International Trade: Further Improvements Needed to Handle
Growing Workload for Monitoring and Enforcing Trade Agreements
(30-JUN-05, GAO-05-537).
The vast majority of U.S. exports are covered by at least one
trade agreement. Ensuring that U.S. companies can take advantage
of the market opportunities created by trade agreements has
therefore become a critical responsibility for U.S. government
agencies. GAO examined U.S. government efforts to monitor and
enforce trade agreements. Specifically, GAO (1) reviewed how the
nature and scope of U.S. trade agreements has changed in the last
10 years and what effect changes had on agencies' monitoring and
enforcement workload, (2) evaluated how U.S. government agencies
monitor and enforce trade agreements, and (3) analyzed how the
U.S. government allocates resources for monitoring and
enforcement of trade agreements within the context of other trade
activities.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-537
ACCNO: A28581
TITLE: International Trade: Further Improvements Needed to
Handle Growing Workload for Monitoring and Enforcing Trade
Agreements
DATE: 06/30/2005
SUBJECT: Foreign trade agreements
Foreign trade policies
International economic relations
International trade
Policy evaluation
Strategic planning
Trade agreements
Monitoring
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-05-537
United States Government Accountability Office
GAO Report to the Ranking Minority Member, Committee on Finance, U.S. Senate
June 2005
INTERNATIONAL TRADE
Further Improvements Needed to Handle Growing Workload for Monitoring and
Enforcing Trade Agreements
a
GAO-05-537
[IMG]
June 2005
INTERNATIONAL TRADE
Further Improvements Needed to Handle Growing Workload for Monitoring and
Enforcing Trade Agreements
What GAO Found
The number and scope of trade agreements have grown significantly in
recent years, increasing the monitoring and enforcement workload for
federal agencies. For example, membership in the World Trade Organization
(WTO) has grown over 30 percent in the past 10 years. In addition, trade
agreements increasingly cover complex subjects like intellectual property
and technical standards. As a result, the amount of work needed to ensure
countries comply with such agreements has increased.
The Office of the U.S. Trade Representative (USTR) and the Departments of
Agriculture, Commerce, and State generally monitor market access issues
brought to the agencies' attention by complaints from the private sector
or that they identify themselves. They also monitor countries' compliance
with certain trade agreements. Over the past 5 years, agencies with trade
responsibilities have taken steps to improve their ability to address
compliance issues. However, weaknesses still exist. For example, staff we
spoke with in Washington, D.C., and at overseas posts told us that
communication is sometimes inefficient. Moreover, Commerce staff do not
always have access to complete information from overseas posts regarding
compliance issues they are working on in those countries.
Agency resources for handling compliance issues face growing demands.
Competition with other activities, such as trade negotiations, and
staffing and training limitations, all affect agencies' ability to
effectively monitor and enforce trade agreements. For example, officials
responsible for monitoring and enforcing trade agreements in all eight
overseas posts we visited said that additional training would help them
monitor and enforce trade agreements more effectively. Despite these
constraints and agencies' shared responsibility for monitoring and
enforcing trade agreements, agencies do not systematically coordinate
their assessment or planning for future resource needs.
Growing Workload for Monitoring and Enforcing Trade Agreements
Number of WTO members Number of free trade agreements
150 10
9
120 8
7
90 6
5
60 4
3
30 2
1
0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Source: GAO analysis of USTR and WTO data.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
The Number and Scope of Trade Agreements Have Grown, Thus
Increasing the Monitoring and Enforcement Workload
Trade Agencies' Ability to Identify and Address Potential Trade
Agreement Violations Has Improved, Although Communication
Needs Further Improvement
Despite Growing Demands on Agency Resources, the U.S.
Government Lacks a Coordinated Resource Strategy for
Monitoring and Enforcing Trade Agreements
Conclusions
Recommendations
Agency Comments and Our Evaluation
1 2 4
7
9
19 30 31 32
Appendixes
Appendix I: Objectives, Scope, and Methodology 34
Additional Information about U.S. Trade 38
Appendix II: Agreements
Countries and Regions with Which the United
States Has Trade
Agreements 38
Types of U.S. Trade Agreements 41
Agency Trade Agreement Archives 42
Examples of U.S. Government Trade Monitoring
Appendix III: and
Enforcement Activities 44
Korea 44
Japan 45
Turkey 45
Morocco and Singapore 46
Appendix IV: Comments from the Department of Agriculture 47
Appendix V: Comments from the Department of Commerce 48
Appendix VI: Comments from the Department of State 52
Appendix VII: GAO Contact and Staff Acknowledgments 56
Related GAO Products 57
Contents
Table Table 1: Key Federal Agencies That Participate in Trade Agreement
Monitoring and Enforcement Efforts 5
Figures Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6: Figure 7: Figure 8:
Growing Workload for Monitoring and Enforcing Trade
Agreements 8
USTR Estimates of the Numbers of Staff Needed to
Support Key Initiatives, 2005 20
Domestic Staff in Key Monitoring and Enforcement
Units 23
Overseas Staff in Key Monitoring and Enforcement
Units 24
Trading Partners with Which the U.S. has Five or More
Agreements, as of 2005 39
U.S. Trade Agreements by Region, as of 2005 40
U.S. Trade Agreements by Type, as of 2005 41
Comparison of USTR, Commerce, and Agriculture
Archives of Trade Agreements, as of 2005 43
Abbreviations
APHIS Animal and Plant Health Inspection Service
CS Trade Promotion/U.S. Foreign and Commercial Service
EU European Union
FAS Foreign Agricultural Service
FDA Food and Drug Administration
FSN Foreign Service National
FSIS Food Safety Inspection Service
FTA free trade agreement
MAC Market Access and Compliance
NAFTA North American Free Trade Agreement
USTR U.S. Trade Representative
WIPI Wireless Internet Platform for Interoperability
WTO World Trade Organization
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
A
United States Government Accountability Office Washington, D.C. 20548
June 30, 2005
The Honorable Max Baucus Ranking Minority Member Committee on Finance
United States Senate
Dear Senator Baucus:
A top trade priority for the United States is opening foreign markets for
American goods and services by ensuring that U.S. trading partners comply
with existing trade agreements. This is because the vast majority of U.S.
exports in 2004 were covered by at least one trade agreement. Ensuring
that U.S. companies can take advantage of the market opportunities created
by trade agreements has therefore become a critical responsibility for
U.S. government agencies. Since U.S. government efforts to monitor and
enforce trade agreements involve numerous federal agencies, these agencies
must coordinate their activities to be effective and to help ensure that
trade agreements are beneficial to the United States.
Given the large and growing number of U.S. trade agreements, the wide
subject areas covered by such agreements, and the limited resources
available to negotiate and enforce trade agreements, we examined U.S.
government efforts to monitor and enforce trade agreements. Specifically,
we (1) reviewed how the nature and scope of U.S. trade agreements has
changed in the last 10 years and what effect the changes had on agencies'
monitoring and enforcement workload, (2) evaluated how U.S. government
agencies monitor and enforce trade agreements, and (3) analyzed how the
U.S. government allocates resources for monitoring and enforcement of
trade agreements within the context of other trade activities.
To describe the nature and scope of U.S. trade agreements, we reviewed
data on trade agreements from the Office of the U.S. Trade Representative
(USTR) and the Departments of Agriculture and Commerce. To evaluate how
U.S. government agencies monitor and enforce trade agreements, we examined
the activities of officials at four key trade agencies: USTR and the
Departments of Agriculture, Commerce, and State.1 In addition, we met
1For the purposes of this report, we use the term "trade agencies" to
collectively refer to the Office of the U.S. Trade Representative and the
Departments of Agriculture, Commerce, and State.
with overseas staff involved in monitoring and enforcement in eight
countries. To select the countries to visit, we considered several
variables and attempted to visit a variety of posts. We further met with
private sector representatives in Washington, D.C., and in the eight
countries where we conducted overseas fieldwork, including private sector
representatives who had recently worked with U.S. government officials to
resolve trade compliance issues. We also analyzed U.S. government reports
and documents, and prior GAO reports related to monitoring and enforcement
activities.2 To determine how the U.S. government allocates resources for
monitoring and enforcement activities, we met with officials from the four
key trade agencies and reviewed budget documents, strategic plans, and
agency performance reports. For a more detailed explanation of our scope
and methodology, including how we selected countries to visit and private
sector representatives to interview, see appendix I. We conducted our work
from July 2004 to April 2005 in accordance with generally accepted
government auditing standards.
Results in Brief Increasing membership in key trade agreements and the
widening scope and complexity of U.S. trade agreements have added to the
monitoring and enforcement workload for federal agencies. World Trade
Organization (WTO) membership has increased by almost one-third over the
past 10 years, increasing the workload for agency officials responsible
for monitoring countries' compliance with their WTO obligations. In
addition, since 2000 the United States has negotiated comprehensive free
trade agreements with 12 countries. These agreements cover complex topics
such as intellectual property rights and technical standards. Monitoring
compliance with these agreements requires intensive efforts from agency
staff, as well as staff with specialized knowledge.
Trade agencies generally monitor market access issues that U.S. companies
bring to their attention or that they identify themselves, some of which
may be covered by a trade agreement. They also routinely monitor
countries' compliance with certain specific trade agreements. Agencies
employ a variety of approaches to address these issues, including using
trade agreements as leverage for resolving a particular trade issue. In
recent
2GAO, International Trade: Strategy Needed to Better Monitor and Enforce
Trade Agreements, GAO/NSIAD-00-76 (Washington, D.C.: Mar. 14, 2000), and
International Trade: Improvements Needed to Track and Archive Trade
Agreements, NSIAD-00-24 (Washington, D.C.: Dec. 14, 1999).
years, agencies have taken action to improve coordination and enhance
human capital available to monitor and enforce trade agreements. For
instance, they have taken steps to create more effective formal and
informal coordination with other agencies and with the private sector.
However, Commerce and State staff in Washington, D.C., and at overseas
posts told us that communication is sometimes inefficient. For example,
State sometimes uses classified e-mail and Web sites to exchange
important, updated information on trade issues, even if the information
itself is not classified. However, Commerce staff in Washington, D.C., and
overseas who work on compliance issues told us that even though they have
the appropriate clearances, they have limited access to these classified
systems, which can impede their ability to address compliance issues.
Despite growing demands on resources for monitoring and enforcing
agreements, agencies typically independently assess and plan for resource
needs. As a result, the U.S. government lacks a coordinated strategy to
ensure that agencies can effectively handle the growing monitoring and
enforcement workload. Resources for monitoring and enforcement face
growing demands from competition with other trade activities such as trade
negotiations, staffing limitations, and barriers to developing and
accessing expertise. For example, many Agriculture, Commerce, and State
staff responsible for monitoring and enforcing trade agreements have not
received training regarding how to fulfill these responsibilities, and
staff in all eight countries we visited said additional training would
help them fulfill these responsibilities more effectively. In spite of
these growing demands and the fact that responsibility for monitoring and
enforcing trade agreements is spread across multiple agencies, there is no
systematic interagency coordination regarding assessing and planning for
resource needs. Since it does not routinely use an interagency trade
policy-making structure to address current trade policy issues, the U.S.
government lacks a formal interagency mechanism or strategy for assessing
and allocating resources for future monitoring and enforcement activities.
While agencies have previously recognized that effectively monitoring and
enforcing trade agreements requires developing a strategy for coordinating
their respective resources, they have not done so since 2001. The lack of
such a strategy complicates each agency's individual resource planning and
sometimes strains agency resources.
In this report, we make several recommendations to improve agency efforts
to monitor and enforce trade agreements in the areas of communication,
training, and resource planning. We provided a draft of
this report to the Office of the U.S. Trade Representative and the
Departments of Agriculture, Commerce, and State for their comments.
Agriculture and State generally concurred with GAO's recommendations.
Commerce offered comments to clarify certain facts. USTR submitted
technical comments.
Background Most U.S. trade is covered by trade agreements, which vary in
type and complexity. In 2004, 97 percent of U.S. exports were to members
of the WTO,3 and 43 percent of U.S. exports were to countries with which
the United States had a free trade agreement (FTA). Some agreements are
multilateral, such as the WTO agreements, which cover trade in multiple
industries among 148 members. Most U.S. trade agreements, however, are
bilateral, such as the U.S.-Singapore Free Trade Agreement. The number of
trade agreements to which the United States is a party has grown
significantly over the past 10 years. According to USTR data, the number
of bilateral trade agreements grew nearly 50 percent in the last 10 years:
from 176 in 1995 to 254 in 2004.4
Monitoring and enforcing trade agreements primarily involves four agencies
and multiple units within each agency. USTR has primary statutory
responsibility for implementation of U.S. international trade policy. In
addition, the Departments of Agriculture, Commerce, and State make
substantial contributions to federal monitoring and enforcement efforts,
both by performing their own monitoring activities and by supporting
USTR's efforts. Each of these agencies has both domestic and overseas
components as well as multiple geographic-, industry-, and issuespecific
units involved in monitoring and enforcement (see table 1).
3The WTO administers rules for international trade, provides a mechanism
for settling disputes, and provides a forum for conducting trade
negotiations.
4For more information about U.S. trade agreements, see appendix II.
Table 1: Key Federal Agencies That Participate in Trade Agreement Monitoring and
Enforcement Efforts
Units performing
monitoring
Monitoring and and enforcement
enforcement work
Agency unit (headquarters) overseas Examples of other
units involved
U.S. Trade Monitoring and U.S. Mission to General Counsel; WTO
Enforcement Unit the WTO, and and Multilateral
Trade Policy Affairs; and
Representative Officer, U.S. region-specific
offices
Mission to the
EU
Commerce Market Access and Trade Promotion/ Manufacturing and
Compliance U.S. and Services, Import
Office Foreign Commercial Administration, Patent
Service, and Trademark
Market Access and Office
Compliance
overseas officers
State Trade Policy and Economic section Country desk staff,
Programs of embassy issue-specific task
forces
Foreign Agriculture Foreign Animal and Plant Health
Agriculture Service Agriculture Inspection
Service
Service, Food Safety
and Inspection
Service
Source: GAO.
Agencies coordinate monitoring and enforcement activities through an
extensive interagency network for trade policy development led by USTR and
involving at least 17 other federal agencies.5 The structure for
interagency monitoring and enforcement coordination flows from the Trade
Policy Committee, which was established pursuant to Section 242 of the
Trade Expansion Act of 1962.6 The Trade Policy Committee has two
subordinate bodies-the Trade Policy Review Group, a management-level
committee, and the Trade Policy Staff Committee, a senior-staff level
committee subordinate to the Trade Policy Review Group. Two of the nearly
100 subsidiary bodies of the Trade Policy Staff Committee-the Monitoring
and Enforcement Subcommittee and the Compliance Task Force-meet on a
regular basis to discuss trade compliance issues. Other geographic and
sectoral subcommittees are also involved in monitoring and enforcement
efforts as part of their overall mandates.
5USTR works with the following federal agencies in monitoring and
enforcement activities: the Departments of Agriculture, Commerce, Defense,
Energy, Health and Human Services, Homeland Security, Interior, Justice,
Labor, State, Transportation, and Treasury, as well as the Council of
Economic Advisers, the Council on Environmental Quality, the Environmental
Protection Agency, the Office of Management and Budget, and the U.S.
Agency for International Development.
619 U.S.C. 1872.
Trade agencies perform a number of monitoring and enforcement activities
following the same general process. In a prior report, we described
several key steps in monitoring and enforcing trade agreements and noted
that communication is important throughout the process.7 The key steps we
identified are
o Identifying problems. Agency officials rely on multiple sources for
information about potential trade compliance problems. In general, the
private sector is the most important source for information for
identifying problems. Agency staff posted overseas are also a valuable
source of information because of their involvement with both private
sector and foreign government officials.
o Setting priorities. Agency officials prioritize among the multiple
trade agreements and compliance issues needing their attention. There are
some common factors that agencies apply when setting priorities, including
the amount of U.S. trade, the trade principles at stake, and how quickly
action needs to be taken.
o Gathering and analyzing information. Once agencies have identified
potential problems, they gather and analyze a wide range of information
about the allegation of noncompliance, such as documentation on foreign
practices that may be inconsistent with trade obligations.
o Developing responses. Developing responses to compliance problems is a
collaborative effort. Federal agencies take into account other agency
views and private sector interests to develop the most appropriate U.S.
response.
o Taking enforcement action. In some cases, the U.S. government can
invoke formal dispute settlement procedures built into trade agreements or
take other actions under U.S. trade law, such as increasing tariff levels
on foreign imports. Since formal dispute settlement procedures are
time-intensive, decisions to pursue these are always vetted through an
interagency process that considers how such actions affect a broad range
of U.S. interests.
7See GAO/NSIAD-00-76.
The Number and Scope of Trade Agreements Have Grown, Thus Increasing the
Monitoring and Enforcement Workload
In addition to the growing number of bilateral trade agreements, other key
factors have increased the monitoring and enforcement workload for U.S.
trade agencies. These factors include growth in WTO membership and the
widening scope and complexity of trade agreements.
Increasing membership in key multilateral trade agreements, particularly
WTO agreements, has significantly expanded agencies' monitoring and
enforcement workload. WTO membership has grown by 36 countries (over 30
percent) to 148 members since 1995, and an additional 27 countries are in
the accession process. The WTO's primary means of facilitating monitoring
of the global trading system is through the WTO committee structure, which
oversees implementation of each WTO agreement. This includes a requirement
that each member file notifications of certain government actions, such as
providing subsidies. Since agency officials must review these
notifications, as the number of WTO members grows, so does the workload
for trade agencies. The increase in WTO membership especially affects
USTR's workload, because it is responsible for advocating and defending
U.S. trade agreement rights and obligations within the WTO. To meet this
and other responsibilities, USTR has posted 13 permanent staff and 14
detailees from other agencies or contractors to the U.S. Mission to the
WTO in Geneva, Switzerland. The other key trade agencies are also affected
by growing WTO membership. For example, China's December 2001 accession to
the WTO required the four trade agencies to add staff resources to meet
the demands of monitoring China's compliance with its WTO commitments.8
Officials from Agriculture told us they have assigned 3 staff members to
monitor China's WTO notifications to ensure it is complying with the terms
of its accession agreement. In addition, Commerce has dedicated more than
95 staff members (more than is dedicated to any other country or region)
to monitoring China's compliance.
An additional reason for the increased workload is the widening scope of
recent trade agreements. For example, FTAs, which cover a wide variety of
areas including agricultural products, services, and intellectual
property, are of growing importance to U.S. trade policy. As shown in
figure 1, the
8The Chinese WTO accession agreement contains commitments in eight broad
areas of China's trade regime-e.g., import regulations, agriculture,
services, and intellectual property rights-covering nearly 700 individual
commitments. These obligations include commitments to reduce tariffs on
more than 7,000 products and remove 600 other restrictions.
United States has negotiated several new FTAs in recent years.9 Monitoring
and enforcing free trade agreements requires intensive effort on the part
of USTR and other trade agencies. For example, staff at the U.S. embassy
in Singapore used a formal free trade agreement monitoring plan to track
Singapore's efforts to implement the FTA and identify areas in which
Singapore needed to take additional action to fully implement the terms of
the agreement. Officials said that these efforts involved significant
involvement by embassy staff throughout the year and a particularly large
effort in advance of a joint U.S.-Singapore review of the operation of the
agreement during its first year.
Figure 1: Growing Workload for Monitoring and Enforcing Trade Agreements
Number of WTO members Number of free trade agreements
150
120
90
60
30
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year Source: GAO analysis of USTR and WTO data.
The federal government's monitoring and enforcement workload is also
affected by the growing complexity of subjects covered in trade
agreements. For example, USTR coordinates with other agencies to increase
intellectual property protection around the world, including negotiating
agreements that address intellectual property protection,
10 9 8 7 6 5 4 3 2 1
0
9Since 2000, the United States has negotiated FTAs with 12 countries.
These countries are Australia, Bahrain, Chile, Costa Rica, the Dominican
Republic, El Salvador, Guatemala, Honduras, Jordan, Morocco, Nicaragua,
and Singapore. Prior to 2000, the United States entered into FTAs with 3
countries-Canada, Israel, and Mexico.
which require monitoring and enforcement.10 Agency officials noted that
they spend a significant amount of time attempting to resolve complex
intellectual property rights issues. Foreign governments are increasingly
using technical standards as trade barriers, which can require some
specific technical knowledge to understand. To address such issues,
Commerce has posted standards attaches in Mexico, Brazil, and at the U.S.
Mission to the EU in Brussels, Belgium, specifically to try to help U.S.
companies deal with complex standards related issues for a wide variety of
products.
Trade Agencies' Ability to Identify and Address Potential Trade Agreement
Violations Has Improved, Although Communication Needs Further Improvement
Trade agencies generally monitor market access issues that are brought to
them by private industry or that they identify themselves. Once a market
access or trade agreement compliance issue is identified, agencies attempt
to resolve the problem as quickly and efficiently as possible.11 Trade
agencies have taken a number of steps to specifically address and improve
their monitoring and enforcement capabilities. In particular, agencies
have improved their coordination with one another and increased their
investment in human capital. Although trade agencies have taken steps to
improve their communication, it could be further improved because
communicating important information on compliance issues is sometimes
inefficient.
Trade Agencies Generally Monitor Market Access Issues and Use Trade
Agreements as Leverage
Trade agencies generally monitor market access issues,12 some of which may
be covered by a trade agreement. They also monitor countries' compliance
with certain specific trade agreements and will use trade
10For more information on U.S. efforts to improve intellectual property
protection, see GAO, Intellectual Property: U.S. Efforts Have Contributed
to Strengthened Laws Overseas, but Challenges Remain, GAO-04-912
(Washington, D.C.: Sept. 8, 2004).
11For examples of how trade agencies have handled some market access and
compliance cases, see appendix III.
12For the purposes of this report, we use the term "market access issue"
to include all barriers to U.S. exports to foreign markets, regardless of
whether there is a trade agreement that relates to the barrier. We use the
term "trade compliance issue" to refer to a barrier covered by the
provisions of one or more trade agreement.
agreements as leverage for resolving a particular case.13 Efforts to
monitor and enforce trade agreements are part of a larger effort to
improve market access for U.S. exports. One part of these efforts is
identifying and addressing trade barriers in foreign markets. To track
such efforts, Commerce has created a database that includes all market
access cases that Commerce staff work on, and it identifies those cases
that are covered by a trade agreement.14 About half of the 161 cases
Commerce staff initiated in fiscal year 2004 related to market access
issues not covered by specific provisions of trade agreements. Most often,
trade agencies become aware of these issues when a U.S. company comes
forth with a complaint. These agency officials told us they then research
the specifics of the issue, including whether it involves a potential
violation of a specific trade agreement.15 If it does, the officials can
then use the trade agreement as leverage for resolving the issue. For
example, Commerce officials told us that U.S. construction companies that
want to bid on construction projects in Japan often report having
difficulty doing so because of strict regulations imposed by the
government of Japan. Commerce's Trade Promotion/U.S. Foreign and
Commercial Service (CS) staff in Japan therefore often use the terms of a
bilateral trade agreement between the United States and Japan, the Major
Projects Agreement, to encourage Japan to open up the bidding process.
Trade agencies' domestic staff also play a significant role in monitoring
international market access issues. For example, CS has a network of
export and industry specialists located in U.S. Export Assistance Centers
throughout the United States. These U.S. Export Assistance Centers are
one-stop shops ready to provide small or medium-sized businesses with
local export assistance. One important function of these centers is to
perform regular outreach to companies. Through this outreach, CS domestic
staff are sometimes the first to hear about potential market access
issues.
13Commerce has identified specific individuals to serve as Designated
Monitoring Officers who serve as the primary point of contact for
inquiries regarding trade agreement. According to Commerce, these officers
are experts on their assigned agreements.
14Commerce is the only trade agency that maintains a database that tracks
market access issues, including compliance with trade agreements.
15For additional information on the U.S. government's process for
monitoring and enforcing trade agreements see USTR, Coordinating the
Interagency Monitoring and Enforcement of Trade Agreements: Report to the
Senate and House of Representatives Committees on Appropriations
(Washington, D.C.: 2004).
Several large U.S. companies told us they often prefer to work directly
with foreign governments to try to resolve market access issues. If these
efforts are unsuccessful, they may request assistance from the U.S.
government. In those instances, the companies with which we spoke were
highly satisfied with the efforts of the U.S. government in addressing
their complaints. At times, however, companies turn to the U.S. government
only as a last resort or ask the U.S. government not to get involved in
certain issues. Companies told us this was particularly the case in those
countries where association with the U.S. government might be seen as more
of a detriment than an aid. For example, several private sector
representatives from large U.S. companies operating in Europe told us that
they typically attempt to resolve compliance issues with European
governments without help from the U.S. government. In France, for example,
a private sector representative told us that negative public sentiment
toward the U.S. government makes some U.S. companies shy away from U.S.
government assistance on trade issues.
Trade agencies also proactively identify new market access issues and
monitor developments regarding long-standing trade issues as a part of
their overall efforts to improve market access for U.S. exporters. At the
overseas posts we visited, we observed that agencies' overseas staff play
a large role in these efforts by monitoring local political and economic
developments and engage in such activities as daily monitoring of the
local press and reviewing official government publications. For example, a
Foreign Agricultural Service (FAS) official in Turkey is assigned to
review the Turkish government's daily publication of newly proposed
regulations in order to identify any proposals that may affect U.S.
agricultural exports. Overseas staff also try to maintain good contact
with their foreign government counterparts, so as to stay informed of
foreign government activities. In addition, Foreign Service Nationals
(FSNs) often play an invaluable role in proactive monitoring.16 With their
institutional knowledge and expertise, FSNs may be the best positioned
staff to identify a potential market access issue and monitor long
standing trade issues. Moreover, at some posts the FSNs are the only staff
an agency may have in the country to carry out monitoring activities. For
example, the Agricultural Attache who covers Romania is posted in
Bulgaria. Although he makes frequent visits to Romania, FSNs employed by
USDA must deal with the day-to-day monitoring of agricultural trade issues
in Romania.
16Foreign Service Nationals are non-U.S. citizens employed to work in U.S.
embassies and consulates throughout the world.
In addition, agencies also proactively monitor countries' compliance with
some trade agreements, often because the issues are particularly important
to U.S. exporters or because of requirements in the agreements. For
example, since trade with Japan is important to U.S. exporters, the United
States and Japan have an agreement that requires annual talks to discuss
ongoing trade issues of interest to both countries. In addition, trade
agencies are involved in periodic WTO reviews of each member's overall
trade policy as a part of the WTO's Trade Policy Review Mechanism. Some
other agreements such as FTAs also include built-in structures for
monitoring compliance. For example, the U.S.-Singapore FTA requires the
countries to meet periodically in order to review implementation progress
by both sides and discuss any issues that have arisen.
USTR is also required by domestic law to prepare a variety of
trade-related reports that assist it in its efforts to monitor and enforce
trade agreements. These requirements range from providing broad trade
policy objectives and plans to reporting on specific issues or sectors.
For instance, USTR's required reports include
o The Annual Report on the Trade Agreements Program. USTR, in
consultation with other agencies, prepares this broad report, which
includes, among other things, discussion of foreign trade restrictions
against U.S. exports.
o The National Trade Estimate Report on Foreign Trade Barriers. This
report identifies and estimates the impact of foreign barriers to U.S.
exports.
o Special 301 Report. USTR is required to identify those countries that
deny adequate and effective protection for intellectual property rights,
or fair and equitable market access for U.S. persons that rely on
intellectual property protection.
o The Annual Review of Telecommunications Trade Agreements. USTR also
reports on individual sectors, such as telecommunications. This particular
report reviews the operation and effectiveness of U.S. telecommunications
trade agreements and determines whether foreign countries are complying
with the terms of these agreements.
Trade Agencies Can Employ a Variety of Approaches to Attempt to Resolve
Market Access and Compliance Issues
Once trade issues have been identified, agencies can employ a variety of
tools to attempt to resolve them, depending on the context. This includes
using overseas staff to take both informal and formal actions. Staff will
attempt to resolve an issue by calling their foreign government
counterparts to discuss the issue. In Korea, for instance, embassy
officials work very closely with the Ministry of Foreign Affairs and Trade
on standards issues. For example, the Korean government is currently
considering switching its automobile license plates to a size that would
require American car manufacturers to alter their vehicles. In response,
embassy officials set up meetings of standards experts from the ministry,
industry, and the U.S. government to try to prevent damaging regulations
from being issued. If this type of initial low-level action does not
resolve the issue, agency officials may send a letter to a foreign
government official in the relevant ministry. If unsuccessful, they may
send a formal letter on behalf of the U.S. government (called a demarche)
requesting that the government take specific action.
While trade agency officials state they try to resolve an issue at the
lowest level possible, they also look to use the most efficient means
possible. Sometimes the most efficient way to solve a problem is through
the immediate involvement of senior officials to raise the visibility of
the issue. Thus, agencies use visits by senior officials as leverage to
attempt to resolve trade issues. For example, the United States and Japan
engage in annual trade talks involving senior government officials. These
talks provide a good opportunity for senior U.S. officials to discuss
unresolved trade issues with their Japanese counterparts.
A particularly contentious issue may require additional intervention by
more senior U.S. officials. In a recent dispute, for instance, the
European Union (EU) had proposed a regulation that would require wood
packaging material such as boxes, pallets, and crates to be made from
debarked wood to ensure no pests or fungi in the wood packaging could be
spread to Europe. This could have hurt U.S. companies exporting to the EU
using methods that were consistent with the international standard for the
treatment of wood packaging material rather than packaging material made
from debarked round wood required by the EU.17 The industry turned to the
U.S. government for assistance, and the issue progressively made its
17U.S. companies do not use debarked wood pallets, claiming that the
internationally agreed upon measures that they follow for treating
softwood logs and timber adequately eradicate all pest and fungi.
way up the government hierarchy, eventually resulting in letters from both
the Secretaries of Agriculture and Commerce and the U.S. Trade
Representative to their European counterparts. The European Commission
agreed to postpone the new rules for 1 year, to give experts time to
discuss technical aspects of debarking.
The U.S. government can also use an international forum to try to resolve
a compliance issue. For instance, the United States has utilized the Joint
Commission on Commerce and Trade in an attempt to resolve some of China's
WTO compliance problems. At the April 2004 meeting of this
government-to-government consultative forum, the U.S. and Chinese
governments discussed key trade issues and formed working groups; signed
several memoranda of understanding and letters of intent; and reached
several more specific agreements to improve China's implementation.18
When necessary, the U.S. government can use domestic law and established
dispute settlement mechanisms to enforce trade agreement obligations. U.S.
trade law provides several opportunities for taking action to ensure
countries' compliance with trade agreements. For instance, Section 301 of
the Trade Act of 1974 allows the U.S. government to increase duties on
imports from foreign countries found to be in violation of a trade
agreement they have entered into with the United States. In addition, some
trade agreements, such as the North American Free Trade Agreement and the
WTO, also include binding dispute settlement mechanisms to which members
can take their disputes.19 For example, since 1995, the United States has
brought 79 cases against other WTO members for alleged violations of WTO
agreements.
18For additional information on the Joint Commission on Commerce and
Trade, see GAO, U.S.-China Trade: Opportunities to Improve U.S. Government
Efforts to Ensure China's Compliance with World Trade Organization
Commitments, GAO-05-53 (Washington, D.C.: Oct. 6, 2004).
19For additional information on WTO dispute settlement, see GAO, World
Trade Organization: U.S. Experience to Date in Dispute Settlement System,
GAO/NSIAD/OGC00-196BR (Washington D.C.: June 14, 2000); World Trade
Organization: Issues in Dispute Settlement, GAO/NSIAD-00-210 (Washington
D.C.: Aug. 9, 2000), and World Trade Organization: Standard of Review and
Impact of Trade Remedy Rulings, GAO-03-824 (Washington, D.C.: July 30,
2003).
Trade Agencies Have Taken Steps to Improve Coordination and Enhance Human
Capital for Monitoring and Enforcement Activities
Coordination
Since we reported on the monitoring and enforcement process in 2000, trade
agencies have taken a number of measures to improve their monitoring and
enforcement activities. These measures fall into two general categories:
coordination and enhancing human capital.
To improve interagency coordination, agencies created formal structures
within the Trade Policy Staff Committee specifically for the purpose of
discussing compliance issues. The Monitoring and Enforcement Subcommittee
and the Compliance Task Force each provide a regular forum for federal
agencies to share and discuss information, set priorities, assign
responsibilities, and design and implement strategies. In addition, some
overseas posts have instituted both formal and informal interagency trade
compliance teams to coordinate monitoring and enforcement efforts abroad
and in Washington, D.C. In Morocco, for example, agencies established a
formal, embassy-wide committee to discuss issues related to the FTA. The
committee meets on an as-needed basis, although it plans to revive the
weekly meetings once FTA implementation begins.20 Trade agencies have also
attempted to improve coordination by taking advantage of technology. For
instance, officials in Washington and several overseas posts noted that
since GAO reported on trade compliance in 2000, e-mail and
video-teleconferencing have become important tools for communicating
information on trade compliance issues.
Trade agencies have also attempted to improve coordination with the
private sector. This is particularly true with regard to the formal
private sector advisory committees that USTR relies on for input on
important trade issues. Following a GAO report recommending improvements
in the private sector advisory committee structure, trade agencies made
several changes to the system.21 For instance, USTR now holds monthly
teleconference calls with all advisory committee chairs and e-mails
updates to advisors on important U.S. trade initiatives. In addition,
Commerce has
20The government of Morocco ratified the FTA in January 2005. As of April
2005, U.S. officials were awaiting the King's signature and the exchange
of notes between USTR and the government of Morocco before the agreement
goes into effect.
21GAO, International Trade: Advisory Committee System Should Be Updated to
Better Serve U.S. Policy Needs, GAO-02-876, (Washington, D.C.: Sept. 24,
2002).
increased its outreach efforts by holding private sector advisory
committee meetings outside of Washington, D.C.; speaking to domestic trade
associations and overseas American Chambers of Commerce; and coordinating
trade shows and events with its U.S. Export Assistance Centers. Commerce
also sponsors a Compliance Liaison Program to help U.S. exporters overcome
trade barriers, identify problems in overseas markets, and solicit new
compliance cases.22
Human Capital Trade agencies have also taken measures to enhance their
human capital resources for monitoring and enforcing trade agreements in
several areas. For instance, some agencies have instituted trade-and
compliance-targeted training for their officers. One such example is the
week-long core trade agreement monitoring and implementation course that
State began offering in 2002. The course covers elements of major trade
agreements (focusing on the WTO) and U.S. trade laws. The course has been
offered about five times a year, four times at State's training facilities
in Virginia and once overseas. Each class accommodates approximately 30
officials, predominately from State but with a few officials from other
agencies as well. Commerce also offers a similar trade agreement
compliance course for officials involved in monitoring trade agreements.
In addition to the formal trade compliance training discussed above,
Commerce and State offer additional formal and informal training
opportunities to officials with monitoring and enforcement
responsibilities. For instance, portions of other formal State training
courses on issues such as intellectual property rights and
telecommunications directly or indirectly train staff to monitor trade
agreements. Commerce also provides additional informal training related to
trade agreements through videoconferences and teleconferences.
Commerce recently addressed human capital issues for monitoring trade
agreements by revising performance guidelines to clarify when staff can
report performance data based on market access and compliance work. The
current guidelines, implemented in April 2005, allow staff to take credit
for the removal, reduction, or alleviation of a market access barrier
whether or not an export sale immediately follows. CS officers told us
that previously, they did not receive credit for the results they were
achieving
22The Compliance Liaison Program is a public/private partnership that
consists of 250 congressional offices, 96 trade associations, 71 District
Export Councils, 53 state government offices, and 26 other business or
trade organizations.
from monitoring trade agreements because they could not be directly tied
to increased exports.
Furthermore, some trade agencies have placed policy experts in overseas
posts, in part to help monitor and enforce trade agreements. For instance,
Commerce has, for the first time, posted four Market Access and Compliance
(MAC) officers and three standards attaches overseas.23 A number of trade
agency officials-who must divide their attention among multiple job
priorities- told us these officials serve as an invaluable resource, as
they dedicate their time almost solely to market access, compliance, and
standards issues. In China, for example, intellectual property rights
violations are a common problem that U.S. trade agency officials must
resolve.24 To attempt to address this issue, the U.S. Patent and Trademark
Office has stationed a patent attorney in China to provide specialized
support on intellectual property rights issues.
Exchanging Information on Trade Issues Is Sometimes Inefficient
While trade agencies' overall coordination has improved since our 2000
report, communication is still sometimes inefficient. According to agency
officials with whom we met, the trade agencies generally coordinate their
monitoring and enforcement efforts well at various levels: within
headquarters, between headquarters and posts, and within posts.
Opportunities exist, however, for further improvement in agency
communication regarding compliance issues.
Communication between Commerce and State, for example, can be difficult,
because of Commerce's limited access to the classified communication
systems that State sometimes uses to exchange information on trade
issues.25 Both Commerce and State officials told us that not all the
information transmitted on classified systems is, in fact, classified;
however the agencies disagree on the extent to which this
23According to Commerce, a fourth standards attache position has been
approved and will be posted in Beijing, China, in August 2005.
24See GAO-05-53.
25State officials noted that while the use of classified communication
systems has increased in recent years, this is not necessarily its primary
means of communicating information on trade issues.
occurs.26 According to State, information regarding trade issues rarely
appears on the classified email system. Commerce, however, believes that
unclassified information that might be utilized in compliance work may be
frequently transmitted over the classified email system. Regardless of the
amount of unclassified information sent over classified systems, Commerce
officers at headquarters have no access to classified information from
their desktop computers. Some other officials told us that they had
trouble obtaining classified information on compliance issues on which
they were working. In order to read classified e-mails or cables, they
must go to a secure reading room. Commerce is in the process of obtaining
access to the secure system for email used by State, but a Commerce
official told us this process has already taken more than four years.
Some overseas officials also experience obstacles to accessing classified
information. At the U.S. Mission to the European Union, for example, CS
officers do not have the means to access classified systems in the
Commercial Section of the Embassy. They must go to a different floor of
the embassy and enter a secure area to obtain access to classified
systems. In addition, FSNs, who we observed play a key role in monitoring
and enforcement activities, cannot have access to classified systems
because they do not have appropriate security clearances. Furthermore, at
some posts the various trade agencies are not located in the same
building, or sometimes even the same city, making communication more
difficult still. In Korea, for example, only one Commerce computer allows
access to State's classified system, yet CS has officers that are located
in satellite offices separate from the embassy. Some officials overseas
said that while they could obtain all the information they needed,
inefficiencies in obtaining information and guidance from officials in
Washington sometimes affected their monitoring and enforcement activities.
26State officials told us that even though the information may not be
classified, State staff use classified systems to send some information in
order to protect the sources of the information.
Despite Growing Demands on Agency Resources, the U.S. Government Lacks a
Coordinated Resource Strategy for Monitoring and Enforcing Trade
Agreements
Agency resources for monitoring and enforcing trade agreements face
growing demands, but USTR, Agriculture, Commerce, and State independently
assess and plan for resource needs. Despite these demands, the U.S.
government lacks a coordinated strategy for assessing and planning for
resource needs for monitoring and enforcement activities.
Trade Agencies Face Significant and Growing Resource Demands
Monitoring and enforcement activities face growing competition from other
trade activities for resources
Trade agencies face growing demands on their resources for handling their
monitoring and enforcement workloads. Since monitoring and enforcing trade
agreements is only one activity undertaken by trade agencies, resources
for monitoring and enforcement face competition from other trade
activities, such as negotiating new agreements. Further, tight budgets and
growing costs in recent years constrained staffing levels. In addition,
agencies sometimes face constraints to developing and accessing necessary
expertise such as limited training.
Staff from USTR, Agriculture, Commerce, and State perform a variety of
trade activities, only one of which is monitoring and enforcing trade
agreements. Each trade agency therefore allocates its own resources among
these various activities. For instance, USTR has categorized its
responsibilities as the lead U.S. trade agency into four areas-trade
policy development, negotiations, communication and management, and
monitoring and enforcement. As shown in figure 2, USTR estimates in its
Fiscal Year 2005 Performance Plan under the Government Performance and
Results Act that about 50 (or about 22 percent) of its 225 full-time
equivalents are needed to support its monitoring and enforcement
activities.
Figure 2: USTR Estimates of the Numbers of Staff Needed to Support Key
Initiatives, 2005
Estimated full-time equivalents y
andcementMonitoringor
Negotiations
Communicationentandmgemanalopment
aTrdeve
enf Key initiatives
Source: USTR Fiscal Year 2005 Performance Plan.
One area with which monitoring and enforcement activities must compete for
resources is the negotiation of new trade agreements. Since the passage of
Trade Promotion Authority in 2002,27 trade agencies have been heavily
involved in supporting numerous negotiations. These have included the
WTO's Doha Development Agenda, the Free Trade Area of the Americas, and
other FTAs. Since 2000 alone, the United States has completed negotiations
on free trade agreements with 12 countries, and negotiations
27Title XXI of the Trade Act of 2002, Pub. L. No. 107-210.
are under way or about to begin with 12 more countries.28 These
negotiations require significant amounts of staff time and resources. This
can have an effect on monitoring and enforcement activities because
oftentimes the same units contributing to negotiating new agreements also
monitor existing agreements. In addition, once FTAs are completed, trade
agencies then must devote significant resources to monitoring countries'
compliance with these new agreements, thus adding further to the workload.
Trade agency officials told us they do not expect to receive significantly
more resources for monitoring and enforcing trade agreements. Commerce
officials said that as the Administration attempts to meet its goal of
reducing the federal budget deficit, they expect to receive few, if any,
additional resources for monitoring and enforcing trade agreements.
Likewise, USTR's fiscal year 2006 budget request includes no increase in
staffing levels. In addition, Agriculture anticipates having fewer
resources because of tight budget conditions.
Units responsible for monitoring and enforcing trade agreements also
typically have multiple additional responsibilities. For instance, staff
in MAC regional units are also responsible for other tasks, including
o providing technical knowledge and detailed expertise to support trade
negotiations;
o participating in international trade conferences, events, and missions
to assess trade barriers; and
o providing technical knowledge and expertise in support of senior level
contacts with foreign government officials.
Staff at the overseas posts we visited reported spending significantly
varying proportions of their time on monitoring and enforcement efforts.
Some staff at posts in Japan and the EU reported spending most or almost
all of their time on such activities. In contrast, staff in some other
posts reported spending little, if any, time on these activities. Overseas
units with monitoring and enforcement responsibilities also typically have
additional
28These countries are Botswana, Colombia, Ecuador, Lesotho, Namibia, Oman,
Panama, Peru, South Africa, Swaziland, Thailand, and the United Arab
Emirates.
responsibilities related to improving the ability of U.S. companies to
export their products. For example, Agriculture's FAS overseas officers
also
o prepare reports on changes in policies and other developments that
could affect U.S. agricultural exports;
o assess U.S. export marketing opportunities; and
o respond to the information needs of those who develop, initiate,
monitor, and evaluate U.S. food and agricultural policies and programs.
Staffing Levels Face Significant As discussed earlier, the monitoring and
enforcement workload has
Constraints increased significantly in recent years. However, since 2002,
staffing levels in trade agency units with primary monitoring and
enforcement responsibility have not increased significantly. While the
number of staff in Commerce's MAC unit and State's Economic and Business
Affairs Bureau grew substantially between 2000 and 2002, the number has
grown little since then. As shown in figure 3, total staff levels in key
trade agencies' primary monitoring and enforcement units has been
essentially static since 2002.
Figure 3: Domestic Staff in Key Monitoring and Enforcement Units
Number of domestic staff 250
State (Econ Bureau)
200
150
100
Agriculture (FAS/ ITP)
50
0 2000 2001 2002 2003 2004
Year
Sources: GAO analysis of Agriculture, Commerce, State, and USTR data.
Note: State data represent the number of staff in the Bureau of Economic
and Business Affairs. Commerce data represent the number of staff in the
International Trade Administration's Market Access and Compliance unit.
Agriculture data represent the number of staff in the Foreign Agriculture
Service's International Trade Policy unit. USTR data represent the number
of staff in the Monitoring and Enforcement Unit.
Some trade agencies have faced particular constraints to overseas staffing
in recent years. As shown in figure 4, the number of overseas staff in key
monitoring and enforcement units in Agriculture and Commerce has been
relatively steady or has declined since 2000.29 For instance, the number
of CS staff has declined by more than 10 percent, from more than 750 in
2000 to less than 670 in 2004.30
29The number of State economic officers has increased since 2000, but
State officials noted that if other agencies reduce their number of staff
overseas, the workload for State officials will increase.
30These data include Commercial Service Officers and Foreign Service
Nationals.
Figure 4: Overseas Staff in Key Monitoring and Enforcement Units
Number of overseas staff 1000
State (Econ Bureau)
600
400
Agriculture (FAS)
2000 2001 2002 2003 2004
Year
Sources: GAO analysis of Agriculture, Commerce, and State data.
Notes: State data represent the number of economic officers. Commerce data
represent the number of staff in the Trade Promotion/U.S. and Foreign
Commercial Service. Agriculture data represent the number of staff in the
Foreign Agriculture Service. Data for Commerce and Agriculture include
U.S. officers and Foreign Service Nationals. Commerce has posted four MAC
officers overseas since 2002. USTR has also posted about 30 staff at the
U.S. Mission to the WTO and one staff person to the U.S. Mission to the
European Union.
In addition, some Agriculture and Commerce overseas staff are responsible
for overseeing activities in several countries other than the one in which
they are posted. For example, the Commercial Counselor posted in Turkey
oversees Commerce operations in five other countries; as a result, he
spends a significant portion of his time traveling, thus reducing the
amount of time he can devote to his monitoring and enforcement
responsibilities in any single country.
The growing costs associated with maintaining an overseas presence in an
era of heightened security concerns may cause some agencies to scale back
their future overseas monitoring and enforcement efforts. For instance,
the cost of shared administrative expenses and accelerated embassy
construction schedules have contributed to the growing costs to each
agency of maintaining an overseas presence. Costs for overseas
administrative support services are distributed among 50 agencies through
the International Cooperative Administrative Support Services system.
These costs rose nearly 30 percent from fiscal year 2001 to 2003, when
they reached a level of about $1 billion.31 In addition, agencies share
the cost of constructing new embassies and consulates. The $17.5 billion
required to construct overseas facilities through 2018 will be allocated
proportionally to each agency based on the number of staff the agencies
have in overseas posts worldwide. For instance, Commerce's assessment is
expected to increase from $4.5 million in 2005 to $40.2 million annually
in 2009 through 2018, and Agriculture's assessment is expected to increase
from $0.6 million in 2005 to $16.3 million annually in 2009 through
2018.32 Some agencies are concerned these increases could affect their
ability to accomplish their overseas missions. Officials from Agriculture
and Commerce have stated that without additional funding, their agencies
would have to cut their overseas staff and some ongoing activities at
numerous locations. For example, we have previously reported that Commerce
has projected that it may have to close offices at as many as 51 of its
152 overseas posts by 2009, reducing staff levels by 498 persons.
Trade Agencies Face Constraints Effectively monitoring and enforcing trade
agreements requires significant
to Developing and Accessing expertise, but agencies face constraints to
developing and accessing such
Necessary Expertise expertise. Monitoring and enforcing trade agreements
typically involves staff with expertise in trade policy as well as staff
with knowledge about the foreign country and expertise in the particular
industry. One way to develop the additional trade policy expertise
necessary to monitor and enforce increasingly complex trade agreements is
through training, which Commerce and State in particular have worked to
improve. However, officials in all eight countries we visited told us that
additional training on
31GAO, Embassy Management: Actions Are Needed to Increase Efficiency and
Improve Delivery of Administrative Support Services, GAO-04-511
(Washington, D.C.: Sept. 7, 2004).
32GAO, Embassy Construction: Proposed Cost-Sharing Program Could Speed
Construction and Reduce Staff Levels, but Some Agencies Have Concerns,
GAO-05-32 (Washington, D.C.: Nov. 15, 2004).
monitoring and enforcing trade agreements would help them fulfill their
responsibilities in this area more effectively.
Many staff responsible for monitoring and enforcement activities have not
yet attended State's Foreign Service Institute's trade agreement
compliance training. This course was developed by USTR, Agriculture,
Commerce, and State in response to a GAO recommendation regarding the need
to improve staff training for monitoring and enforcing trade agreements.33
The agencies' stated goal was to offer trade compliance training to
monitoring and enforcement staff of all agencies assigned overseas and in
Washington, D.C. While the exact number of U.S. government personnel
responsible for monitoring and enforcing trade agreements is hard to
determine precisely, in reporting to Congress,34 Commerce estimated that
it devotes 602 staff, Agriculture estimated devoting 222 staff, and State
estimated devoting 775 staff to goals that include monitoring and
enforcement activities. However, in the 5 years since our recommendation,
approximately 450 officials (or less than 30 percent of the nearly 1,600
staff identified above) had taken the course; the vast majority (84
percent) of which were from State. According to officials responsible for
facilitating the course, Commerce staff have accounted for about 15
percent of the course attendees, and Agriculture staff less than 1
percent.
In addition, not all staff at overseas posts have been able to attend
monitoring and enforcement training. State has made efforts to target its
trade agreements compliance course to staff in need of the training by
offering the class at overseas posts. However, even when the course was
offered overseas, some interested staff were not able to attend. For
instance, Commerce staff in Japan told us that when State arranged for the
course to be taught in the Tokyo embassy, Commerce staff did not attend
because Commerce would have had to reimburse State for the tuition.35 In
addition, despite Commerce efforts to offer training courses on trade
compliance, staff who have not received such training include those posted
in key U.S. trading partners like Mexico, where Commerce staff have
33See GAO/NSIAD-00-76.
34Office of the U.S. Trade Representative, Coordinating the Interagency
Monitoring and Enforcement of Trade Agreements: Report to the Senate and
House of Representatives Committees on Appropriations (Washington, D.C.:
2004).
35In another overseas post (Beijing, China), Commerce staff were able to
participate in the course without paying tuition to State because Commerce
staff provided the classroom and administrative support for the course.
received no formal training on monitoring and enforcing trade agreements
from fiscal year 2000 to date.
Similarly, FAS staff have been offered no formal training on monitoring
and enforcing trade agreements. FAS officials noted that this is due in
large part to the fact that the agency has a very limited training budget.
In 2005 its $2 million budget for training provides, on average, $150 per
employee to build subject matter expertise. FAS officials added that they
try to minimize the effect of this constraint by spending 1 or 2 days
focusing on trade compliance issues at regional meetings of FAS overseas
staff.
Although the four trade agencies worked together to design the Foreign
Service Institute course, recent efforts suggest a lack of coordination.
For instance, State and Commerce separately contracted with the same
company to provide training on trade agreement compliance to their staff.
State pays the contractor $15,000 to teach a 5-day course discussed
earlier for about 30 students, thus equaling an average cost of $100 per
student per day. Commerce contracted with the same company to teach
several 3-day courses covering similar material, at a cost of $25,000 per
class. According to Commerce records, about 30 Commerce staff attended one
such class, thus equaling an average cost of about $275 per student per
day for that class.
In addition, while input from staff with specialized legal, technical, or
scientific knowledge may be necessary, depending on the nature of the
issue, agencies face limitations in accessing this expertise. Trade agency
officials told us that as trade agreements cover an increasingly broad set
of issues including regulatory issues, they are increasingly relying on
staff with specialized technical and scientific expertise. For instance,
officials from FAS rely heavily on officials in Agriculture's Animal and
Plant Health Inspection Service (APHIS) and Food Safety Inspection Service
(FSIS) to handle complex issues relating to the WTO's Agreement on
Sanitary and
Phytosanitary Standards.36 According to APHIS and FSIS officials, the
amount of work they perform to support FAS' monitoring and enforcement of
trade agreements has grown steadily over time, and they have tried to
dedicate sufficient resources to such activities. However, both these
agencies' primary missions are focused on U.S. public and agricultural
health.37 Officials from both agencies told us that given existing
resource constraints, they must place primary emphasis on allocating
resources to their primary mission areas. USTR officials also told us that
similar issues face the Food and Drug Administration (FDA). USTR has
utilized the expertise of FDA officials for handling a variety of trade
issues, most notably, trade in biotechnology products. Several countries
have blocked U.S. exports of biotechnology products, and FDA officials
have helped USTR attempt to dismantle these barriers by supplying
scientific research and analysis demonstrating that such products do not
pose a health risk. However, USTR noted that it realizes that FDA's
dedication of significant resources to these efforts has caused it to make
trade-offs with other activities.
U.S. Government Lacks a Mechanism and Coordinated Strategy for Assessing
and Planning Future Resource Needs
While trade agencies have established formal mechanisms and a strategy for
coordinating on trade policy issues, no such formal mechanism or strategy
exists for coordinating agency resource planning efforts for trade
activities. Agency officials told us that USTR, which leads this formal
interagency structure, holds regular discussions to develop trade policy
strategy. However, officials from all four key trade agencies told us that
the formal interagency process is not used to assess or plan for future
resource needs for trade activities in general or monitoring and enforcing
agreements specifically. Instead, each agency independently assesses its
resource needs for fulfilling its mission.
While trade agencies have previously recognized that effectively
monitoring and enforcing trade agreements requires developing a strategy
for coordinating their respective resources, they have not done so since
2001. At that time, the Administration recognized the need for an
integrated
36Sanitary and phytosanitary standards are measures taken to protect
animal and plant health.
37APHIS is responsible for protecting and promoting U.S. agricultural
health, administering the Animal Welfare Act, and carrying out wildlife
damage management activities. FSIS is responsible for ensuring that the
nation's commercial supply of meat, poultry, and egg products is safe,
wholesome, and correctly labeled and packaged.
approach to improving U.S. capacity to monitor and enforce trade
agreements rather than having each agency address its capacity
independently. This approach, coordinated by the National Economic
Council, led interagency discussions aimed at enhancing coordination in
this area and increasing funding to bolster expertise in key trade
agencies. This initiative proposed a $22 million increase in the resources
for Agriculture, Commerce, State, and USTR. Following this initiative,
USTR agreed to continue to work with other agencies to assess the
monitoring and enforcement workload and the resources needed to address
it. However, trade agency officials told us that no such coordinated,
comprehensive effort has taken place since then.
Trade agency officials told us they recognize the need to coordinate their
resources and have taken some steps to address this need.38 However, these
efforts did not include involving all trade agencies in developing a
comprehensive interagency strategy for resource planning. State officials
told us that they recognize the importance of coordinated resource
planning and in the past have invited officials from trade agencies to
meetings at which the Bureau of Economic and Business Affairs justifies
its budget request to the Deputy Secretary of State. State officials told
us that the Deputy Secretary often asks officials from other trade
agencies whether they have any issues with the bureau's requested
resources, especially regarding the posting of overseas staff. Commerce
and State officials also told us that there have been recent discussions
regarding coordinating their resources for handling commercial issues in
other countries. However, these efforts focused on overseas posts where
Commerce has no staff.
38According to USTR, the most recent interagency effort regarding
resources for monitoring and enforcing trade agreements was in response to
a 2004 congressional mandate. In this effort, USTR surveyed all the Trade
Policy Staff Committee subcommittees regarding their efforts to monitor
and enforce trade agreements and the resources necessary to undertake
these efforts.
Officials from all four trade agencies told us that there is currently no
comprehensive interagency strategy regarding resources for monitoring and
enforcement efforts. We have previously reported that without sufficient
interagency coordination, scarce funds can be wasted and the overall
effectiveness of the federal effort is limited.39 We have also previously
reported that agencies lack coordinated resource planning for trade
activities.40 In that report, we found that USTR relies heavily on other
trade agencies to staff negotiating teams but lacks a systematic approach
for addressing resource issues because formal interagency meetings do not
include any detailed discussion of these issues. Agencies reported that
while they have been able to meet USTR's needs, doing so has complicated
their own resource planning efforts and sometimes strained their
resources. We also found that at times it was necessary for agencies to
make trade-offs. For instance, according to Department of the Treasury
officials, they have had to "perform triage" on some operations because of
the heavy negotiating workload. We recommended that USTR work with other
trade agencies to develop more systematic data and plans for allocating
staff and resources across the full U.S. trade agenda, including FTAs and
other negotiating priorities. The Trade Representative disagreed with our
recommendation, stating that in his view the straining of resources by an
ambitious negotiating agenda is mainly caused by the amount of resources
available, not their allocation. We responded that given limited
resources, USTR needs to develop a resource strategy based on solid data
and planning and coordinate with other agencies whose resources USTR
routinely calls upon during the course of negotiations. Without
coordinated resource planning for shared functions, each agency's
individual resource planning efforts are more difficult, and the
government's ability to effectively utilize the unique talents and skills
of each agency can be limited.
Conclusions The steps that trade agencies have taken to monitor and
enforce trade agreements since we last reported on U.S. government
efforts, such as the creation of formal structures to coordinate agency
efforts, have helped to increase the attention trade agency officials
focus on ensuring other
39GAO, Managing for Results: Barriers to Interagency Coordination,
GAO/GGD-00-106 (Washington, D.C.: Mar. 29, 2000).
40GAO, International Trade: Intensifying Free Trade Negotiating Agenda
Calls for Better Allocation of Staff and Resources, GAO-04-233
(Washington, D.C.: Jan. 12, 2004).
countries comply with their trade agreement obligations. However, as the
monitoring and enforcement workload continues to increase without
commensurate increases in resources, USTR, Agriculture, Commerce, and
State will find it more difficult to ensure countries comply with trade
agreements while also fulfilling their other trade responsibilities. For
example, unless agencies address communication issues, they may miss
opportunities to open foreign markets to U.S. exports. In addition, to the
extent that some trade agency officials, including those posted in
important trading partner countries, are not adequately trained to
effectively monitor and enforce complex and technical trade agreements,
they cannot provide effective service to U.S. exporters that face barriers
in foreign markets.
As we have noted in previous reports, without interagency coordination on
resource assessments and planning, fulfilling future monitoring and
enforcement responsibilities will be even more difficult. Agencies have
recognized the importance of assessing human capital needs in a strategic
way, as in the National Economic Council-led effort in the early 2000s
that resulted in a more coordinated human capital approach. However, the
benefits of this concept have not been institutionalized or applied in a
broader trade context for all monitoring and enforcement activities. In an
environment of growing workloads and static or declining resources-
particularly in vital overseas posts-lack of an interagency coordination
strategy regarding resource planning means that the federal government
cannot be assured that its limited resources are sufficiently prioritized
or targeted at the areas of greatest risk.
Recommendations In order to improve efforts to monitor and enforce trade
agreements so that U.S. companies are able to take full advantage of the
trade agreements negotiated by the U.S. government, we recommend that the
Secretaries of Commerce and State work together to facilitate
communication between officials working on trade compliance issues. Such
steps could include installing a secure cable in Commerce headquarters and
encouraging State staff to send unclassified information regarding trade
issues using unclassified systems. We also recommend that the Secretaries
of Agriculture, Commerce, and State jointly develop a strategy for meeting
the training needs of staff responsible for monitoring and enforcing trade
agreements to better equip them to effectively handle increasingly complex
or technical barriers to U.S. exports. This interagency strategy should
include an assessment of what trade compliance training exists, what
knowledge and skills will be necessary to effectively handle future trade
compliance issues, and what additional training is required to provide
staff with the necessary knowledge and skills.
Further, to most effectively utilize the unique talents and skills of each
agency to meet monitoring and enforcement objectives, we recommend that
the U.S. Trade Representative work with the Secretaries of Agriculture,
Commerce, State, and other trade agencies to develop and update as
necessary an interagency strategy for assessing and planning for resource
needs for monitoring and enforcing trade agreements.
Agency Comments and Our Evaluation
We provided a draft of this report to the Departments of Agriculture,
Commerce, and State, as well as to the Office of the U.S. Trade
Representative.
Agriculture acknowledged the merits of our recommendations and intends to
work with other trade agencies to implement the two recommendations that
apply to it.
Commerce had concerns regarding the completeness of our characterization
of its efforts in several areas, including emphasizing its proactive
monitoring and training activities. We added clarifying language, where
appropriate, to provide a more complete picture.
State commented that the report appeared factual and reflective of State's
efforts. State emphasized its variety of formal and informal training that
relate to trade agreement compliance and agreed to implement our
recommendation by improving coordination of training activities. State
also commented that it believes that the use of classified communication
systems to exchange information on trade issues is rare.
Commerce and USTR also provided technical comments, which we have
incorporated where appropriate.
As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time we will send copies to other interested
congressional committees. We will also send copies to the U.S. Trade
Representative and the Secretaries of Agriculture, Commerce, and State. We
will also make copies available to others upon request. In addition, this
report will be available at no charge on the GAO Web site at
http://www.gao.gov.
If you or your staff have any questions about this report, please contact
me
at (202) 512-4347 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made major contributions to this report are
listed in appendix VII.
Sincerely yours,
Loren Yager
Director, International Affairs and Trade
Appendix I
Objectives, Scope, and Methodology
The Ranking Minority Member of the Senate Committee on Finance requested
that we review U.S. government efforts to monitor and enforce trade
agreements. This report addresses (1) how the nature and scope of U.S.
trade agreements has changed in the last 10 years and what effect changes
have had on agencies' monitoring and enforcement workload, (2) how U.S.
government agencies monitor and enforce trade agreements, and (3) how the
U.S. government allocates resources for monitoring and enforcement of
trade agreements within the context of other trade activities.
To analyze how the nature and scope of U.S. trade agreements has changed
in the last 10 years and what effect changes have had on agencies'
monitoring and enforcement workload, we reviewed data on trade agreements
from the Departments of Agriculture and Commerce and the Office of the
U.S. Trade Representative (USTR) and interviewed officials with each
agency. In addition, to determine the types of U.S. trade agreements
currently in force, we analyzed archives of U.S. trade agreements held by
each agency. To categorize each agreement, we generally used the official
name of the agreement, though in some cases the official name was too
vague to determine the category, so we looked at the agreement itself. We
included each agreement in only one category to ensure that there would be
no double-counting, so in some cases we made a determination to categorize
an agreement when it could have fit into more than one category. We
counted the World Trade Organization agreements to which all WTO members
are party to as one agreement. We also analyzed the combined list of U.S.
trade agreements to obtain trade agreement data by country and region.
Further, to determine the growth in the number of trade agreements, we
analyzed trade agreement data from USTR's Annual Report on the Trade
Agreement Program for each year from 1995 through 2004. Since USTR is the
only trade agency to publish its list annually, this was the only
consistent way to determine how many trade agreements were in force each
year. In addition, to determine the growth in WTO membership, we compiled
the accession years for each WTO member through 2004.
To assess the reliability of these data, we interviewed knowledgeable
agency officials about the data and performed visual and logic tests on
the data. We do not have complete assurance that we have identified every
trade agreement the United States has entered into because other agencies
beyond USTR, Agriculture, and Commerce may have additional agreements.
However, we believe that because USTR, Agriculture and
Appendix I
Objectives, Scope, and Methodology
Commerce are the agencies most involved in the monitoring and enforcement
of trade agreements, their archives contain the vast majority of U.S.
trade agreements. We chose not to include data from State's annual
publication Treaties in Force, which includes some trade agreements but
does not clearly define what it considers to be a trade agreement.1 We
determined that the data are sufficiently reliable for the purposes of
this report.
To review how U.S. government agencies monitor and enforce trade
agreements, we began by determining whether the general monitoring and
enforcement framework we established in our 2000 report was still correct.
We did this by examining the activities of four key trade agencies in
Washington, D.C.: USTR and the Departments of Agriculture, Commerce, and
State. We focused on agencies' efforts to monitor and enforce trade
agreements that open foreign markets and did not focus on, for instance,
agreements covering foreign government subsidies or trade remedy laws. We
also visited 10 U.S. embassies and consulates in eight countries and
interviewed USTR, Agriculture, Commerce, and State overseas staff involved
with monitoring and enforcement. In addition, we met with more than 35
private sector representatives in Washington, D.C., and overseas to obtain
their perspective on the role of the U.S. government in monitoring and
enforcing trade agreements. This included representatives from business
groups such as the American Chamber of Commerce as well as individual
company representatives from a range of sectors, including insurance and
other financial services, telecommunications, pharmaceuticals,
automotives, and software. The private sector representatives overseas
were chosen because they had recently worked with U.S. government
officials to resolve trade compliance issues. Although some of the
business groups we met with include small and medium-sized companies, the
individual companies we met with were large and may not reflect the views
of small or medium sized companies. Furthermore, we analyzed U.S.
government reports and documents on monitoring and enforcement activities.
1After reviewing Treaties in Force and meeting with officials from State's
Office of Treaty Affairs, we determined that State relies on other
agencies to report trade agreements to them and does not have a reliable
procedure for removing any trade agreements from its list that were no
longer in force. Therefore, we determined that the information was not
sufficiently reliable for the purpose of accurately determining the number
of trade agreements currently in force.
Appendix I
Objectives, Scope, and Methodology
To select the overseas posts to visit, we considered several variables and
attempted to visit a variety of posts. Specifically, we considered for
each of 34 countries whether there was a Market Access and Compliance
Officer, the number of bilateral trade agreements, the types of agreements
(e.g., free trade agreements, bilateral investment treaties, etc.), the
number of open compliance issues listed in Commerce's Market Access
Database, the number of Commerce and Agriculture staff at the post, the
country's total trade with the United States, and the country's gross
domestic product. We then selected countries to get a broad and varied
understanding of monitoring and enforcement activities conducted overseas.
For instance, we chose to visit some countries with many bilateral trade
agreements with the United States and others with few agreements.
Similarly, we chose to visit countries that frequently experience
compliance issues as well as others that experience few compliance issues.
We also chose to visit some countries with Agriculture staff and some
countries for which the responsible Agriculture staff were not posted in
the country. However, the posts we visited may not provide a
representative view of how all posts operate, and we cannot generalize our
observations to all overseas posts.
To review how the U.S. government allocates resources for monitoring and
enforcement of trade agreements within the context of other trade
activities, we interviewed key agency officials and reviewed agency
documents. We interviewed unit management officials in each of the
monitoring and enforcement units to understand how they make decisions
regarding allocating resources for trade activities, including monitoring
and enforcing trade agreements. We identified resource constraints by
reviewing agency performance reports, budget requests, and staffing data.
We also identified resource constraints by interviewing unit managers and
staff in Washington, D.C., and in overseas posts. To analyze USTR's
allocation of staff to various trade activities, we reviewed its Fiscal
Year 2005 Performance Plan under the Government Performance and Results
Act. This report includes USTR office managers' estimates of the number of
staff required to support each activity. Because these estimates are not
based on official records, they should not be viewed as precise
calculations of the number of staff working on each activity. However, we
compared the 2005 estimates with estimates for prior years. We concluded
that these estimates are reliable for the purpose of demonstrating the
general breakdown of USTR's staff into its self-identified key
initiatives. In addition, we met with Agriculture officials from units
trade officials rely on heavily for technical or other specialized
expertise.
Appendix I
Objectives, Scope, and Methodology
We also discussed agency training activities related to monitoring and
enforcement with Agriculture, Commerce, and State unit management and
training officials. We identified interagency structures and efforts to
assess and plan for resource needs by reviewing interagency reports on
monitoring and enforcement and interviewing key officials at each trade
agency. We also reviewed prior GAO reports discussing monitoring and
enforcing trade agreements, interagency resource planning, and the cost of
maintaining an overseas presence.
We conducted our work in Washington, D.C.; Brussels, Belgium; Paris,
France; Rabat and Casablanca, Morocco; Ankara and Istanbul, Turkey;
Bucharest, Romania; Tokyo, Japan; Seoul, South Korea; and Singapore from
July 2004 through April 2005 in accordance with generally accepted
government auditing standards.
Appendix II
Additional Information about U.S. Trade Agreements
You requested that we provide some additional information about the scope
and nature of U.S. trade agreements. This information is provided below.
Countries and Regions The U.S. currently has bilateral trade agreements
with 105 countries.1 With
the vast majority (95) of these countries, we have four or fewer
bilateralwith Which the United trade agreements. In contrast, we have five
or more agreements with 11 States Has Trade trading partners (see fig. 5).
Agreements
1The United States has no bilateral trade agreements with 87 countries.
Appendix II
Additional Information about U.S. Trade
Agreements
Figure 5: Trading Partners with Which the U.S. has Five or More
Agreements, as of 2005
Number of agreements
Japan
ear
Ko
iwanaT
Canada Russia China Israel India
xicoMe
Ukraine
Eurmember countriesTrading partner
Source: GAO analysis of Agriculture, Commerce, and USTR data.
Appendix II
Additional Information about U.S. Trade
Agreements
As shown in figure 6, the United States has more agreements with countries
in the Asia-Pacific region than with countries in any other region, though
there are also many agreements with European countries. There are
relatively few agreements with countries in Africa, the Near East, and
South Asia.
Figure 6: U.S. Trade Agreements by Region, as of 2005
Number of agreements 150
120
90
60
30
0 Asia-Europe Western Near Africa South Asia Pacific hemisphere East
Region
Source: GAO analysis of Agriculture, Commerce, and USTR data.
Appendix II
Additional Information about U.S. Trade
Agreements
Types of U.S. Trade Trade agreements vary widely by type (see fig. 7). A
large percentage (41 percent) of agreements are industry-specific
agreements, covering such
Agreements things as agricultural products, steel, telecommunications
issues, or textiles. There are also many framework agreements, which open
trade between two nations without directly setting conditions for trade in
any particular industry. There are over 40 bilateral investment treaties,
which concern the reciprocal encouragement and protection of investment.
Figure 7: U.S. Trade Agreements by Type, as of 2005
2%
Comprehensive Free Trade agreements
2%
General Market Access agreements
4%
WTO and related agreements
Bilateral Investment Treaties
Framework agreements
Issue-specific agreements
Intellectual property rights (10%)
Other issue-specific (4%)
Government procurement (3%)
Competition policy (2%)
Industry-specific agreements
Agriculture (20%)
Other industry-specific (10%)
Telecommunications (6%)
Textiles and apparel (4%)
Steel (2%)
Sources: GAO analysis of Agriculture, Commerce, and USTR data.
Note: Subtotals for issue-and industry-specific agreements do not add up
to category totals because of rounding.
Appendix II
Additional Information about U.S. Trade
Agreements
Agency Trade Agreement Archives
In order to determine the scope and nature of U.S. trade agreements, we
examined the trade agreement archives of three agencies: USTR, Commerce,
and Agriculture.2 USTR publishes a list of trade agreements annually in
its Trade Policy Agenda and Annual Report, and Commerce and Agriculture
each maintain an archive of trade agreements that is available via each
agency's Web site. Agencies keep archives for a variety of purposes,
including tracking for their own monitoring and enforcement purposes, and
providing the public with information on agreements currently in force.
As shown in figure 8, of the 384 agreements that we identified, only 19
appear in all three archives, and each archive is the only source for
numerous agreements: USTR is the only source for 80 agreements and
Commerce is the only source for 90 agreements. Commerce's archive includes
active, binding agreements covering manufactured products and services,
and does not include agricultural commodity agreements. Agriculture's
archive contains agriculture-related agreements only.
2These three archives do not represent the entire universe of trade
agreements. For example, State also keeps track of some trade agreements
in its annual publication Treaties in Force. Other agencies may track
trade agreements for their own purposes as necessary.
Appendix II
Additional Information about U.S. Trade
Agreements
Figure 8: Comparison of USTR, Commerce, and Agriculture Archives of Trade
Agreements, as of 2005
Source: GAO.
Note: WTO agreements to which all WTO members are a party to are counted
as one agreement.
aUSTR data are from the 2004 Annual Report of the President of the United
States on the Trade Agreements Program and include trade agreements since
1984.
bCommerce data are from its Trade and Related Agreements Database, which
includes active, binding agreements between the United States and its
trading partners covering manufactured products and services.
cAgriculture lists agriculture-related agreements on its Web site.
Appendix III
Examples of U.S. Government Trade Monitoring and Enforcement Activities
U.S. trade agencies undertake monitoring and enforcement activities as
part of a larger U.S. government strategy to improve market access for
U.S. exports. In general, these monitoring and enforcement activities tend
to be similar across agencies. Once a market access or compliance issue is
identified, agency officials in the countries we visited told us they will
investigate the case and gather information. They will then take whatever
action is deemed appropriate to resolve the problem, trying to resolve the
issue as quickly and efficiently as possible. Trade agencies tend to
follow this procedure whether the issue relates to a specific trade
agreement or not.
Korea The U.S. government was recently successful in getting the
government of Korea to drop its plans to mandate a telecommunications
technology standard that would have become a significant barrier to trade.
For several years, a U.S. company has successfully marketed cell phone
"middleware" (the software that allows applications such as ring tones and
games downloaded on to the handset from the Internet to work with the
handset's operating system), reaching 7 million subscribers. Because each
mobile service operator used different middleware for its phones,
subscribers of one cellular provider could not share their downloaded
applications with subscribers of a different provider. With the argument
that this lack of interoperability constituted a market failure, the
Korean government announced a plan to mandate that all mobile service
providers exclusively use a technology called the Wireless Internet
Platform for Interoperability (WIPI) that was developed by a
state-financed research institute. The U.S. government considered this to
be a clear-cut case of protectionist industrial policy that would have
immediately closed the market to a U.S. company that had already developed
a relationship with 7 million Korean consumers.
Representatives from the affected U.S. company complained to USTR and the
U.S. embassy in Korea about the problem. U.S. embassy officials embarked
on an extended series of meetings at all levels of the Korean government.
This intervention went all to way to the ambassadorial level, as the U.S.
Ambassador raised this issue in meetings with Korean ministers on more
than one occasion. The Ambassador also used this trade dispute as a key
point in all his speeches dealing with economic issues. In addition,
State's Coordinator for International Information and Communications
Policy and Commerce's Assistant Secretary for Market Access and Compliance
visited Korea, in part to raise this issue with their Korean counterparts.
USTR and Commerce officials became involved in the case not only during
the quarterly U.S.-Korea trade meetings, where this topic
Appendix III
Examples of U.S. Government Trade
Monitoring and Enforcement Activities
was given a high priority, but also through visits of the Deputy USTR and
USTR's chief telecommunications negotiator. After approximately 3 years of
negotiations, the two governments reached a compromise in which carriers
may use any middleware in addition to WIPI, which was satisfactory for the
U.S. company. During the negotiations, several embassy staff rotated to
assignments in different countries and were replaced by new embassy staff,
but company representatives said the U.S. government's efforts never
faltered in persuading the Korean government to allow multiple protocols.
Japan Many trade compliance issues that the United States faces in Japan
pertain to regulatory issues and competition (antitrust) policy. To
address these and other issues, the United States and Japan created the
U.S.-Japan Economic Partnership for Growth, which provides a broad
framework for addressing ongoing trade compliance issues. It establishes
working groups whose purpose is to address measures to promote regulatory
reform and competition policy. The working groups are required to report
to a highlevel officials' group, which is in turn required to report
annually on the progress the working groups have made in their respective
fields. The most recent report, published in 2004, lists progress made in
key U.S. export sectors such as telecommunications, information
technologies, energy, and medical devices and pharmaceuticals. For
example, the report notes that the government of Japan has removed various
barriers to e-commerce and will ensure that its ministries and agencies
continue to do so in order to promote free and diverse e-commerce
activities. U.S. government officials noted that the agreement is valuable
to the United States because it provides a forum for discussing key
compliance issues and allows U.S. agency officials to monitor progress on
these issues.
Turkey In July 2002, a U.S. company's high-fructose corn syrup facility
in Turkey was threatened with being shut down because of alleged
deficiencies with its zoning permits. The U.S. company immediately
contacted the embassy and the Departments of Commerce and State. Commerce,
in turn, called in the Acting Turkish Ambassador to meet with the Deputy
Secretary of Commerce, and the U.S. Ambassador voiced similar concerns in
Ankara. All embassy activities were closely coordinated. Soon thereafter,
the Turkish Prime Minister passed a ministerial decree that allowed the
plant to continue operations and promised to change the zoning law to
permit the facility to operate free of these constraints. According to
U.S. officials,
Appendix III
Examples of U.S. Government Trade
Monitoring and Enforcement Activities
last year the Turkish Parliament passed amendments to the Industrial Zone
Law that were signed into law by the President. These amendments allow the
U.S. company to retroactively seek all the necessary permits it needs to
operate its facility.
Morocco and Singapore
Since 2000, the U.S. government has entered into free trade agreements
with 12 countries, including Morocco and Singapore. Trade agency officials
realize that increased trade with these countries will undoubtedly create
market access or compliance issues and increase the monitoring workload.
Commerce therefore developed a set of guidelines for formulating a
blueprint for monitoring recent free trade agreements. The plan includes
the detailed commitments made by the foreign government and therefore lays
the groundwork for U.S. trade agencies' future monitoring and enforcement
activities. Agency officials told us that this blueprint greatly
facilitates monitoring activities in Singapore, and they expect similar
results in Morocco once implementation of the free trade agreement begins.
Appendix IV
Comments from the Department of Agriculture
Appendix V
Comments from the Department of Commerce
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
See comment 1.
Appendix V
Comments from the Department of
Commerce
See comment 2.
Now on p. 28. See comment 3.
See comment 4.
Appendix V
Comments from the Department of
Commerce
See comment 5.
See comment 6.
Appendix V
Comments from the Department of
Commerce
The following are GAO's comments on the Department of Commerce's letter
dated June 14, 2005.
GAO Comments 1.
2.
3.
4.
5.
6.
Since our report attempts to provide a description of monitoring and
enforcement activities performed consistently across U.S. government
agencies, we did not initially include information on some of Commerce's
proactive outreach and monitoring activities. We have revised the report
to include additional information on Commerce's efforts in these areas,
including citing some of the specific examples mentioned in Commerce's
letter.
We highlight the specific trade agreement compliance training courses
because they are solely focused on training staff regarding monitoring and
enforcing trade agreements and because officials we met with identified
them as useful courses. However, we have supplemented our report with
additional information regarding Commerce's and State's other related
formal and informal training efforts.
Based on documents obtained from Commerce and State, we note that both
agencies contracted with the same vendor to provide similar training, but
that Commerce paid significantly more per student, per day. Commerce
provided a participant list for the July 2003 course, which included 27
Commerce staff. Our point was to demonstrate the cost differential between
the two similar courses.
We have revised the report to clarify the various trade agencies'
statutory authority and their role in monitoring and enforcing trade
agreements.
Based on comments from Commerce and State, we have revised the report to
clarify that the two agencies disagree about the extent to which
unclassified information about trade issues is sent using classified
systems. We also note that while Commerce is in the process of obtaining
access to the secure system for email used by State, Commerce officials
told us that this process has taken more than four years.
Foreign trade remedy laws and subsidies were not within the scope of this
review. We have clarified this in our scope and methodology, which is
discussed in appendix I.
Appendix VI
Comments from the Department of State
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Appendix VI
Comments from the Department of State
See comment 1.
Appendix VI
Comments from the Department of State
See comment 2.
See comment 3.
Appendix VI
Comments from the Department of State
The following are GAO's comments on the Department of State's letter dated
June 16, 2005.
GAO Comments 1.
2.
3.
We highlight the Foreign Service Institute's specific trade agreement
compliance training course because it is solely focused on training staff
regarding monitoring and enforcing trade agreements and because officials
we met with identified it as a useful course. However, we have
supplemented our report with additional information regarding Commerce's
and State's other related formal and informal training efforts.
Based on comments from Commerce and State, we have revised the report to
clarify that the two agencies disagree about the extent to which
unclassified information about trade issues is sent using classified
systems.
We have revised the report to clarify the fact that the U.S.-Japan
Economic Partnership for Growth was not a signed agreement. However, both
USTR's and Commerce's publicly available lists of trade agreements in
force list this agreement. Further, agency officials in Japan and
Washington, D.C. told us this is the key trade agreement that covers the
compliance issues they monitor.
Appendix VII
GAO Contact and Staff Acknowledgments
GAO Contact Loren Yager, (202) 512-4347
Staff In addition, Anthony Moran, Jason Bair, Leah DeWolf, Judith
Williams, Acknowledgments Ernie Jackson, and Jamie McDonald made key
contributions to this report.
Related GAO Products
Embassy Construction: Proposed Cost-Sharing Program Could Speed
Construction and Reduce Staff Levels, but Some Agencies Have Concerns,
GAO-05-32 (Washington, D.C.: Nov. 15, 2004).
U.S.-China Trade: Opportunities to Improve U.S. Government Efforts to
Ensure China's Compliance with World Trade Organization Commitments,
GAO-05-53 (Washington, D.C.: Oct. 6, 2004).
Intellectual Property: U.S. Efforts Have Contributed to Strengthened Laws
Overseas, but Challenges Remain, GAO-04-912 (Washington, D.C.: Sept. 8,
2004).
Embassy Management: Actions Are Needed to Increase Efficiency and Improve
Delivery of Administrative Support Services, GAO-04-511 (Washington, D.C.:
Sept. 7, 2004).
International Trade: Intensifying Free Trade Negotiating Agenda Calls for
Better Allocation of Staff and Resources, GAO-04-233 (Washington, D.C.:
Jan. 12, 2004).
Human Capital: Significant Challenges Confront U.S. Trade Agencies,
GAO-04-301T (Washington, D.C.: Dec. 9, 2003).
World Trade Organization: Standard of Review and Impact of Trade Remedy
Rulings, GAO-03-824 (Washington, D.C.: July 30, 2003).
International Trade: Advisory Committee System Should Be Updated to Better
Serve U.S. Policy Needs, GAO-02-876, (Washington D.C.: Sept. 24, 2002).
Human Capital: Major Human Capital Challenges at SEC and Key Trade
Agencies, GAO-02-662T (Washington, D.C.: April 23, 2002).
World Trade Organization: Issues in Dispute Settlement, NSIAD-00-210
(Washington D.C.: Aug. 9, 2000).
World Trade Organization: U.S. Experience to Date in Dispute Settlement
System, NSIAD/OGC-00-196BR (Washington D.C.: June 14, 2000).
International Trade: Strategy Needed to Better Monitor and Enforce Trade
Agreements, NSIAD-00-76 (Washington, D.C.: March 14, 2000).
International Trade: Improvements Needed to Track and Archive Trade
Agreements, NSIAD-00-24 (Washington, D.C.: Dec. 14, 1999).
GAO's Mission The Government Accountability Office, the audit, evaluation
and investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
Obtaining Copies of The fastest and easiest way to obtain copies of GAO
documents at no cost
is through GAO's Web site (www.gao.gov). Each weekday, GAO postsGAO
Reports and newly released reports, testimony, and correspondence on its
Web site. To Testimony have GAO e-mail you a list of newly posted products
every afternoon, go to
www.gao.gov and select "Subscribe to Updates."
Order by Mail or Phone The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548
To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061
To Report Fraud, Contact:
Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm
E-mail: [email protected] Programs Automated answering system: (800)
424-5454 or (202) 512-7470
Congressional Gloria Jarmon, Managing Director, [email protected] (202)
512-4400 U.S. Government Accountability Office, 441 G Street NW, Room 7125
Relations Washington, D.C. 20548
Public Affairs Paul Anderson, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***