provided other 
forms of support, including equity infusions, debt forgiveness, debt 
rollovers and marketing assistance. Some loans for Airbus programs, 
repayable from royalties on aircraft sold, have been effectively 
forgiven because projected sales did not materialize. The EU also 
supports Airbus indirectly through government funded research 
targeted at specific civil aircraft projects. Government support of 
Airbus raises serious concerns about EU Member State compliance with 
their bilateral and multilateral obligations in this sector. The 
United States has urged the Airbus member governments to ensure that 
their planned support for the Airbus A380 aircraft program is on 
commercial terms, reflecting the fact that Airbus is now a highly 
competitive global producer of aircraft. The European Commission 
recently informed the United States that seven EU Member State 
governments have committed to substantial direct support to develop 
the A380 aircraft. The United States is examining the information 
that the European Commission provided and plans to seek further 
information in future discussions with the EU.
    In addition, the Government of Korea, through the Korean 
Development Bank (KDB), has initiated a program aimed at providing 
direct financial support to several large companies that are 
encountering severe cash flow problems. For example, the KDB 
purchased $200 million worth of newly issued Hyundai Electronics 
Industries (HEI) bonds in January 2001. The KDB made similar 
purchases of the newly issued bonds of five other cash-strapped, 
debt-burdened Korean companies, three of which are other Hyundai 
subsidiaries. The KDB reportedly plans to provide additional 
financing in the future to HEI and other companies to cover $15-20 
billion in bonds coming due in 2001. The Korean Government maintains 
that only viable companies will benefit from temporary KDB support 
and that the KDB support will terminate at the end of 2001. The 
United States has expressed its concern to Korea about the negative 
implications of this type of government-directed lending for Korea's 
restructuring efforts and the Korean economy. The United States also 
has noted that a significant share of the benefits under this 
program has been provided thus far to companies that are largely 
export focused and has raised with Korea its concerns over the 
potential inconsistency of this intervention with the WTO Agreement 
on Subsidies and Countervailing Measures.

F. Services and Investment Barriers

    Services are what most Americans do for a living. Service 
industries account for nearly 80 percent of both U.S. employment and 
GDP. U.S. cross-border exports of commercial services (i.e., 
excluding military and government) were $255 billion in 1999, 
supporting over 4 million services and manufacturing jobs in the 
United States. U.S. services exports have more than doubled over the 
last 10 years, increasing from $118 billion in 1989 to $255 billion 
last year.

[[Page 23072]]

Likewise, foreign investment provides capital that fuels economic 
expansion, increases productivity, improves living standards, and 
provides links to the international marketplace. Access to overseas 
investment markets allows U.S. companies to remain competitive in a 
world of new and changing opportunities. U.S.-owned companies with 
affiliates abroad accounted for 64% of total U.S. goods exports in 
1998.
    These statistics reveal the importance of services and 
investment in promoting open markets. Continued liberalization in 
this area represents a ``force multiplier'' for structural reforms 
abroad and for economic growth domestically.
    Unfortunately, as discussed below, we continue to encounter 
barriers to the supply of U.S. services and to investment by U.S. 
businesses, particularly with respect to telecommunications 
regulations, trade-related investment measures (TRIMs) in the 
automobile sector, and retail store laws. We therefore make it a 
priority to intensify our efforts to promote the dynamism of this 
sector and reduce trade barriers.
    Telecommunications Trade Barriers: Since the WTO Basic 
Telecommunications Agreement came into force in February 1998, 
telecommunications markets overseas have rapidly opened to 
competition. U.S. companies have invested billions of dollars to 
build global networks, partner with foreign companies, and expand 
their commercial presence in foreign markets. However, as discussed 
in USTR's review of telecommunications trade agreements under 
``Section 1377'', released on April 2, 2001 (see www.ustr.gov), 
practices of certain trading partners raise serious concern about 
compliance with their international telecommunications obligations.
    For instance, in Taiwan, telecommunications regulations impose 
serious limitations on the competitive offering of 
telecommunications services and undermine the ability of new 
entrants to compete in Taiwan's market. These restrictions also 
appear to be inconsistent with the commitments undertaken by Taiwan 
as part of its bilateral WTO accession negotiations with the United 
States to liberalize its telecommunications market by July 1, 2001. 
USTR welcomes the ongoing regulatory review of Taiwan's telecom 
regulations and expects this review to result in the promised 
liberalization of its market. If Taiwan does not appear to be taking 
the necessary steps to liberalize its market consistent with its 
commitments, USTR will consider appropriate action, including under 
Section 1374 of the 1988 Trade Act. In addition, as discussed above, 
the United States remains seriously concerned that Mexico has not 
yet addressed the key issue of ensuring competition in the market 
for international calls or enforcing certain rules designed to 
address anti-competitive conduct in telecommunications services. 
Absent progress on these issues by June 1, the United States will 
determine whether additional action is necessary, including moving 
the pending WTO case forward.
    Auto TRIMS: The WTO Agreement on Trade Related Investment 
Measures (TRIMs) limits the ability of foreign governments to 
develop programs that favor the purchase or use of goods produced 
locally. Such measures often reduce the export of U.S.-manufactured 
goods and also impede a company that operates in a market with TRIMs 
from acting in an economically efficient manner. The maintenance of 
TRIMs has been a particular problem in the motor vehicle sector. As 
discussed above, the United States currently has two pending WTO 
cases on this issue, challenging the maintenance by India and the 
Philippines of measures affecting trade and investment in the motor 
vehicle sector.
    The United States also has serious concerns about local content 
requirements imposed by Malaysia on the production of motor 
vehicles. Under the TRIMs Agreement, Malaysia was required to remove 
these measures by January 1, 2000 unless additional time was granted 
by the WTO. On December 29, 1999, Malaysia made a formal request for 
an additional two years to bring these measures into compliance with 
its obligations under the Agreement. The United States has noted its 
willingness to agree to an extension, but is concerned by 
conflicting statements made by the Government of Malaysia with 
regard to its intentions. For this reason, the United States will 
continue to monitor Malaysia's compliance with its WTO obligations 
in the motor vehicle sector.
    Retail Store Laws: Retail store laws that discriminate with 
regard to the country of origin of the goods that a retailer can 
sell harm not only the firms operating in this sector, but also harm 
consumers by limiting access to products that may be more 
competitive in terms of price and quality. The Philippines requires 
that certain foreign retailers source at least 30 percent of their 
inventory, by value, in the Philippines. Additionally, firms 
specializing in luxury goods must source at least 10 percent of 
their inventory, by value, in the Philippines. These requirements 
appear to violate the Philippines' commitments under several WTO 
agreements. The United States will monitor this issue to determine 
what action should be taken to address these concerns.

G. Lack of Intellectual Property Protection

    The USTR is releasing the ``Special 301'' report today (see 
www.ustr.gov), which identifies those countries that deny adequate 
and effective intellectual property protection or that deny fair and 
equitable market access to U.S. intellectual property products. As 
discussed above, on March 13, 2001, the United States self-initiated 
a section 301 investigation following the identification of Ukraine 
as a Priority Foreign Country under Special 301 for Ukraine's 
persistent failure to take effective action against significant 
levels of optical media piracy and to implement adequate and 
effective intellectual property laws. In addition, this year's 
Special 301 report addresses a number of key issues, including (1) 
failure of numerous economies, including Brazil and Taiwan, to take 
effective enforcement action that provides adequate deterrence 
against commercial piracy and counterfeiting; (2) failure of the 
European Union to provide national treatment for the protection of 
geographical indications for agricultural products and foodstuffs; 
(3) failure by Argentina, Hungary and Israel, among others, to 
provide adequate protection for the confidential test data of 
pharmaceutical and agricultural chemical companies; (4) the 
insufficient term of protection for patents in trading partners such 
as the Dominican Republic and India; (5) the inadequate protection 
for pre-existing works in numerous trading partners, particularly in 
Armenia, Azerbaijan, Belarus, Kazakhstan, Tajikistan, Turkmenistan, 
and Uzbekistan; (6) the failure of the Philippines to provide 
adequate enforcement, including making available ex parte search 
remedies; and (7) lax border enforcement against pirate and 
counterfeit goods in many of our trading partners.

H. Barriers to Trade in Electronic Commerce

    Barriers to electronic commerce can occur at various points in 
the e-commerce value chain, such as restrictions on basic 
telecommunications services, Internet access services, and services 
provided through the Internet. For example, Israel is pursuing a 
policy that would disadvantage U.S. companies wishing to offer 
Internet access services over the cable platform and would favor the 
state-owned telecommunications company (Bezeq). Although Israel has 
licensed Bezeq to enter the high-speed Internet access market 
without any licensing fees, it has introduced legislation that will 
require cable television companies seeking to enter this market to 
pay licensing fees (above their cable franchise fees). The United 
States is seriously concerned that regulatory favoritism undermines 
the investment environment in Internet services in Israel. We will 
closely monitor developments in Israel as well as in other markets.

I. Other Barriers

    Not all trade obstacles fit neatly into one category. There are 
many exporters facing conditions in overlapping categories that 
combine to limit market access to U.S. goods and services, and 
unfavorable treatment of a certain foreign industry by any given 
country often involves a multitude of overlapping barriers. One 
illustration of how numerous trade measures can affect the 
conditions for access to overseas markets can be found in the 
textile and apparel industries. U.S. industry has raised a series of 
concerns regarding a number of measures, often used in combination, 
that impede access to overseas markets, including: high tariffs, 
additional import taxes and charges, some of which may be forgiven 
for goods destined for the export market, excessive and impractical 
marking and labeling requirements, reference pricing and non-
automatic licensing, burdensome certificates of origin requirements, 
lack of intellectual property protection, and pre-shipment 
inspection requirements. Ironically, some of the countries with the 
most protected internal markets are also the most significant 
beneficiaries of the WTO Agreement on Textiles and Clothing's 
liberalization and elimination provisions, as applied by the United 
States. The United States will continue its efforts to work within 
the WTO and with our trading partners to ensure that all countries 
meet their WTO obligations to

[[Page 23073]]

open their market to textile and apparel products.
    The United States has continuing concerns about treatment of 
foreign, research-based pharmaceuticals under the reimbursement 
pricing systems in place in Korea and Taiwan. These reimbursement 
pricing systems lack transparency and appear arbitrary, raising 
questions about whether they are being implemented in a fair and 
non-discriminatory manner. These systems also create an uncertain 
business environment for pharmaceutical manufacturers. In addition, 
burdensome and non-science-based regulatory requirements are applied 
to pharmaceutical products in Korea and Taiwan, including 
requirements relating to the acceptance of foreign clinical test 
data, testing, and approval of new drugs. Korea and Taiwan need to 
undertake significant improvements in their systems to make them 
fair, non-discriminatory and transparent. Finally, while the Korean 
Government has been responsive to some U.S. concerns in the 
pharmaceutical sector, serious questions remain regarding the lack 
of IPR protection for these products. In particular, the lack of 
coordination between the Korea Food and Drug Administration and the 
Korea Intellectual Property Office concerning marketing approval for 
pharmaceuticals and inadequate data protection, discourage the 
introduction of innovative drugs. The U.S. Government will continue 
to pursue these issues with the Korean Government to ensure that 
foreign pharmaceuticals are provided fair and non-discriminatory 
treatment in the Korean market.
    Finally, the U.S. flat glass industry continues to experience 
serious market access problems in Japan, owing mainly to the 
continued domination of the Japanese flat glass market by domestic 
flat glass manufacturers. Over the past year, U.S. industry has 
strengthened its business and marketing activities in Japan. 
However, despite better quality, technology and competitive prices, 
U.S. flat glass manufacturers have failed to gain access to the 
Japanese market commensurate with their level of access in the rest 
of the world. The domination by Japanese flat glass manufacturers of 
distributors is a key problem for U.S. firms. The leading Japanese 
flat glass producers exert tight control over flat glass 
distribution by majority ownership, equity and financing ties, 
employee exchanges, and purchasing quotas. The U.S. Government 
remains very concerned about the closed distribution channels in the 
oligopolistic flat glass sector. To address these concerns, the U.S. 
Government has proposed, under the bilateral Enhanced Initiative on 
Deregulation and Competition Policy, that the Japanese Government 
take further steps to promote competition in wholesale and retail 
distribution channels for a range of products, including flat glass. 
The U.S. Government will continue to monitor closely the flat glass 
industry and urges the Japanese Government to promote competition 
and eliminate unhealthy oligopolistic behavior in the flat glass 
sector.

A. Jane Bradley,
Assistant U.S. Trade Representative for Monitoring and Enforcement.
[FR Doc. 01-11355 Filed 5-4-01; 8:45 am]
BILLING CODE 3190-01-P