[Federal Register Volume 61, Number 196 (Tuesday, October 8, 1996)]
[Notices]
[Pages 52827-52835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25763]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

Report on Trade Expansion Priorities Pursuant to Executive Order 
12901 (``Super 301'')

AGENCY: Office of United States Trade Representative.

ACTION: Notice.

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SUMMARY: Notice is hereby given that the Acting United States Trade 
Representative (USTR) has submitted the report on United States trade 
expansion priorities published herein to the Committee on Finance of 
the United States Senate and the 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 
12901 of March 3, 1994, as extended by Executive Order No. 12973 of 
September 27, 1995.

DATE: The report was submitted on October 1, 1996.

FOR FURTHER INFORMATION CONTACT: Irving Williamson, Chairman, Section 
301 Committee, Office of the U.S. Trade Representative, 600 17th 
Street, N.W., Washington, DC 20508, (202) 395-3432.

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

Identification of Trade Expansion Priorities Pursuant to Executive 
Order 12901; October 1, 1996

    This report is submitted pursuant to Executive Order No. 12901 of 
March 3, 1994, as extended by Executive Order No. 12973 of September 
27, 1995. Under the Executive Order the United States Trade 
Representative (USTR) is required, by September 30, 1996, to ``review 
United States trade expansion priorities and identify priority foreign 
country practices, the elimination of which is likely to have the most 
significant potential to increase United States exports, either 
directly or through the establishment of a beneficial precedent.'' The 
Executive Order permits the USTR to include, if appropriate, ``a 
description of foreign country practices that may in the future warrant 
identification as priority foreign country practices.'' The USTR may 
also include ``a statement about other foreign country practices that 
were not identified because they are already being addressed by 
provisions of United States trade law, existing bilateral trade 
agreements, or in trade negotiations with other countries and progress 
is being made toward their elimination.''

[[Page 52828]]

Trade Expansion Priorities

    President Clinton's top trade expansion priority continues to be 
ensuring economic prosperity for the American people by expanding U.S. 
exports of goods and services. The President is committed to achieving 
this goal by negotiating agreements that afford access to foreign 
markets, ensuring that U.S. trading partners comply with their trade 
agreement obligations, ensuring that U.S. trade laws are vigorously 
enforced, and that we continue to expand international trade rules to 
cover sectors of greatest interest to U.S. exporters.

Priority Foreign Country Practices

    President Clinton's commitment to the enforcement of trade 
agreements and U.S. trade laws has been clear from the beginning of his 
Administration. Through vigorous application of U.S. trade laws and 
active enforcement of U.S. rights under the new dispute settlement 
procedures of the WTO, the Administration has effectively opened 
foreign markets to U.S. goods and services. The President also has 
successfully used the incentive of access to the U.S. market to 
encourage improvements in workers' rights and reform of intellectual 
property laws and practices in other countries. The more than 40 
enforcement actions already taken are outlined in the attachment to 
this report.
    Under President Clinton's direction, the Office of the USTR has 
negotiated close to 200 trade agreements--including the World Trade 
Organization (WTO) agreements, and many other market-opening agreements 
that expand opportunities for U.S. companies and workers. These 
agreements, combined with aggressive export promotion and enforcement 
of U.S. trade laws, have helped increase U.S. exports of goods and 
services substantially. In the first seven months of 1996, U.S. exports 
of goods and services were running at an annual rate of $845 billion, 
some 37 percent higher than in 1992.
    For purposes of this report, the Administration has decided not to 
identify any priority foreign country practices. The most significant 
foreign trade barriers are already being addressed through 
Administration's ongoing strategy of actively monitoring and enforcing 
trade agreements, strategically applying U.S. trade laws, and invoking 
WTO dispute settlement. Enforcement action is ongoing, not just in 
response to an annual review. Since 1993, the Administration has 
enforced its agreements by deploying all available trade enforcement 
tools at its disposal. The USTR has used the leverage of Section 301 of 
the Trade Act of 1974 and the ``Super 301'' annual review eleven times 
to resolve significant problems in foreign markets; used Section 1377 
of the Omnibus Trade and Competitiveness Act of 1988 to gain compliance 
with telecommunications trade agreements with three major trading 
partners; addressed discrimination in foreign government procurement 
practices in five cases under Title VII of the Omnibus Trade and 
Competitiveness Act of 1988; and invoked the dispute settlement 
procedures of the WTO to protect the interests of U.S. producers and 
manufacturers in 20 cases, including the three new WTO disputes 
initiated as a result of this annual review. The Administration has 
also used the ``Special 301'' provisions in U.S. trade law to improve 
intellectual property protection in more than fifteen major markets, 
and has used the benefits of the Generalized System of Preferences 
program to encourage several developing countries that benefit from 
that program to improve intellectual property protection or to afford 
all workers internally recognized worker rights. In addition, the 
Administration is constantly using the leverage of U.S. trade laws to 
secure market opening agreements and to eliminate specific trade 
barriers, without having to formally invoke the provisions of those 
laws.

New Section 301 and WTO Enforcement Actions

    As a result of the 1996 annual review, the Administration is 
initiating the following new actions:
     Indonesia's national auto policy: Indonesia has recently 
expanded a domestic auto policy that offers tax and tariff incentives 
to increase the local ownership of automotive companies in Indonesia 
and the local content of the automobiles they manufacture. Indonesia's 
national car policy grants tax and tariff benefits to ``national car'' 
automobile manufacturers based on the percentage of domestic content in 
their vehicles. This policy adversely affects U.S. experts of autos and 
auto parts to Indonesia. Therefore, the USTR will request consultations 
under WTO dispute settlement procedures in the context of an 
investigation under Section 301 of the Trade Act of 1974. Further steps 
under WTO dispute settlement procedures will depend on the outcome of 
the consultations on these measures.
     Brazil's auto program: Brazil offers auto manufacturers 
reduced duties on imports of assembled cars and other benefits if they 
export sufficient quantities of parts and vehicles and promise to meet 
local content targets in their Brazilian plants. The program adversely 
affects U.S. exports of auto parts in Brazil. In August 1996 the USTR 
invoked WTO dispute settlement procedures and held consultations with 
Brazil on these measures. As a result, Brazil has agreed to enter into 
intensive talks with the United States, with the goal of removing the 
discriminatory impact of its practices on U.S. exports. The USTR will 
initiate a Section 301 investigation of these measures, and further 
steps under WTO dispute settlement procedures will depend on the 
outcome of the talks with Brazil.
     Australia's export subsidies: Australia provides 
significant export subsidies despite its obligations under the WTO 
Agreement on Subsidies and Countervailing Measures. In response to a 
section 301 petition, the USTR will invoke WTO settlement procedures in 
the context of an investigation under Section 301 to challenge 
Australian export subsidies that adversely affect U.S. manufacturers of 
leather for automobile upholstery.
     Argentina's import duties: Argentina maintains specific 
import duties on textiles, apparel and footwear that exceed the 35% ad 
valorem tariff rate to which Argentina committed under the WTO 
agreements. Argentina also maintains other WTO-inconsistent import 
barriers. Therefore, the USTR will invoke WTO dispute settlement 
procedures in the context of an investigation under Section 301.

Strategic Enforcement and Automotive Trade

    A top priority of the Clinton Administration has been monitoring 
implementation of the WTO agreements to ensure that the members of the 
WTO are living up to their Uruguay Round commitments and complying with 
the WTO rules. In the course of these monitoring efforts, the United 
States has focused in particular on foreign practices that could pose 
serious problems to the international trading system if they 
proliferate in many markets. Therefore, the Clinton Administration has 
adopted a strategic enforcement strategy--aimed not only at challenging 
existing barriers but also at preventing the future adoption of similar 
barriers around the world. Successful challenges to such measures will 
establish beneficial precedents not only for the United States but for 
all WTO members.
    Application of the Administration's strategic enforcement strategy 
is particularly appropriate in the

[[Page 52829]]

automotive sector, where trade-related investment measures effect U.S. 
exports in many countries. Manufacturing of autos and auto parts is a 
key industry for the United States and access to foreign markets is 
important for its future growth. The U.S. auto industry has made 
enormous strides in competitiveness and productivity. As a result of 
USTR's monitoring of compliance with WTO agreements, the USTR has 
identified practices that are inhibiting U.S. exports of autos and auto 
parts and the creation of the jobs associated with those exports. In 
many cases such practices appear to be consistent with WTO rules, 
including those under the WTO Agreement on Trade-Related Investment 
Measures (TRIMs).
    In addition to initiating the actions in the auto sector mentioned 
above, the Administration is pursuing the following other practices 
affecting the auto sector:
     Bilateral agreement with Japan: In 1995, the United States 
and Japan negotiated an agreement on market access for foreign 
automobiles, which addresses the full range of market access barriers 
regarding sales of autos and auto parts in Japan and to Japanese 
companies outside Japan. In September 1996, the U.S. and Japan held the 
first follow-up meeting under the agreement. Results under the 
agreement in its first year have been very good. Sales of U.S.-made Big 
Three vehicles in Japan were up more than 40 percent in the first half 
of 1996, and Japanese purchases of U.S. auto parts are rising steadily. 
However, full implementation of the agreement remains critical. Among 
other issues, the United States is concerned about an apparent 
slackening in the pace of new dealership relationships between the Big 
Three and Japanese auto dealers, as well as deregulation with respect 
to the auto parts replacement market in Japan. The United States and 
Japan will meet regularly during the year to assess progress under the 
agreement on the basis of quantitative and qualitative factors.
     Bilateral agreement with Korea: The United States 
concluded a bilateral trade agreement with Korea in 1995 to open the 
auto market for U.S. automakers. The agreement reduced discriminatory 
taxes that disadvantage the types of autos U.S. manufacturers produce, 
eliminated and streamlined auto standards that act as barriers to 
market access, permitted U.S. advertisers equal access to television 
time, and allowed foreign majority ownership of auto retail financing 
entities. Since that agreement was concluded, domestic producers have 
identified other measures that continue to impede market access. Market 
penetration by foreign automobiles still remains at less than one 
percent. In addition, the protected Korean market has provided a 
sanctuary for Korean manufacturers, allowing them to charge higher 
prices to their domestic consumers so that they can pursue an 
aggressive export strategy abroad. USTR is conducting a thorough review 
of U.S. access to Korea's auto market, including whether additional 
bilateral commitments are necessary to further open the Korean market, 
and whether existing barriers violate Korea's obligations under the WTO 
agreements. USTR officials will raise these issues with Korean 
officials in Seoul in mid-October.
     China's Automotive Industry Policy: China imposes local 
content requirements, import restrictions and export performance 
requirements and other trade distorting measures in its autos sector 
that are inconsistent with WTO rules. The United States is addressing 
these measures bilaterally and in the context of negotiations on the 
accession of China to the WTO, to ensure that such measures are not 
maintained. The WTO working party on China's accession request meets 
again in Geneva at the end of October.
     Auto TRIMs monitoring: USTR will carefully monitor and 
consider action with respect to practices in other major auto markets 
such as (a) India, where import licensing, domestic content and export 
performance requirements affect market access; (b) Argentina, where 
local content requirements have been increased since Argentina notified 
the WTO of its auto regime pursuant to the TRIMs agreement; and (c) 
Malaysia, which maintains a national auto program which must be phased 
out in accordance with the TRIMs Agreement. The next meeting of the WTO 
Committee on Trade-Related Investment Measures will be held in Geneva 
on October 10.

Other Bilateral Priorities That May Warrant Identification as 
Priority Foreign Country Practices in the Future

     Japan Market Access for Insurance: The Administration is 
continuing negotiations with Japan concerning its implementation of the 
insurance agreement reached between the United States and Japan in 
1994. The core of the dispute centers on the linkage between 
deregulation of Japan's primary life and non-life insurance markets and 
the entry of Japanese insurance firms into the so-called ``third 
sector,'' a segment of the market consisting of such products as 
personal accident and cancer insurance, which are the areas of greatest 
strength for foreign firms. The agreement provides that ``radical 
change in the business environment'' in the third sector will be 
avoided until significant deregulation of the primary sectors, and a 
``reasonable period'' for medium to small and foreign insurance 
providers to compete in the primary sectors. On September 30, 1996, the 
U.S. and Japan reached an interim agreement regarding the conditions 
under which the new subsidiaries of the major Japanese life and non-
life companies may offer products in the third sector upon the start-up 
of their business on October 1, 1996. These conditions will restrict 
entry by the subsidiaries into the third sector until the two 
governments reach, before the end of the year, an overall agreement on 
``avoiding radical change'' in the third sector and substantial 
deregulation of the primary sectors. In addition to temporary 
restrictions in the third sector, the interim agreement provides some 
important initial primary sector deregulation. However, significantly 
more primary sector deregulation will be necessary as part of an 
overall resolution of this issue, consistent with the 1994 agreement.
     Japan telecommunications: In October 1994, the United 
States and Japan entered into a bilateral agreement to increase access 
and sales of foreign telecommunications products and services in the 
Japanese government procurement market. In May 1996, Japan's National 
Police Agency (NPA) selected two Japanese companies to develop the 
specifications for a new telecommunications system. When a foreign 
company challenged this decision under Japan's government procurement 
bid protest mechanism, the Japanese Government cited the ``order and 
safety'' exception of the WTO Government Procurement Agreement as the 
basis for denying any review of this issue. The United States 
Government has serious concerns about the use of the order and safety 
exception in this case, and serious concerns about the procedures and 
manner in which the Japanese Government has conducted this procurement. 
The two governments held consultations on this issue on September 17, 
1996, but made no progress toward resolving the issue. Accordingly, the 
United States is consulting with industry representatives on 
appropriate next steps. USTR officials will meet with Japanese 
officials at the end of October on implementation of the bilateral 
telecommunications agreement.
     Japan Market Access for Paper and Paper Products: In the 
April 1992 U.S.-

[[Page 52830]]

Japan paper agreement, Japan agreed to take GATT-consistent measures to 
increase substantially market access in Japan for foreign paper and 
paperboard products. Nevertheless, a number of structural barriers 
continue to impede the U.S. paper industry's ability to export into the 
nearly $40 billion Japanese paper market, which is the world's second 
largest. The market is restricted by a variety of systemic impediments, 
including: (1) Exclusionary business practices, (2) the complex and 
essentially closed Japanese paper distributions systems, (3) 
interlocking relationships between Japanese producers, distributors, 
merchants, converters, and corporate end-users, (4) non-transparency in 
corporate purchasing practices, and (5) inadequate enforcement of the 
Japanese Anti-Monopoly Act (AMA). The United States is continuing to 
press Japan to fully implement the agreement and address the 
outstanding barriers. Further consultations will take place in the near 
future.
     China Market Access for Agricultural Products: China 
continues to apply phytosanitary standards to U.S. exports of citrus 
fruit and wheat, particularly wheat from the Pacific Northwest, that 
are not based on scientific principles and which act as a virtual ban 
on these exports. Under the 1992 U.S.-China Market Access Memorandum of 
Understanding, China committed to remove by October 1993 any non-
science-based phytosanitary standards on a number of agricultural 
items, including citrus and wheat. China is a major potential market 
for U.S. citrus and wheat producers. Despite further commitments on the 
part of China and repeated efforts by the United States to negotiate a 
resolution of these issues, China has yet to remove these non-science-
based restrictions. The United States and China have accelerated 
discussions at senior levels of both governments, with the next round 
of talks to be held in late October. These issues are also being 
addressed in the context of WTO accession negotiations.
     Korea telecommunications: In July 1996, the USTR 
identified Korea as a ``Priority Foreign County'' under Section 1374 of 
the 1988 Omnibus Trade and Competitiveness Act for failure to address 
market access barriers to U.S. telecommunications products and 
services. The United States seeks to address a range of Korean 
practices and obtain commitments by the Korean government to refrain 
from interfering in private sector procurement, to provide 
nondiscriminatory access and regulatory transparency in the 
telecommunications services sector, and to protect intellectual 
property rights. The United States seek to conclude a bilateral 
understanding to resolve these outstanding issues but, absent an 
agreement, will pursue vigorously all options available under U.S. 
trade law. The Administration has made clear its intention not to use 
the full year provided under the statute for these negotiations. The 
next round of consultations will be held in late October .
     Germany--electrical equipment. In April 1996, the 
Administration identified Germany under Title VII of the 1988 Omnibus 
Trade and Competitiveness Act for its failure to comply with market 
access procurement requirements in the heavy electrical equipment 
sector. The imposition of trade sanctions provided under Title VII was 
delayed until September 30, 1996, because consultations suggested a 
resolution was possible given additional time. On September 25, the 
German Cabinet approved going forward with legislative reform of the 
procurement remedies system. The Economics Ministry has also agreed to 
undertake certain monitoring and outreach actions prior to enactment of 
the legislation. Accordingly, the USTR has decided to continue the 
suspension of sanctions while it monitors closely Germany's progress 
toward making the necessary reforms, and monitors upcoming procurements 
involving U.S. bidders. The USTR will review the situation on December 
1, 1996. If there has been insufficient progress and problems facing 
U.S. firms persist, USTR will impose sanctions.
     Ecolabeling Directive: The EU Ecolabeling Directive sets 
forth a scheme whereby EU member states will grant voluntary 
environmental labels based on criteria approved by the European 
Commission for products in specific sectors. While the United States 
supports the concept of ecolabeling and appreciates the EU's attempts 
to address problems regarding ecolabeling criteria, the United States 
continues to be concerned that the EU process for developing criteria 
for certain paper and textile products has not been sufficiently 
transparent. The EU has committed to improve meaningful participation 
by non-EU interests, but there is still room for improvement. The 
United States has urged that the EU ecolabeling program provide 
meaningful and accurate information to consumers on the environmental 
impacts of products, and that ecolabeling criteria not be based on a 
single approach to environmental protection without giving adequate 
attention to other potentially comparable approaches. Bilateral 
discussions with the EU under the auspices of the New Transatlantic 
Agenda will be held on October 28-29 and will focus on the shared 
environmental objectives of ecolabeling programs.
     EU design--restrictive standards: Use of design standards 
rather than performance-based standards increasingly creates an 
impediment to U.S. exports to the EU. The United States has raised its 
concern with such standards both bilaterally and in the WTO. In 
particular, the USTR has objected to European standards which, by 
prescribing non-safety-related design characteristics for gas appliance 
connectors, preclude the use of U.S.-made connectors in Europe. 
Progress in obtaining product approvals and/or changes to these 
standards in certain EU member states may be negated by the recent 
decision of a European regional standards body to establish a technical 
committee to develop a European-wide standard for gas connectors. U.S. 
firms have also expressed concern that the EU may adopt a design-
restrictive standard for asphalt shingles that would effectively 
preclude U.S. exports. To prevent the adoption of further standards-
related trade barriers, the United States is continuing bilateral 
discussions with member state and Commission officials, with the next 
meetings scheduled for mid-October.
     Saudi Arabia International Conformity Certification 
Program (ICCP): Saudi Arabia has implemented mandatory certification 
requirements that affect a wide range of U.S. exports to Saudi Arabia. 
The certification program fails to meet fundamental obligations, such 
as transparency and nondiscrimination, that the Saudi government would 
have to meet as a member of the WTO. The United States has raised its 
concerns with the certification program, both bilaterally and in the 
context of Saudi Arabia negotiations to accede to the WTO. Bilateral 
consultations with Saudi officials were held on September 30 and will 
resume in Geneva in early November.

Multilateral Priorities

    Trade in Services. The General Agreement on Trade in Services 
(GATS) is the first legally enforceable multilateral agreement covering 
trade and investment in the services sector. Market access concessions 
agreed under the GATS provide assurances of open markets and 
nondiscriminatory treatment for U.S. services exporters. Effective U.S. 
participation in further negotiations on opening services

[[Page 52831]]

markets under the GATS is a high priority.
     Telecommunications Market Access Negotiations: The WTO 
Agreement provides for continuing market access negotiations in the 
basic telecommunications services sector. These negotiations cover 
local, long-distance, and international basic telecommunications 
services. In these negotiations, the United States has sought to ensure 
that U.S. firms may provide basic telecommunications services in 
foreign markets both through facilities-based competition--including 
the right to build, own, and operate domestic and international network 
facilities--and through resale of services on existing networks. The 
United States has also sought to ensure that U.S. companies can compete 
in foreign markets on reasonable and nondiscriminatory rates, terms, 
and conditions. The United States has offered to open its telecom 
market if other nations would open their markets. Unfortunately, the 
United States did not obtain a critical mass of high quality offers 
from its trading partners by April 30, 1996, which was the original 
deadline for these talks. Rather than accept a bad deal--or walk away 
from the good offers tabled by some countries--the United States won 
support for an extension of the telecom talks to February 15, 1997. The 
additional time will allow other nations to significantly improve their 
market-opening offers, a precondition to any eventual agreement.
     Finanical Services Market Access Negotiations: Financial 
services are at the heart of the world's economy, facilitating all 
commerce and making possible the creation, allocation and preservation 
of capital which is fundamental to economic activity. A country that 
isolates its financial sector cannot be a full participant in, or 
beneficiary of, the global economy. The United States has a 
competitive, world-class financial services industry. For these reasons 
the Administration has placed the highest priority on a meaningful 
conclusion of the financial services negotiations that are to take 
place in 1997 in the WTO. The United States seeks an agreement that 
provides, on a nondiscriminatory basis, substantially full market 
access to, and national treatment in, the world's major financial 
markets, including those in Asia and Latin America, and seeks 
guarantees that rights now enjoyed by U.S. financial services providers 
in foreign markets will continue.
    Trade Restrictions Imposed for Balance of Payments Purposes. The 
Uruguay Round produced stronger GATT disciplines on the invocation and 
maintenance of trade restrictions (quotas or tariff surcharges) imposed 
for balance of payments (BOP) reasons. The United States has worked in 
the WTO Balance of Payments Committee to ensure that BOP measures are 
imposed and maintained only in response to legitimate balance of 
payments problems, not as a method to protect specific industries or 
sectors. As a result, 8 of the 13 countries that maintained BOP 
measures at the end of the Round will have eliminated all such measures 
by the end of 1996. Further, in 1995 Brazil was denied BOP cover for 
import quotas designed to protect its auto industry. At forthcoming 
meetings of the BOP Committee in October and November 1996 and during 
1997, the United States will seek to ensure that the remaining BOP 
measures are eliminated where legitimate balance of payments problems 
do not exist.

WTO Dispute Settlement Proceedings

    During the past year the United States has accelerated its use of 
the dispute settlement provisions of the World Trade Organization (WTO) 
to address significant foreign trade barriers. Since the WTO began 
operation 21 months ago, the United States has decided to invoke the 
new WTO dispute settlement procedures in 20 cases to enforce the WTO 
agreements--14 in 1996 alone--including the three new WTO disputes to 
be initiated as a result of the 1996 Super 301 annual review. This 
vigorous use of WTO enforcement provisions far exceeds that of any 
other country. By comparison, Canada and the European Communities have 
invoked WTO dispute settlement procedures in 8 and 7 disputes 
respectively.
    The WTO dispute settlement procedures have already yielded positive 
results: The United States won the first case that it took to the WTO, 
involving Japan's taxes on liquor imports; USTR has signed a settlement 
agreement in one case, involving EU imports of grains; in one case the 
defending party has already changed its practice as a result of a U.S. 
complaint (Portugal's term of protection for patents); and we are close 
to settlement on at least two others, involving Japan's protection for 
sound recordings, and Turkey's discriminatory box office tax on foreign 
films.

Early WTO successes

    Japan--liquor taxes. The United States won the first case it 
referred to a WTO dispute settlement panel when the panel found that 
Japan's liquor tax law violates WTO rules by favoring the domestic 
liquor shochu.
     Japan--sound recordings. After the United Stats invoked 
WTO dispute settlement procedures against Japan for denying protection 
to millions of dollars' worth of U.S. sound recordings made between 
1946 and 1971, Japan agreed to change its law, and consultations are 
continuing on Japan's plans for implementing such a change.
     EU--grain imports. The United States invoked WTO dispute 
settlement procedures to enforce the EU's WTO obligation to limit the 
duties it applies to imports of grains so that a duty does not result 
in a duty-paid import price in excess of a specified level. Before a 
panel was established, a settlement was reached in conjunction with the 
U.S.-EU settlement on EU enlargement. The United States remains 
concerned about the EU's implementation of this settlement agreement, 
and will continue to monitor it closely.
     Turkey--film tax. Turkey has taxed box office receipts 
from foreign films at a higher rate than receipts from domestic films. 
In WTO consultations, Turkey agreed to eliminate the tax 
discrimination.
     Portugal--patent protection. After the United States used 
WTO dispute settlement procedures to challenge Portugal's patent law, 
which failed to provide the required minimum 20 years of patent 
protection, Portugal changed its system to implement its obligations 
under the WTO TRIPs agreement.

Ongoing Disputes

    In addition to the three new dispute settlement proceedings already 
cited in this report, the United States is also addressing the 
following barriers in the WTO:
     Brazil--auto imports. The United States and Brazil held 
consultations under WTO dispute settlement procedures in August to 
address Brazil's auto regime that adversely affects exports of U.S. 
autos and auto parts. Brazil has agreed to enter into intensive talks 
to address U.S. concerns.
     Pakistan--patent protection. Pakistan has failed to comply 
with its WTO obligation to establish a ``mailbox'' mechanism through 
which persons may file patent applications for pharmaceutical or 
agricultural chemical products and receive exclusive marketing rights 
for such products under some circumstances. The Untied States has 
referred the matter to a WTO dispute settlement panel to enforce this 
obligation.
     India--patent protection. India has failed to implement 
its WTO obligation to establish a ``mailbox'' mechanism through which 
persons may file patent applications for pharmaceutical or

[[Page 52832]]

agricultural chemical products and receive exclusive marketing rights 
for such products under some circumstances. At WTO consultations 
requested by the United States, India agreed that it is legally 
obligated to establish mailbox and exclusive marketing rights systems, 
but it has not yet taken the required action.
     Japan--photographic film and paper. The United States has 
invoked WTO dispute settlement procedures and requested a panel to 
address various laws, regulations and requirements of the Government of 
Japan affecting the distribution, offering for sale and internal sale 
of imported consumer photographic film and paper. The measures include 
a number of laws, regulations and administrative actions, originating 
in Japan's strategy of liberalization countermeasures in this sector, 
and inhibiting sales of imported film and paper. Japan's photographic 
film and paper market is valued at about $2.8 billion per year.
     Japan--distribution services. The United States has 
invoked WTO dispute settlement procedures regarding measures affecting 
market access for distribution services, applied by the Government of 
Japan pursuant to or in connection with Japan's Large Scale Retail 
Stores Law and other laws, and will refer the matter to a panel if it 
is not resolved through further consultations. These measures affect 
market access in Japan for a variety of U.S. products, including film.
     Hungary--agricultural export subsidies. The United States, 
joined by Argentina, Australia, Canada, New Zealand and Thailand, is 
consulting with Hungary under WTO dispute settlement procedures 
concerning Hungary's lack of compliance with its scheduled commitments 
on agricultural export subsidies.
     Canada--magazine imports. The United States has asked a 
WTO dispute settlement panel to find that Canada's import ban and 
special excise tax on foreign magazines with content targeted at 
Canada, and Canada's postal rates discriminating against foreign 
magazines, are inconsistent with Canada's WTO obligations.
     EU--meat imports. The United States has asked a WTO panel 
to find that the EU's restrictions on imports of meat from animals 
treated with growth hormones are inconsistent with its WTO obligations.
     Australia--salmon imports. The United States has invoked 
WTO dispute settlement procedures concerning Australia's ban on imports 
of untreated fresh, chilled or frozen salmon. The ban is allegedly 
imposed for phytosanitary reasons, even though a draft risk assessment 
found in 1995 that imports of eviscerated fish are not a basis for 
concern about the transmission of fish diseases to Australia's fish 
stocks. The Australian government is in the process of reconsidering 
the scientific basis for the restrictions.
     EU--banana imports. The United States, Guatemala, 
Honduras, Mexico and Ecuador have asked a WTO panel to find that the 
EU's practices relating to the importation, sale and distribution of 
bananas are inconsistent with its WTO obligations. The practices 
adversely affect the services exports of U.S. banana marketing 
companies.
     Korea--shelf-life requirements. Following WTO 
consultations concerning Korea's food regulations, which contained 
arbitrary shelf-life restrictions that inhibited or precluded U.S. 
exports of many agricultural products, Korea agreed to convert to a 
manufacturer-determined shelf-life system for most beef, pork, poultry 
and other foods. Korea also agreed to remove other barriers to U.S. 
meat exports. Korea is the third largest market for U.S. agricultural 
exports. The United States has recently informed Korea of problems that 
have arisen in implementing the shelf-life agreement and is consulting 
on those matters. The United States will refer these issues to a WTO 
dispute settlement panel if these problems are not expeditiously 
addressed.
     Korea--import clearance. After consultations under WTO 
procedures concerning Korea's unjustifiably long and burdensome import 
clearance process for agricultural products, Korea revised its 
inspection procedures for fresh fruit and vegetables, and stated its 
intention to reform its food inspection and sanitation system. Since 
Korea's actions did not resolve the import clearance problems, the 
United States held further consultations with Korea and is now awaiting 
detailed information requested in September from Korean officials on 
specific reforms to its import clearance procedures. The United States 
will refer the matter to a WTO panel if Korea does not implement the 
needed changes.

NAFTA Dispute Settlement Proceedings

    The United States continues to make use of the dispute settlement 
provisions of the North American Free Trade Agreement (NAFTA) to 
address the following significant foreign trade barriers:
     Canada--dairy and poultry tariffs. Following the Uruguay 
Round, Canada raised its tariffs on several agricultural products. It 
applies those higher tariffs to U.S. exports of dairy, poultry, eggs, 
barley and margarine. The United States has asked a NAFTA panel to find 
that Canada's application of these tariffs on imports from the United 
States is inconsistent with the NAFTA prohibition against the 
imposition of new or increased tariffs or the imposition of tariffs in 
excess of Canada's NAFTA tariff schedule.
     Mexico/Small Package Delivery. Mexico has denied a U.S. 
firm the ability to operate large trucks in its small package delivery 
service even though Mexican firms engaged in the same business can do 
so, despite Mexico's obligation under the NAFTA to accord U.S. firms 
national treatment in this service sector. Consultations with Mexico 
under NAFTA procedures are continuing.

Attachment--Trade Enforcement: An Active Record

Section 301 and Super 301

    Section 301 of the Trade Act of 1974 is the principal U.S. statute 
for addressing foreign unfair practices affecting U.S. exports of goods 
or services. Section 301 may be used to enforce U.S. rights under 
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. Under Section 301 the 
USTR may take action against such practices, including withdrawing 
trade agreement concessions and imposing duties, fees or restrictions 
on imports. In addition, as part of the ``Super 301'' process, the U.S. 
Trade Representative annually reviews U.S. trade expansion priorities 
and identifies those priority foreign country practices the elimination 
of which is likely to have the most significant potential to increase 
U.S. exports.
    The Administration has actively used the leverage of Section 301 
and Super 301 to eliminate foreign unfair trade practices and open 
foreign markets to American goods and services. Indeed, event the 
threat of imposition of retaliatory measures under Section 301 has, in 
many instances, resulted in improved market access for American 
exporters. For example:
     China--intellectual property protection. Employing the 
leverage of possible trade sanctions, the USTR used Section 301 to 
reach agreement in February 1995 with China on enforcement of its 
intellectual property protection laws, and in June 1996 to secure 
effective enforcement of that agreement.

[[Page 52833]]

     Canada--Country Music Television. As a result of a Section 
301 investigation of Canadian government practices regarding the 
authorization for distribution via cable of U.S.-owned programming 
services, U.S. and Canadian firms reached a settlement in March 1996 
that will restore market access.
     EU--banana imports. As the result of a Section 301 
petition filed with USTR by Chiquita Brands International, Inc., and 
the Hawaii Banana Industry Association, the United States reached 
agreement with Colombia and Costa Rica in January 1996 regarding their 
actions affecting exports of bananas to the European Union (EU). The 
United States has also invoked WTO dispute settlement procedures, 
jointed by Ecuador, Guatemala, Honduras and Mexico, to challenge the 
EU's import practices, which discriminate against U.S. banana 
distribution services.
     EU--enlargement. As a result of the enlargement of the EU 
to include Austria, Finland and Sweden among its member states, U.S. 
exports of semiconductors and certain other products were subject to 
higher tariffs. With Section 301 retaliation and WTO dispute settlement 
rules as leverage, USTR negotiated an agreement with the EU in November 
1995 to lower the EU's tariffs on semiconductors and hundreds of other 
products. The tariff reductions will result in an estimated $4 billion 
in savings for U.S. companies over the next ten years.
     Korea--auto imports. In conjunction with its annual 
``Super 301'' review, the United States negotiated an agreement with 
Korea in September 1995 to increase access to the Korean market for 
U.S. passenger vehicles. The agreement reduced by 15 percent the 
overall tax burden on autos with larger engines, liberalized many 
Korean standards and certification procedures lifted some restrictions 
on advertising and retail financing, and provided the Korean 
Government's assurances that it would no longer promote an anti-import 
bias among consumers.
     Korea--steel exports. In July 1995, in response to a 
Section 301 petition from the Committee on Pipe and Tube Imports, the 
United States reached agreement with Korea on a mechanism to discuss 
Korea's economic trends and data on steel sheet and pipe and tube 
products, and Korea agreed to notify the United States in advance of 
Korean government measures that control steel production, pricing or 
exports.
     Korea--meat imports. In response to a Section 301 petition 
filed by the National Pork Producers Council, the American Meat 
Institute, and the National Cattlemen's Association, the United States 
negotiated an agreement with Korea in July 1995 on measures to 
eliminate non-science-based shelf-life requirements and thereby open 
the Korean market to U.S. meat and other food products. The agreement 
requires Korea to notify the WTO as it implements each stage of the 
agreement.
     Japan--auto and auto parts imports. In May 1995 the United 
States proposing using Section 301 to increase tariffs on luxury cars 
from Japan, after determining that Japanese policies discriminate 
against imports of U.S. autos and auto parts. The two governments 
subsequently reached a results-oriented agreement on measure Japan will 
take in this sector, including deregulation. The agreement has led to 
positive results as shown by increased purchases of auto parts by 
Japanese transplants, deregulation of the Japanese aftermarket for 
replacements parts, and an increased number of Japanese dealerships 
displaying foreign cars.
     Canada--beer imports. After the United States imposed 
retaliatory duties on Canadian beer pursuant to Section 301, the United 
States and Canada in August 1993 settled a longstanding dispute over 
access for U.S. beer to the Canadian market.
     Japan--wood product imports. after the United States noted 
in the 1994 and 1995 Super 301 reports that Japan was not fully 
implementing the U.S.-Japan bilateral agreement on market access for 
wood products, cooperation on this issue improved significantly. In an 
exchange of letters in July 1996, Japan confirmed that it has taken 
important additional steps toward implementation of the agreement. 
Japan has also made deregulation of the housing sector and improved 
market access for building materials a high national priority.
     Taiwan--medical device imports. In conjunction with its 
annual Super 301 review, the United States obtained a commitment from 
authorities on Taiwan to address concerns raised by the United States 
regarding discrimination against U.S. exports of medical devices by 
requiring cost data from foreign manufacturers not required from 
domestic firms and by establishing, through non-transparent procedures, 
arbitrary price controls that favor domestic producers.

``Special 301''--Intellectual Property Protection

    Under the ``Special 301'' provisions in U.S. trade law, USTR has at 
least once a year identified countries that deny adequate and effective 
protection to foreign intellectual property rights or deny fair and 
equitable market access for persons that rely on intellectual property 
protection. Countries that have the most onerous or egregious practices 
and whose practices have the greatest adverse impact on the relevant 
U.S. products have been designated as ``priority foreign countries'' 
and were subject to Section 301 investigations. Other countries with 
particular problems of protection or enforcement of intellectual 
property rights have been placed on a ``watch list'' or ``priority 
watch list'' and are monitored closely for progress. Major progress has 
been made as a result of using Special 301:
     China--intellectual property protection. As noted above, 
the USTR reached agreement in February 1995 with China on enforcement 
of its intellectual property protection laws, and in June 1996 to 
secure effective enforcement of that agreement.
     Brazil. In April 1996, Brazil enacted a new, long-awaited 
industrial property law, providing patent protection and greater market 
access for products relying on such protection. This new legislation is 
a direct result of earlier commitments made by Brazil in February 1994 
to settle a Section 301 investigation.
     Taiwan. The Special 301 provisions of U.S. trade law have 
been used continuously since 1992 to obtain steady progress by 
authorities on Taiwan in improving the legislative framework available 
to protect intellectual property rights and the enforcement of those 
rights in the Taiwan judicial system. In 1994 Taiwan made significant 
strides in passing intellectual property rights legislation. In April 
1996, Taiwan issued an 18-point action plan for enhanced protection, 
which covered all major remaining areas of concern.
     Thailand. After the United States identified Thailand as a 
``priority foreign country'' under the Special 301 provisions of U.S. 
trade law in 1993, Thailand made steady progress in its protection of 
intellectual property, including increased enforcement efforts and the 
enactment of a new copyright law in 1994. In addition, action on a new 
law establishing intellectual property law courts in nearly complete, 
and Thailand is in the process of drafting a new patent law.
     The Philippines. As a result of the Special 301 process, 
the Philippines signed an agreement in April 1993 that made commitments 
to improve protection of copyrights, patent and trademarks, and to 
improve enforcement. Since that time, the Philippines has intensified 
its enforcement efforts, and enactment of

[[Page 52834]]

new legislation bringing the country's intellectual property laws in 
compliance with the WTO agreement on intellectual property should be 
completed soon.
     Bulgaria. The United States reached an agreement 
committing Bulgaria to join major international intellectual property 
conventions and to put in place effective procedures to protect 
intellectual property rights.
     Singapore. Singapore agreed to provide a level of patent 
protection consistent with WTO obligations by December, 1995.
     India. India agreed to take steps to protect copyright 
works.
     Japan. The United States and Japan concluded two bilateral 
agreements to provide more effective patent protection for U.S. 
inventors.
     Ecuador. USTR concluded a comprehensive bilateral 
agreement obligating Ecuador to provide equivalent levels of 
intellectual property protection and enforcement to that required of 
NAFTA parties.
     Trinidad and Tobago. USTR concluded a comprehensive 
bilateral agreement obligating Trinidad and Tobago to provide 
equivalent levels of intellectual property protection and enforcement 
to that required of NAFTA parties.
     Jamaica. USTR concluded a comprehensive bilateral 
agreement obligating Jamaica to provide equivalent levels of 
intellectual property protection and enforcement to that required of 
NAFTA parties.
     Estonia. USTR concluded a Trade and Intellectual Property 
Rights Agreement that is now awaiting approval by the Estonian 
legislature.
     Latvia. USTR concluded an Agreement on Trade and 
Intellectual Property Rights Protection.
     Lithuania. USTR concluded a Trade and Intellectual 
Property Rights Agreement now awaiting approval by the Lithuanian 
legislature.

Telecommunications Trade (Section 1377)

    Under Section 1377 of the Omnibus Trade and Competitiveness Act of 
1988 the USTR has reviewed annually the operation and effectiveness of 
U.S. telecommunications trade agreements, and taken action where non-
compliance was found.
     Korea. The Administration has used the annual Section 1377 
review continuously to address persistent barriers to access by U.S. 
telecommunications equipment and service suppliers to the Korean 
market. In 1993, 1995 and 1996 the United States and Korea concluded 
understandings on a range of issues pertaining to market access for 
equipment, procurement practices, standards, and intellectual property 
protection. Under the 1996 review the Administration initiated talks 
with Korea regarding compliance with existing agreements as well as 
areas not previously covered, including services and non-interference 
by the government in private sector procurement.
     Japan. During the 1996 Section 1377 review, the United 
States and Japan resolved issues relating to procurement by Nippon 
Telegraph and Telephone (NTT) and NTT's Personal Handy Phone 
subsidiary, thus providing access to the Japanese market for U.S. 
suppliers. Previously, Section 1377 was used to enforce the 1989 Third 
Party Radio and Cellular Telephone Agreement with Japan. The 1994 
review had identified a violation of the cellular portion of that 
agreement, which was resolved when Japan signed a new agreement in 
March 1994, providing comparable market access to U.S. cellular 
telephone systems.

Foreign Government Procurement (Title VII)

    Under Title VII of the Omnibus Trade and Competitiveness Act of 
1988, USTR has annually reviewed compliance by foreign governments with 
the Government Procurement Code, and identified countries that were 
discriminating in government procurement against United States goods 
and services.
     Japan--telecommunications and medical technology. 
Following identification of Japan under Title VII, in October 1994 the 
United States and Japan reached agreement on government procurement of 
telecommunications products and services and medical technology 
products and services. The United States continues to monitor Japan's 
compliance with both agreements and to assess tangible progress in 
Japanese procurement practices in these two sectors.
     Japan--construction. USTR identified Japan under Title VII 
in April 1993 for discriminatory practices in its public sector 
construction market. Japan averted sanctions scheduled to go into 
effect as of January 20, 1994, by announcing a plan to reform its 
public sector construction market, including measures to expand 
transparent and non-discriminatory procedures and adopt an open and 
competitive bidding system. Japan also agreed to monitor foreign access 
and engage in annual consultations. Since the signing of the most 
recent U.S.-Japan Public Works Agreement in 1994, U.S. firms have 
experienced little overall improvement in accessing the Japanese public 
works market. Consequently, in April 1996, Japan was placed on the 
Title VII watchlist due to continued concern over the implementation of 
both the 1994 Public Works Agreement and the 1991 Major Projects 
Arrangements.
     EU--telecommunications. Title VII trade sanctions were 
imposed for the first time by the Clinton Administration, against the 
EU for its discriminatory government procurement practices in the 
telecommunications sector.
     EU--electrical equipment. Following U.S. announcement of 
its intention to impose sanctions, the United States and the EU reached 
a historic agreement in May 1993 on access to EU government procurement 
of heavy electrical equipment, opening a $20 billion market to U.S. 
companies. The agreement was expanded in April 1994 to cover the 
electrical utility sector and subcentral government entities, doubling 
to $100 billion the bidding opportunities available to U.S. and EU 
firms under the GATT Government Procurement Code.

WTO Dispute Settlement--Early Successes

    The WTO dispute settlement mechanism is proving to be a very 
effective tool to open markets for U.S. exporters. The United States 
insisted on tough new dispute settlement rules because we bring--and 
win--a significant number of cases before dispute settlement panels. 
And we settle a lot of disputes by initiating the dispute settlement 
process. Indeed, enforceability of the dispute settlement rules has 
made settlement of disputes a much more frequent, speedy and useful 
outcome. Before, the WTO, the global trading rules did less to benefit 
American workers. The process is already working to our benefit:
     Japan--liquor taxes. In July 1996 the United States won 
the first case it referred to a WTO dispute settlement panel when the 
panel found that Japan's liquor tax law violates WTO rules by favoring 
the domestic liquor shochu. Japan is the United States' second largest 
export market for whisky.
     Japan--sound recordings. After the United States invoked 
WTO dispute settlement procedures against Japan for denying protection 
to millions of dollars' worth of U.S. sound recordings made between 
1946 and 1971, Japan agreed to change its law, and consultations are 
continuing on Japan's plans for implementing such a change.
     EU--grain imports. The United States invoked WTO dispute 
settlement procedures to enforce the EU's WTO obligation to limit the 
duties it applies

[[Page 52835]]

to imports of grains so that a duty does not result in a duty-paid 
import price in excess of a specified level. Before a panel was 
established, a settlement was reached in conjunction with the U.S.-EU 
settlement on EU enlargement. The United States remains concerned about 
the EU's implementation of this settlement agreement, and will continue 
to monitor it closely.
     Turkey--film tax. Turkey has taxed box office receipts 
from foreign films at a higher rate than receipts from domestic films. 
In WTO consultations, Turkey agreed to eliminate the tax 
discrimination.
     Portugal--patent protection. After the United States used 
WTO dispute settlement procedures to challenge Portugal's patent law, 
which failed to provide the required minimum 20 years of patent 
protection, Portugal changed its system to implement its obligations 
under the WTO TRIPs agreement.

Using Access to the U.S. Market to Encourage Improvements in Worker 
Rights and Intellectual Property Rights Protection

    Congress has provided, and in 1996 renewed, the Generalized System 
of Preferences (GSP) program of duty-free access for some imports from 
developing countries. The Clinton Administration has used the GSP 
program to integrate developing countries into the international 
trading system in a manner commensurate with their development. The 
Administration has encouraged GSP beneficiary countries to eliminate or 
reduce significant barriers to trade in goods, services, and 
investment; to afford all workers internationally recognized worker 
rights; and to provide adequate and effective means for foreign 
nationals to secure, exercise, and enforce intellectual property 
rights.
     Pakistan. In March 1996 the Administration announced its 
intention to partially suspend Pakistan's GSP benefits as a result of 
child labor and bonded labor problems in Pakistan.
     Thailand. The Administration restored GSP benefits to 
Thailand in 1995 only after Thailand made significant improvements in 
intellectual property protection.
     Maldives. The Administration suspended GSP benefits for 
the Maldives in July 1995, for failure to provide worker rights.
     El Salvador, Dominican Republic and Honduras. The 
Administration used GSP country practice reviews to obtain improvements 
in worker rights.
     Guatemala and Thailand are being monitored for further 
progress on worker rights improvements.
     Poland and El Salvador. The Administration concluded in 
October 1996 reviews after progress on intellectual property rights was 
achieved.
Irving Williamson,
Chairman, Section 301 Committee.
[FR Doc. 96-25763 Filed 10-7-96; 8:45 am]
BILLING CODE 3190-01-M