International Trade: Strategy Needed to Better Monitor and Enforce Trade
Agreements (Letter Report, 03/14/2000, GAO/NSIAD-00-76).

Pursuant to a congressional request, GAO reviewed whether federal
agencies have the capacity to monitor and enforce trade agreements,
focusing on: (1) the federal structure for monitoring and enforcing
trade agreements; (2) the increasing complexity of the federal
monitoring and enforcement task and key activities that federal agencies
must perform; and (3) whether the Office of the U.S. Trade
Representative (USTR), the Department of Commerce, and the Department of
Agriculture (USDA) have the capacity to handle their monitoring and
enforcement workload, that is, whether their human capital resources and
support mechanisms enable them to perform needed monitoring and
enforcement activities.

GAO noted that: (1) U.S. government efforts to monitor and enforce trade
agreements involve at least 17 federal agencies, with USTR having
primary statutory responsibility; (2) the other agencies' contributions
to federal monitoring and enforcement efforts vary according to their
legal requirements, mission, and expertise, but Commerce, USDA, and the
Department of State have substantial monitoring and enforcement roles;
(3) USTR and Commerce both created offices in 1996 specifically
dedicated to trade agreement monitoring and enforcement; (4) at least 13
other federal agencies provide policy input or technical expertise to
U.S. monitoring and enforcement efforts; (5) several interagency
mechanisms exist to coordinate the contributions and perspectives of the
multiple agencies involved in monitoring and enforcement; (6) private
sector input is obtained from statutory advisory councils, informal
advisory groups, trade associations, and private companies; (7) the task
of monitoring and enforcing foreign compliance with trade agreements had
become more complex as the number of trade agreements and trade
agreement partners has grown and the issues covered by trade agreements
have expanded; (8) in the past, trade agreements primarily helped to
reduce tariffs charged on merchandise imports; (9) however, current
trade agreements address more complicated types of import restrictions,
such as product standards and food safety regulations, and cover a
broader range of issues, such as trade-related investment measures or
intellectual property rights; (10) federal agencies that monitor and
enforce trade agreements must be able to perform several key activities
that include identifying and prioritizing compliance problems, analyzing
information about them, and seeking ways to resolve them; (11) although
USTR, Commerce, and USDA have taken steps to improve their monitoring
and enforcement efforts, certain capacity weaknesses limit their ability
to handle the federal monitoring and enforcement workload; (12)
officials at all three agencies told GAO that steadily declining staff
levels in recent years have adversely impacted the agencies' monitoring
and enforcement activities; (13) agency officials also told GAO that
although the technical complexity of trade agreements has been
increasing, the expertise needed to analyze compliance problems is not
always available; and (14) although private sector information about
trade agreement compliance problems is essential to federal monitoring
and enforcement efforts, some agency offices that GAO examined had
better mechanisms than others for obtaining comprehensive and balanced
input from the private sector.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-76
     TITLE:  International Trade: Strategy Needed to Better Monitor and
	     Enforce Trade Agreements
      DATE:  03/14/2000
   SUBJECT:  Trade agreements
	     International trade
	     Trade policies
	     Federal agencies
	     International trade regulation
	     Interagency relations
	     Foreign trade agreements
	     Internal controls
	     Monitoring
	     Private sector practices
IDENTIFIER:  General Agreement on Tariffs and Trade
	     WTO Information Technology Agreement

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GAO/NSIAD-00-76

Appendix I: Executive Branch, Congressional, and Private Sector Structures
for Monitoring and Enforcing Trade Agreements

30

Appendix II: Key Federal Monitoring and Enforcement Activities

42

Appendix III: Key Reporting Mechanisms Related to Trade Agreement Monitoring
and Enforcement

48

Appendix IV: Staffing at Three Key Agencies Responsible for Trade Agreement
Monitoring and Enforcement

51

Appendix V: Objectives, Scope, and Methodology

59

Appendix VI: Comments From the Office of the U.S. Trade
Representative

63

Appendix VII: Comments From the Department of Commerce

68

Appendix VIII: Comments From the Department of Agriculture

71

Appendix IX: GAO Contacts and Staff Acknowledgments

75

Table 1: Trade Policy Staff Committee Subcommittees and Task
Forces 35

Table 2: Private Sector Advisory Committees 40

Table 3: Key Reporting Mechanisms Used in Monitoring and
Enforcing Trade Agreements 48

Table 4: Agencies and Units Selected by GAO for Detailed Analysis 60

Table 5: Representative Monitoring or Enforcement Examples
Selected by Government Units 61

Figure 1: U.S. Merchandise Export Growth as Compared to Gross
Domestic Product Growth, 1970-98 6

Figure 2: Share of 1998 U.S. Merchandise Exports to Trade Agreement Partners
7

Figure 3: Agencies That Participate in Federal Trade Agreement
Monitoring and Enforcement Efforts 9

Figure 4: Cumulative Number of USTR-negotiated Trade Agreements, 1984-98 13

Figure 5: USTR Authorized and Actual Staff Levels, Fiscal
Years 1995-99 52

Figure 6: Operating Units' Authorized and Actual Staffing in the
International Trade Administration's Market Access and
Compliance Division, Fiscal Years 1992-99 54

Figure 7: Authorized Staff Allowance by Region in the International
Trade Administration's Market Access and Compliance Division,
Fiscal Years 1992-99 55

Figure 8: Authorized and Actual Staffing in the International Trade
Administration's Trade Development (Industry) Division, Fiscal
Years 1992-99 56

Figure 9: Foreign Agricultural Service Staff Years Allocated to Market
Access Program Area, Fiscal Years 1995-2000 58

GDP gross domestic product

NAFTA North American Free Trade Agreement

USTR U.S. Trade Representative

WTO World Trade Organization

National Security and
International Affairs Division

B-284600

March 14, 2000

The Honorable Bill Archer
Chairman, Committee on Ways and Means
House of Representatives

Dear Mr. Chairman:

The United States has entered into over 400 trade-related agreements since
the early 1980s, most of which were intended to liberalize trade and
increase U.S. companies' access to foreign markets.1 Over half of these
agreements were signed between 1992 and 1998. Included among them are the
far-reaching 1994 World Trade Organization agreements, which cover about
$1.4 trillion in annual U.S. trade with 135 countries, as well as
significant bilateral agreements with key trading partners such as Japan and
China. The Office of the U.S. Trade Representative and other federal
agencies routinely monitor foreign compliance with trade agreements to
maximize the benefits to the U.S. economy that such agreements were intended
to provide. The Office of the U.S. Trade Representative also takes actions
to enforce and defend U.S. trade agreement rights when necessary. Federal
monitoring and enforcement efforts help inspire public confidence that trade
agreements are beneficial to the United States.

Because of Congress' interest in determining whether U.S. agencies have the
capacity to monitor and enforce trade agreements, you asked us to assess
U.S. government efforts in this regard. As agreed with your office, this
report (1) identifies the federal structure for monitoring and enforcing
trade agreements; (2) describes the increasing complexity of the federal
monitoring and enforcement task and key activities that federal agencies
must perform; and (3) assesses whether the Office of the U.S. Trade
Representative, the Department of Commerce, and the Department of
Agriculture have the capacity to handle their monitoring and enforcement
workload, that is, whether their human capital (staff) resources and support
mechanisms enable them to perform needed monitoring and enforcement
activities. To meet our objectives, we examined the monitoring and
enforcement activities of nine offices at the Office of the U.S. Trade
Representative, the Department of Commerce, and the Department of
Agriculture. (App. V provides details about our scope and methodology.)

A broad range of activities underpins federal monitoring and enforcement
efforts, and the distinction between monitoring activities and enforcement
activities is not clearly defined. In this report, "monitoring" refers to
federal activities that are undertaken to identify instances where foreign
laws, regulations, and practices may be inconsistent with trade agreement
provisions. When such problems are identified, agencies take a variety of
actions to encourage and obtain foreign compliance with trade agreements.
"Enforcement" refers to actions taken by the Office of the U.S. Trade
Representative to compel foreign compliance with trade agreements, such as
initiating dispute settlement procedures that certain trade agreements
provide. The Office of the U.S. Trade Representative also defends the United
States when other countries initiate dispute settlement procedures to assert
that U.S. laws, regulations, and practices are inconsistent with trade
agreement provisions.

U.S. government efforts to monitor and enforce trade agreements involve at
least 17 federal agencies, with the Office of the U.S. Trade Representative
having primary statutory responsibility. The other agencies' contributions
to federal monitoring and enforcement efforts vary according to their legal
requirements, mission, and expertise, but the Departments of Commerce,
Agriculture, and State have substantial monitoring and enforcement roles.
The Office of the U.S. Trade Representative and Commerce both created
offices in 1996 specifically dedicated to trade agreement monitoring and
enforcement. At least 13 other federal agencies provide policy input or
technical expertise to U.S. monitoring and enforcement efforts. Several
interagency mechanisms exist to coordinate the contributions and
perspectives of the multiple agencies involved in monitoring and
enforcement. Private sector input is obtained from statutory advisory
councils, informal advisory groups, trade associations, and private
companies.

The task of monitoring and enforcing foreign compliance with trade
agreements has become more complex as the number of trade agreements and
trade agreement partners has grown and the issues covered by trade
agreements have expanded. In the past, trade agreements primarily helped to
reduce the tariffs charged on merchandise imports. However, current trade
agreements address more complicated types of import restrictions, such as
product standards and food safety regulations, and cover a broader range of
issues, such as trade-related investment measures or intellectual property
rights. Federal agencies that monitor and enforce trade agreements must be
able to perform several key activities; these include identifying and
prioritizing compliance problems, analyzing information about them, and
seeking ways to resolve them.

Although the Office of the U.S. Trade Representative and the Departments of
Commerce and Agriculture have taken steps to improve their monitoring and
enforcement efforts, certain capacity weaknesses limit their ability to
handle the federal monitoring and enforcement workload. Officials at all
three agencies told us that steadily declining staff levels in recent years
have adversely impacted the agencies' monitoring and enforcement activities.
Agency officials also told us that although the technical complexity of
trade agreements has been increasing, the expertise needed to analyze
compliance problems is not always available. For example, officials at the
Office of the U.S. Trade Representative said that strong economic analysis
and modeling are needed to develop dispute settlement cases before the World
Trade Organization, but the agency has a limited number of staff with this
kind of economic expertise. Despite these human capital constraints,
interagency discussions were only recently held to identify additional
resources needed for federal monitoring and enforcement activities. However,
these discussions did not appear to address how agencies will manage the
growing monitoring and enforcement workload, what skills are needed and
available to perform this function, or whether federal efforts are targeted
at the areas of greatest risk. Finally, although private sector information
about trade agreement compliance problems is essential to federal monitoring
and enforcement efforts, some agency offices that we examined had better
mechanisms than others for obtaining comprehensive and balanced input from
the private sector.

In this report, we recommend that the Office of the U.S. Trade
Representative and the Departments of Commerce and Agriculture jointly
develop a strategy to better manage the U.S. government's growing trade
agreement monitoring and enforcement workload.

Trade's influence on the U.S. economy has increased dramatically in the past
decade. Exports of goods have grown faster than gross domestic product
(GDP), particularly since 1992 when such exports grew about
1-1/2 times as fast as GDP (see fig. 1).

Figure 1: U.S. Merchandise Export Growth as Compared to Gross Domestic
Product Growth, 1970-98

Note: Exports and GDP are presented as index numbers where their value in
1970 equals 100.

Source: GAO calculations based on International Financial Statistics
(Washington, D.C.: International Monetary Fund, Nov. 1999).

Most of this growing volume of U.S. exports is governed by the terms of
trade agreements. For example, about 91 percent of U.S. merchandise exports
in 1998 were to members of the World Trade Organization (WTO)2 and were
covered by the terms of multiple WTO agreements.3 Another
6 percent of merchandise exports that year were to countries that are not
WTO members but with whom the United States has bilateral
(country-to-country) trade agreements that improve U.S. access abroad (see
fig. 2).

Figure 2: Share of 1998 U.S. Merchandise Exports to Trade Agreement Partners

Note: To avoid "double counting," in this chart, U.S. exports to WTO
members, whether covered by the WTO agreements or other bilateral
(country-to-country) agreements, are combined under the heading "WTO
members." "Bilateral partners" are countries that are not WTO members but
with whom the United States has bilateral trade agreements.

Sources: GAO analysis based on U.S. Department of Commerce trade statistics,
U.S. Trade Representative data on trade agreements, and WTO membership data.

Key bilateral trade agreements, and multilateral agreements like the WTO's,
improve U.S. market access abroad by setting ground rules for the treatment
of U.S. exporters and investors in foreign markets. While they vary in
content and form, major trade agreements help ensure that U.S. exporters and
investors will be treated the same as other foreign and domestic suppliers,
establish the maximum tariff (tax) that will apply to U.S. exports, and
provide for the gradual lowering or elimination of trade barriers.

According to recognized trade experts and responsible agency officials, the
U.S. government's monitoring and enforcement efforts are designed to attain
certain broad goals--ensuring foreign compliance with trade agreements,
providing credible deterrence, and inspiring confidence.

ï¿½ Ensuring compliance--Vigorous efforts to monitor and enforce trade
agreements are necessary to ensure that foreign partners fulfill their trade
agreement obligations and that U.S. firms fully realize the improvements in
market access these agreements offer.

ï¿½ Providing credible deterrence--Federal monitoring and enforcement
activities also provide a credible deterrent to future trade agreement
violations and improve the likelihood of full implementation by other U.S.
trading partners.

ï¿½ Inspiring confidence--A reliable, well-functioning system for monitoring
and enforcing trade agreements helps sustain congressional and public
confidence in the administration's trade strategy and fosters their support
for continued trade liberalization.

U.S. efforts to monitor and enforce trade agreements play a key role in the
success of U.S. trade policy. These efforts help U.S. companies gain access
to foreign markets and increase U.S. exports. In addition, through
challenging and defending trade policies under the WTO dispute settlement
process, the United States establishes legal precedents that help create a
fair, predictable, rules-based trading system that is beneficial for U.S.
companies and industries.

Efforts and Rely on Private Sector Input

The Office of the U.S. Trade Representative (USTR) has primary statutory
responsibility for monitoring and enforcing U.S. trade agreements and works
with at least 16 other federal agencies and the private sector in carrying
out this responsibility. Among these agencies, Commerce, Agriculture, and
State make substantial contributions to federal monitoring and enforcement
efforts, both by performing their own monitoring activities and supporting
USTR's efforts. Because of trade agreements' expanding scope and technical
complexity, the policy and technical input of regulatory or scientific
agencies has become increasingly important. A statutory interagency
structure exists to coordinate the development of trade policy, including
monitoring and enforcement activities, across multiple agencies. Federal
agencies also receive essential private sector input from multiple federal
advisory councils, informal advisory groups, trade associations, and private
companies.

Enforcement Efforts

The vast majority of statutory trade agreement monitoring and enforcement
responsibility rests with USTR. Commerce and Agriculture also have certain
statutory monitoring responsibilities for trade agreements. State has an
important role in monitoring and enforcing trade agreements because of its
foreign policy expertise. Congress has generally not mandated in law the
role of other executive branch agencies in monitoring or enforcing trade
agreements. Thus, based upon their general legislative authorities, agencies
have exercised their discretion in structuring their operations to assist
USTR in monitoring and enforcing trade agreements. The agencies that
participate in federal trade agreement monitoring and enforcement efforts
are shown in figure 3.

Figure 3: Agencies That Participate in Federal Trade Agreement Monitoring
and Enforcement Efforts

Source: GAO analysis.

USTR is responsible for developing and coordinating U.S. international trade
and foreign direct investment policy and for leading or directing
negotiations with other countries on such matters. With respect to
monitoring and enforcing trade agreements, USTR is required by law to
identify any foreign policies and practices that constitute significant
barriers to U.S. exports of goods and services, particularly those that are
covered by international agreements to which the United States is a party.4
It is the sole federal agency authorized to initiate actions to enforce U.S.
rights under bilateral and multilateral trade agreements, at its own
discretion or as petitioned by private enterprises or individuals.5 USTR
receives support from other agencies in its enforcement efforts. In 1996,
USTR established a Monitoring and Enforcement Unit within its Office of
General Counsel to help coordinate USTR's trade agreement monitoring and
enforcement obligations.

Among the other most active agencies, Commerce has general operational
responsibility for the major nonagricultural trade functions of the U.S.
government. It shares statutory responsibility with USTR for monitoring
other countries' compliance with WTO rules on subsidies, but its overall
monitoring role is broader.6 In 1996, Commerce created a Trade Compliance
Center within its International Trade Administration to help ensure that
U.S. trade agreements are monitored and compliance issues are promptly
addressed. Agriculture is statutorily responsible for implementing,
monitoring, and reporting to USTR on any noncompliance with the agricultural
provisions of the World Trade Organization and the North American Free Trade
Agreement.7 The Foreign Agricultural Service handles most of these
responsibilities on Agriculture's behalf and monitors many bilateral trade
agreements as well. State advises USTR on the foreign policy implications of
any trade-related actions and participates in trade negotiations that have a
direct and significant impact on foreign policy.

At least 13 other federal agencies are also involved in federal monitoring
and enforcement efforts, as shown in figure 3. They primarily provide
technical or policy input that is derived from their particular agency
mission or areas of expertise. For example, the Treasury advises USTR on the
financial services aspects of trade agreements, while Labor reviews trade
agreements that involve labor and workers' rights issues.

Several Interagency Mechanisms

Although no interagency mechanism exists specifically to coordinate federal
monitoring and enforcement efforts, these issues are addressed within
several interagency mechanisms that coordinate the formulation and
implementation of trade policy. The highest-level interagency coordination
mechanism is the National Economic Council, a cabinet-level organization
established in 1993 that includes the heads of multiple federal agencies.8
The National Economic Council was created in part to coordinate domestic and
international economic policy formulation. One of its responsibilities is to
review significant trade policy issues and help ensure overall trade policy
coordination.

In addition, Congress created an interagency structure in the Trade
Expansion Act of 1962, as amended by the Trade Act of 1974, to help ensure
that the development of trade policy reflects a range of agency perspectives
and is coordinated throughout the government. This structure includes
several management- and staff-level committees that are chaired by USTR.
Trade policy decisions, including those related to trade agreement
monitoring and enforcement, are generally developed via consensus within
these interagency structures. Interagency conflicts that arise are addressed
at progressively higher levels including, when necessary, within the
National Economic Council.

Agreements

The private sector plays an essential role in federal efforts to monitor and
enforce trade agreements by providing agencies with information about trade
agreement compliance problems and supporting federal actions to address such
problems. In the 1974 Trade Act, Congress created a private sector advisory
committee system to ensure that U.S. trade policy and negotiation objectives
reflect U.S. commercial and economic interests. Within this system, a wide
variety of advisory committees exist that, among other things, report on
trade agreements that the United States has negotiated and enhance
communication and information-sharing between federal agencies and the
private sector related to federal monitoring and enforcement efforts.9
Private sector input is also obtained through mechanisms created by the
private sector or agencies themselves and through direct contact with
individual companies or exporters.

Appendix I contains more information about the federal structure for
monitoring and enforcing trade agreements, the interagency structure for
coordinating trade policy, the congressional structure for overseeing these
agencies and activities, and the statutory industry advisory groups.

Tasks

Increases in the number of trade agreements, the number of trade agreement
partners, and the complexity of topics covered by trade agreements have made
the task of monitoring and enforcing such agreements more challenging for
federal agencies in recent years. In the past, trade agreements focused
primarily on reducing tariff levels for merchandise trade. Now they address
a broader range of trade barriers, such as product standards and food safety
measures. They also address many new subjects, such as trade in services and
trade measures related to the protection of intellectual property rights,
and provide more specific guidance for traditional trade areas, such as
trade in agricultural products. The size and complexity of the monitoring
and enforcement workload are expected to continue growing. In order to meet
this challenge and achieve their monitoring and enforcement goals, federal
officials said they must perform certain key activities, such as identifying
compliance problems and developing responses to address them.

USTR negotiates most trade agreements on behalf of the United States.
According to USTR, it has negotiated about 250 enforceable trade agreements
since 1984, the majority of which increase access for U.S. exports to
markets overseas.10 Two-thirds entered into force after 1992 (see fig. 4).

Figure 4: Cumulative Number of USTR-negotiated Trade Agreements, 1984-98

Source: USTR 1999 Trade Policy Agenda and 1998 Annual Report.

Among the agreements USTR has negotiated, several multilateral ones have
fundamentally changed the nature of trade agreements:

ï¿½ The Uruguay Round of Multilateral Trade Negotiations (1986-94), conducted
under the auspices of the General Agreement on Tariffs and Trade, led to the
creation of the World Trade Organization and its binding dispute settlement
mechanism; added WTO agreements on intellectual property rights, services,
agriculture, and textiles to the global trade system for the first time; and
established rules on a host of nontariff barriers to trade, such as product
standards. These agreements, which entered into force in 1995, currently
apply to 135 nations.

ï¿½ Three additional WTO agreements entered into force after 1995 that cover
trade in financial services, basic telecommunications, and information
technology.

ï¿½ NAFTA entered into force in 1994 and provided for the elimination of
tariffs and other barriers to goods, services, and investment between the
United States and its two largest trading partners, Canada and Mexico.

Several of these agreements involve very technical subjects, and responding
to potential violations of these agreements is complex. For example, one WTO
agreement addresses the impact on agricultural trade of members' laws and
regulations that are designed to protect human, animal, and plant life and
health.11 Responding to potential violations of this agreement may require
cognizant agencies to demonstrate whether meat products can transmit animal
diseases to animals or humans or to provide data on how much pesticide can
be applied to a crop before residues exceed an importing country's limits.
If available scientific research is incomplete or in conflict, it can be
difficult to convince other countries to dismantle certain types of trade
barriers.

Meanwhile, membership in several key trade agreements has grown, expanding
the federal monitoring and enforcement workload. For example, when the
Uruguay Round was launched in 1986, 90 countries were members of the General
Agreement on Tariffs and Trade, the organizational structure that preceded
the World Trade Organization. When the WTO agreements were signed in 1994,
the number of WTO members had expanded to 123, and 12 additional countries
have joined the WTO since then. Similarly, 19 countries have joined the WTO
Information Technology Agreement since it was concluded in 1996.

Finally, while these far-reaching agreements have substantially increased
U.S. trade agreement rights, they have also increased U.S. trade agreement
obligations to other nations. As a result, the defense of U.S. laws and
practices is a growing focus of federal monitoring and enforcement efforts.
This has affected USTR's workload, in particular, because it is responsible
for advocating and defending U.S. trade agreement rights and obligations
within the WTO. As of November 1999, the United States had filed
49 complaints against other countries under WTO dispute settlement
procedures, and 35 complaints had been filed against the United States by
other countries.

Expected

The U.S. government's monitoring and enforcement workload is expected to
continue growing, for the following reasons:

ï¿½ Several important WTO agreements that gave developing countries a longer
period of time than developed countries to come into compliance with the
agreements' provisions are now in effect. For example, while key provisions
of the WTO agreements on intellectual property rights, trade-related
investment measures, customs valuation, and subsidies took effect for most
developing countries on January 1, 2000, they had taken effect for developed
countries with the advent of the WTO on January 1, 1995.12

ï¿½ WTO membership is likely to increase. Thirty one more countries are
seeking to join the WTO, including China, the U.S.' 12th largest export
market in 1998.

ï¿½ WTO members are already committed to negotiate further liberalization in
the agriculture and services sectors beginning in early 2000, and a new
round of broader WTO negotiations may be launched.

Officials at the agencies we examined--USTR, Commerce, and
Agriculture--described several key steps that they perform in monitoring and
enforcing trade agreements. These steps include identifying compliance
problems, setting priorities, gathering and analyzing information,
developing and implementing responses, and taking actions to enforce
agreements. (App. II contains more information about key federal monitoring
and enforcement activities.)

Because the number and scope of trade agreements are so broad, agency
officials indicated that their primary purpose in monitoring trade
agreements is to identify important trade agreement compliance problems
rather than monitor compliance with all aspects of all trade agreements.
Several trade experts and private sector representatives that we spoke with
said this was a sensible approach, since federal monitoring resources are
limited. Officials in the offices we examined described their efforts to
identify compliance problems as both reactive and proactive. For example,
they said that such problems are frequently identified by the private
sector, but staff in several offices indicated they are trying to identify
more compliance problems on their own by routinely reviewing compliance with
certain trade agreements and initiating contact with private sector
representatives. Agency officials indicated that some agreements are
routinely monitored, such as those with built-in monitoring mechanisms,
while others receive little or no monitoring, particularly if private sector
interest in the agreement is lacking. This more targeted approach still
produces a substantial workload, requiring agencies to continually
prioritize their monitoring and enforcement efforts and balance them with
their other trade responsibilities. The offices we examined apply certain
common criteria in setting their priorities and determining which compliance
problems to focus on, including the amount of U.S. trade involved, the trade
principles at stake, and any reporting or other deadlines they faced.

Agencies gather and analyze a wide range of information about compliance
problems, including foreign trade agreement commitments, foreign market
data, and scientific research or technical data. They attempt to resolve
compliance problems through various methods and levels of communication with
foreign governments, ranging from phone calls to visits by high-level U.S.
officials. Their objective is to resolve problems quickly and at the lowest
government level possible. However, when foreign governments are not
responsive to U.S. efforts, USTR may seek to enforce U.S. trade agreement
rights through available mechanisms, such as the WTO dispute settlement
process.

In addition to these key activities, several federal agencies, including
USTR and Commerce, are required to report to Congress each year on various
trade and economic issues. Some of these reports focus on the implementation
and results of specific trade agreements, while others are more broad. For
example, USTR prepares multiple reports on other countries' trade practices.
(App. III contains more information on the
trade-related reporting requirements for USTR and other agencies.)

and Enforcement Efforts

USTR, Commerce, and Agriculture have taken various steps to improve their
ability to monitor and enforce trade agreements. For example, Commerce and
Agriculture have implemented measures to improve their ability to identify
compliance problems and to enhance coordination within their departments,
while USTR has improved its capacity to enforce U.S. trade agreement rights.
However, other capacity weaknesses have negatively affected these agencies'
monitoring and enforcement efforts. First, officials at all three agencies
said that steady declines in staff resources have limited the agencies'
monitoring and enforcement activities and the level of support they provide
each other. Second, agency officials said that gaps in staff expertise have
hindered their efforts to analyze and respond to compliance problems. Third,
the agencies have only recently worked together to determine what resources
the U.S. government needs to monitor and enforce its trade agreements, but
they have not addressed whether the skills needed are currently available or
whether federal efforts are targeted at the areas of greatest risk. Finally,
we observed that the three agencies' ability to obtain comprehensive and
balanced input from the private sector is uneven.

Coordination, and Enforcement Capacities

USTR, Commerce, and Agriculture have made several changes to improve their
capacity to perform key monitoring and enforcement activities. First, we
found that the nine USTR, Commerce, and Agriculture offices we examined had
good capacity to identify potential trade agreement compliance problems
(app. V identifies the nine offices we studied). Commerce and Agriculture
had both taken steps to further improve their performance in this area. For
example, Commerce's Trade Compliance Center had developed an internet web
site where users, particularly
small- and medium-sized companies, can enter information about problems
concerning trade agreement implementation or market access.13 It also had
established "compliance liaisons" at over 70 trade and labor associations to
create a reporting channel for compliance problems, according to Commerce
officials. In addition, Commerce and Agriculture had developed instructions
for their staff posted overseas to emphasize the role that these staff play
in identifying and reporting to their headquarters on compliance problems.
Through their reliance on multiple sources of information and reporting
mechanisms, staff in the offices we examined believed that they were able to
identify most of the important compliance issues affecting U.S. interests.

Second, USTR, Commerce, and Agriculture have also taken steps to improve the
coordination of agency efforts to monitor and enforce trade agreements. For
example, in 1995, the Foreign Agricultural Service established weekly
meetings to coordinate the efforts of multiple Agriculture agencies to
address compliance problems under the WTO Agreement on the Application of
Sanitary and Phytosanitary Measures, which addresses the impact of
countries' health and food safety measures on agricultural trade. In 1998,
USTR created a steering committee that included representatives of multiple
trade and regulatory agencies to better coordinate U.S. efforts to monitor
and enforce this agreement.14 Finally, in 1998, Commerce's Trade Compliance
Center established a system to designate which staff from multiple Commerce
offices were responsible for monitoring various trade agreements. The Center
also held biweekly meetings of managers from various Commerce offices to
share information on identified compliance problems and department efforts
to address them.

Third, USTR took steps to enhance its ability to enforce trade agreements.
USTR officials said that the workload associated with enforcing U.S. trade
rights through the WTO dispute settlement system has increased dramatically.
For example, the United States was involved in 22 new WTO dispute settlement
cases in 1996, which was 7 times as many cases as it had handled in the
previous 5 years. USTR determined that its existing legal resources were
insufficient to handle this increased workload and, in fiscal year 1998,
added seven lawyers and two legal technicians to its Monitoring and
Enforcement Unit. Several USTR officials said these additional staff
enhanced U.S. enforcement efforts.

and Enforcement Efforts

Despite having taken steps to improve their ability to identify trade
agreement compliance problems, coordinate with each other, and enforce U.S.
trade agreement rights, officials in the USTR, Commerce, and Agriculture
offices we examined frequently identified insufficient staff
resources--either in their own office or agency or in other agencies--as a
hindrance to their monitoring and enforcement efforts. Managers in all of
the offices we examined said that human capital is the most important
resource they have for monitoring and enforcing trade agreements.15 However,
USTR, Commerce, and Agriculture have faced flat or declining budgets and
staff numbers in the past 5 years at the same time that the federal trade
agreement monitoring and enforcement workload has been growing. For example,
the number of USTR staff dropped from 168 in fiscal year 1994 to 159 in
fiscal year 1996 but rose back to 169 in fiscal year 1999. Although USTR
requested and sometimes received authorization to increase its staff level
during this time, in some years its appropriated funds did not allow it to
meet authorized staff levels.

At all three agencies, officials in some offices said that their staff
levels have adversely affected their ability to monitor and enforce trade
agreements. In an environment of flat or declining resources, agency
decisions to create new monitoring and enforcement offices precluded the
agencies from adequately staffing other offices that also had important
monitoring responsibilities. (App. IV provides data on staff levels at USTR,
Commerce, and Agriculture.)

USTR, Commerce, and Agriculture officials identified several situations in
which insufficient staff numbers had adversely affected their monitoring and
enforcement efforts.

ï¿½ Officials in USTR's Office of WTO and Multilateral Affairs told us that
their individual workload is so great that they are routinely unable to
perform certain parts of their monitoring job. One official in this office
said he often does not have enough time to provide monitoring guidance to
posts overseas or return phone calls. Another official in this office said
he does not have enough time to read all of the reports that WTO member
countries submit to the WTO on their compliance with the agreement he
monitors.

ï¿½ Commerce officials identified several trade issues that it could not
address because it did not have enough staff with the right expertise to
handle the issues. These included European barriers affecting U.S. providers
of gas and electricity components and weather service products, various
Southeast Asian standards and testing and certification procedures, and
Japanese barriers on recreational boat and engine products. Commerce
reported that U.S. exports could grow by hundreds of millions of dollars if
these issues were resolved.

ï¿½ Agriculture officials told us that the Foreign Agricultural Service
receives an increasing number of requests from its overseas posts for
training visits by headquarters staff with knowledge about the use of
biotechnology in agricultural products. Although the United States faces a
growing number of biotechnology-related trade problems, these requests are
routinely denied because of staff and budget constraints.

Many agency and private sector officials we spoke with believed that USTR,
in particular, had insufficient staff resources to handle its growing
monitoring and enforcement workload. For example, one private sector
official noted that USTR has one person handling customs issues compared to
five full-time staff working on this issue for the European Union. Despite
increased resource levels in USTR's Monitoring and Enforcement Unit, some
private sector officials stated their belief that USTR staff levels limit
the number of dispute settlement cases that USTR can handle at any given
time and have prevented it from initiating certain dispute settlement cases
that private sector officials thought should go forward.

USTR and Agriculture officials also stated that insufficient staff at other
agencies limits the extent to which other agencies have supported their
monitoring and enforcement efforts. Several USTR officials said that the
overall amount and quality of trade policy support and participation in
interagency trade policy committees by other agencies has diminished, in
part because of limited or declining agency resources and turnover. As a
result, these officials said that USTR has had to take on more operational
tasks and does not always have the breadth of perspectives or information it
needs to respond to compliance problems.

ï¿½ Several USTR officials observed that declining resources have reduced the
overall level of support they get from Commerce, which is the agency that
has provided USTR with the most assistance in the past. These officials said
that Commerce used to provide USTR with more foreign market data and
industry information, perform more analysis of compliance problems, and do
more preparatory work for meetings with foreign officials.

ï¿½ An official in USTR's Office of WTO and Multilateral Affairs who monitors
three different WTO agreements that came into force in 1995 told us he has
gotten very little support from Commerce to address compliance problems
under two of these agreements.

ï¿½ Officials in USTR's Office of Japan told us that USTR, Commerce, State,
and the Treasury divided responsibilities for monitoring 31 U.S.-Japan trade
agreements among the four agencies, but these agencies often have not been
able to support USTR's efforts to monitor the agreements as they did in the
past.

ï¿½ Several Foreign Agricultural Service officials said the agency faces
ongoing challenges in getting the technical support it needs from regulatory
agencies inside and outside of the Agriculture Department to address certain
types of compliance problems, in part because the regulatory agencies do not
have resources available for the task.

According to agency officials, budget constraints at USTR, Commerce, and
Agriculture have not only affected staff levels but have also limited the
funds available for necessary travel and training expenses. In addition, the
demand and cost for translation services have been rising. These constraints
have impacted the agencies' monitoring and enforcement efforts.

ï¿½ To manage the effect of flat budgets in fiscal years 1999-2000, the
Foreign Agricultural Service imposed a 40-percent cut in training and travel
funds. The Director of the Foreign Agricultural Service's Europe, Africa,
and Middle East Division said that because of reduced travel funds, he can
only send one staff person at a time to the European Union to negotiate the
resolution of multiple compliance issues. This one U.S. official, whose
expertise is typically focused in a certain area, faces several experienced
European Union officials, a situation that, agency and private sector
officials observed, makes it difficult for the United States to obtain
favorable resolutions to compliance problems.

ï¿½ Similarly, officials in Commerce's International Trade Administration
Office of Latin America and the Caribbean said the office has had
insufficient travel funds for several years to send its staff to the Latin
American countries it covers. This situation has affected the office's
ability to make the kind of contacts in the foreign governments and the
private sector that would facilitate the resolution of compliance issues.
Private sector officials told us that constraints on the office's travel
limited its ability to address intellectual property rights problems in this
region.

ï¿½ Because of high staff turnover rates, agency officials said educating new
staff about how to do their job is very important, but certain agencies lack
sufficient training funds. Some agency officials also said that staff do not
have access to the kind of computer tools they need. For example, the
Foreign Agricultural Service's Multilateral Trade Negotiations Division,
which submits and reviews multiple WTO reports throughout the year, lacks
appropriate software for communicating with the WTO, slowing U.S. response
times.

Ability to Analyze and Respond to Compliance Problems

The growing complexity of trade agreements has made it increasingly
important for federal agencies to have certain types of staff expertise to
properly analyze and implement responses to compliance problems. USTR,
Commerce, and Agriculture officials in the offices we examined told us that
addressing such problems requires federal agencies to have access to
country, industry, and functional expertise and to perform a mixture of
economic, technical, and legal analysis. However, because most of these
offices did not have the capability to do all types of analysis themselves,
they required input from other offices and agencies. Based on the types of
problems these officials identified, we found that the three agencies'
ability to do legal analysis of compliance problems is strong, but their
ability to perform needed economic and technical analysis is not always
assured. Officials in the offices we examined often stated that they had
difficulty obtaining needed analytical support from other offices within
their own agency or in other agencies.

ï¿½ Officials in USTR's Monitoring and Enforcement Unit and Office of Economic
Affairs told us that economic analysis is increasingly important,
particularly for developing arguments in WTO dispute settlement cases, but
USTR has limited capacity to perform such analysis. The Office of Economic
Affairs only has two economists on staff and limited capacity to draw on
resources elsewhere but has been heavily involved in several major WTO
cases. These two staff worked for 8 months on the U.S. complaints about
European Union measures affecting beef and banana imports that were
simultaneously being reviewed by the WTO. During this time, the office had
to turn down multiple requests from other USTR offices for economic
assistance.

ï¿½ USTR officials told us that they held discussions several times with
officials from Commerce's Trade Compliance Center to emphasize their need
for assistance with economic analysis. However, the Deputy Assistant
Secretary that oversees the Trade Compliance Center told us that while he
understood USTR's needs, Commerce does not have enough staff with the right
expertise to be able to provide this assistance.

ï¿½ In 1997, the United States negotiated several mutual recognition
agreements with the European Union, making it easier for exporting companies
to comply with testing and certification requirements. U.S. industry
estimates the agreements will reduce market entry costs by $500 million per
year, but Commerce is unable to ensure implementation of these complex
agreements because it does not have enough staff with the appropriate
technical expertise to examine the issue.

Several agency officials told us they sometimes rely on the private sector
for expertise and analysis to address compliance problems. However, this
situation raises several concerns. First, during our recent study of U.S.
government efforts to monitor and enforce bilateral agreements with Japan
concerning insurance, USTR officials told us that neither USTR nor the U.S.
government possessed the technical capabilities to independently verify
private sector information and analysis about Japan's compliance with
certain aspects of the agreements.16 Second, several private sector
officials told us they need to provide agencies with this kind of assistance
to ensure their issues receive agencies' attention. However, not all private
sector groups have these capabilities.

Efforts Is Insufficient

Despite the resource constraints they face and their dependence on each
other for support, USTR, Commerce, and Agriculture have not engaged in
integrated, comprehensive strategic planning for overall federal efforts.
The Government Performance and Results Act of 1993 (Results Act)17 requires
federal agencies to engage in a results-oriented strategic planning process.
Executive branch implementing guidance for the Results Act requires that
when multiple agencies are responsible for federal programs contributing to
the same or similar outcomes, agency planning should be closely coordinated
to ensure that goals are consistent and that program efforts are mutually
reinforcing. Sound management principles suggest that high-performance
organizations should employ risk-management techniques to target their
efforts toward areas most at risk.

As the Results Act requires, USTR, Commerce, and Agriculture each developed
5-year strategic plans for fiscal years 1997-2002, and annual performance
plans. The agencies' strategic plans all contain goals related to trade
agreement monitoring and enforcement, and USTR and Agriculture indicated in
their strategic or annual plans that their ability to monitor and enforce
trade agreements would depend, in part, on the level of support they receive
from other agencies. However, the agencies continue to face problems in
obtaining this support. Although USTR is the lead trade agency and was
intended to coordinate federal trade efforts, the multiple agencies
responsible for monitoring and helping USTR enforce trade agreements
typically estimate their resource and budget needs independently, and USTR
has no input into other agencies' budget requests, according to USTR
officials. Moreover, even though all three agencies face growing monitoring
and enforcement workloads and declining resources, some agency officials
told us that until very recently no high-level discussions had occurred to
discuss the full scope of the federal monitoring and enforcement workload
and how responsible agencies will manage it.

USTR, Commerce, and Agriculture officials cited some examples of coordinated
planning for monitoring and enforcement, however. For example, officials
from USTR's Monitoring and Enforcement Unit and Commerce's Trade Compliance
Center developed a joint memo to the National Economic Council in 1997 to
define the roles each would play in monitoring and enforcing trade
agreements, and Commerce reports that its staff routinely discuss compliance
problems and resolution strategies with their USTR counterparts. Also,
Foreign Agricultural Service officials said that their monitoring and
enforcement efforts are closely integrated with USTR, in part because more
than half of the staff in USTR's Office of Agricultural Affairs are on
detail from various Agriculture agencies.

On February 7, 2000, shortly after our audit work was completed, the
President submitted his budget proposal for fiscal year 2001. The budget
proposal requested $22 million to fund an interagency trade compliance
initiative and bolster monitoring and enforcement resources at USTR,
Commerce, Agriculture, and State. While the funds have not been approved yet
by Congress, the initiative appears to be a first step in moving toward more
coordinated planning of federal monitoring and enforcement efforts. However,
interagency discussions on this initiative did not appear to include a
thorough assessment of what skills are needed and available to monitor and
enforce trade agreements or whether current efforts are targeted at the
areas of greatest risk.

The offices we examined identified several challenges in working with the
private sector, including balancing divergent private sector interests and
agreeing upon the nature and timing of U.S. actions to address compliance
problems. Some offices that we examined were better able than others to
obtain comprehensive private sector input and unified private sector
positions. For example, officials in the Foreign Agricultural Service's
Dairy, Livestock, and Poultry Division said they work closely with the Meat
Industry Trade Policy Council, an industry-created coalition of trade
associations that tries to work out differences among its members before
presenting industry positions to the U.S. government. Private sector groups
with an interest in intellectual property rights have formed a similar
coalition.

However, other offices faced more difficulty in determining overall industry
positions. Officials in Commerce's Office of Automotive Affairs said that
positions in the automotive industry often vary between companies. Also, the
office often has to make multiple contacts within a company because
perspectives vary among headquarters, foreign subsidiaries, and Washington
representative offices. Other offices, such as USTR's Office of Japan and
Commerce's Office of Latin America and the Caribbean, had more difficulty
obtaining private sector input. In some cases, this was because the trade
agreements they monitored affected a broad range of private sector
interests. In other cases, the offices had to contact individual companies
to obtain private sector input because the issues were not adequately
covered by existing trade associations or advisory councils. Several agency
officials said that obtaining objective and balanced input and determining
the overall U.S. national interest are especially difficult in situations
where the private sector is divided over a compliance problem or when a
problem affects only one or two companies.

The offices we examined identified other challenges they faced in getting
private sector input. For example, lack of consensus within the private
sector or between the private sector and the government can stall U.S.
efforts to move forward. This consensus is affected when the private sector
wants to move more quickly or slowly than the government, when companies or
industries have divided interests, when companies want to protect their
business data or fear foreign retribution to U.S. actions, and when they
want the government to do something it cannot do. Officials said that
decisions about the U.S. responses to compliance problems in these cases may
be made at higher levels within federal agencies or the U.S. government.

The creation of the World Trade Organization and its vast array of trade
agreements has caused dramatic increases to the trade agreement monitoring
and enforcement workloads at USTR, Commerce, and Agriculture. However, these
agencies' ability to monitor and enforce U.S. trade agreements is limited
because they sometimes lack sufficient numbers of experienced staff with the
right expertise; they do not always get needed analytical or other types of
support from other agencies; and they sometimes have difficulty obtaining
balanced, comprehensive input from the private sector. Moreover, even though
these agencies each face similar challenges, they have not engaged in
sustained discussions to identify the full scope of the federal monitoring
and enforcement workload, the number and types of resources needed across
the federal government to perform it, the availability of these resources
within the government, the roles of individual agencies, and the resources
each agency will devote to the task. Because of these weaknesses, USTR,
Commerce, and Agriculture are unable to effectively assess, analyze, and
respond to all of the trade agreement compliance problems that they or the
private sector identify. These deficiencies prevent the U.S. government from
maximizing the intended benefits of its trade agreements and thoroughly
achieving its monitoring and enforcement goals.

Based on our work, we believe that a thorough examination of the current and
future trade agreement monitoring and enforcement workload is necessary.
Such an assessment could help identify areas in which capacity is currently
lacking, as well as areas in which capacity needs to be developed to handle
future increases in the federal monitoring and enforcement workload. Current
monitoring and enforcement tasks may not be allocated in a way that best
uses the agencies' relative strengths and capacities. In light of the recent
trade compliance budget initiative, these steps are particularly important
to ensure that any additional funds are properly allocated. Also, given the
importance of timely and active private sector support for U.S. monitoring
and enforcement efforts, the mechanisms for obtaining private sector input
may not ensure that federal agencies obtain complete and balanced
information on trade agreement compliance problems.

In order to improve U.S. capacity to monitor and enforce trade agreements,
we recommend that the U.S. Trade Representative, the Secretary of Commerce,
and the Secretary of Agriculture, in consultation with other relevant
agencies, develop a strategy for how the U.S. government will manage its
growing trade agreement monitoring and enforcement workload. This strategy
should (1) assess the human capital skills needed and available to monitor
and enforce U.S. trade agreements now and in the future and determine how
any gaps can be addressed, (2) consider whether the current workload is
targeted toward the highest risks and properly allocated among key agencies,
and (3) assess whether the mechanisms for obtaining private sector input
provide full and balanced coverage of existing and future trade issues.

We received written comments on a draft of this report from the U.S. Trade
Representative and the Departments of Commerce and Agriculture (see apps. VI
to VIII). The agencies also provided technical comments, which we
incorporated in the report as appropriate.

The U.S. Trade Representative agreed with our assessment that, to improve
U.S. capacity to monitor and enforce trade agreements, the executive branch
must employ a more integrated approach rather than have each agency
independently address its capacity in this area. It stated that the
administration had followed such an approach in preparing its budget for
fiscal year 2001, which included an additional $22 million for trade
agreement monitoring and compliance. The U.S. Trade Representative also
stated its belief that our report did not adequately recognize the extent to
which the U.S. Trade Representative had engaged in joint strategic planning
related to trade agreement monitoring and enforcement. In developing its
strategic plan under the Government Performance and Results Act, the U.S.
Trade Representative said that it had received comments from, and provided
comments to, other agencies. We reviewed the comments that the U.S. Trade
Representative provided to other agencies in 1997 and modified our report
accordingly, but we continue to believe that our recommendation is
appropriate because neither the administration's fiscal year 2001 budget
initiative for trade agreement compliance nor the U.S. Trade
Representative's efforts to coordinate with other agencies in developing its
strategic plan constitute the kind of comprehensive and sustained strategic
planning for federal efforts to monitor and enforce trade agreements that we
believe is necessary. In particular, the U.S. Trade Representative did not
provide any evidence to show that either of these efforts involved a
thorough interagency assessment of the human capital skills needed and
available to handle current and future trade agreement monitoring and
enforcement activities.

The U.S. Trade Representative also indicated that we misunderstood its
statements in our assessment that steadily declining staff levels at the
U.S. Trade Representative, Commerce, and Agriculture had adversely affected
these agencies' monitoring and enforcement activities. It said that the U.S.
Trade Representative was not referring to its own staff levels but was
instead expressing concern about declining staff levels at other agencies
that support the U.S. Trade Representative's monitoring and enforcement
efforts. We agree that the U.S. Representative officials were particularly
concerned about their ability to obtain support from other agencies, but we
also consistently heard from U.S. Trade Representative staff that they were
stretched too thinly to handle their own monitoring and enforcement
workload. Moreover, we note that the administration is requesting 25
additional staff for the U.S. Trade Representative in fiscal year 2001, at
least half of which are to be allocated to trade agreement compliance.

Commerce and Agriculture generally agreed with our report and its
recommendation. Commerce characterized our report as helpful and said it
plans to implement our recommendation to better develop its strategy for
managing the compliance workload. Commerce also mentioned the President's
recent compliance initiative contained in his fiscal year 2001 budget
request. Agriculture said that it supported the report's conclusions and
recommendation and noted that it intends to work with the U.S. Trade
Representative to improve interagency coordination of federal monitoring and
enforcement efforts through existing interagency coordination structures.

We are sending copies of this report to appropriate congressional
committees. We are also sending copies of this report to the Honorable
Charlene Barshefsky, U.S. Trade Representative; the Honorable Madeleine K.
Albright, Secretary of State; the Honorable William M. Daley, Secretary of
Commerce; and the Honorable Dan Glickman, Secretary of Agriculture. Copies
will also be made available to others upon request.

If you or your staff have any questions about this report, please contact me
on (202) 512-4128. Other GAO contacts and staff acknowledgments are listed
in appendix IX.

Sincerely yours,

Susan S. Westin
Associate Director
International Relations and Trade Issues

Executive Branch, Congressional, and Private Sector Structures for
Monitoring and Enforcing Trade Agreements

At least 17 federal agencies, led by the Office of the U.S. Trade
Representative (USTR), are involved in U.S. government efforts to monitor
and enforce trade agreements. USTR and the Departments of Agriculture,
Commerce, and State have relatively broad roles and responsibilities with
respect to trade agreement monitoring and enforcement, while other agencies
play more specialized roles. Federal monitoring and enforcement efforts are
coordinated through an interagency mechanism comprised of several
management- and staff-level committees and subcommittees. The congressional
structure for funding and overseeing federal monitoring and enforcement
activities is also complex because it involves multiple committees of
jurisdiction. In addition to the executive branch and congressional
structures, multiple private sector advisory committees exist to provide
federal agencies with policy and technical advice on trade matters,
including trade agreement monitoring and enforcement.

Includes Multiple Agencies

Among the multiple agencies involved in monitoring and enforcing U.S. trade
agreements, some have a mandate that specifically focuses on trade,
including USTR and the Departments of Agriculture, Commerce, and State.
Other agencies' missions are closely related to trade issues, such as the
Department of the Treasury, or the agencies have a particular expertise that
is sometimes relevant to trade, such as the Food and Drug Administration or
the Environmental Protection Agency.

USTR is the primary agency responsible for developing and coordinating U.S.
international trade, commodity, and direct investment policy and leading or
directing negotiations with other countries on such matters. As part of its
overall mission, and as derived from certain key trade statutes, USTR is
also the primary agency responsible for monitoring and enforcing U.S. trade
agreements. For example, USTR is statutorily required to annually identify
foreign policies and practices that constitute significant barriers to U.S.
exports of goods and services and particularly consider whether any
identified policies or practices are covered by international agreements to
which the United States is a party. Further, USTR is required to refer to
the appropriate agency any unfair trade practice that it considers to be
inconsistent with the provision of any trade agreement and that may have a
significant adverse impact on U.S. commerce.18 Finally, USTR is authorized
to initiate actions to enforce U.S. rights under bilateral and multilateral
trade agreements, at its own discretion or as petitioned by private
enterprises or individuals.19 Among its other responsibilities, USTR chairs
the interagency organization that oversees the multiple interagency
committees that have been formed for coordinating trade policy.

Staff in several USTR offices carry out the agency's monitoring and
enforcement responsibilities. USTR's organizational structure includes
geographic, industry, multilateral affairs, and general support offices,
including legal and economic functions. In 1996, USTR established the
Monitoring and Enforcement Unit within its Office of General Counsel to help
coordinate the implementation of USTR's statutory obligations to monitor and
enforce trade agreements. The Monitoring and Enforcement Unit is devoted
exclusively to monitoring all U.S. trade agreements and implementing U.S.
trade laws, determining compliance by foreign governments, and pursuing
litigation actions necessary to defend U.S. rights under those agreements
and laws. The Monitoring and Enforcement Unit focuses on enforcing trade
agreements, handling USTR's docket of World Trade Organization (WTO) and
North American Free Trade Agreement (NAFTA) dispute settlement cases, among
other things.

Commerce has general responsibility for major nonagricultural trade
functions of the U.S. government, including monitoring and taking certain
steps to secure compliance with trade agreements and ensuring that U.S.
companies have access to foreign markets. Commerce's monitoring role is
largely derived from its membership in the interagency trade policy
committees and from a 1979 executive branch reorganization plan rather than
from any specific statutory mandate.20 However, Commerce is statutorily
responsible, along with the U.S. International Trade Commission, for
administering U.S. unfair trade laws.21 These laws require Commerce to
assess whether imports have benefited from foreign subsidies or have been
sold at less than fair market value in the United States. Commerce also
shares statutory responsibility with USTR for monitoring violations of WTO
rules concerning member countries' subsidy practices.22

Commerce's trade activities are carried out primarily by its International
Trade Administration, which is organized like USTR into geographic and
industry offices. In 1996, the International Trade Administration created a
Trade Compliance Center to help ensure that U.S. trade agreements are
properly monitored and compliance issues are promptly addressed. The Trade
Compliance Center helps coordinate Commerce's monitoring activities. Among
its activities, it maintains a data base to give U.S. exporters access to
information about trade agreements and invites companies to notify it about
problems in complying with trade agreements.23 The International Trade
Administration's monitoring and enforcement efforts are assisted by staff in
its U.S. and Foreign Commercial Service that are stationed in certain U.S.
embassies and consulates,24 and by Commerce's Office of General Counsel.

The Department of Agriculture provides technical assistance to USTR on
matters pertaining to agricultural trade, including international
negotiations on agricultural trade agreements. Agriculture is statutorily
responsible for implementing and monitoring the agricultural provisions of
the World Trade Organization and NAFTA.25 Agriculture is required to report
to USTR and specified congressional committees on any lack of compliance
with WTO provisions that adversely affects U.S. agricultural trade.26

The Foreign Agricultural Service handles the Department of Agriculture's
trade activities and works with USTR and State on international agricultural
trade issues. The Foreign Agricultural Service's mission is to open, expand,
and maintain global market opportunities for U.S. agricultural products. In
its efforts to address problems with trade agreement compliance, it
coordinates regularly with other Department of Agriculture agencies that
have certain technical expertise and with the Department of Agriculture's
Office of General Counsel. Its organizational structure includes country
desks, agricultural commodity offices, and multilateral affairs offices.
Since 1995, the Foreign Agricultural Service has steadily enhanced its
ability to address an increasingly prominent form of trade barrier--other
countries' health and food safety measures that may restrict imports of
agricultural products. Its monitoring and enforcement activities are greatly
aided by its staff that cover agricultural issues in 130 countries from 64
U.S. diplomatic posts.

The Department of State advises USTR on the foreign policy implications of
any trade-related actions and participates in trade negotiations that have a
direct and significant impact on foreign policy. Although not explicitly
responsible for monitoring and enforcing trade agreements, State
nevertheless plays an important role in this area.27 State's Bureau of
Economic and Business Affairs has overall responsibility for formulating and
implementing policy regarding foreign economic matters. In addition, through
State's extensive network of embassies, consulates, and other overseas
missions, State economic officers--through their in-country contacts with
U.S. businesses and foreign government officials--provide instrumental
assistance in monitoring and enforcing trade agreements.

In addition to these 4 agencies, at least 13 other federal agencies are also
involved in the monitoring and enforcement of trade agreements. These
agencies generally play more specialized roles by providing technical or
policy input that is derived from their particular agency mission or areas
of expertise. For example, the Department of the Treasury, whose mission is
to promote a prosperous and stable U.S. and world economy, is responsible
for developing policies on international monetary affairs, trade and
investment, international debt strategy, and U.S. participation in
international financial institutions. The Treasury advises USTR on the
financial services aspects of trade agreements. Similarly, the Department of
Labor advises USTR on any labor and workers' rights issues that are
associated with trade agreements.

As trade agreements have grown more technical, these specialized agencies'
input has become increasingly important for analyzing and resolving trade
compliance issues. For example, the Foreign Agricultural Service relies on
several regulatory agencies, such as the Department of Health and Human
Services' Food and Drug Administration, to help it address other countries'
health and food safety measures that affect U.S. exports; these agencies
have the expertise to understand and evaluate the scientific bases of other
countries' measures.28

Among these 13 agencies, the U.S. International Trade Commission plays a
unique role due to its broad investigative powers in monitoring trade data
and trade agreements. The Commission is an independent fact-finding agency
whose activities include gathering, analyzing, and reporting on trade
developments and the operation of trade agreements. The Commission must
investigate and make reports to USTR and to Congress whenever requested,
thus enhancing executive branch efforts to monitor and enforce trade
agreements.29

Multiple Committees, Subcommittees, and Task Forces

Congress created an interagency structure in the Trade Expansion Act of
1962, as amended by the Trade Act of 1974,30 to help ensure that the
development of trade policy reflects a range of agency perspectives and is
coordinated throughout the government. This structure, called the Trade
Policy Committee, is chaired by USTR and includes the Secretaries of State,
Agriculture, Commerce, the Treasury, and Labor.31 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 management level committee). These
subordinate committees include all the agencies that are members of the
Trade Policy Committee, and a wide range of other agencies as well.

Among these multiple interagency coordination mechanisms, the Trade Policy
Staff Committee is the most active. This committee operates primarily
through a network of subcommittees and task forces. These units are chaired
by USTR staff and are composed of staff from a wide range of federal
agencies. USTR assigns responsibilities for issue analysis to members of the
appropriate staff subcommittee or task force. Since trade issues cut across
both geographic and functional lines, subcommittees have been formed to deal
with both regional and industry-specific issues. In addition, several
specialized task forces have been formed to deal with specific trade issues.
Table 1 shows the breadth of topics covered by Trade Policy Staff Committee
subcommittees.

Table 1: Trade Policy Staff Committee Subcommittees and Task Forces

Continued from Previous Page

 Name of subcommittee or task Geographic         Functional        Task
 force                        subcommittee       subcommittee      force
 Africa                       X
 Andean Countries             X
 ASEAN                        X
 Australia/New Zealand        X
 Name of subcommittee or task Geographic         Functional        Task
 force                        subcommittee       subcommittee      force
 Canada                       X
 Caribbean/CBI                X
 Central America              X
 China                        X
 Eastern/Central Europe       X
 European Union               X
 European Union Transatlantic
 Economic Partnership         X
 Free Trade Area of the
 Americas                     X
 India                        X
 Israel                       X
 Japan                        X
 LDC Trade Issues             X
 Mexico                       X
 Middle East                  X
 North Africa                 X
 Russia                       X
 Sub-Saharan Africa           X
 South Asia                   X
 Southern Cone                X
 Taiwan                       X
 Aerospace Trade Issues                          X
 Aeronautical Equipment                          X
 Agriculture                                     X
 Antidumping                                     X
 Barter and Countertrade                         X
 Business and Professional
 Services                                        X
 Chemical Trade                                  X
 Commodity Agreements                            X
 Congressional Liaison                           X
 Customs (Including Harmonized
 System and Customs Valuation                    X
 Code)
 Economic Analysis                               X
 Energy Issues                                   X
 European Union MRAs                             X
 Name of subcommittee or task Geographic         Functional        Task
 force                        subcommittee       subcommittee      force
 EU Transatlantic Economic
 Partnership                                     X
 Export Financing                                X
 Fisheries                                       X
 Generalized System of
 Preferences                                     X
 Government Procurement Code                     X
 High Technology Trade Issues                    X
 Import Licensing                                X
 Information Systems                             X
 Intellectual Property                           X
 Intergovernmental Relations                     X
 Investment                                      X
 Non-Tariff Barriers                             X
 OECD Trade Issues                               X
 Preferential Trading
 Arrangements                                    X
 Pre-Shipment Inspections                        X
 Rules of Origin                                 X
 Safeguards                                      X
 Section 301a                                    X
 Section 337b                                    X
 Semiconductors                                  X
 Services                                        X
 Shipbuilding                                    X
 Space Industries Trade                          X
 Standards                                       X
 Steel                                           X
 Subsidies                                       X
 Tariffs                                         X
 Basic Telecom                                   X
 Trade and Competition                           X
 Trade and the Environment                       X
 Trade and Labor Standards                       X
 Trade and Technology                            X
 Trade Policy Issues Related
 to International Finance                        X
 Name of subcommittee or task Geographic         Functional        Task
 force                        subcommittee       subcommittee      force
 UNCTAD Trade Issues                             X
 Wood Products                                   X
 WTO Dispute Settlement                          X
 WTO Sanitary and
 Phytosanitary Measures                          X
 WTO Regional Trade Agreements                   X
 Driftnet Fishing Sanctions                                        X
 Russian Space Launch                                              X
 Trade With Guam                                                   X
 Softwood Lumber                                                   X
 Tobacco Import Licensing                                          X
 Wheat Gluten                                                      X
 WTO Telecom Services                                              X

Legend

ASEAN = Association of Southeast Asian Nations
CBI = Caribbean Basin Initiative
EU = European Union
LDC = Least Developed Country
MRA = Mutual Recognition Agreement
OECD = Organization for Economic Cooperation and Development
UNCTAD = United Nations Conference on Trade and Development

aThe Section 301 subcommittee addresses unfair trade practices.

bThe Section 337 subcommittee addresses intellectual property rights
violations.

Source: USTR.

Exercised by Multiple Congressional Committees

Numerous committees and subcommittees of the U.S. Senate and House of
Representatives have jurisdiction over the agencies that participate in
federal monitoring and enforcement efforts. These Committees typically have
responsibilities along budgetary, agency, or subject area lines. For
example, the Senate Committee on Appropriations allocates jurisdiction for
federal funding to various subcommittees. USTR, Commerce, and State are all
covered by one subcommittee, and Agriculture is covered by another. In
addition, at least five other Senate committees (Agriculture, Nutrition and
Forestry; Banking, Housing and Urban Affairs; Finance; Foreign Relations;
and Commerce, Science and Transportation) have subject area jurisdiction
over certain trade matters. The situation is similar in the House of
Representatives, where at least seven committees have funding or subject
area jurisdiction over trade issues and responsible agencies (Agriculture;
Appropriations; Banking and Financial Services; Commerce; International
Relations; Small Business; and Ways and Means).

In the Trade Act of 1974, Congress created a private sector advisory
committee system to ensure that U.S. trade policy and negotiation objectives
reflect U.S. commercial and economic interests.32 Congress expanded and
enhanced the role of this system in three subsequent acts. Numerous advisory
committees grew from these acts that provide information and advice both
prior to entering into trade agreement negotiations and on other matters
relating to U.S. trade policy.33 The committee with the broadest
representation is the President's Advisory Committee for Trade Policy and
Negotiations, whose 45 members are appointed by the President. This
committee considers trade policy issues in the context of the overall
national interest. The advisory system is also composed of committees with
more specific representation and responsibility. These include 6 additional
policy advisory committees and 26 specific committees designed to provide
technical advice. These technical committees focus on industry-specific
sectors; agricultural commodities; or, in the case of the functional
committees, cross-sectoral issues. (See table 2.) In total, the advisory
system has about 1,000 members. These committees, most of which meet on a
fairly regular basis, enhance communication and information-sharing between
the federal government and the private sector about federal monitoring and
enforcement efforts.

Table 2: Private Sector Advisory Committees

Continued from Previous Page

                          Policy         Industry Sector/   Industry
 Name of committee        Advisory       Agriculture        Functional
                          Committees     Technical Advisory Committees
                                         Committees
 Trade Policy and
 Negotiations             X
 Intergovernmental Policy X
 Africa Trade             X
 Agricultural Policy      X
 Labor                    X
 Defense Policy           X
 Trade and Environment    X
 Aerospace Equipment                     X
 Capital Goods                           X
 Chemicals and Allied
 Products                                X
 Consumer Goods                          X
 Electronics and
 Instrumentation                         X
 Energy                                  X
 Ferrous Ores and Metals                 X
 Footwear, Leather,
 Leather Products                        X
 Building Products and
 Other Materials                         X
 Lumber and Wood Products                X
 Nonferrous Ores and
 Metals                                  X
 Paper and Paper Products                X
 Services                                X
 Small and Minority
 Business                                X
 Textiles and Apparel                    X
 Transportation,
 Construction, Mining,
 and Agricultural                        X
 Equipment
 Wholesaling and
 Retailing                               X
 Trade in Fruits and
 Vegetables                              X
 Trade in Sweeteners                     X
 Trade in Animal and
 Animal Products                         X
 Trade in Grain, Feed,
 and Oilseeds                            X

                          Policy         Industry Sector/   Industry
 Name of committee        Advisory       Agriculture        Functional
                          Committees     Technical Advisory Committees
                                         Committees
 Trade in Tobacco,
 Cotton, and Peanuts                     X
 Customs                                                    X
 Standards                                                  X
 Intellectual Property
 Rights                                                     X
 Electronic Commerce                                        X

Source: USTR, Commerce, and Agriculture data.

Other nongovernmental advisory mechanisms also provide government agencies
with advice on trade-related matters. These mechanisms, which often include
the participation of trade associations, can provide agencies with
information about foreign noncompliance with trade agreements and help in
developing strategies to address such instances. For example, the Meat
Industry Trade Policy Council, a coalition of meat and agricultural groups
that aims to create export opportunities for the U.S. meat and poultry
industry, advocates on behalf of its members before USTR, Agriculture, and
Commerce. As part of this effort, the Council notifies these agencies of
foreign practices that disrupt the flow of trade, including those that may
violate trade agreements.

Key Federal Monitoring and Enforcement Activities

The task of monitoring and enforcing foreign compliance with trade
agreements has become more complex as the number of trade agreements and
trade agreement partners has grown and the issues covered by trade
agreements have expanded. Responsible units, including those at USTR,
Commerce, and Agriculture that we examined, perform a number of key
activities to monitor and enforce trade agreements. These activities include
identifying compliance problems, prioritizing the unit's workload, analyzing
information about selected compliance problems, seeking ways to resolve such
problems including taking enforcement action, and coordinating with other
agencies and the private sector.

USTR, Commerce, and Agriculture use several sources of information to
identify potential compliance problems. Most of the offices we examined at
these agencies said that the private sector was the most important source of
information for the compliance problems they work on. This is because the
private sector is closer to the market than the government and is usually in
the best position to identify potential problems. Agency staff working in
U.S. embassies were another prominent source of information because of their
ability to monitor developments in the country where they are posted and to
interact with local government and private sector officials. Commerce and
Agriculture generally relied on their own staff posted overseas, while USTR
generally relied on other agencies' staff, particularly State Department
staff posted overseas.

Some of the offices we examined had other unique sources of information for
identifying compliance problems. For example, officials in USTR's Office of
WTO and Multilateral Affairs and the Foreign Agricultural Service's
Multilateral Trade Negotiations Division said they had identified certain
compliance problems because of their responsibility for reviewing
information that WTO members are required to report under certain WTO
agreements. Many WTO agreements, including those on agriculture, import
licensing, and subsidies, require countries to provide information to the
WTO at least yearly about their current and proposed practices related to
implementing the agreement. In addition, USTR's Monitoring and Enforcement
Unit monitors all WTO dispute settlement actions between foreign governments
to determine whether the compliance issues involved are relevant to the
United States.

One compliance case we examined illustrates how compliance issues may be
identified. In 1990, the United States and Korea entered into a bilateral
agreement in which Korea promised to import steadily increasing levels of
U.S. beef each year. During 1997 and 1998, the Foreign Agricultural
Service's Dairy, Livestock, and Poultry Division was closely watching
Korea's compliance with the agreement because of difficulties Korea was
experiencing as a result of the Asian financial crisis. Working with Foreign
Agricultural Service staff in Korea and interested private sector parties,
the division determined that Korea had failed to import the agreed-upon
amounts of beef in 1997 and 1998. The division did so by comparing import
data to the annual import commitments contained in the agreement.

All of the offices we examined faced a substantial trade agreement
monitoring and enforcement workload, in addition to their other
responsibilities, such as trade agreement negotiation or market development
activities. As a result, managers and staff in these offices had to
prioritize among the multiple trade agreements and compliance issues needing
their attention. We found certain common criteria that all of the offices
applied in setting priorities and determining which compliance issues they
should address, including the amount of U.S. trade and the trade principles
at stake and any deadlines the offices faced.

The USTR, Commerce, and Agriculture offices we examined generally tried to
maximize the impact of their monitoring and enforcement efforts by giving
priority to compliance issues that affect a high dollar value of U.S.
trade.34 However, several U.S. and private sector officials stated that
doing so raises questions about whether compliance issues that affect a
small value of trade get sufficient attention from the government. By making
trade principles another monitoring and enforcement priority, agencies help
ensure that any compliance issue that has important trade policy
implications also gets addressed. For example, USTR and the Foreign
Agricultural Service put significant effort into addressing Hungary's
failure to comply with certain export subsidy limits in the WTO Agreement on
Agriculture, even though the United States generally does not compete with
Hungary in export markets. These agencies addressed the issue primarily to
preserve the integrity of the agreement and to prevent other countries from
following Hungary's example.

Notwithstanding their efforts to prioritize according to these criteria,
managers and staff in the offices we examined said that upcoming deadlines
were an equally and sometimes more influential factor in setting priorities.
Several staff described setting their own priorities based primarily on
which deadline had to be met next. Deadlines can flow from such things as
congressional reporting requirements; WTO reporting requirements; preparing
for and attending various meetings, either among U.S. agencies, with foreign
officials, or as required by certain trade agreements or international
organizations; and the specific time lines required to pursue formal dispute
settlement cases.

Once agencies have identified potential compliance problems, they must be
able to gather and analyze a wide range of information about these problems.
For example, staff in the offices we examined said they need information to
document foreign governments' commitments, such as copies of trade
agreements and information about any formal or informal commitments foreign
governments made to the United States. They also reported needing
information on what the foreign government or private sector actors are
doing that caused the allegation of noncompliance. This includes
documentation of a foreign government's current or proposed laws and
regulations; documentation on foreign practices that may be inconsistent
with trade obligations; and various trade and foreign market data, such as
prices, distribution of market share, and foreign product consumption
trends. Staff said they also need information about U.S. and foreign
industry practices and procedures in order to fully understand how best to
address an issue. Finally, information about any political dimensions of the
foreign government's action or position is often useful.

Once the offices have gathered all necessary and available information, they
begin an analytical process that may require a wide range of expertise and,
therefore, may require input from other offices or agencies. The type and
amount of analysis that is done depend on the nature of the case and how
elaborate U.S. efforts to address the case become. In several compliance
cases we examined, economic analysis was done to assess how economic
problems in the foreign country led to the compliance problem and what
impact the compliance problem had on U.S. trade. In other cases, legal
analysis was done to assess relevant trade agreement provisions and
commitments made by the foreign government and to determine whether the
compliance issue violated those provisions. As trade agreements become more
complex, technical analysis is increasingly done to compare the U.S. and
foreign approach to relevant regulatory or scientific issues. For example,
in one compliance case we examined, USTR argued that Japanese requirements
that each U.S. apple variety be tested for certain pests before Japanese
officials would approve the varieties for import were not based on sound
scientific evidence. In addition, strategic or policy analysis is done to
weigh various response options available to the United States and the
appropriate timing of such a response.

The process of developing and implementing responses to compliance problems
is a collaborative effort between the federal government and the private
sector, the overall goal of which is to resolve compliance problems quickly
in the most commercially beneficial way for the private sector. During this
process, responsible agencies weigh other agencies' perspectives and private
sector interests to develop the most appropriate U.S. response. Their
success in resolving compliance problems depends on a number of factors,
some of which they do not control. These include
(1) the nature of the compliance problem itself; (2) the degree of private
sector support and commitment to resolving the problem; (3) the level of
resources that multiple agencies can and will devote to resolving the
problem; (4) the extent to which the United States can bring to bear
sufficient leverage and the foreign government's willingness to respond to
the problem; and (5) the available means to enforce compliance, which is
tied to the specific terms of the agreement and whether any consultative or
legal recourse mechanisms are available.

The USTR, Commerce, and Agriculture offices we examined described using
various methods and levels of communication with foreign governments in
their attempts to resolve compliance problems. For example, one common
method is to have U.S. embassy staff deliver a demarche, or formal message,
to relevant foreign agency officials that outlines the U.S. position
regarding the compliance problem. Another common method is to discuss the
problem in meetings of the WTO committees that oversee the implementation of
individual agreements. For example, in one compliance case we examined, the
United States raised concerns about a proposed Swiss agricultural regulation
in two WTO committees overseeing two different agricultural agreements and
successfully persuaded Switzerland to modify its regulation.

Compliance issues cannot be resolved as quickly when the issue itself is
complex, agreement terms are vague or subject to interpretation, or the
foreign government is unresponsive to U.S. resolution efforts. Under such
circumstances, U.S. efforts enter a protracted phase in which agencies look
for opportunities to raise the issue at appropriate and increasingly higher
levels within the foreign government. For example, in one compliance case we
examined, USTR officials learned that Peru planned to request a
precedent-setting extension of time to meet its obligations to the United
States under the WTO agreement on customs valuation. USTR officials in
Washington and overseas coordinated their efforts to raise the issue with
four different Peruvian officials in four separate forums and locations on
the same day. The approach persuaded Peru to work with USTR to resolve the
problem.

Because of differences in their legislative authority, USTR, Commerce, and
Agriculture play different roles in the resolution process. Offices from all
three agencies may take the lead in addressing an issue in the early stages,
but USTR is the only agency authorized to invoke dispute settlement
procedures on behalf of the United States. Therefore, its involvement
conveys the seriousness of the U.S. government's commitment to resolve an
issue.

In some cases, the U.S. government must make a decision about invoking
dispute settlement procedures where provided by trade agreements or about
taking other actions under U.S. trade law, such as increasing tariff levels
on foreign imports. According to U.S. and private sector officials,
initiating dispute settlement procedures requires considerable time and
effort by both the government and the private sector. For example, officials
in USTR's Monitoring and Enforcement Unit told us that a substantial amount
of evidence may be required to prove one's case in dispute settlement
proceedings. They also told us that the process can be
time-consuming--two prominent WTO dispute settlement cases the United States
initiated against the European Union, on European Union import measures for
hormone-treated beef and bananas, were each pending in the WTO's dispute
settlement system for about 3 years. Finally, USTR officials told us that,
from the U.S. government's perspective, the outcome of WTO dispute
settlement cases can have positive and negative impacts on the global
trading system. Therefore, USTR's Monitoring and Enforcement Unit closely
monitors developments in many WTO cases, whether or not the United States is
a participant. For these reasons, decisions to proceed with dispute
settlement are always vetted through an interagency process that considers
how such actions affect a broad range of U.S. interests.

Many agency officials noted that interagency coordination is necessary and
beneficial throughout this process for obtaining a breadth of agency
perspectives and expertise, developing cohesive U.S. positions to address
compliance issues, leveraging available resources, and bringing the full
weight of the U.S. government to bear in seeking resolutions to problems.
Staff in the offices we examined regarded interagency coordination as an
inherent aspect of federal monitoring and enforcement efforts, although it
was recognized that the quality of such coordination was sometimes uneven
because it is very dependent on the level of commitment by other agencies.
In some areas, like within Agriculture or between USTR and certain parts of
Commerce and State, coordination appears to be active and effective.
However, because the overall amount and quality of participation by other
agencies in interagency trade policy committees have diminished in recent
years, USTR officials report that they do not always have the breadth of
perspectives or information needed to develop or advance U.S. positions. As
a result, USTR is less able to perform its role of weighing different agency
perspectives to determine the overall U.S. national interest in trade policy
matters.

The offices we examined also regarded private sector support as crucial to
the success of their monitoring and enforcement efforts. Officials said the
private sector knows the market and has contacts, information, expertise,
and other resources the U.S. government lacks. It takes a pragmatic point of
view toward resolving problems and can be a source of creative strategies.
The private sector can also marshal political backing in the United States
and abroad, increasing U.S. leverage for resolving compliance issues.

Key Reporting Mechanisms Related to Trade Agreement Monitoring and
Enforcement

U.S. agencies are required by domestic law to prepare a variety of
trade-related reports that assist them in their efforts to monitor and
enforce trade agreements. Since these are monitoring tools, preparation of
some of the reports requires agencies to review the operation or
implementation of certain trade agreements. In addition, some of the reports
provide information necessary for U.S. agencies to consider in taking
enforcement action. The reporting requirements range from supplying
comprehensive coverage of a wide array of trade issues, industries, or
geographic sectors to providing a narrow focus on specific issues or areas.
Table 3 provides more detailed information on many of the key reporting
mechanisms.

Table 3: Key Reporting Mechanisms Used in Monitoring and Enforcing Trade
Agreements

Continued from Previous Page

 Lead
 responsible    Reporting mechanisms  Frequency Description
 agency                               of report
                                                This report provides
                                                information on the
                                                operation of the trade
                                                agreements program and the
                                                provisions of import relief
                                                and adjustment assistance
                Annual Report on the            to workers and firms. In
                Trade Agreements                part, the report covers
 USTR           Program               Annual    areas such as new trade
                                                negotiations, changes in
                (19 U.S.C. sect. 2213)              trade agreements, and the
                                                results of actions to
                                                remove foreign trade
                                                restrictions against U.S.
                                                exports and eliminate
                                                foreign practices that
                                                discriminate against U.S.
                                                service industries.
                                                The report is a statement
                                                of U.S. trade policy
                                                objectives and any actions
                                                proposed to achieve those
 USTR           Trade Policy Agenda   Annual    objectives, including
                (19 U.S.C. sect. 2213)
                                                proposed legislation and
                                                progress made during the
                                                preceding year in achieving
                                                prior objectives.
                                                The report identifies and
                                                estimates the impact of
                                                acts, policies, or
                                                practices of foreign
                                                countries that constitute
                National Trade                  significant barriers to
                Estimate (NTE)                  U.S. exports of goods and
 USTR           Report on Foreign     Annual    services, property
                Trade Barriers (19              protected by intellectual
                U.S.C. sect. 2241)                  property rights, foreign
                                                direct investment, and U.S.
                                                electronic commerce. The
                                                NTE also notes any action
                                                taken to reduce or
                                                eliminate barriers
                                                described in the reports.
                                                Report on the activities
                                                and work programs of the
                                                WTO in the preceding year,
                Report on the World             including any efforts by
 USTR           Trade Organization    Annual    USTR to implement
                (19 U.S.C. sect. 3534)              recommendations in a WTO
                                                dispute settlement report
                                                that was adverse to the
                                                United States.
                                                Section 310 of the Trade
                                                Act of 1974, as amended, is
                Identification of               commonly referred to as
                Trade Expansion                 "Super 301." In the Super
                Priorities (Super               301 report, USTR annually
 USTR           301) (19 U.S.C. sect.     Annual    reviews U.S. trade
                2420 note containing            expansion priorities to
                Executive Order                 identify in a report those
                13116)                          foreign country practices,
                                                which, if eliminated, would
                                                most likely increase U.S.
                                                exports.

 Lead
 responsible    Reporting mechanisms  Frequency Description
 agency                               of report
                                                Section 182 of the Trade
                                                Act of 1974, as amended, is
                                                commonly referred to as
                                                "Special 301." This section
                                                requires USTR to identify
                                                those countries that deny
                                                adequate and effective
                                                protection for intellectual
                                                property rights, or fair
 USTR           Special 301 Review    At least  and equitable market access
                (19 U.S.C. sect. 2242)    annually  for U.S. persons that rely
                                                on intellectual property
                                                protection. USTR shall only
                                                designate as "priority
                                                foreign countries" those
                                                that have the most onerous
                                                or egregious practices and
                                                whose practices have the
                                                greatest adverse impact on
                                                the relevant U.S. products.
                                                This report reviews the
                                                operation and effectiveness
                                                of U.S. telecommunications
                                                trade agreements and
                                                determines whether any act
                                                or policy of a foreign
                                                country that has entered
                                                into a
                Annual Review of                telecommunications-related
 USTR           Telecommunications    Annual    agreement with the United
                Trade Agreements (19            States is either not in
                U.S.C. sect. 3106)                  compliance with the terms
                                                of the agreement, or
                                                denies, within the context
                                                of the agreement, mutually
                                                advantageous market
                                                opportunities to
                                                telecommunications products
                                                and services of U.S. firms
                                                in that country.
                                                This report identifies
                                                foreign countries that are
                                                signatories to the WTO
                                                Government Procurement
                                                Agreement, NAFTA, or other
                                                agreements relating to
                                                government procurement and
                                                that are in violation of
                Annual Report on                their obligations under
                Discrimination in               these agreements. The
                Foreign Government              report also identifies
 USTR           Procurement (19       Annual    those countries that
                U.S.C. sect. 2420 note              maintain a significant and
                containing Executive            persistent pattern of
                Order 13116)                    discrimination in
                                                government procurement
                                                against U.S. goods and
                                                services that results in
                                                identifiable harm to U.S.
                                                businesses and whose goods
                                                and services are purchased
                                                in significant amounts by
                                                the U.S. government.
                                                A comprehensive assessment
                                                of the net effect of NAFTA
 USTR           Study on the                    in areas such as the U.S.
                Operation and Effect  Once in   economy, labor and
                of NAFTA (19 U.S.C.   1997      environmental conditions in
                sect. 3462)                         Mexico, and pollution
                                                levels in the region of the
                                                U.S.-Mexican border.

                Study on Trade With             Annual review of the
                Mexico in             Annual    effectiveness of NAFTA
 USTR           Automobiles and       from 1995 provisions with respect to
                Automobile Parts (19  through   increasing U.S. exports of
                U.S.C. sect. 3463)        1999      motor vehicles and motor
                                                vehicle parts to Mexico.
                                                This report describes the
                                                subsidy practices of major
                                                trading partners of the
                                                United States, and the
 USTR and       Annual Report on                monitoring and enforcement
 Commerce       Subsidies (19 U.S.C.  Annual    activities on the part of
                sect. 3571)
                                                USTR and Commerce relating
                                                to these subsidy practices
                                                throughout the previous
                                                year.
                                                This report presents a U.S.
                                                governmentwide strategic
                                                plan that, in part,
 Commerce and                                   establishes priorities for
 the Trade      National Export                 federal activities
 Promotion      Strategy              Annual    supporting U.S. exports,
 Coordination   (15 U.S.C. sect. 4727)              evaluates current export
 Committee                                      programs to bring them in
                                                line with these priorities,
                                                and puts forth plans to
                                                eliminate overlap between
                                                programs.
                The Year in Trade:
 U.S.           Annual Report on the            This report provides
 International  Operation of the      At least  Congress with factual
 Trade          Trade Agreements      annually  information on the
 Commission     Program (19 U.S.C. sect.            operation of the trade
                2213)                           agreement program.
 Lead
 responsible    Reporting mechanisms  Frequency Description
 agency                               of report
                                                This report outlines the
                                                economic policy and trade
                                                practices of each country
                Country Economic                with which the United
                                                States has an economic or
 State          Policy and Trade      Annual    trade relationship,
                Reports (15 U.S.C. sect.
                4711)                           including acts, policies,
                                                and practices that
                                                constitute significant
                                                barriers to U.S. exports or
                                                foreign direct investment.
                                                This report provides
                                                Congress with information
                                                regarding financial
                                                institutions from foreign
                                                countries that offer
                                                services in the United
                National Treatment              States, the types of
 Treasury       Study                 Every 4   services being offered by
                (22 U.S.C. sect. 5352)    years     these companies, the extent
                                                to which foreign countries
                                                deny equal treatment to
                                                U.S. banking and securities
                                                concerns, and the efforts
                                                taken by the U.S.
                                                government to eliminate
                                                discriminatory practices.

Source: GAO analysis.

Staffing at Three Key Agencies Responsible for Trade Agreement Monitoring
and Enforcement

Despite the significant increase in the federal monitoring and enforcement
workload that occurred in 1995 when the comprehensive World Trade
Organization agreements took effect, overall staff levels at USTR and within
responsible Commerce and Agriculture agencies or divisions have been flat or
declining since that time, with the exception of 10 new positions for
monitoring and enforcement added to USTR's budget in fiscal year 1998.
Appropriations also did not always keep pace with authorized staffing
levels. As a result, all three agencies had to pay for annual increases in
salary and other costs by making unwanted staff cuts. USTR, meanwhile, has
faced substantial staff turnover. Decisions to create dedicated monitoring
and enforcement offices made in this environment resulted in a shift, not an
increase, of resources. Some of these resources came from offices that have
important monitoring responsibilities of their own. USTR staffing was
increased in fiscal year 1998, but our work at USTR, Commerce, and
Agriculture shows that some key agency offices are still struggling to
overcome weakness that stem from inadequate resources of their own and at
other agencies.

Managers in all of the offices we examined said staff availability and
expertise are the most important resources they need to monitor and enforce
trade agreements and quickly and comprehensively address compliance
problems. Our work at USTR, Commerce, and Agriculture shows that some agency
offices generally have the amount and type of staff resources they need to
monitor and enforce trade agreements, while others face resource challenges.
Private sector representatives said that USTR, Commerce, and Agriculture
were responsive to industry concerns and dedicated to resolving compliance
problems but noted that the agencies' capacity to do so is limited.

Most staff with monitoring responsibilities also perform other functions,
such as negotiating trade agreements or developing foreign market
opportunities. Because agencies could not provide separate data, we analyzed
data on staffing in the agencies or portions of agencies that have primary
responsibility for trade agreement monitoring and enforcement.

Actual staffing at USTR, which is the agency with the most extensive
statutory monitoring and enforcement responsibilities, was relatively flat
from fiscal years 1995 to 1998, before rising in fiscal year 1999, as shown
in figure 5. Moreover, because its appropriation did not keep pace with
rising costs, USTR was unable to hire as many staff as it was authorized.

Figure 5: USTR Authorized and Actual Staff Levels, Fiscal Years 1995-99

Legend

FTE = Full time equivalent

Source: USTR data.

USTR's actual staff levels reached a low point of 155 at the beginning of
fiscal year 1998. For fiscal year 1998, USTR was authorized to hire
14 additional staff, and it added 7 lawyers to the Monitoring and
Enforcement Unit to handle WTO dispute settlement cases. USTR's Japan Office
staff also increased from 3 to 5, including one detailee from the Department
of State. However, other important USTR offices shrank in size. For example,
staffing in the Office of WTO and Multilateral Affairs, which is responsible
for monitoring most WTO agreements, went from
10 slots in fiscal year 1996 to 9 slots in fiscal year 1999. Staffing in the
Western Hemisphere unit, which monitors the North American Free Trade
Agreement, declined from 13 slots in fiscal year 1995 to 9 in fiscal
year 1999. In addition, about 14 percent of USTR's staff separated from the
agency in each of the last 5 fiscal years (fiscal years 1995-99). Such
turnover can be particularly problematic because of USTR's tendency to have
only one staff member covering a given trade topic. In part to bolster its
ability to monitor and enforce trade agreements, USTR requested seven
additional positions for fiscal year 2000, but no increases were authorized.

Some officials pointed out that USTR was designed to be a small,
policy-focused agency and said it is not well equipped to perform
resource-intensive activities, like trade agreement monitoring. In five of
the six particular cases we examined, private sector officials said that
USTR's staff levels had hindered efforts to resolve their compliance
concerns. In the sixth case, industry provided extensive data analysis and
other support to mitigate USTR's limited capacity. USTR staffing also
affected other agencies' efforts. For example, in one case we examined, the
U.S. company tried unsuccessfully for over a year to get USTR to address its
concerns about a possible trade agreement violation by Korea that was
blocking its exports. A company official stated that the company finally
persuaded one of its Senators to ask Commerce about the issue at a
congressional trade hearing, which investigated the problem and
satisfactorily resolved it within a month.

Commerce provides support to USTR and has important monitoring
responsibilities of its own. Its monitoring and enforcement workload has
grown, both because of the increase in the number of U.S. trade agreements
and because of a rise in the number of small- and medium-sized exporters
that rely on Commerce for assistance in resolving market access concerns.
The two divisions with the most export-related trade agreement monitoring
responsibilities--Market Access and Compliance, and Trade Development-- both
experienced declining staff levels since fiscal year 1992.35 Authorized
staff allowances in the Market Access and Compliance division's operating
units fell steadily, from 220 in fiscal year in 1992 to 141 in fiscal year
1999, as shown in figure 6. The Market Access and Compliance division houses
the Trade Compliance Center. After the Center's creation in 1996, Congress
directed Commerce to allocate it 25 staff.36 However, because Commerce did
not receive an overall increase in funds for the Market Access and
Compliance division, other offices in this division decreased in size, as
shown in figure 7. For example, the Japan office that monitors 18 U.S. trade
agreements with Japan declined from 17 staff in fiscal year 1992 to 8 in
fiscal year 1999. The unit responsible for monitoring NAFTA shrank from 33
to 13 during the same time period. The office that monitors trade with China
had 5 positions in fiscal 1999, down from 10 in fiscal year 1994 and 7 in
fiscal year 1992.

Figure 6: Operating Units' Authorized and Actual Staffing in the
International Trade Administration's Market Access and Compliance Division,
Fiscal Years 1992-99

Legend

FTE = Full time equivalent

Source: Commerce Department data

Figure 7: Authorized Staff Allowance by Region in the International Trade
Administration's Market Access and Compliance Division, Fiscal Years 1992-99

Legend

FTE = Full time equivalent

Source: Commerce Department data.

Overall actual staffing in Commerce's Trade Development division, which is
responsible for monitoring over 100 U.S. trade agreements on sectors such as
aerospace, telecommunications, services, and textiles, fell by about
9 percent between fiscal years 1994 and 1999, as shown in figure 8. However,
some offices experienced larger staffing declines. The Office of Automotive
Affairs, which monitors bilateral agreements with Japan and Korea and
NAFTA's automotive chapter, declined from 24 in fiscal year 1994 to 16 in
fiscal year 1999, or by about one-third. Moreover, some Commerce staff are
responsible for monitoring multiple trade agreements, in addition to having
other trade responsibilities, and may not be able to routinely monitor all
of the trade agreements for which they are responsible. For example, the
Commerce official responsible for monitoring several insurance agreements
with Japan also covers insurance matters in other major markets, such as
China, as well as several multilateral agreements on financial services.

Figure 8: Authorized and Actual Staffing in the International Trade
Administration's Trade Development (Industry) Division, Fiscal Years 1992-99

Legend

FTE = Full time equivalent

Source: Commerce Department data.

This loss of resources has been debilitating for country desks and has meant
that some issues brought to the agency's attention are not addressed fully
or quickly. For example, two cases involving Japanese government procurement
are not being worked on full-time because of a lack of staff with
appropriate expertise. Commerce is also less able to support USTR in its
enforcement work. For example, the Commerce staff person assigned to support
USTR in the customs area is also working on WTO accessions, the preshipment
inspection agreement, and a dispute with Mexico over artificially high duty
assessments. Commerce requested 20 additional staff positions in its fiscal
year 2000 budget proposal for the Market Access and Compliance division, but
Congress did not fund 12 of them.

Cuts in Travel, Training, and Equipment

Agriculture plays an important role in trade agreement monitoring and
enforcement. It routinely examines notifications made under WTO and NAFTA
provisions on agriculture, analyzes trade trends, and identifies potential
compliance problems. In cases such as Russia's threatened ban on U.S.
poultry, Agriculture was instrumental in analyzing trade and food safety
issues and supporting policymakers at Agriculture and other departments.
Agriculture also works with USTR on formal dispute settlement cases. It
provided extensive support in WTO cases on the European Union's ban on
hormone-treated beef and Japanese testing requirements for individual
varieties of fruit.

Most of Agriculture's trade responsibilities are handled by the Foreign
Agricultural Service. The Foreign Agricultural Service's trade agreement
monitoring activities are part of its "market access" program area.37 The
staff resources devoted to this program area are shown in figure 9.

Over the last 5 years, the Foreign Agricultural Service has faced flat staff
levels and operating budgets that did not completely cover rising salary
costs. In fiscal year 1999, 50 vacant positions were eliminated across the
agency, and agency officials expect to eliminate about 30 more positions to
help absorb budget cuts for fiscal year 2000. Agency officials said the cuts
in their operating budget will force them to close several overseas offices,
cut back the agency's performance of certain activities, and further reduce
the funds spent on travel, training, and equipment. The agency currently
faces increased responsibilities for WTO negotiations on agriculture, and
officials said they requested additional staff resources in fiscal year 2001
to undertake this task.

Figure 9: Foreign Agricultural Service Staff Years Allocated to Market
Access Program Area, Fiscal Years 1995-2000

a1999 and 2000 are estimates.

Note: Disparities in staff year data between fiscal years 1995 and 1998 are
due in part to changes in the way the Foreign Agricultural Service defined
its various program areas for the 1993 Government Performance and Results
Act and estimated program area staff allocations. Since fiscal year 1999,
the definition of the market access program area has remained relatively
unchanged.

Source: Foreign Agricultural Service data.

About 10 percent of the Foreign Agricultural Service's foreign service staff
rotate to new positions within the agency each year, with implications for
trade agreement monitoring and enforcement. Some officials said that
building relationships with a constantly changing workforce can be
difficult, and noted that it takes staff about a year to come up to speed on
their newly assigned areas. On the other hand, others felt that the agency's
overall expertise is enhanced as a result of staff rotation.

Objectives, Scope, and Methodology

The Chairman of the House Committee on Ways and Means asked us to
(1) identify the federal structure for monitoring and enforcing trade
agreements; (2) describe the increasing complexity of the federal monitoring
and enforcement task and key activities that federal agencies must perform;
and (3) assess whether the Office of the U.S. Trade Representative, the
Department of Commerce, and the Department of Agriculture have the capacity
to handle their monitoring and enforcement workload, that is, whether their
staff resources and support mechanisms enable them to perform needed
monitoring and enforcement activities.

To identify the federal structure for trade agreement monitoring and
enforcement, we first reviewed the relevant legal authorities to determine
the extent to which there is a legal framework for this function. We also
reviewed documentation and interviewed officials at the National Economic
Council and six key agencies identified by statute as most responsible for
administering trade policy: USTR and the Departments of Agriculture,
Commerce, Labor, State, and the Treasury. We obtained information from
officials at these agencies on their specific monitoring and enforcement
responsibilities, their agency's structure for conducting the activities,
and their procedures for coordinating with other trade agencies.

In order to obtain more detailed information about the federal government's
monitoring and enforcement activities, we first selected three offices
within each of USTR, Commerce, and Agriculture as units of analysis. At
Commerce and Agriculture, we chose units that perform either a coordinating
function or represent a geographic location or a commodity or industry. At
USTR, we selected the unit responsible for enforcement, as well as the unit
that handles WTO issues and a geographic unit. The units are listed in table
4.

Table 4: Agencies and Units Selected by GAO for Detailed Analysis

 Agency                Unit                          Unit's orientation
 U.S. Trade
 Representative
                                                     Coordination of
                       ⋅ Monitoring and         monitoring and
                       Enforcement Unit
                                                     enforcement
                       ⋅ Office of Japan        Geographic

                       ⋅ Office of WTO and      WTO issues
                       Multilateral Affairs
 Department of Commerce

                       ⋅ Trade Compliance       Coordination of
                       Center                        monitoring

                       ⋅ Office of Latin        Geographic
                       America/Caribbean

                       ⋅ Office of Automotive   Industry issues
                       Affairs
 Department of Agriculture
                                                     Coordination of
                       ⋅ Multilateral Trade     agriculture trade
                       Negotiations Division
                                                     policy

                       ⋅ Europe, Africa, and    Geographic
                       Middle East Division

                       ⋅ Dairy, Livestock, and  Commodity issues
                       Poultry Division

Source: GAO analysis.

To describe the increasing complexity of the federal monitoring and
enforcement task and key activities that federal agencies must perform, we
reviewed agency records and conducted structured interviews with both
managers and staff from our selected units. We asked them to discuss their
monitoring and enforcement activities, how they set goals and priorities,
how they allocate resources and coordinate with other government units, and
how they interact with the private sector, among other topics. In addition,
we conducted structured interviews with experts in trade policy to gain
their perspective on monitoring and enforcement issues.

To assess whether USTR, Commerce, and Agriculture have the capacity to
handle their current and future monitoring and enforcement workload, we
asked the managers from each of our selected units to choose examples of
trade agreement compliance issues that they believed were representative of
their unit's monitoring or enforcement activities (see table 5 for the list
of examples). We then conducted structured interviews with staff responsible
for managing the example. In addition, we interviewed knowledgeable private
sector representatives affected by the example to gain their perspectives on
how the government responded to the issue. We also reviewed budget,
planning, and other documents from each agency to contrast their recent
resource allocations with their anticipated future workload.

Table 5: Representative Monitoring or Enforcement Examples Selected by
Government Units

 Unit                 Unit-selected example       Nature of issue
 U.S. Trade Representative
 Monitoring and       ⋅ Japan distilled      National treatment and
 Enforcement Unit     spirits                     taxation
                      ⋅ WTO TRIPS Agreement  Intellectual property

 Office of Japan      ⋅ National Police      Government procurement
                      telecommunications
                                                  Plant health measures
                      ⋅ Japan varietal       affecting U.S. fruit
                      testing
                                                  exports
 Office of WTO and
 Multilateral Affairs ⋅ Customs valuation    Tariff administration

                      ⋅ WTO Subsidies        Government subsidies
                      Agreement
 Commerce
 Trade Compliance     ⋅ Korea washing        Technical barriers to
 Center               machines                    trade

                      ⋅ Korea Airport        Government procurement
                      Construction Authority
 Office of Latin
 America and the      ⋅ Ecuador Dealer's Act National treatment
 Caribbean

                      ⋅ Argentina exclusive  Intellectual property
                      marketing rights

 Office of Automotive ⋅ Mechanic
 Affairs              certification under the     Nontariff trade barrier
                      U.S.-Japan Auto Agreement
                      ⋅ Korea Auto Agreement Agreement implementation
 Agriculture
 Multilateral Trade
 Negotiations         ⋅ Philippine pork and  Tariff rate quota
 Division             poultry

                      ⋅ Switzerland animal   Tariff rate quota and
                      welfare regulations         animal health
 Europe, Africa, and  ⋅ EU veterinary
 Middle East Division equivalency                 Standards

                      ⋅ EU Canned Fruit      Government subsidies
                      Agreement
 Dairy, Livestock,
 and Poultry Division ⋅ Russian poultry ban  Market access
                      ⋅ Korea Beef Agreement Tariff rate quota

Legend

EU = European Union
TRIPS = Trade-related Intellectual Property Rights

Source: GAO analysis.

We did our work from June 1998 through February 2000 in accordance with
generally accepted government auditing standards.

Comments From the Office of the U.S. Trade Representative

The following are GAO's comments on the Office of the U.S. Trade
Representative's letter dated February 22, 2000.

1. Our report has been revised to include information on the President's
recent compliance initiative, which is included in the President's fiscal
year 2001 budget request. However, as noted on page 27, we do not believe
this initiative satisfies our recommendation.

2. We revised our report to reflect this point. However, as discussed on
page 27, we continue to believe that our recommendation is appropriate.

3. We respond to this comment on page 28.

4. We revised the report to clarify that federal agencies perform routine
monitoring of certain trade agreements, but our evidence shows that some
trade agreements receive little or no monitoring. We also added language to
show that many trade experts and private sector representatives we spoke
with considered this to be a sensible approach, given the increased number
of U.S. trade agreements and the resources available to monitor them.

5. We contacted USTR to clarify its concerns on this point. USTR was
commenting on our description of a compliance problem in which a U.S.
company tried unsuccessfully for over a year to get USTR to address its
concerns about a possible trade agreement violation by Korea that was
blocking the company's exports (see p. 53). After the company persuaded one
of its Senators to ask Commerce about the issue at a congressional trade
hearing, Commerce investigated the problem and satisfactorily resolved it
within a month. In its comment, USTR draws a distinction between USTR's role
in monitoring trade agreements and Commerce's role in helping U.S.
businesses address problems that are not related to trade agreements. In
explaining USTR's comment, a USTR official told us USTR believes the example
is an unfair criticism of USTR because the issue was more appropriately
handled by Commerce. However, because the issue involved a potential trade
agreement violation, we believe that USTR should have attempted to
understand and address the company's concerns.

6. In the report, we clarified that the statement in question reflects the
beliefs of the private sector source that made the comment. This example is
included in the report to show that some private sector representatives we
spoke with had concerns about whether USTR's resources implicitly limit the
number of dispute settlement cases that USTR can undertake at a given time.
We understand that USTR and private sector representatives may disagree
about whether particular compliance problems should be handled through
dispute settlement proceedings, and we did not attempt to assess the merits
of any potential dispute settlement case.

Comments From the Department of Commerce

The following is GAO's comments on the Department of Commerce's letter dated
February 23, 2000.

1. Our report has been revised to include information on the President's
recent compliance initiative, which is included in the President's fiscal
year 2001 budget request. However, as noted on page 27, we do not believe
this initiative satisfies our recommendation.

2. We revised our report to describe more fully the range of monitoring and
enforcement activities undertaken by federal agencies, as well as the nature
of support provided by the private sector.

3. We noted in our report that Commerce states its staff routinely discuss
compliance problems and resolution strategies with their USTR counterparts.

4. Our report already stated our observation that the government's ability
to do legal analysis of compliance problems is strong. We revised our report
to specifically note that Commerce's Office of General Counsel provides
legal support to the International Trade Administration.

5. Although we already discussed the Commerce Trade Compliance Center's
efforts to assist small- and medium-sized companies through an internet site
in an earlier section of the report, we modified our report to reflect the
priority given by the Trade Compliance Center in this area. In addition, we
have previously commented on the Commerce internet site in International
Trade: Improvements Needed to Track and Archive Trade Agreements
(GAO/NSIAD-00-24, Dec. 14, 1999), which is also noted in the report.

Comments From the Department of Agriculture

The following is GAO's comment on the Department of Agriculture's letter
that we received on February 24, 2000.

1. Our report has been revised to include information on the President's
recent compliance initiative, which is included in the President's fiscal
year 2001 budget request. However, as noted on page 27, we do not believe
this initiative satisfies our recommendation.

GAO Contacts and Staff Acknowledgments

Elizabeth Sirois, (202) 512-8989
Shirley Brothwell, (202) 512-3865

In addition to those named above, David Artadi, Carlos Evora, Wayne Ferris,
Kim Frankena, Anthony Moran, Mary Moutsos, and Katharine Woodward made key
contributions to this report.

(711459)

Table 1: Trade Policy Staff Committee Subcommittees and Task
Forces 35

Table 2: Private Sector Advisory Committees 40

Table 3: Key Reporting Mechanisms Used in Monitoring and
Enforcing Trade Agreements 48

Table 4: Agencies and Units Selected by GAO for Detailed Analysis 60

Table 5: Representative Monitoring or Enforcement Examples
Selected by Government Units 61

Figure 1: U.S. Merchandise Export Growth as Compared to Gross
Domestic Product Growth, 1970-98 6

Figure 2: Share of 1998 U.S. Merchandise Exports to Trade Agreement Partners
7

Figure 3: Agencies That Participate in Federal Trade Agreement
Monitoring and Enforcement Efforts 9

Figure 4: Cumulative Number of USTR-negotiated Trade Agreements, 1984-98 13

Figure 5: USTR Authorized and Actual Staff Levels, Fiscal
Years 1995-99 52

Figure 6: Operating Units' Authorized and Actual Staffing in the
International Trade Administration's Market Access and
Compliance Division, Fiscal Years 1992-99 54

Figure 7: Authorized Staff Allowance by Region in the International
Trade Administration's Market Access and Compliance Division,
Fiscal Years 1992-99 55

Figure 8: Authorized and Actual Staffing in the International Trade
Administration's Trade Development (Industry) Division, Fiscal
Years 1992-99 56

Figure 9: Foreign Agricultural Service Staff Years Allocated to Market
Access Program Area, Fiscal Years 1995-2000 58
  

1. For further information on U.S. trade agreements, see International
Trade: Improvements Needed to Track and Archive Trade Agreements
(GAO/NSIAD-00-24, Dec. 14, 1999).

2. The WTO was established on January 1, 1995, as a result of the Uruguay
Round of Multilateral Trade Negotiations of the General Agreement on Tariffs
and Trade. The WTO facilitates the implementation, administration, and
operation of multiple agreements that govern trade among its member
countries. It also provides dispute settlement procedures to resolve
disagreements among its members.

3. About one-third of U.S. merchandise exports in 1998 were to Canada and
Mexico and were covered by the WTO agreements as well as the North American
Free Trade Agreement (NAFTA).

4. 19 U.S.C. 2241 (a)(1)(A)(i).

5. 19 U.S.C. 2412.

6. 19 U.S.C. 3571.

7. 7 U.S.C. 5606, 7 U.S.C. 5674, 19 U.S.C. 3381, and 19 U.S.C. 3391.

8. Members of the National Economic Council include the President; the Vice
President; the Secretaries of State, the Treasury, Agriculture, Commerce,
Labor, Housing and Urban Development, Transportation, and Energy; the
Administrator of the Environmental Protection Agency; the Chair of the
Council of Economic Advisors; the Director of the Office of Management and
Budget; the U.S. Trade Representative; the Assistants to the President for
Economic Policy, Domestic Policy, and Science and Technology Policy; the
National Security Advisor; and other officials of executive departments and
agencies as the President may, from time to time, designate.

9. Advisory committees are to report after the conclusion of trade agreement
negotiations on, among other things, the extent to which a trade agreement
promotes the economic interests of the United States and meets applicable
U.S. negotiating objectives. 19 U.S.C. 2155 (e) and 19 U.S.C. 2902 (4).

10. The actual number of trade agreements currently in force is unknown,
although we found over 400 agreements that entered into force since 1984. In
addition, multiple agencies negotiate trade agreements on behalf of the
United States. For an explanation of the difficulty in identifying and
archiving trade agreements, see International Trade: Improvements Needed to
Track and Archive Trade Agreements.

11. WTO Agreement on the Application of Sanitary and Phytosanitary Measures.

12. The Agreement on Trade-Related Aspects of Intellectual Property Rights
became obligatory for developed countries one year later, on January 1,
1996.

13. We reported on Commerce's internet web site in International Trade:
Improvements Needed to Track and Archive Trade Agreements . The web site can
be found on the internet at http://www.mac.doc.gov/tcc.

14. We reported on U.S. efforts to address other countries' health and food
safety measures that restrict U.S. exports in Agricultural Exports: U.S.
Needs a More Integrated Approach to Address Sanitary/Phytosanitary Issues
(GAO/NSIAD-98-32, Dec. 11. 1997).

15. "Human capital" refers to an agency's workforce, including its technical
and program skills and institutional memory.

16. International Trade: Implementation and Monitoring of the U.S.-Japan
Insurance Agreements (GAO/NSIAD-99-209, Sept. 24, 1999).

17. P.L. 103-62 (Aug. 3, 1993).

18. 19 U.S.C. 2171 and 19 U.S.C. 2241.

19. 19 U.S.C. 2412.

20. 44 Fed. Reg. 69273, December 3, 1979 (19 U.S.C. 2171, notes).

21. 19 U.S.C. 1677.

22. 19 U.S.C. 3571.

23. We reported on Commerce's efforts to create this data base in
International Trade: Improvements Needed to Track and Archive Trade
Agreements (GAO/NSIAD-00-24, Dec. 14, 1999). The data base can be found on
the internet at http://www.mac.doc.gov/tcc.

24. The U.S. and Foreign Commercial Service is a global network located in
more than 220 cities worldwide that assists U.S. exporters by promoting and
protecting U.S. business interests abroad. In the United States, the service
operates a hub-and-spoke network of 92 Export Assistance Centers, which
offer companies a comprehensive range of export facilitation services in one
location.

25. 7 U.S.C. 5606, 7 U.S.C. 5674, 19 U.S.C. 3381, and 19 U.S.C. 3391.

26. 7 U.S.C. 5606.

27. Reorganization Plan No. 3 of 1979 (44 Fed. Reg. 69273, sec. 7, Sept. 25,
1979), as amended (19 U.S.C. 2171, notes). This plan emphasizes the
importance of State's foreign policy expertise to trade policy.

28. We reported on U.S. efforts to address other countries' health and food
safety measures that restrict U.S. exports in Agricultural Exports: U.S.
Needs a More Integrated Approach to Address Sanitary/Phytosanitary Issues
(GAO/NSIAD-98-32, Dec. 11, 1997).

29. Section 332 of the Tariff Act of 1930 (19 U.S.C. 1332 (a), (b), and
(g)).

30. 19 U.S.C. 1872.

31. The Trade Policy Committee was established by Executive Order 11846, on
March 25, 1975.

32. Section 185 of the Trade Act of 1974 (19 U.S.C. 2155).

33. Pursuant to section 135 (c) (1) and (2) of the Trade Act of 1974, as
amended
(19 U.S.C. 2155), 17 Industrial Sector Advisory Committees, 4 Industrial
Functional Advisory Committees, and 5 Agricultural Technical Advisory
Committees were established.

34. Commerce's Trade Compliance Center places a high priority on serving as
a resource for small- and medium-sized exporters.

35. The International Trade Administration's Import Administration Division
monitors the implementation of certain trade agreements, notably those that
address other countries' subsidy and dumping practices.

36. Upon Commerce's request, this "earmark" was removed in fiscal year 1999.

37. Under the market access program area, the Foreign Agricultural Service
initiates, directs, and coordinates the Agriculture Department's formulation
of trade policies and programs with the goal of maintaining and expanding
world markets for U.S. agricultural products. This program area should not
be confused with the Market Access Program, which is funded by Agriculture's
Commodity Credit Corporation to help finance the overseas marketing
activities of various groups, including private companies that qualify as
small businesses under the Small Business Act (The 1996 Farm Act, P.L.
104-127). The Foreign Agricultural Service funds the salaries and
administrative expenses for the Market Access Program, but the Commodity
Credit Corporation receives funds for the program under separate budget
authority (7 C.F.R. 2.16 and 7 U.S.C. 5641).
*** End of document. ***