[Federal Register Volume 62, Number 195 (Wednesday, October 8, 1997)]
[Notices]
[Pages 52604-52611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26565]
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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 if hereby given that the 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, 1997.
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, 1997.
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, regarding the ``Super 301'' annual review. Under the
Executive Order the United States Trade Representative (USTR) is
required, by September 30, 1997, 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.''
Keeping America growing and creating good high-wage jobs by tearing
down foreign barriers to American goods and services continues to be
President Clinton's top trade expansion priority. For this reason the
President has asked Congress to renew fast track procedures to
negotiate tough new trade agreements that break down trade barriers and
unfair trade restrictions in key areas, such as in agriculture,
information technology, telecommunications, automobiles, medical
equipment, environmental technology and services, and the creative
power of our entertainment and software industries. Fast track would
enable the United States to complete the built-in agenda of the World
Trade Organization (WTO) by concluding major trade negotiations that
were deferred at the end of the Uruguay Round and by participating in
negotiations mandated by the Uruguay Round agreements in areas ranging
from rules to origin to services. Fast track would enable the United
States to pursue market-opening initiatives in sectors where the United
States either leads the world or is a powerful competitor, and where
extraordinary potential for growth exists. Fast track is also essential
if the United States is to negotiate more comprehensive market access
agreements with individual countries, as well as on a regional basis.
The Clinton Administration intends to concentrate on the fastest
growing markets in the world in Latin America and Asia. These markets
are growing three times faster than our own. Without fast track, our
competitors will continue to negotiate trade agreements that benefit
their products at the expense of our own. Fast track is necessary, not
only to promote our own economic well-being, but to enable us to
continue to play a leadership role in advancing the cause of freedom
and prosperity in the world.
The Administration is addressing the most significant foreign trade
barriers through an ongoing strategy of vigorous monitoring and
enforcement of trade agreements, strategic application of U.S. trade
laws, active use of the dispute settlement provisions of our trade
agreements, and continued engagement in multilateral, sectoral,
regional and bilateral negotiations. Through this strategy the
Administration has used the trade law tools and dispute settlement
mechanisms at its disposal on more than 70 occasions so far to enforce
U.S. rights. As a result of the 1997 review of priorities, the
Administration has identified one priority foreign country practice and
will proceed under WTO dispute settlement procedures in four cases.
Priority Foreign Country Practice
Korea--barriers to auto imports. Specific Korean practices
of concern include an array of cumulative tariff and tax disincentives
that disproportionately affect imports; onerous and costly auto
standards and certification procedures; auto financing restrictions;
and a climate of bias against imported vehicles that Korean officials
have not effectively addressed. While some of these barriers were
addressed in the 1995 bilateral agreement, implementation of that
agreement has been disappointing, especially as new practices have been
introduced that undermine the 1995 agreement. Meanwhile, Korean auto
manufacturers are expanding domestic capacity, which is forecast to
rise from 2.8 to over 5 million units by the year 2000.
Although some progress was made during recent bilateral
negotiations to improve market access in Korea for foreign automobiles,
Korea was not prepared to undertake the reforms which are necessary for
real opening of its autos market. In light of the foregoing, the USTR
has decided to identify Korea's barriers to imported automobiles as a
priority foreign country practice under the Executive Order and will
initiate a section 301 investigation of Korea's practices. The United
States continues to hope that it can reach an agreement with Korea that
will effectively address U.S. concerns.
Strategic Enforcement
Enforcing our trade agreements and our trade laws is among the
Administration's top trade expansion priorities. A critical part of our
job is what happens after an agreement is signed. The Administration's
trade policy recognizes that the best way to build confidence in trade
agreements is to enforce them. Vigorous enforcement is critical to
ensuring good agreements.
The Administration has assigned top priority to monitoring
implementation of its trade agreements, especially the WTO agreements
and NAFTA to ensure that signatories live up to their commitments and
comply with the rules. In the course of these monitoring efforts, the
Office of the United States Trade Representative, in cooperation with
the Departments of Commerce and Agriculture, has focused in particular
on foreign practices that could pose serious problems to the
international trading
[[Page 52605]]
system if they proliferate in many markets. Therefore, the
Administration has adopted a strategic enforcement plan--aimed not only
at challenging existing barriers but also at preventing the future
adoption of similar barriers around the world.
The Administration will continue to make vigorous use of the
dispute settlement provisions in trade agreements to ensure compliance
with the terms of those agreements. Since the inception of the WTO the
United States has invoked the WTO dispute settlement procedures far
more than any other member. The new WTO dispute settlement procedures
have already yielded positive results--both in terms of reduced
barriers and increased export opportunities.
Efforts to enforce the WTO agreements include not only dispute
settlement, but also making use of the various oversight committees of
the WTO that ensure implementation of WTO agreements, especially those
agreements that address the mechanics of getting goods to the
marketplace; rules on technical barriers to trade (standards,
certification, testing requirements); sanitary and phytosanitary
measures; import licensing requirements; customs valuation procedures;
rules of origin; and preshipment inspection procedures.
New Cases to be Launched
As a result of this year's review of its trade expansion
priorities, and its monitoring of compliance with U.S. trade
agreements, the Administration will take the following actions to
enforce U.S. rights under those agreements, with heavy emphasis on
challenging foreign government actions that appear to circumvent the
WTO rules on export subsidies.
Japan--Market Access Barriers to Fruit. USTR will initiate
a section 301 investigation and in that context, request the
establishment of a WTO panel to challenge the Japanese government
requirement of separate efficacy testing of certain quarantine
treatments for each variety of imported fruit, even where the same
treatment has been accepted by Japan as effective for another variety.
Although the fruit of immediate export concern is apples, Japan's
requirement operates as a significant import barrier to nectarines,
cherries, and other fruits that are of export interest to the United
States. The United States and Japan have already completed
consultations on this matter pursuant to WTO dispute settlement
procedures, so the United States will proceed directly to request a
panel.
Canada--Export Subsidies and Import quotas on Dairy
Products. USTR will invoke WTO dispute settlement procedures in the
context of a section 301 investigation to challenge practices that
subsidize exports of dairy products from Canada, and Canadian
implementation of its import quotas on milk. The U.S. dairy industry
has petitioned USTR to initiate this investigation on the grounds that
both of these practices are inconsistent with Canada's WTO obligations
and adversely affect U.S. exports.
EU--Circumvention of Export Subsidy Commitments on Dairy
Products. USTR also will invoke WTO dispute settlement procedures in
the context of a section 301 investigation to challenge practices by
the European Union (EU) that circumvent the EU's commitments under the
WTO to limit subsidized exports of processed cheese and adversely
affect U.S. exports to third markets. The EU is counting these exports
against its limits on powdered milk and butterfat to avoid the limits
on subsidies of cheese. USTR will also closely monitor EU compliance
with its WTO agricultural subsidy commitments on all other agricultural
products.
Australia--Export Subsides on Automotive Leather.
Following bilateral and multilateral consultations, Australia agreed to
eliminate export subsidies for leather used in automobiles. However,
Australia's subsequent package of assistance for its industry
(comprised of a sizable loan and grant), has raised similar concerns
regarding consistency with WTO subsidies rules. While some progress has
been made in recent months, these concerns have not yet been adequately
addressed. Thus USTR will invoke WTO dispute settlement procedures, but
remains hopeful that a solution satisfactory to both countries can be
reached during consultations.
Recent Enforcement Actions
During the past year, USTR has invoked WTO dispute settlement
procedures to challenge a wide variety of foreign government practices,
covered by the broad range of agreements administered by the WTO,
seeking to enforce the rules on tariffs, agriculture, services,
intellectual property rights, antidumping measures, and sanitary and
phytosanitary measures. Those complaints include challenges of:
Argentina's import duties on footwear, textiles, and
apparel that exceed the maximum to which Argentina is committed under
WTO tariff rules:
licensing requirements in Belgium that discriminate
against U.S. suppliers of commercial telephone directory services;
Brazilian government measures that give certain benefits
to manufacturers of motor vehicles and parts, conditioned on compliance
with average domestic content requirements, trade-balancing and local
content requirements with regard to inputs;
the failure of Denmark to provide adequate measures to
enforce intellectual property rights;
reclassification by the European Union, the United
Kingdom, and Ireland of certain computers and computer-related
equipment to different tariff categories with higher tariff rates;
import restrictions on more than 2700 agricultural,
textile and industrial products imposed by India for which India can no
longer claim a justification for balance-of-payments reasons;
Indonesia's programs granting preferential tax and tariff
benefits to producers of automobiles based on the percentage of local
(Indonesian) content of the finished automobile;
Ireland's failure to expeditiously bring its copyright
laws into compliance with the WTO agreement on intellectual property
rights;
Japan's barriers to market access for photographic film
and paper, and barriers to distribution and retail services in Japan;
Korea's taxes on Western-style distilled spirits that are
higher than those assessed on the traditional Korean-style spirit soju;
an antidumping action by Mexico of high-fructose corn
syrup imports from the United States that does not conform to WTO
procedures;
a licensing system in the Philippines that discriminates
against U.S. exports of pork and poultry; and
the failure of Sweden to provide adequate measures to
enforce intellectual property rights.
In addition to using dispute settlement procedures strategically,
the Administration has continued to use the leverage of U.S. trade laws
to obtain market access for U.S. goods and services and to encourage
other countries to ensure adequate protection of intellectual property
rights:
Japan--port practices. Restrictive practices in Japanese
ports have caused serious difficulties for U.S. shipping companies for
many years. After initial consultations with Japan failed to resolve
these problems, on September 4, 1997, the Federal Maritime Commission
imposed sanctions of $100,000 per voyage on container vessels owned or
operated by Japanese companies entering the United States.
Consultations to remove the restrictive practices which impede open and
[[Page 52606]]
efficient business operations of our carriers continue.
Argentina--patent protection. On January 15, 1997, the
Administration decided to withdraw 50 percent of Argentina's tariff
benefits under the Generalized System of Preferences as a result of its
continued delay in providing adequate patent legislation, particularly
for pharmaceutical products.
Bulgaria--intellectual property protection. The ``Special
301'' provisions of U.S. trade law have been used to obtain progress in
improving the legislative framework for protecting intellectual
property rights and enforcing those rights in Bulgaria. Just prior to
the April 1997 Special 301 announcement, Bulgaria adopted amendments to
expand the scope of protection for computer software.
Korea--telecommunications. In 1996, Korea was identified
as a Priority Foreign Country under the Telecommunications Trade Act of
1988. Year-long negotiations bore fruit in July 1997, with commitments
by Korea to ensure that U.S. telecommunications equipment suppliers
would be treated fairly in areas including procurement, certification,
type approval, protection of intellectual property and technology
transfer.
Mexico--telecommunications. In the 1996 review under the
Telecommunications Trade Act of 1988, USTR cited Mexico for not
fulfilling its NAFTA obligation to accept other parties' laboratory or
test facility test data relating to product safety in certifying
telecommunications equipment for safe use. An agreement reached in
April 1997 established procedures to resolve this issue, which will
further facilitate the export of U.S. telecommunications products to
Mexico.
Honduras--piracy. In response to the failure of Honduras
to address effectively the unauthorized broadcasting of pirated U.S.
videos and the rebroadcasting of U.S. satellite-carried programming,
the Administration is taking steps to withdraw some of the tariff
benefits accorded Honduras under the Generalized System of Preference
and Caribbean Basin Initiative programs.
Bilateral Market Access Issues
Through bilateral negotiations as well as through enforcement
actions, the Administration continues to monitor progress made toward
increasing market access for U.S. exports of goods and services to key
markets.
Japan
A top priority of the Administration has been to increase access to
the Japanese market. The Administration has negotiated 31 market-
opening agreements with Japan since 1993. The most recent of these was
concluded on September 30, 1997, when agreement was reached to extend
and improve the bilateral agreement on procurement by Nippon Telegraph
and Telephone Company, commonly referred to as the NTT agreement. This
agreement will provide U.S. telecommunications suppliers with improved
access to NTT's $13 billion market.
Bilateral agreements, combined with enforcement of U.S. trade laws,
use of the WTO dispute settlement process, and regional and
multilateral initiatives, have helped to increase significantly U.S.
exports to Japan. U.S. exports to Japan increased 41 percent from 1993
to 1996.
Nevertheless, the Administration is increasingly concerned that
Japan's progress in opening its market has slowed. Market access
problems persist and U.S. companies in a wide range of sectors continue
to face serious impediments that hinder their ability to compete in the
Japanese market. These barriers include a closed distribution system,
nontransparent regulations, discriminatory procurement policies, and
restrictive business practices.
Meanwhile, the Japanese economy is weaker than expected and Japan's
current account surplus is increasing, reaching 2.6 percent of GDP in
the second quarter of this year. Prime Minister Hashimoto has publicly
articulated the objective of ``promoting strong, domestic demand-led
growth in Japan and avoiding a significant increase in the external
surplus.'' It is essential that Japan take seriously its
responsibilities to generate domestic demand-led growth and open its
markets to competitive goods and services from the United States and
other countries.
Our objectives correspond closely with key elements of the Japanese
Government's economic agenda. Resolution of such issues as reform of
Japan's port practices, significant opening of Japan's civil aviation
market, and improved market access for U.S. autos and auto parts are
early tests of the Japanese Government's commitment to deregulation and
market opening. The deregulatory measures implemented by the Government
of Japan in the sectors included in the Enhanced Dereguation Initiative
agreed to by President Clinton and Prime Minister Hashimoto at the G-8
Summit last June--including telecommunications, housing,
pharmaceuticals/medical technology, and financial services--will also
serve as early indications of the seriousness of Japan's commitment to
deregulation.
Japan--Market Access for Autos and Auto Parts. The United
States and Japan concluded an agreement in 1995 on the full range of
market access barriers facing sales of autos and auto parts in Japan
and to Japanese companies outside Japan. Noteworthy progress was made
during the first year of the agreement, with sales of North American-
made big Three vehicles up 34 percent last year and sales of U.S.--made
auto parts up 20 percent in 1996. However, during the first six months
of 1997, sales of North American-made Big Three vehicles have declined
17 percent over 1996 levels. Moreover, although U.S. auto parts exports
increased 14 percent during the first six months of 1997, foreign
access to this market remains limited. In light of these trends,
increased focus on implementation is necessary. Of particular
importance is improved access of U.S. and other competitive foreign
firms to Japan's automotive distribution system, including to new and
existing dealerships. With respect to auto parts, continued progress
will depend on further meaningful deregulation of the replacement
market. The United States and Japan will meet in early October 1997 to
access progress based on the quantitative and qualitative indicators in
the agreement and to discuss concrete actions for improving market
access in this important sector.
Japan--Market Access for Flat Glass. Implementation of the
1995 U.S.-Japan Flat Glass Agreement proceeded well in the first year,
but early progress has not been sustained. While a major objective of
the agreement was to provide foreign companies access to distributors
controlled by the three major Japanese glass companies, the increase in
volume of foreign glass within the Japanese glass distribution system
continues to be very limited, and major Japanese distributors are not
carrying foreign glass in any meaningful quantities. There also has
been virtually no increase in the overall use of insulated glass and a
decline in the use of safety glass, even though the Agreement provided
that Japan was to promote actively the use of both types of glass.
Among the promotion measures Japan agreed to undertake was the issuance
of new standards to promote the use of insulated glass in residential
and commerical construction. The United States and Japan will hold
consultations in late October to discuss
[[Page 52607]]
our market access concerns. The United States will continue to press
Japan to take actions to ensure that genuine market access is achieved
under the agreement.
Japan--Market Access for Paper and Paper Products. Despite
continued U.S. efforts in the part year, structural barriers continue
to impede U.S. industry's access to Japan's paper market. In the first
six months of 1997, Japan's paper and paperboard imports fell by more
than 20 percent and import penetration declined further to 4.3 percent.
The United States seeks agreement with Japan on a joint work program
designed to provide substantially increased market access for foreign
paper and paperboard products. Such a program would lead to a reduction
in structural barriers and exclusionary business practices and will
result in meaningful access to distribution channels and end users.
China
The Administration is actively pursuing a broad range of market
opening initiatives with China. Through active leadership in
multilateral WTO accession talks and pursuit of a full bilateral
agenda, we are seeking the elimination of China's multiple and
overlapping barriers to U.S. exports of industrial goods, agricultural
products and U.S. services. Despite China's actions to liberalize its
economy, many aspects of its economic and legal regime are inconsistent
with international norms. While our large and growing trade deficit
with China is the result of many factors, China's trade and economic
policies are a significant contributor to that deficit. Opening China's
market and brining China's policies into conformity with international
norms are the Administration's key objectives in the trade area and the
best means to address the trade deficit.
Given the size and potential of China's market and the nature of
China's trade regime, negotiating the terms of China's membership in
the WTO will continue to be a major focus of U.S. efforts to open
China's markets. The WTO accession negotiations represent an important
opportunity to work with our trading partners and with the Chinese
government to develop an accession package that opens markets and
commits China to create an environment conducive to international
trade, requiring compliance with WTO rules and internationally accepted
trade norms of transparency, predictability and the rule of law.
The United States supports China's accession to the WTO on the
basis of commercially meaningful commitments that provide market access
for U.S. goods, agriculture and services. China has, in the context of
the Asia Pacific Economic Cooperation Forum (APEC), taken some recent
steps towards liberalizing its trade regime. Effective October 1, 1997,
China will cut its average tariffs to 17 percent as a step towards
meeting its APEC commitment of a 15 percent average tariff by the year
2000. This is a welcome step, but more is needed in the context of WTO
accession. The Administration is, for example, committed to eliminating
quotas, licensing requirements and other barriers affecting U.S.
exports and investment in the WTO Accession.
The united States is pursuing a program of vigorously monitoring
compliance with existing agreements and addressing new market access
barriers. During the Clinton Administration, we have reached important
agreements on intellectual property rights (IPR) protection, textiles
and market access. Concluding these agreements, however, was only a
first step. We have continually worked with China to ensure that
implementation problems are addressed.
China--IPR Enforcement. We have seen progress through
closure of 58 pirate compact disc production lines and the
establishment of an infrastructure for enforcement of IPRs. Continuing
problems exist regarding computer software piracy and trademark
counterfeiting, however, since Chinese authorities often fail to impose
penalties sufficient to deter illegal activities. U.S. negotiators are
continuing to work with Chinese authorities to improve compliance with
our IPR agreements.
China--Sanitary and Phytosanitary Measures. Progress has
been achieved in opening China's market to U.S. agriculture for
products such as live cattle, bovine embryos, cherries and applies from
Washington, and most recently grapes from California. Serious problems
still remain. We have, for example, serious objections to China's
unjustified sanitary and phytosanitary (SPS) restrictions. China bans
imports of U.S. oranges, lemons, grapefruit, plums and Pacific
Northwest (PNW) wheat based on SPS concerns. The United States believes
that China's concerns lack a scientific basis and are unjustified. The
United States exports these products globally. U.S. negotiators are now
working to reach agreement with China's experts on the conditions for
importation of U.S. citrus, PNW wheat and plums.
China--Meat Imports. While China has begun a one-year
experiment to allow U.S. meat imports for general consumption, China
has only certified a handful of U.S. beef, pork and poultry processing
plants. Given the continued application of high tariffs, however,
certification of plants has yet to result in increased market access
for our meat exports. These are products in which the United States is
highly competitive and enjoys a large global trade.
China--Financial Information Providers. We are nearing an
interim solution of a longstanding problem concerning registration of
foreign financial information providers like Dow Jones and Reuters.
China's plan to authorize China's main financial data provider and
competitor to U.S. companies, Xinhua, to regulate foreign economic
information providers was challenged by the United States from its
inception. This interim solution will permit U.S. firms to continue
their operations in China while the United States seek more
comprehensive commitments from China on market access and national
treatment for financial service providers and online data processing in
the negotiations on China's accession to the WTO.
China--Insurance Providers. Foreign insurers' access to
the Chinese market is severely restricted. U.S. insurers must first
establish a representative office for two years before applying for a
license. If China grants the company a license, numerous non-prudential
restrictions apply on doing business, including restrictions on the
form of investment, scope of business lines, and geographic location.
We are seeking elimination of these non-prudential restrictions.
Korea
The Administration is focused on eliminating barriers to entry and
distribution of U.S. products in Korea--The United States' fifth
largest export market overall, and fourth largest market of
agricultural and food products. This year, the Administration made
solid progress toward opening the Korean market through the use of U.S.
trade laws and WTO dispute settlement procedures, negotiation and
enforcement of bilateral trade agreements, and close coordination with
other countries on U.S. trade initiatives regarding Korea, particularly
in the OECD and the WTO. Specifically, the United States negotiated a
bilateral settlement addressing restrictive Korean telecommunications
practices; reached agreement on an IPR action plan; and used WTO
procedures to improve Korean market access for U.S. food and
agricultural products.
The Administration is committed to continuing its varied and
[[Page 52608]]
comprehensive efforts to tackle commercial barriers in what U.S.
industry still describes as one of the toughest markets in the world
for doing business. Korea must begin to take actions and accept the
responsibilities commensurate with its new international position as a
developed nation. Our priority will be on achieving systemic changes to
trade-restricting procedures and rules in Korea, including those
affecting market access for automotive products, cosmetics, and food
and agricultural goods.
Korea--Impediments to Entry and Distribution of Cosmetics.
The Korean government uses measures that restrict the entry and
distribution of cosmetics including: restrictions on sales promotions
(premiums), including changes to the valuation methodology; delegation
of authority to a Korean industry association to screen advertising and
information brochures prior to use; mandatory provision of proprietary
information on imports to Korean competitors; redundant testing;
unreasonable prior-approval requirements on cosmetic tester labels; and
burdensome import authorization and tracking requirements. After
bilateral talks with U.S. officials, Korea stated its intention to
change some of these measures, but the Korean government still has not
fully addressed U.S. concerns, including those relating to
implementation of relevant provisions in international agreements. The
Administration will continue to pursue unimpeded trade in cosmetics
with Korea over the coming year and will review the situation again in
January 1998.
Korea--Import Clearance Procedures. After WTO dispute
settlement consultations with Korea on its long, burdensome, and non-
science-based import clearance procedures, the Korean government made
changes, including expediting clearance for fresh fruits and
vegetables; instituting a new sampling, testing, and inspection regime;
eliminating some phytosanitary requirements; and starting the process
of updating Korean Food Additives Code standards.
However, Korean port inspectors have failed to implement changes to
which the Korean government has committed, including the elimination of
requirements for proprietary information (on manufacturing process and
ingredient listing by percentage) and for sorting of produce. Also,
some of the changes Korean officials are implementing do not adequately
address U.S. concerns. The United States will raise this issue at the
October meeting of the WTO SPS Committee and has proposed consultations
on the Korean Food Additives Code. The United States will take further
action under WTO dispute settlement procedures if its concerns are not
addressed fully.
Korea--Steel Subsidies. The United States is concerned
that the Korean government may have provided large subsidies for the
establishment and expansion of Hanbo Iron and Steel, and directed the
banking industry to continue to extend credits beyond what is
financially prudent. U.S. industry is concerned that such measures may
be subsidies that are creating unfair competition through price
undercutting and displaced U.S. exports to Korea and to third country
markets. We have sought further information from the Korea government,
both bilaterally and in the WTO Subsidies Committee, and will examine
Korea's practices in light of its WTO obligations.
Problems Requiring Special Attention
As traditional barriers to market access have been reduced at the
border, the increase in the application of government measures under
the guise of technical requirements has increased. These are problems
that are being given special attention by the Administration, and that
may warrant enforcement action in the future if they are not resolved
satisfactorily.
Sanitary and Phytosanitary Measures
Numerous U.S. agricultural exports have been denied import approval
or have faced costly import quarantine requirements due to sanitary and
phytosanitary (SPS) barriers to trade that lack a scientific basis and
appear to discriminate arbitrarily or unjustifiably against U.S.
agricultural exports. The Administration has implemented an aggressive
agenda to address unjustified SPS barriers, including high-level
technical talks with our trading partners, raising these issues in the
WTO SPS Committee to apply multilateral pressure, and resorting to WTO
dispute settlement procedures where necessary.
As a result of intense efforts in the past year, the Administration
has resolved technical issues bilaterally to permit exports of tomatoes
to Japan, table grapes to China, lemons, table grapes, kiwis, oranges
and grapefruit to Chile, sweet cherries to Mexico, rough rice to
Honduras, live swine to Argentina and Peru, and live cattle to Peru.
The Administration will continue to press our trading partners to
remove unjustified SPS barriers facing U.S. agricultural exports,
including:
EU-Specified Risk Material (SRM) Ban and Cosmetics
Directive. Two recent directives approved by the European Commission
prohibiting the sale in the EU of cosmetic products containing tallow
and its derivatives, and governing the production of certain materials,
due to concerns regarding the transmission of Bovine Spongiform
Encephalopathy (BSE), raise concerns with respect to the EU's WTO
obligations. The directives fail to recognize that BSE is not known to
occur in the United States and that the United States maintains an
aggressive surveillance program for BSE that exceeds international
standards. The EU has failed to provide a scientific basis for these
requirements, and both directives are expected to have severe negative
effects on U.S. exports of pharmaceutical, cosmetic and tallow
products; and the potential impact on the international availability of
essential pharmaceutical products also raises serious public health
concerns.
France--Pet Food Imports. In September 1996, France
adopted new requirements for pet food production, restricting the use
of certain animal products or proteins and prohibiting the use of
certain material. The regulation requires that manufacturers exclude
materials from the rendering process that are commonly considered safe
by renderers and this has effectively stopped all U.S. pet food exports
to France. France has not demonstrated the scientific principle
underlying the restriction of non-mammalian material as a protective
measure against any risk factor. This issue was raised by the United
States at the July 1997 meeting of the WTO SPS Committee.
Australia--Pest Risk Analyses. For a number of years, and
in a variety of fora, the United States has requested entry into
Australia's market for stone fruit, shelled almonds, Florida citrus
fruit and California grapes. The United States has submitted several
pest lists to enable Australia to complete its WTO-required risk
assessments. To date, Australia has provided no scientific basis for
its prohibitions on U.S. exports of these products, nor has it provided
pest risk analyses.
The delays experienced on these issues have seriously hampered the
approval process for U.S. exports of these commodities.
Technical Barriers to Trade
Technical barriers to trade are of particular concern in our
important relationship with the EU. In successive meetings of the WTO
Committee on Standards, and other WTO bodies, the United States and
other nations have
[[Page 52609]]
flagged concerns that standards, certification, and testing
requirements in the EU can sometimes pose serious technical barriers to
trade. The U.S.-EU trade and investment relationship is the largest and
most complex in the world. Sophisticated business interactions across
the Atlantic are affected to a significant degree by standards,
technical regulations and conformity assessment procedures. While the
recent U.S.-EU mutual recognition agreement on conformity assessment,
covering six industrial sectors, should help reduce standards-related
barriers, U.S. companies continue to be concerned about certain aspects
of EU standards-related practices that could inhibit U.S. exports.
EU -Design Restrictive Standards. U.S. firms continue to
encounter difficulty in obtaining market access for certain products in
Europe due to design-restrictive standards that may have no bearing on
the safety and performance of the product. While U.S. companies with
U.S. Government assistance may achieve some success in addressing
problems in individual national markets, market access becomes even
more difficult if a European regional standards body decides to develop
a European-wide standard. The initiation of work on a regional standard
results in a standstill on related work in individual member States and
thus can delay or, if unnecessarily restrictive standards are finally
adopted, prevent improved access to EU markets. The United States
continues to raise its concerns, both bilaterally and in the WTO, with
the standards making process in the EU and design-restrictive standards
and has in particular sought to address the problems encountered by a
U.S. manufacturer of gas connectors.
EU 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. The United States affirms
its support for the concept of ecolabeling and has previously expressed
appreciation for the EU's attempts to address problems raised by the
United States regarding its ecolabeling program. However, while
improvements in the transparency of procedures and opportunity for
foreign participation in the EU's ecolabeling program have been
reported, concern remains that the EU ecolabeling program favors
European industry, thus leading to trade concerns.
EU Units of Measurement Directive. The EU plans to
implement a directive requiring that after December 31, 1999, the only
indications of measurement that can be used on product labels will be
metric units. Currently, labels may include other units (e.g., inches,
pounds) in addition to metric units. Such a step is unnecessary and
burdensome, and will affect many U.S. companies, particularly in those
industries where packaging and labeling are key aspects of placing a
product on the market (e.g., food products, consumer goods and
cosmetics).
Other Bilateral Issues
Argentina--Footwear Import Restrictions. After the United
States initiated WTO panel proceedings to determine whether Argentine
import duties on textiles, apparel and footwear are within Argentina's
maximum permissible rate, Argentina revoked its challenged duties on
footwear and replaced them with similar duties in the guise of an
emergency import relief measure. On September 1, 1997, Argentina
notified the WTO that this so-called safeguard measure would be
extended for three years. The United States is reviewing this action in
light of Argentina's obligations under the WTO agreement on safeguard
measures.
Brazil--Import Financing Measures. On March 25, 1997,
Brazil imposed new import financing rules that are adversely affecting
a wide range of U.S. exports to Brazil. The measure, which requires
importers to purchase foreign exchange to pay for imports upon
importation or 180 days in advance rather than when payment is due
under their contract, effectively increases the cost of many imports by
eliminating or reducing supplier credits of less than one year. The
United States is consulting with Brazil bilaterally and is reviewing
the matter in light of Brazil's WTO obligations.
Taiwan--Market Access for Pharmaceuticals. U.S.
pharmaceutical companies are increasingly concerned about
discriminatory aspects of Taiwan's reference pricing system for
pharmaceuticals. This system, as applied by Taiwan's Bureau of National
Health Insurance, appears to be inconsistent with national treatment
principles. Taiwan authorities have agreed to consultations on this
problem in the near future.
Multilateral Priorities
Within the next three years the United States will participate in a
number of major WTO negotiations in areas where we are a top global
competitor. As a result of the Uruguay Round, the United States has a
broad agenda in the WTO to pursue further negotiations and strengthen
existing agreements. Among others, WTO negotiations are scheduled to
open further the $600 billion global agriculture market beginning in
1999; to further open the $1.2 trillion global services market; and to
review the Agreement on Trade-Related Intellectual Property Rights
(TRIPs) which protects a variety of U.S. intellectual property right
holders, including U.S. copyright holders whose foreign sales and
exports exceed $53 billion a year. Also included is the two-pronged
agenda to negotiate improvements to the current reciprocal Agreement on
Government Procurement and to conclude an agreement obligating all WTO
members to maintain transparent procurement practices, thereby enabling
U.S. companies to compete in the trillion-dollar global government
procurement market. We will also review the WTO Dispute Settlement
Understanding that has already enabled us to open many new markets in
the last two years. As illustrated by most of the comments received
from the public by USTR in preparing this report, high tariffs--
especially in the agricultural sector--continue to block U.S. exports
to a number of markets. Fast track procedures are essential if we are
going to capitalize on the additional market opportunities presented by
the WTO negotiations.
Our most immediate goal is to obtain significantly improved
commitments from our trading partners that will allow us to conclude
successfully the WTO financial services negotiations by the end of this
year. These negotiations represent an important opportunity to reach a
successful agreement that opens new opportunities for U.S. financial
services providers in the key emerging markets around the world and
furthers the integration of national financial systems needed for a
more interconnected global economy in the 21st century.
Adding New Markets to the Rules-based Trading System. The United
States continues to place high priority on ensuring that its trading
partners accept the rule of law as it applies to trade--ensuring that
their trade and economic policies are consistent with international
trade practices and norms, such as those of the WTO. A principal means
of ensuring that new entrants into the international trading system
accept the rule of law is through the negotiation of the terms and
conditions of an applicant's WTO membership. New members must be
prepared to implement WTO obligations and to grant commercially
meaningful market access commitments and concessions, on both goods and
services, as well as
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make specific commitments to limit agricultural subsidies. There are
presently 29 applicants negotiating to become members of the WTO,
including China, Russia, Taiwan, Ukraine, and Saudi Arabia.
Sectoral Priorities
The Administration will continue to ensure that U.S. industries
that are competitive global leaders enjoy export success commensurate
with their competitive position. In the last year we have taken major
steps forward in advancing this goal with the Information Technology
Agreement (ITA) and the Agreement on Basic Telecommunications. The ITA
will reduce tariffs to zero in a $500 million global market in which
the United States is the world's largest single exporter. The Agreement
on Basic Telecommunications ensures that U.S. companies can compete
against and invest in all existing carriers around the world. U.S.
companies will now have access to markets accounting for over 95
percent of global telecommunications revenue and will be in the best
position to take advantage of a $600 billion industry that is expected
to double or even triple in the next 10 years. The agreement provides
U.S. companies market access for local, long-distance and international
service and the ability to establish or hold a significant stake in
telecommunications companies around the world. Sixty-five countries
adopted procompetitive regulatory principles based on landmark U.S.
legislation, the 1996 Telecommunications Act.
We are seeking to build on our success to pursue market-opening
sectoral agreements in areas where the United States can capitalize
further on its global competitive advantage if market access barriers
are reduced, including in areas such as trade in chemicals,
environmental technology and services, medical equipment and services,
oilseeds and oilseed products, and wood and paper products. Fast track
procedures are essential to ensure that the United States can continue
to play the critical role in negotiations that reduce such barriers.
Regional Priorities
The Asia Pacific region contains the fastest growing economies in
the world. Reaching the goal of open markets with the members of the
Asia Pacific Economic Cooperation Forum (APEC) would increase U.S.
global exports of goods alone by 13 percent or $80 billion a year. As a
step toward that goal, market opening agreements in key sectors would
provide important new opportunities for U.S. exporters.
Latin America and the Caribbean are the fastest growing markets for
U.S. merchandise exports. During the first six months of 1997, our
exports to the region grew more than twice as fast as our exports to
the rest of the world. At the recent meeting of the Trade Ministers of
the nations participating in the Free Trade Area of the Americas (FTAA)
in Belo Horizante, Brazil, the Ministers agreed that FTAA negotiations
should be launched at the Second Summit of the Americas in April 1998.
The negotiations will address the full range of issues from tariff
reductions to agriculture to structural issues such as intellectual
property rights protection and government procurement. We remain fully
committed to negotiating a comprehensive free trade agreement with
Chile.
In addition, we are continuing intensive discussion with our
partners in Western Europe to complete commercially significant
sectoral market-enhancing commitments in the context of the
Transatlantic agenda. The United States and the EU are participating in
a joint study of high priority sectors where we can progressively
eliminate or reduce barriers. In June 1997 the United States and the EU
concluded negotiations on a mutual recognition agreement that
facilities U.S. exports to the EU in sectors such as telecommunications
equipment, pharmaceuticals, and medical devices, by allowing U.S.
manufacturers to have conformity assessment procedures, such as testing
and inspection, conducted in the United States. This agreement will
reduce costs for both manufacturers and regulators alike, and will help
harmonize standards in certain sectors.
Finally, through President Clinton's ``Partnership for Economic
Growth and Opportunity in Africa'' initiative, we seek to strengthen
the process of economic and political reform and encourage the further
opening of African markets and the maintenance of open markets through
the assumption of increased WTO obligations. Increased African
participation in the international trading system should benefit
American and African exporters alike and lay the foundation for
eventual free trade agreements between African countries and the United
States.
Appendix--Successfully Enforcing WTO Agreements
Early victories. The United States has won the first five cases
that it has taken through the WTO dispute settlement panel process.
Japan-liquor taxes. The United States--joined by the EU
and Canada--successfully challenged a discriminatory Japanese tax
scheme that placed high taxes on whisky, vodka, and other Western-style
spirits, while applying low taxes to a traditional Japanese spirit
(shochu). This was an important victory for the U.S. distilled spirits
industry, whose exports to Japan have reached $100 million per year
even in spite of the heavy Japanese taxes. Japan has already enacted
legislation that is a major step toward eliminating the problem. The
excise taxes on whisky and other brown spirits are being dramatically
reduced, starting in October 1997, and the excise tax on shochu will be
increased. The result will be a drastic tax cut for our brown spirits
exports.
Canada-restrictions on magazines. The United States
successfully challenged a recently enacted Canadian law that placed a
high tax on American magazines containing advertisements directed at a
Canadian audience. This tax, which was the latest in a series of
Canadian government measures designed to protect the Canadian magazine
industry from U.S. competition, was specifically calculated to put the
Canadian edition of Sports Illustrated, published by the Canadian
subsidiary of Time Warner, Inc., out of business. By ruling in favor of
the United States, this case makes clear that WTO rules prevent
governments from using ``culture'' as a pretense for discriminating
against imports.
EU--banana imports. The United States joined Ecuador,
Guatemala, Honduras, and Mexico in challenging an EU import program
that gave French and British companies a big share of the banana
distribution services business in Europe that U.S. companies had built
up over the years. Ruling against the EU, the WTO panel and Appellate
Body found that the EU banana import rules violated both the General
Agreement on Trade in Services and the General Agreement on Trade in
Goods by depriving U.S. banana distribution services companies and
Latin American banana producers of a fair share of the EU market.
EU--hormone ban. Both the United States and Canada
challenged Europe's ban on the use of six hormones to promote the
growth of cattle, and a WTO panel agreed that the EU has no scientific
basis for blocking the sale of American beef in Europe. This is a sign
that the WTO dispute settlement system can handle complex and difficult
disputes where a WTO member attempts to justify trade barriers by
thinly disguising them as health measures. The panel affirmed the need
for food safety measures to be based on
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science, as they are in the United States. In addition to potentially
affecting over $100 million in U.S. beef exports annually, this ruling
sets an important precedent that will act to protect other U.S.
exporters from unscientific and unjustified trade barriers in the
future.
India--patent law. The United States recently obtained a
panel ruling against India for failing to provide procedures for filing
patent applications for pharmaceuticals and agricultural chemicals, as
required by the WTO agreement on intellectual property protection.
Besides serving notice that the United States expects all WTO members,
including developing countries, to carry out their WTO obligations
concerning intellectual property rights, this case also demonstrates
that the WTO dispute settlement mechanism can play an important role in
protecting American rights and interests in this field.
Significant settlements. The WTO agreements and the new dispute
settlement rules are already paying dividends by helping us increase
jobs and exports. The new dispute settlement rules often make it
possible for us to enforce WTO agreements without ever having to reach
a panel decision. The fact that the WTO can and will authorize us to
retaliate pays off in earlier settlements opening markets for more of
our exports. We have already used the WTO procedures to obtain
favorable settlements in some important cases:
Korea--shelf-life requirements. Consultations under WTO
procedures resulted in a commitment by Korea to phase out its shelf-
life restrictions on food products--which removed a major barrier to US
exports of beef, pork, poultry and frozen products.
EU--grains imports. By demonstrating our resolve to refer
the matter to a panel, we succeeded in pushing the EU to implement a
settlement agreement on grains that benefits U.S. exports of rice and
malting barley.
Japan--sound recordings. In only a matter of months after
we held WTO consultations, the Government of Japan amended its law to
provide U.S. sound recordings with retroactive protection, as required
by the WTO agreement on intellectual property rights.
Portugal--patent law. After the United States requested
WTO consultations, Portugal agreed to revise its patent law to provide
a 20-year term to old, as well as new, patents, as required by the WTO
agreement on intellectual property rights.
Pakistan--patent law. After the United States requested
the establishment of a WTO panel to enforce the WTO intellectual
property rights agreement, Pakistan implemented the requirements of
that agreement to provide procedures for filing patent applications and
preserving exclusive marketing rights to protect pharmaceuticals and
agricultural chemicals.
Turkey--film tax. The United States has used the WTO
dispute settlement process to convince the Government of Turkey to
eliminate discriminatory tax treatment currently given to box office
receipts from exhibition of foreign films. Turkey has agreed to change
its practice.
Hungary--agricultural export subsidies. The United States,
joined by Argentina, Australia, Canada, New Zealand, Thailand, and
Japan, used the WTO dispute settlement procedures to address Hungary's
lack of compliance with its commitments on agricultural export
subsidies. The result was a settlement agreement in which Hungary will
have to cut its current export subsidy levels by more than 65%.
Irving A. Williamson,
Chairman, Section 301 Committee.
[FR Doc. 97-26565 Filed 10-7-97; 8:45 am]
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