Agricultural Exports: U.S. Needs a More Integrated Approach to Address
Sanitary/Phytosanitary Issues (Letter Report, 12/11/97, GAO/NSIAD-98-32).

Pursuant to a congressional request, GAO provided information on the:
(1) extent to which foreign sanitary and phytosanitary (SPS) measures
may unfairly restrict U.S. agricultural exports; and (2) federal
structure and approach for addressing such measures.

GAO noted that: (1) despite growing concerns that certain foreign
sanitary or phytosanitary measures may be inconsistent with World Trade
Organization (WTO) provisions and may unfairly impede the flow of
agricultural trade, the U.S. government is not well positioned to
address this issue; (2) agricultural trade associations and key
government officials have identified such measures as an increasingly
important issue in agricultural trade; (3) however, the U.S. Trade
Representative (USTR) and the Department of Agriculture (USDA) have had
difficulty defining the nature and scope of the problem that foreign
sanitary and phytosanitary measures present for U.S. exports, partly
because of the complex nature of the issue but for other reasons as
well; (4) the available data indicate that foreign sanitary and
phytosanitary measures affect the exports of a broad range of
commodities, result in a variety of trade effects, and may create
additional costs for the U.S. industry and government; (5) the U.S.
government approach for addressing foreign sanitary and phytosanitary
measures has been evolving in the 2 years since WTO provisions on
sanitary and phytosanitary measures took effect; (6) however, the
current approach exhibits certain weaknesses; (7) the federal structure
for for addressing foreign sanitary and phytosanitary measures is
complex; (8) at least 12 federal trade, regulatory, and research
entities have some responsibility for addressing such measures, but no
one entity is directing and coordinating overall federal efforts; (9)
some entities' roles and responsibilities for addressing such measures
are not clearly defined, and these entities have had difficulty
coordinating their activities; (10) federal entities lack comprehensive
data on which sanitary and phytosanitary measures are being addressed or
what progress has been made to address them; (11) they have not
developed a process to jointly evaluate measures and determine which
ones the government should address, and in what order; (12) once the
government decides to challenge a measure, multiple entities with
conflicting viewpoints have made it difficult to develop a unified
approach to address measures and decide which cases should be referred
to WTO for dispute resolution; and (13) coordinated goals, objectives,
and performance measures related to federal efforts to address SPS
measures do not yet exist.

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

 REPORTNUM:  NSIAD-98-32
     TITLE:  Agricultural Exports: U.S. Needs a More Integrated Approach 
             to Address Sanitary/Phytosanitary Issues
      DATE:  12/11/97
   SUBJECT:  Interagency relations
             Agricultural products
             Foreign trade agreements
             International economic relations
             Food inspection
             Agricultural industry
             International trade restriction
             Exporting
             Product safety
             Restrictive trade practices
IDENTIFIER:  NAFTA
             North American Free Trade Agreement
             China
             Japan
             Korea
             European Union
             Russia
             Mexico
             
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Cover
================================================================ COVER


Report to Congressional Requesters

December 1997

AGRICULTURAL EXPORTS - U.S.  NEEDS
A MORE INTEGRATED APPROACH TO
ADDRESS SANITARY/ PHYTOSANITARY
ISSUES

GAO/NSIAD-98-32

Agricultural Exports

(711176)


Abbreviations
=============================================================== ABBREV

  AMS - Agricultural Marketing Service
  APAC - Agricultural Policy Advisory Committee
  APHIS - Animal and Plant Health Inspection Service
  ARS - Agricultural Research Service
  ATAC - Agricultural Technical Advisory Committee
  EPA - Environmental Protection Agency
  ERS - Economic Research Service
  EU - European Union
  FAS - Foreign Agricultural Service
  FDA - Food and Drug Administration
  FSIS - Food Safety and Inspection Service
  GATT - General Agreement on Tariffs and Trade
  GIPSA - Grain Inspection, Packers and Stockyards Administration
  NAFTA - North American Free Trade Agreement
  MAFF - Ministry of Agriculture, Forestry and Fisheries (Japan)
  OFM - Oriental fruit moth
  TBM - tobacco blue mold
  TCK - tilletia controversa kuhn
  TPSC - Trade Policy Staff Committee
  SPS - sanitary and phytosanitary
  USDA - U.S.  Department of Agriculture
  USTR - U.S.  Trade Representative
  WTO - World Trade Organization

Letter
=============================================================== LETTER


B-277551

December 11, 1997

The Honorable Thomas A.  Daschle
Minority Leader
United States Senate

The Honorable Tom Harkin
Ranking Minority Member
Committee on Agriculture, Nutrition, and Forestry
United States Senate

The Honorable Patrick J.  Leahy
Ranking Minority Member
Subcommittee on Research, Nutrition and
  General Legislation
Committee on Agriculture, Nutrition, and Forestry
United States Senate

The economic health of the U.S.  agricultural sector depends
increasingly on its ability to export products to foreign markets. 
However, certain foreign sanitary and phytosanitary (SPS) measures
may prohibit U.S.  agricultural products from entering foreign
markets and constrain the growth of U.S.  agricultural exports.  SPS
measures are designed to protect human, animal, or plant life or
health.  For example, a government might require imported plant
products to be inspected or treated to prevent the introduction of
new pests into the country.  Subject to certain conditions, SPS
measures are allowed under international trade rules, but the U.S. 
Trade Representative (USTR) and the U.S.  Department of Agriculture
(USDA) believe that some foreign SPS measures may in reality be
disguised barriers to trade.  You expressed concern about U.S. 
government efforts to address foreign SPS measures that may unfairly
restrict U.S.  agricultural exports. 

New rules regarding the appropriate use of SPS measures in relation
to trade, established under the World Trade Organization (WTO)\1 in
1995 and the North American Free Trade Agreement (NAFTA)\2 in 1994,
present new challenges to the U.S.  government.  First, determining
whether foreign SPS measures comply with WTO or NAFTA rules requires
input from U.S.  trade agencies as well as U.S.  regulatory agencies
with technical and scientific expertise on food-related issues. 
These regulatory agencies were set up to achieve domestic objectives
but now are increasingly expected to be involved in addressing
international trade issues.  Moreover, U.S.  efforts to address
foreign SPS measures must take into account U.S.  regulatory efforts
to ensure the health and safety of domestically produced and imported
food and agricultural products.  (See Related GAO Products for
reports dealing with agricultural trade and food safety issues.)

In response to your request, this report provides information and
analysis on (1) the extent to which foreign SPS measures may unfairly
restrict U.S.  agricultural exports and (2) the federal structure and
approach for addressing such measures.  As you requested, this report
does not address U.S.  efforts to ensure domestic food safety or
other countries' concerns about U.S.  SPS measures.\3


--------------------
\1 WTO was established on January 1, 1995, as a result of the Uruguay
Round of the General Agreement on Tariffs and Trade (GATT), which
began in 1986 and ended in 1994.  WTO facilitates the implementation,
administration, and operation of multiple agreements that govern
trade among its member countries.  As of September 6, 1997, WTO had
132 member countries. 

\2 NAFTA is a multilateral trade agreement that contains obligations
to govern trade among Canada, Mexico, and the United States. 
Negotiations began in June 1991, and the agreement was signed in
December 1992.  This agreement was supplemented in 1993 by
negotiations of side agreements on labor, the environment, and the
use of temporary import controls for emergency purposes, called
"safeguards." NAFTA entered into force on January 1, 1994. 

\3 Several GAO reports address U.S.  efforts to ensure domestic food
safety, including Agricultural Inspection:  Improvements Needed to
Minimize Threat of Foreign Pests and Diseases (GAO/RCED-97-102, May
5, 1997) and Food Safety:  New Initiatives Would Fundamentally Alter
the Existing System (GAO/RCED-96-81, Mar.  27, 1996). 


   BACKGROUND
------------------------------------------------------------ Letter :1

Sanitary and phytosanitary measures encompass many complex technical
and scientific issues.\4 Typically applied to both domestically
produced and imported goods, SPS measures may be designed to protect

  -- human or animal life or health from food-borne risks,

  -- humans from animal- and plant-carried diseases,

  -- plants and animals from pests or diseases, and

  -- the territory of a country from the spread of a pest or disease. 

To minimize or avoid exposure to risk, SPS measures may address how
goods are produced, processed, stored, and/or transported.  They may
require exporters to certify that their products meet
importing-country requirements and may require imported products to
be inspected or treated before entering the country.  If a government
believes that certain products present a high risk that cannot be
reduced through risk-mitigation techniques, it may impose SPS
measures to ban product entry altogether.\5 Although SPS measures may
result in trade restrictions, governments generally recognize that
some of these restrictions are necessary and appropriate in order to
protect human, animal, and plant life and health.  However,
governments may disagree about whether certain SPS measures are
necessary and appropriate. 

SPS measures are not a new issue in global agricultural trade.  The
United States has long-standing concerns that some SPS measures, such
as European Union (EU)\6 measures on meat imports, Chinese measures
on wheat imports, and Japanese measures on apple and tomato imports,
are unnecessary and have unfairly restricted U.S.  agricultural
exports.  At the same time, other countries have concerns about U.S. 
SPS measures that restrict agricultural products entering the United
States. 

Because of its concerns, the United States played a lead role during
negotiations to establish the WTO and NAFTA; these negotiations
developed rules and principles to help minimize the adverse impact of
SPS measures on trade.\7 The WTO Agreement on the Application of
Sanitary and Phytosanitary Measures (SPS agreement) and NAFTA's
chapter 7 on Agriculture and Sanitary and Phytosanitary Measures
recognize that countries have a right to maintain SPS measures that
protect the health and safety of their population and agricultural
sector and to determine acceptable levels of risk.  However, these
agreements stipulate that the application of SPS measures and
determination of risk levels should not be arbitrary or constitute
disguised restrictions to trade.  Therefore, they require SPS
measures to be based on scientific principles, including an
assessment of relevant risks.  (These two agreements are similar, but
not identical.  App.  I contains more information about the WTO SPS
agreement.)

In addition to these rules and principles, the WTO and NAFTA also
provided dispute settlement procedures to help resolve disagreements
between countries about their SPS measures.  These procedures include
consultations (discussions) and review by a dispute settlement panel. 
Before invoking dispute settlement procedures, countries generally
try to resolve their disagreements through more informal means. 

Although the SPS agreement and NAFTA have established certain
standards for the application of SPS measures, disagreements between
countries about these measures often involve complex issues not
specifically addressed by the texts of the agreements.  First, the
agreements require measures to be based on scientific principles, but
scientific research on certain topics may not exist or existing
research may be inconclusive.  For example, the lack of sufficient
research on certain poultry diseases affects U.S.  exports of poultry
meat to Australia.\8

Second, the SPS agreement and NAFTA require measures to be based on
an assessment of risk, but governments may have different risk
tolerances or may disagree about how to ensure certain minimal levels
of risk.  Such a disagreement exists between the United States and
China concerning wheat imports.\9 Finally, because of domestic
pressures or larger outstanding trade or political issues,
governments may be unwilling or unable to change their SPS measures. 
An EU ban in place since the mid-1980s that prohibits importing meat
treated with growth-promoting hormones\10 appears to be linked, in
part, to such issues.\11

Moreover, in attempting to resolve such concerns, the U.S. 
government may not fully understand a foreign government's reasons
for establishing a measure and therefore may have difficulty
determining what strategy will be most effective to resolve the issue
or assessing whether its efforts are having any impact.  If
additional research is required, such research can be time consuming
to complete.  Finally, the government must work closely with industry
officials to determine whether they are willing to perform any
risk-mitigation techniques that the foreign government may request. 
In some cases, although the government may not believe such
techniques are necessary, industry officials may be willing to
perform risk mitigation in order to gain access to a new market. 
Because of such issues, addressing and seeking resolution to foreign
SPS measures can be a long and complex process that requires
substantial negotiation between the United States and foreign
governments. 

The United States has had long-standing concerns about several
foreign SPS measures that the new WTO rules on SPS measures have
helped resolve.  For example, on June 30, 1997, a WTO dispute
settlement panel requested by the United States found that the EU
hormone ban does not conform with a number of provisions in the WTO
SPS agreement.  While this represents a significant achievement for
the United States, the matter is not yet resolved because the EU has
filed an appeal regarding the decision.  Examples of other key SPS
issues that were resolved in 1997 include a Japanese ban on U.S. 
tomato imports, EU acceptance of most U.S.  meat inspection
procedures, long-standing Chinese bans on U.S.  grape and sweet
cherry imports, Chilean measures on wheat and several types of fruit,
and Mexican measures on sweet cherry imports.\12 Examples of
prominent measures that were resolved in 1996 and 1995, respectively,
include Russian measures on poultry imports and Korean shelf-life
standards.  However, in spite of these successes, many other SPS
measures remain unresolved, and new problems involving SPS measures
continually surface. 

Federal efforts to resolve issues related to foreign SPS measures
coincide with new expectations that the management of federal
programs will increasingly focus on results.  Specifically, the
Government Performance and Results Act of 1993 (the Results Act)
seeks to improve federal program management by requiring federal
agencies to set goals for program performance and to measure the
results of their efforts.\13 The Results Act envisions that when
multiple federal agencies share responsibility for addressing
cross-cutting issues, as is true for SPS measures, programs should be
closely coordinated to ensure that goals are consistent, and, as
appropriate, mutually reinforcing. 


--------------------
\4 Sanitary measures pertain to human and animal health and safety. 
Phytosanitary measures pertain to protecting plants from pests and
diseases. 

\5 Such techniques include inspection or treatment in the exporting
country or at the point of entry to the importing country, post-entry
treatment or detention in quarantine facilities, or restrictions on
the use or distribution of a commodity. 

\6 EU member countries include Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain, Sweden, and the United Kingdom. 

\7 The ministerial declaration that launched GATT's Uruguay Round in
1986 stated that "negotiations shall aim to achieve greater
liberalization of trade in agriculture and bring all measures
affecting import access and export competition under strengthened and
more operationally effective GATT rules and disciplines by," among
other things, "minimizing the adverse effects that sanitary and
phytosanitary regulations and barriers can have on trade in
agriculture."

\8 According to USDA officials, the United States needs to determine
whether research exists or conduct new research to attempt to refute
Australian concerns that avian influenza, a disease that affects
poultry, can be transmitted through poultry meat.  Because of these
concerns, the United States has been unable to export poultry meat to
Australia. 

\9 China has a stated ban on U.S.  wheat exports that contain the
tilletia controversa kuhn (TCK) fungus, arguing that for food
security reasons it cannot be exposed to any risk that might reduce
its wheat production.  The U.S.  government has argued, based on
research about the fungus, that China does not have the right
climatic conditions for the fungus to become established and,
therefore, U.S.  wheat exports that are found to contain the fungus
do not present a risk to China.  China is not a WTO member, but has
applied to join.  See page 11 and appendix III for more details. 

\10 Until November 1, 1993, the EU was known as the European
Community.  The hormone ban was established under the European
Community by the European Commission, which was the executive branch
of the European Community and continues to exist under the EU.  For
ease of reference, we refer to the hormone ban throughout this report
as an EU measure. 

\11 According to a January 1996 press report, even though scientific
evidence demonstrated that the use of growth-promoting hormones in
livestock did not present a human health risk, EU agriculture
ministers were opposed to lifting the ban because of strong consumer
opposition to hormone use.  See "U.S.  Plans to Launch WTO Challenge
of EU Hormone Ban Today," Inside U.S.  Trade (Jan.  26, 1996).  See
page 11 and appendix III for more details. 

\12 As discussed in footnote 9, China is not a WTO member but has
applied to join and would be expected to comply with WTO provisions
on SPS measures upon being granted membership. 

\13 P.L.  103-62 (Aug.  3, 1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Despite growing concern that certain foreign sanitary or
phytosanitary measures may be inconsistent with World Trade
Organization provisions and may unfairly impede the flow of
agricultural trade, the U.S.  government is not well positioned to
address this issue.  Agricultural trade associations and key
government officials have identified such measures as an increasingly
important issue in agricultural trade.  However, the U.S.  Trade
Representative and the U.S.  Department of Agriculture have had
difficulty defining the nature and scope of the problem that foreign
sanitary and phytosanitary measures present for U.S.  exports, partly
because of the complex nature of the issue but for other reasons as
well.  For example, they lack complete information on the number of
measures that affect U.S.  exports, they are unsure how many measures
that have been identified may be inconsistent with World Trade
Organization provisions, and they do not have reliable estimates of
the impact such measures have had on exports.  The best available
data indicated that, in June 1996, U.S.  agricultural exports faced
several hundred measures in
63 countries whose impact on the value of trade was potentially
extensive.  These data, as well as the experiences of U.S. 
government and industry officials and our review of six foreign
measures, indicate that foreign sanitary and phytosanitary measures
affect the exports of a broad range of commodities, result in a
variety of trade effects, and may create additional costs for the
U.S.  industry and government. 

The U.S.  government approach for addressing foreign sanitary and
phytosanitary measures has been evolving in the 2 years since World
Trade Organization provisions on such measures took effect.  However,
the current approach exhibits certain weaknesses.  The federal
structure for addressing foreign sanitary and phytosanitary measures
is complex.  At least 12 federal trade, regulatory, and research
entities have some responsibility for addressing such measures, but
no one entity is directing and coordinating overall federal efforts. 
Some entities' roles and responsibilities regarding sanitary and
phytosanitary measures are not clearly defined, and these entities
have had difficulty coordinating their activities.  Federal entities
lack comprehensive data on which sanitary and phytosanitary measures
are being addressed or what progress has been made to address them. 
They have not developed a process to jointly evaluate measures and
determine which ones the government should address, and in what
order.  Once the government decides to challenge a measure, multiple
entities with conflicting viewpoints have made it difficult to
develop a unified approach to address measures and decide which cases
should be referred to the World Trade Organization (or, in cases
involving Canada or Mexico, possibly initiated under the North
American Free Trade Agreement) for dispute resolution.  Finally,
coordinated goals, objectives, and performance measurements related
to federal efforts to address sanitary and phytosanitary measures do
not yet exist. 


   FOREIGN SPS MEASURES ARE
   REGARDED AS AN IMPORTANT TRADE
   ISSUE, BUT THE PROBLEM IS NOT
   CLEARLY DEFINED
------------------------------------------------------------ Letter :3

Agricultural trade associations and government agencies responsible
for promoting agricultural trade regard foreign SPS measures as an
important trade issue.  Private sector and government officials are
concerned that such measures may be used inappropriately to restrict
the growth of U.S.  agricultural exports.  While the government does
not know the full scope of the problem, available data indicate that
foreign SPS measures affect a broad range of U.S.  processed product,
meat, poultry, fruit, vegetable, and grain exports.  Such measures
have disrupted ongoing trade or prevented U.S.  products from
entering new markets. 


      AGRICULTURAL INDUSTRY AND
      U.S.  GOVERNMENT HAVE
      IDENTIFIED FOREIGN SPS
      MEASURES AS A PROMINENT
      AGRICULTURAL TRADE ISSUE
---------------------------------------------------------- Letter :3.1

Many agricultural trade association and U.S.  government officials
have identified foreign SPS measures as a prominent trade issue. 
Some U.S.  and industry officials attributed this prominence to an
increase in the number of SPS measures that appear to affect U.S. 
exports, while others attributed it to increased visibility of such
measures following recent trade agreements.  The WTO and NAFTA
addressed certain types of policies that have traditionally
restricted trade in agricultural products, such as high tariffs and
quotas.\14

However, several industry and government officials expressed concern
that other countries may be increasing their use of SPS measures as a
way to compensate for these required reductions in tariffs and quotas
and to continue protecting their markets from imports. 

We discussed SPS issues with representatives from 19 agricultural
trade associations that represent commodities such as meat, poultry,
fruits, vegetables, and wheat.  Most of the associations regarded
foreign SPS measures as an important and growing issue for U.S. 
agricultural exports, and several representatives told us they
consider such measures to be their association's primary trade
concern.  These officials provided examples of foreign SPS measures
that they believe are inconsistent with WTO provisions and have
disrupted their exports to certain markets or caused them to
decrease, created additional costs for their producers, or prevented
their exports from entering new markets. 

Some U.S.  government agencies have also become concerned about the
potentially negative impact of foreign SPS measures on U.S.  exports. 
USTR and the Secretary of Agriculture have both identified foreign
SPS measures that they believe are inconsistent with WTO rules as key
barriers to exports of U.S.  agricultural products.\15 Several USDA
officials estimated that the number of complaints and the percentage
of time they or their staff spend addressing them have increased
substantially over the last few years.  For example, the Special
Assistant for International Trade to the Secretary of Agriculture
told us that while he is supposed to handle all agricultural trade
issues, his agenda has been dominated by the proliferation of SPS
issues.  USTR and the Secretary of Agriculture have established the
removal of such barriers as a primary objective of their trade agenda
to increase U.S.  agricultural exports.  Total agricultural exports
were just over $60 billion in 1996. 


--------------------
\14 The WTO Agreement on Agriculture required member countries to
convert nontariff barriers (such as quotas and import licenses) to
tariffs, reduce the level of tariffs and subsidies, and offer new
market access opportunities.  These requirements are discussed in The
General Agreement on Tariffs and Trade:  Uruguay Round Final Act
Should Produce Overall U.S.  Economic Gains (GAO/GGD-94-83a and 83b,
July 29, 1994).  NAFTA required the gradual removal of tariffs on
agricultural products.  See North American Free Trade Agreement: 
Assessment of Major Issues (GAO/GGD-93-137a and 137b,
Sept.  9, 1993). 

\15 Statement by Dan Glickman, Secretary of Agriculture, before the
House of Representatives, Committee on Agriculture (Mar.  18, 1997). 
Statement of Ambassador Charlene Barshefsky, before the Senate
Finance Committee (Jan.  29, 1997). 


      DEFINING THE PROBLEM HAS
      BEEN DIFFICULT
---------------------------------------------------------- Letter :3.2

Although USTR and USDA are concerned about foreign SPS measures, they
have been unable to precisely define the problem that such measures
present for U.S.  exports, for several reasons.  First, USTR and USDA
do not know the number of foreign measures that currently affect U.S. 
exports, in part because the number changes frequently as new
complaints surface and old complaints are resolved.  Nevertheless,
USTR and USDA have both developed information that indicates that
foreign SPS measures that have an actual or apparent adverse affect
on U.S.  exports exist in many countries and apply to a broad range
of U.S.  agricultural commodities. 

USTR's 1996 annual report on foreign trade barriers contained
information about SPS measures in 26 of the 46 countries or regions
it reviewed.\16 In early 1996, USDA attempted to develop a more
comprehensive definition of the problem.  It surveyed (1) Foreign
Agricultural Service (FAS) attachs posted overseas that collectively
covered 132 countries that accounted for 98 percent of the 1996 U.S. 
export market for agricultural, forestry, and fisheries products; and
(2) representatives of agricultural producer groups.  It asked the
FAS attachs and producer groups to identify foreign technical
barriers to trade that, among other things, appeared to violate one
or more provisions of recent trade agreements.\17 As of June 1996,
USDA had developed a list of 315 technical barriers to agricultural
trade in
63 countries, over 90 percent of which were SPS measures.\18 One USDA
official observed that measures were frequently identified in
countries that were among the top importers of U.S.  agricultural
products in 1996. 

While the USTR and USDA data provide some sense of the problem, they
do not accurately measure its size.  The USDA survey is the best
available definition of the problem; it represents a "snapshot" of
foreign SPS measures that had been identified as of June 1996 and,
therefore, does not reflect information about measures that have been
resolved or measures that have emerged after that time.  An FAS
official told us that, in mid-1997, responsible USDA agencies began
to update the survey data on a quarterly basis by adding newly
identified measures and deleting resolved measures.  USDA officials
said that, despite its limitations, the survey has helped them better
understand the nature and extent of foreign SPS measures. 

The second reason that USTR and USDA have had difficulty defining the
size of the problem that foreign SPS measures present is because they
do not know, of the measures they have identified, how many may be
inconsistent with WTO provisions regarding SPS measures.  For
example, USDA officials said some of the SPS measures identified in
the 1996 survey could be legitimate, appropriate measures that the
United States should not contest.  USTR and USDA officials said that
considerable scientific research, testing, and exchange of
information is often necessary before the United States can make
conclusive determinations about whether or not a foreign measure
complies with the WTO SPS agreement.  These officials said this
process generally takes considerable time. 

Third, USTR and USDA do not know how the SPS measures they have
identified impact the value of trade, in part because such estimates
are inherently difficult to develop.  USDA unofficially estimated
that the
315 measures identified in the 1996 survey threatened, constrained,
or blocked almost $5 billion of U.S.  agricultural exports at the
time the survey was conducted.  However, some USDA officials told us
they question the accuracy of the estimate for several reasons.  For
example, USDA officials said it is difficult to predict whether an
SPS measure would affect all exports of a given commodity or only
selected exports of the commodity.  Also, in cases where a U.S. 
commodity does not yet have access to a market, estimates of the
market's potential size were based on U.S.  exports to a similar
market, which may not be accurate.  USDA officials also told us the
estimates were not derived from empirical trade models and therefore
should be regarded only as an order-of-magnitude indication of the
significance of foreign SPS measures to U.S.  exports. 

Without better data, particularly regarding the number of measures
that affect U.S.  exports and more reliable estimates of their impact
on trade, USTR and USDA are unable to determine the size of the
problem or whether the problem is growing.  They are also unable to
evaluate how their efforts have affected the size of the problem and
the value of trade. 


--------------------
\16 1996 National Trade Estimate Report on Foreign Trade Barriers,
USTR (Washington, D.C.:  1996). 

\17 The measures had to meet three criteria.  First, they had to be
recently proposed or currently enforced by foreign government
officials.  Second, they had to decrease or potentially decrease U.S. 
exports.  Third, they had to appear to be in violation of one or more
disciplines of the new trade agreements (for example, the WTO and
NAFTA), although the determination of actual violation of any given
measure would require substantial additional investigation. 

\18 Several USDA agencies participated in developing the survey and
analyzing its results.  Therefore, we refer to the survey as a USDA
effort, although a published report that discusses the survey and its
results states that it does not reflect the official USDA position. 
See Overview of Foreign Technical Barriers to U.S.  Agricultural
Exports, Economic Research Service Staff Paper, Commercial
Agriculture Division, Economic Research Service (Washington, D.C.: 
USDA, Mar.  1997). 


      FOREIGN SPS MEASURES APPEAR
      TO HAVE A BROAD AND DIVERSE
      EFFECT ON TRADE
---------------------------------------------------------- Letter :3.3

Foreign SPS measures appear to affect a wide range of agricultural
products, involve various health and safety issues, and result in
multiple trade effects or additional costs.  According to USDA and
industry officials, the foreign SPS measures they have identified
affect numerous commodities, including processed products, grains,
oilseeds, animal products, fruits, vegetables, cotton, seeds, nuts,
fish, and forestry products.  A large portion of the foreign SPS
measures identified involve plant health issues, while others involve
food safety or animal health issues. 

According to U.S.  government and industry officials, the way in
which foreign SPS measures affect U.S.  exports also varies.  These
measures have threatened or constrained trade to existing markets or
prevented U.S.  exports from entering new markets.  Some measures
constrain trade by requiring products to be treated or inspected
before entering markets, which may damage the quality and
marketability of certain perishable products.  Some commodities, such
as fruits and vegetables, appear to face a large number of measures
while others, such as wheat, appear to face a limited number of
measures.  USDA and industry officials have estimated that some
measures affect several hundred million dollars of trade, while other
measures affect $1 million or less. 

We reviewed six foreign SPS measures that have affected or continue
to affect U.S.  agricultural exports.  These measures impacted
various commodities, involved various issues, and were estimated to
have a range of impacts on the value of trade (additional information
about these measures and federal efforts to address them are
contained in app.  III).  Of these six measures, one was determined
to be inconsistent with WTO provisions regarding SPS measures by a
WTO dispute settlement panel (the EU ban on growth-promoting
hormones).  USDA officials told us that four others may also be
inconsistent with these provisions and stated their belief that the
measures lacked a scientific basis.\19

  -- Since 1974, China has banned wheat shipped from U.S.  states in
     the Pacific Northwest, an area where the TCK fungus is known to
     occur.\20 China has continued to import wheat shipped from other
     U.S.  ports, but if it detects TCK in these shipments, China
     requires the price to be discounted and, on a few occasions, has
     refused to accept such shipments.  The impact of the ban on U.S. 
     wheat exports has not been quantified. 

  -- In anticipation of the 1989 implementation of the EU ban on
     growth-promoting hormones in livestock production, U.S.  beef
     and veal exports to the EU dropped about 93 percent in 1 year,
     from about $117 million in 1988 to about $9 million in 1989, and
     have recovered little since then (see fig.  1).  In June 1997, a
     WTO dispute settlement panel found the measure to be
     inconsistent with the SPS agreement.  The EU has appealed this
     decision. 

   Figure 1:  U.S.  Beef and Veal
   Exports to the EU, Calendar
   Years 1985-95

   (See figure in printed
   edition.)

Note:  Edible organ meat includes only products destined for human
consumption. 

Source:  USDA. 

  -- Since as early as 1983, Japan blocked U.S.  tomato exports over
     concerns that U.S.  tomatoes might carry tobacco blue mold
     (TBM).  After USDA conducted 4 years of research to demonstrate
     that tomatoes were not a host for TBM, Japan lifted the ban on
     25 varieties of tomatoes in April 1997.  An industry association
     estimates U.S.  tomato exports to Japan could reach $50 million
     annually. 

  -- In 1994, a sudden and unexpected change in Korean shelf-life
     standards blocked the entry of more than $1 million worth of
     perishable U.S.  sausage products that had already arrived in
     Korean ports.  According to USTR, had these and other Korean
     shelf-life measures not been revised following WTO
     consultations, they could have affected as much as $1 billion in
     annual U.S.  exports by 1999. 

  -- Since 1992, Mexico has required U.S.  peach and nectarine
     exports to be treated and inspected before entering Mexico to
     protect that country from the Oriental fruit moth, a pest that
     is known to occur in the United States.  USDA officials said the
     quantity of U.S.  peach and nectarine exports to Mexico,
     measured in terms of metric tons, dropped by about 40 percent
     from 1991 to 1996. 

  -- In 1996, Russia imposed a brief ban on U.S.  poultry exports
     because of concerns about food safety and poultry disease
     issues.  The ban was in effect for about 1 week before the
     United States and Russia resolved the issue.  The ban did not
     actually cause U.S.  exports to drop, but it appeared to
     threaten the poultry industry's largest export market, worth
     over $900 million in 1996. 

SPS measures can result in a variety of costs to the agricultural
industry and to the government.  In addition to the costs associated
with a partial or complete loss of sales, industry officials told us
that addressing apparently unfair SPS measures or reaching agreement
with foreign officials to enable U.S.  exports to begin or continue
may result in other costs.  In several of the six cases we reviewed,
industry groups or private companies incurred additional costs for
research, treatment, or inspection.  For example, when Russian
officials said they wanted to inspect the nearly 300 U.S.  poultry
processing facilities that export poultry to Russia, these processing
facilities paid for Russian officials' travel expenses.  Several of
the six cases also resulted in additional costs to the U.S. 
government for such things as research, official travel, or
translator services. 


--------------------
\19 The four measures include those of China, Japan, Korea, and
Russia that we reviewed.  Although China and Russia are not WTO
members, both have applied to join WTO and would be required to
comply with its SPS provisions upon becoming members.  Therefore the
United States cites WTO provisions in its negotiations on SPS issues
with China and Russia. 

\20 According to USDA's Agricultural Research Service, the TCK fungus
reduces plant height. 


   EVOLVING U.S.  APPROACH FOR
   ADDRESSING SPS MEASURES IS NOT
   INTEGRATED OR SYSTEMATIC
------------------------------------------------------------ Letter :4

WTO rules regarding SPS measures have been in place for less than 2
years, and the U.S.  approach for addressing SPS measures that
restrict U.S.  exports is evolving.  However, the current approach is
not integrated or systematic and exhibits several weaknesses.  The
approach is based on a complex structure of multiple trade and
regulatory entities, but no one entity leads overall federal efforts. 
In addition, some entities' roles and responsibilities are unclear,
and their efforts have not been adequately coordinated.  The process
by which measures are addressed lacks comprehensive data and guidance
for making key decisions, including what measures the United States
should address and what steps it should take to address them. 
Moreover, although federal agencies are increasingly expected to set
goals for program performance and coordinate efforts related to
cross-cutting programs, as envisioned by the Results Act, the federal
government lacks coordinated goals, objectives, and performance
measurements for addressing foreign SPS measures. 


      FEDERAL STRUCTURE IS COMPLEX
      AND LACKS INTEGRATION
---------------------------------------------------------- Letter :4.1

The federal structure for addressing foreign SPS measures is complex. 
At least 12 federal entities have some responsibility for identifying
and evaluating SPS measures and attempting to resolve bilateral
disagreements about measures that appear to be inconsistent with the
WTO.  No single entity directs and coordinates the entire scope of
federal efforts, and the roles and responsibilities of some entities
are not clearly defined.  Entities' work loads related to addressing
SPS measures vary, as do the resources each entity has allocated to
this activity.  Concerns exist about insufficient resource
allocations in some entities.  Concerns also exist that the complex
structure contributes to a lack of integration and coordination among
responsible entities. 


         MULTIPLE FEDERAL ENTITIES
         ARE INVOLVED
-------------------------------------------------------- Letter :4.1.1

Of the multiple entities involved in addressing foreign SPS measures,
USTR has the broadest responsibility.  USTR has statutory
responsibility for developing and coordinating the implementation of
U.S.  international trade policy, monitoring the implementation of
trade agreements reached with foreign governments, and enforcing U.S. 
rights under those agreements.\21 It is also responsible for issuing
and coordinating policy guidance to Departments and agencies on
WTO-related matters.\22

Eight USDA entities have collective responsibility for addressing
issues related to foreign SPS measures.  In addition, the Special
Assistant for International Trade to the Secretary of Agriculture has
been given a prominent role in addressing SPS measures and
coordinating USDA's efforts in this area.  As USDA's trade agency,
FAS carries out USDA's statutory responsibility for identifying
foreign SPS measures that adversely impact U.S.  exports and
providing relevant information about them to USTR.\23 In addition,
FAS participates in negotiations to address such measures and is
expected to coordinate its efforts with other USDA agencies and work
closely with USTR.  USDA has several regulatory\24 entities,
including the Animal and Plant Health Inspection Service; Food Safety
and Inspection Service; and Grain Inspection, Packers and Stockyards
Administration, that have domestic food-related responsibilities and,
therefore, are responsible for participating in negotiations to
address the technical aspects of foreign SPS measures and evaluating
how U.S.  trade positions may affect U.S.  SPS measures.  In
addition, USDA's Agricultural Marketing Service plays a limited
technical role because it addresses certain product quality issues
which, while not considered SPS issues, are nonetheless related.\25
In addition, scientific and economic research is performed primarily
by USDA's Agricultural Research Service and Economic Research
Service.  Finally, legal counsel and assistance is provided by USDA's
Office of the General Counsel. 

In addition to USTR and USDA, other federal entities help address SPS
measures.  Federal regulatory authorities with domestic food-related
responsibilities have the needed technical expertise for addressing
foreign SPS measures and evaluating how U.S.  trade positions affect
U.S.  SPS measures; these include the Department of Health and Human
Service's Food and Drug Administration (FDA) and the Environmental
Protection Agency (EPA).  The Department of State is responsible for
facilitating communication with foreign government officials; it also
participates in certain bilateral negotiations on SPS issues and
contributes to the overall U.S.  government policy-making process on
SPS issues.  Industry groups also play a major role in helping the
U.S.  government identify foreign SPS measures that affect their
actual or potential exports, supporting research on technical issues
and advising on strategies to address SPS measures. 

Overlapping or closely related areas of responsibility among these
federal entities can make it difficult to determine which agency
should lead federal efforts to address certain SPS measures.  For
example, USTR and FAS both perform SPS-related activities and have
responsibility for monitoring and addressing agricultural trade
issues.  Overlap also exists within FAS, where some divisions address
trade from a commodity perspective and others address trade from a
geographic perspective.  Food-related responsibilities among the
regulatory entities are closely related (see
table 1). 



                                Table 1
                
                Primary Food-related Responsibilities of
                   Selected U.S. Regulatory Entities

U.S.       Primary food-related
entity     responsibility                Products covered
---------  ----------------------------  -----------------------------
USDA

AMS        Certifies the quality of a    Wide range of products except
           broad range of products       grains and seafood (primarily
           through grading and           quality)
           inspection services.
           Regulates the marketing of
           products under federal
           marketing orders.\a

APHIS      Protects U.S. animal and      Live animals, some animal
           plant resources from pests    products, and all plant
           and diseases.                 products

FSIS       Ensures that the U.S. supply  Meat, poultry, and some egg
           of meat, poultry, and some    products
           egg products is safe and
           wholesome.

GIPSA      Grades the quality of grain   Grains (quality and some
           products.                     diseases)

FDA        Regulates food safety and     All food (except meat,
           labeling (except meat,        poultry, and some egg
           poultry, and some egg         products), animal feed, pet
           products), use of animal      food, animal drugs, food and
           drugs including setting and   color additives, food
           enforcing limits for animal   labeling
           drug residues in food, and
           animal feed and pet food.

EPA        Regulates the use of          Any products affected by
           pesticides in the United      pesticides (FDA and FSIS
           States. Establishes           enforce EPA pesticide
           tolerance levels for          tolerances)
           pesticide residues in or on
           food.
----------------------------------------------------------------------
Legend

AMS = Agricultural Marketing Service.
APHIS = Animal and Plant Health Inspection Service.
FSIS = Food Safety and Inspection Service.
GIPSA = Grain Inspection, Packers and Stockyards Administration. 

\a Marketing orders authorize the Secretary of Agriculture to
regulate the marketing of fruits, vegetables, specialty crops, and
milk.  Depending on the commodity, marketing orders may address
product size, grade, quality, maturity, quantity, distribution,
packaging, or producer prices.  Industry members enter the programs
voluntarily and choose to have federal oversight of certain aspects
of their operations. 

Because of their areas of responsibility, several federal entities
may be involved in addressing a foreign SPS measure.  For example,
the EU ban on growth-promoting hormones has been addressed by USTR,
USDA (FAS and the Food Safety and Inspection Service), and FDA.  The
ban involved technical issues, some of which were under FDA's
jurisdiction (the use of drugs in animals) and others of which were
under the Food Safety and Inspection Service's jurisdiction (the sale
of meat from animals).  As discussed later, we found that in certain
instances the involvement of multiple entities has caused
coordination and communication problems.  However, officials from the
various trade and regulatory entities stated that the participation
of multiple entities is not inherently problematic because each
entity brings its own expertise to an issue. 


--------------------
\21 Trade Act of 1974, as amended, 19 U.S.C.  2411-2420. 

\22 Trade Act of 1974, as amended, 19 U.S.C.  2171(c)(1)(D). 

\23 Agricultural Trade Act of 1978, as amended, 7 U.S.C.  5674(c). 

\24 For ease of reference, we refer to USDA's Agricultural Marketing
Service; Animal and Plant Health Inspection Service; Food Safety and
Inspection Service; and Grain Inspection, Packers and Stockyards
Administration as regulatory entities, even though the scope of each
entity's regulatory authority differs. 

\25 For all products (including agricultural and industrial
products), technical regulations and standards imposed by a country,
such as those related to product characteristics or related processes
and production methods, are subject to the provisions of the WTO
Agreement on Technical Barriers to Trade. 


         NO ENTITY DIRECTS ALL
         FEDERAL EFFORTS
-------------------------------------------------------- Letter :4.1.2

No single federal entity is currently directing and coordinating the
entire scope of federal efforts undertaken to address SPS measures. 
During our review, several U.S.  government and industry officials
expressed concerns that the federal structure for addressing SPS
measures lacked clear leadership and caused various undesirable
effects, including independent and separate agendas among responsible
entities, difficulty making decisions and tracking federal efforts,
and uncoordinated activities.  The Secretary of Agriculture's Special
Assistant for International Trade was particularly concerned about
the difficulty overcoming organizational boundaries among USDA
agencies.  Several industry representatives said the federal
structure made it difficult to know which federal entity should be
contacted to report a given problem, how the information the industry
provided would be shared among federal entities, or what actions
federal entities would take in response to the problem. 

Certain mechanisms exist at USTR and USDA through which portions of
the federal response are directed and coordinated.  However, none of
the mechanisms is comprehensive enough to include all responsible
federal entities and manage all federal efforts to address SPS
measures.  As a result, substantial coordination among these
mechanisms and responsible federal entities is still necessary. 

One coordination mechanism is led by USTR.  USTR created the position
of Director for SPS Affairs within its Office of WTO and Multilateral
Affairs in the fall of 1996 to work closely with other federal
entities responsible for addressing SPS measures.  At that time, the
Director for SPS Affairs began to more actively use the mechanism
established for formal interagency trade policy coordination--the
Trade Policy Staff Committee (TPSC)--to establish the U.S.  position
and approach for addressing certain foreign SPS measures.\26

However, TPSC discussions have focused primarily on determining which
individual SPS measures the U.S.  government should raise for
discussion in meetings of the WTO SPS committee.  Neither USTR,
because of its limited resources, nor the TPSC addresses all SPS
measures that concern the U.S.  government. 

A second coordination mechanism was recently implemented at USDA. 
Although the bulk of federal efforts to address foreign SPS measures
occurs at USDA, neither any of the eight USDA agencies nor the
Secretary of Agriculture's Special Assistant for International Trade
has responsibility for directing and prioritizing overall USDA
efforts to address SPS measures or allocating resources.  We
discussed this situation several times with the Special Assistant
during the course of our review.  In October 1997, the Secretary of
Agriculture announced the formation of a Working Group on
Agricultural Trade Policy to address SPS and other trade issues.  The
working group, which will be led by the Special Assistant and
comprised of the heads of several USDA agencies, is to coordinate
USDA efforts on agricultural trade issues and provide direction
regarding the allocation of resources and establishment of
priorities.  However, because the group's primary purpose is to
improve coordination within USDA on trade issues, participation is to
be limited to USDA agencies.  The group is to serve as USDA's point
of reference for coordination on trade policy issues with other
federal agencies. 

A group of industry associations representing various commodities has
suggested that the federal structure and approach for addressing SPS
measures could be improved with the creation of a single office that
would be responsible for receiving complaints about SPS measures,
coordinating U.S.  government activities to address the measure, and
communicating with the industry. 


--------------------
\26 The TPSC is one of two subcabinet interagency trade policy
coordination groups that USTR leads and administers.  The TPSC is a
staff level group, while the Trade Policy Review Group is comprised
of deputy or undersecretaries.  Membership includes the Departments
of Commerce, Agriculture, State, the Treasury, Labor, Justice,
Defense, the Interior, Transportation, Energy, and Health and Human
Services; EPA; the Office of Management and Budget; the Council of
Economic Advisers; the International Development Cooperation Agency;
the National Economic Council; and the National Security Council. 


         SOME ROLES AND
         RESPONSIBILITIES NOT
         CLEARLY DEFINED
-------------------------------------------------------- Letter :4.1.3

Absent overall leadership of federal efforts, some federal entities'
specific roles in addressing individual measures as well as their
overall responsibility for addressing trade issues have not been
clearly defined.  Although USTR is statutorily responsible for
coordinating U.S.  trade policy, USTR and USDA officials told us that
initial federal efforts to address SPS measures are often handled by
another federal entity, such as FAS or one of the regulatory
entities.  However, it may be difficult to determine which of these
entities should lead initial federal efforts to address an individual
SPS measure because their areas of responsibility overlap or are
closely related.  In discussing federal efforts to address individual
SPS measures with responsible officials, we sometimes found examples
of a lack of clarity about which entity was considered to be leading
federal efforts or disagreement about which entity should be leading
federal efforts.  For example, it was not clear whether USTR or USDA
was leading federal efforts to address the Chinese ban on U.S.  wheat
imports found to contain TCK, and there were differences of opinion
about whether the U.S.  strategy should focus on technical issues or
trade policy. 

USTR, FAS, the Animal and Plant Health Inspection Service, and the
Food Safety and Inspection Service have all had leadership roles in
addressing certain SPS measures and have all supported each other's
leadership in addressing other measures.  FDA and EPA officials told
us they have generally not led federal efforts to address individual
SPS measures but have instead supported such efforts by providing
important technical expertise.  (As discussed in app.  II, FDA has a
lead role in other SPS-related activities that were not the focus of
this report.) The Agricultural Research Service, the Economic
Research Service, and State have also played primarily support roles. 

In addition to the lack of clarity about leadership roles to address
individual SPS measures, several U.S.  and industry officials
expressed concern about various entities' overall responsibility for,
and commitment to, addressing trade issues.  For example, several
industry officials expressed concern that USTR has not taken a
sufficiently active role in addressing foreign SPS measures.  While
USTR is the only federal entity that can initiate WTO dispute
settlement cases, some industry officials said USTR has appeared
reluctant to do so regarding certain SPS measures.  USTR officials
said they will pursue dispute settlement in all SPS cases that have
merit, but said that dispute settlement may not be the only way to
resolve a problem.  They also said industry groups are sometimes
uncomfortable elevating their complaints to such a formal level. 
Some industry officials also said USTR has appeared reluctant to play
a role during bilateral negotiations on certain SPS measures, prior
to seeking dispute settlement within the WTO or NAFTA.  USTR
officials said their role tends to become more active on a bilateral
basis when USDA agencies believe they have done all they can to
address a case.  USTR officials noted they had been heavily involved
in several bilateral negotiations on SPS measures. 

Several government and industry officials also expressed concern that
regulatory and research entities' roles and responsibilities for
addressing foreign SPS measures have not been clearly defined.  As
discussed previously, regulatory and research entities were created
to achieve domestic objectives related to ensuring food safety and
protecting U.S.  agricultural resources but are increasingly expected
to help facilitate trade.  However, officials from USTR and FAS and
several industry officials expressed concern that some regulatory
entities do not regard their role in addressing foreign SPS measures
as an agency priority.  On the other hand, several regulatory
officials expressed concern that their role in the trade area has
expanded but their resources, which must still be allocated to their
primary food-related missions, have not changed.  Therefore, they
said, increasing their trade facilitation activities would probably
require resources to be reprogrammed. 

Many officials from trade, regulatory, and research agencies, and
industry representatives agreed that the participation of regulatory
and research entities in this area is necessary because these
entities have technical and scientific expertise that trade agencies
lack.  Beyond their technical expertise, certain USDA entities have a
mandated trade role because they are responsible for certifying that
exports of products they regulate are healthy and safe.\27


--------------------
\27 The Animal and Plant Health Inspection Service certifies that
plant products are free of pests and diseases and that live animals
are free of disease.  In 1995, it issued 274,000 export certificates
for plant products and an estimated 25,000 export certificates for
live animals.  The Food Safety and Inspection Service certifies that
meat, poultry, and egg product exports are safe and wholesome.  It
could not provide data on the number of certificates issued, but
responsible officials estimated the figure at over 200,000 each year. 


         WORKLOADS AND RESOURCES
         VARY
-------------------------------------------------------- Letter :4.1.4

Because the SPS-related roles and responsibilities of federal
entities vary, their workloads and the resources they have allocated
to addressing SPS measures also vary.  Some entities have substantial
responsibility regarding SPS measures, while others' responsibility
is more limited.  Some entities, accordingly, have increased the
staff allocated to this issue.  However, the resource allocations of
certain entities remained a concern among government and industry
officials. 

In USTR, SPS responsibilities are handled primarily by the Director
for SPS Affairs, staff from the Offices of Agricultural Affairs and
General Counsel and, as needed, various regional trade specialists. 
USTR officials acknowledged that its responsibilities for addressing
SPS measures are broad, but its resources for doing so are limited. 
The Director for SPS Affairs, who is currently detailed to USTR from
State, estimated that USTR allocates three to four full-time staff
year equivalents to addressing SPS issues; other staff are assigned
as needed.  As a result, USTR officials said they rely on USDA
agencies to help them identify SPS measures, perform technical and
scientific assessments of the measures, initiate discussions with
foreign government officials about measures, and keep USTR informed
of their progress.  In addition, several USTR and USDA officials said
USTR's small legal staff has been overwhelmed by the growing workload
associated with initiating and following dispute settlement cases on
behalf of multiple trade sectors.  USTR officials said the number of
dispute settlement cases involving agricultural products, in
particular, has grown since the WTO was created, and the litigation
of such cases is extremely resource intensive.\28 (As discussed in
app.  I, a WTO official also expressed concern about the growing
number of dispute settlement cases.)

Within USDA, although the Secretary's Special Assistant has a central
role in coordinating USDA efforts to address SPS measures, he does
not control any budget or staff resources.  FAS, which has broad
daily responsibility for addressing SPS measures, has increased its
staff resources over the last few years to respond to this problem
(see fig.  2).  In 1990, it established the Office of Food Safety and
Technical Services to better address SPS issues affecting U.S. 
exports.  In 1997, the office was renamed the Food Safety and
Technical Services Division. 

   Figure 2:  FAS Full-time Staff
   Years for Addressing Foreign
   SPS Measures, Fiscal Years
   1994-97

   (See figure in printed
   edition.)

Note:  Includes staff in FAS' Food Safety and Technical Services
Division, commodity divisions, and overseas posts. 

Source:  USDA. 

Among regulatory entities, workloads for addressing SPS measures vary
according to their food-related responsibilities and technical
expertise.  USDA officials told us that technical assistance is
required most often from the Animal and Plant Health Inspection
Service, the Food Safety and Inspection Service, and FDA.  Because of
varying workloads, as well as the continued lack of clarity about
regulatory entities' growing trade role, these entities have
allocated different levels of resources to address SPS measures.  For
example, officials from the Animal and Plant Health Inspection
Service told us that their agency's mission has been expanded to
include trade facilitation of both imports and exports and they have
allocated additional staff and budget resources to addressing foreign
SPS measures.\29 Officials from the Food Safety and Inspection
Service told us that while trade facilitation is important, it is not
their primary mission, and they have not allocated additional
resources to this activity.  Figure 3 shows the full-time staff years
that the Animal and Plant Health Inspection Service and the Food
Safety and Inspection Service told us they devoted to negotiating
with foreign government officials about SPS measures from 1994 to
1997. 

   Figure 3:  Selected USDA
   Regulatory Entities' Full-time
   Staff Years for Addressing
   Foreign SPS Measures, Fiscal
   Years 1994-97

   (See figure in printed
   edition.)

Legend

APHIS = Animal and Plant Health Inspection Service
FSIS = Food Safety and Inspection Service

Source:  USDA. 

FDA and EPA officials told us they do not have a mandate or any
resources to assist agricultural exports, although they have made
resources available when USDA or USTR requested their assistance. 
FDA officials said the resources required for regulatory entities to
address foreign SPS measures and defend U.S.  SPS measures have not
been adequately evaluated and are likely to be substantial. 


--------------------
\28 From 1986 through 1992, the United States requested 12 GATT
panels be formed to review issues involving agricultural products
(including fish and processed products).  Most of these were
requested between 1986 and 1988.  Between the WTO's creation on
January 1, 1995, and August 30, 1997, the United States had engaged
in WTO consultations or had dispute settlement panels be established
12 times for issues involving agricultural products (including fish
or processed products). 

\29 For example, in 1992, the Animal and Plant Health Inspection
Service established a Trade Support Team to ensure internal
coordination on technical trade issues and facilitate the agency's
relationship with other USDA and non-USDA entities.  In 1995, it
established a Phytosanitary Issues Management Team to better manage
the agency's trade responsibilities for plant products. 


         CONCERNS EXPRESSED ABOUT
         UNCOORDINATED ACTIVITIES
-------------------------------------------------------- Letter :4.1.5

Several industry and government officials expressed concern that
insufficient coordination among federal entities hinders the
effectiveness of federal efforts to address SPS measures. 
Responsible federal officials said inadequate coordination led to a
lack of knowledge among responsible entities about which measures
each was working on, what activities were planned or had been
performed, or the status of each other's efforts.  We found
inadequate coordination could be attributed to several factors,
including lack of overall leadership, shifting and sometimes unclear
roles, and separate management structures.  For example, seven of the
eight USDA entities report to their own administrators and to one of
four undersecretaries or assistant secretaries, who make independent
decisions about their agencies' priorities and how to allocate their
agencies' budget and staff resources.\30

Inadequate coordination among multiple federal entities is not a new
problem.  For example, in our past work on the U.S.  system for
ensuring food safety, which is comprised of multiple federal
entities, we concluded that agency self-interest and differing
regulatory approaches hindered adequate coordination.\31

Moreover, we noted that efforts to improve coordination have
traditionally fallen short because federal entities continued to
operate under different statutes and appropriation acts.  Many of the
entities we examined in our past work also have responsibility for
addressing the technical aspects of foreign SPS measures. 

In a March 1997 review of NAFTA implementation, USDA's Office of the
Inspector General also concluded that departmental guidance is needed
to improve coordination among USDA trade and regulatory entities on
trade issues, particularly regarding the development of unified
negotiating strategies.\32 The Inspector General also found that the
lack of such coordination had hampered USDA's progress in negotiating
with Mexico about SPS measures and related issues that blocked access
for certain U.S.  agricultural products. 

To address coordination problems within USDA, two interagency groups
were created in 1995 at the staff and management levels.  The staff
level group is headed by FAS' Food Safety and Technical Services
Division; it includes staff from all responsible USDA entities and
coordinates informally with non-USDA entities.  It meets weekly to
discuss new developments and the status of ongoing efforts.  The
management level group, called the "SPS Action Team," was headed by
the Secretary of Agriculture's Special Assistant and included
high-level staff from all responsible USDA entities.  The action team
met intermittently to coordinate overall USDA efforts regarding
certain SPS measures based on information provided by the staff level
group.  According to the Special Assistant, the action team is being
replaced by the Working Group on Agricultural Trade Policy.  He said
the emphasis of the two groups differs--the action team focused on
coordinating USDA efforts to address certain measures, while the
working group is to have a broader management focus by addressing
overall coordination, resource allocation, and prioritization of
efforts. 


--------------------
\30 FAS reports to the Undersecretary for Farm and Foreign
Agricultural Services.  The Agricultural Marketing Service; the
Animal and Plant Health Inspection Service; and the Grain Inspection,
Packers and Stockyards Administration report to the Assistant
Secretary for Marketing and Regulatory Programs.  The Food Safety and
Inspection Service reports to the Undersecretary for Food Safety. 
The Agricultural Research Service and the Economic Research Service
report to the Undersecretary for Research, Education, and Economics. 

\31 See Food Safety and Quality:  Uniform, Risk-based Inspection
System Needed to Ensure Safe Food Supply (GAO/RCED-92-152, June 26,
1992) and GAO/RCED-96-81, Mar.  27, 1996. 

\32 See Implementation of Agricultural Provisions of NAFTA, Office of
the Inspector General, USDA (Washington, D.C.:  USDA, Mar.  1997). 


      FEDERAL APPROACH IS NOT
      SYSTEMATIC AND LACKS
      GUIDANCE TO MAKE KEY
      DECISIONS
---------------------------------------------------------- Letter :4.2

The federal approach for addressing SPS measures encompasses many
activities, including negotiating with trading partners about
individual measures; performing scientific research; working with
international bodies such as the WTO, NAFTA, and certain
international standard-setting organizations;\33 and managing the
overall federal work load.  In this report, we focus on federal
efforts to systematically identify, evaluate, prioritize, and address
SPS measures that appear inconsistent with WTO provisions and to
manage the associated work load. 

Federal entities seek to address foreign SPS measures through
bilateral discussions and within multilateral forums; both approaches
may focus on technical issues or international trade rules.  Based on
our review of federal efforts to resolve six SPS measures, we found
that the specific federal efforts undertaken to address each measure
differed from case to case.  We also found that entities with
food-related technical expertise typically lead bilateral discussions
on technical issues, in which they assess the necessity of foreign
measures and provide data or conduct research to demonstrate the
health or safety of U.S.  products or the process by which they are
produced.  Trade entities typically lead bilateral discussions that
focus on international trade rules, in which they discuss a foreign
measure's compliance with WTO rules regarding SPS measures.  In a few
instances, the government has turned to the multilateral arenas of
the WTO or NAFTA and invoked dispute settlement procedures to resolve
certain issues.  USTR is responsible for leading U.S.  efforts in
multilateral trade arenas.  (App.  II contains more information about
the federal approach for addressing SPS measures and related
activities.)


--------------------
\33 Key organizations include the Codex Alimentarius Commission, the
International Office of Epizootics, and the International Plant
Protection Convention.  The Codex Alimentarius Commission was
established in 1962 by the United Nations Food and Agriculture
Organization and the World Health Organization to facilitate fair
trade in food, protect the health of consumers, and promote the
creation of international food standards.  It has examined
pesticides, food additives and contaminants, and veterinary drugs
related to a broad range of agricultural products.  The International
Office of Epizootics was established in 1924 to facilitate
international trade in animals and animal products by addressing
health issues to avoid the spread of animal diseases.  The
International Plant Protection Convention was established in 1951 to
facilitate the development of international phytosanitary standards. 


         NO PROCESS TO DEVELOP
         CENTRALIZED INFORMATION
         AND EVALUATE MEASURES
-------------------------------------------------------- Letter :4.2.1

The U.S.  government lacks centralized, up-to-date information to
track its efforts to address foreign SPS measures, such as the number
of foreign SPS measures that affect U.S.  exports, which of these
measures federal entities are addressing, what steps have been taken
to address each measure, which measures have been resolved, and how
any resolved cases have affected U.S.  exports.  The federal
structure contributes to this problem because information about SPS
measures is collected and tracked separately by trade and regulatory
entities.  For example, several USDA entities have developed their
own electronic data bases or management systems for identifying SPS
measures and tracking the status of their efforts to address them. 
However, even though these systems may include some of the same
issues, they are not linked and cannot be accessed by other USDA
staff.  Moreover, whether entities had such systems or not, most were
unable to tell us what measures they were working on at any given
time. 

Some centralized information has been developed, but it is of limited
use.  In 1996, the Animal and Plant Health Inspection Service
developed a system to track the status of its efforts to address
trade issues, many of which are SPS measures.  The system, in which
the Animal and Plant Health Inspection Service plans to store certain
other entities' trade issues, can be accessed outside of the agency
by authorized USDA staff.  So far the system only contains
information about a limited number of issues tracked by the Animal
and Plant Health Inspection Service and the Agricultural Marketing
Service.  Officials from the Food Safety and Inspection Service and
the Grain Inspection, Packers and Stockyards Administration told us
they plan to add their trade issues to the system, but FAS officials
said they do not plan to do so.  According to several USDA officials,
progress on developing this system has been slowed by concern among
the participating entities about storing what they view as internal
agency information on a system that can be accessed by other USDA
agencies or the public.  The other centralized information is
contained in the 1996 USDA survey.  FAS has begun to update the
survey on a quarterly basis to add new issues and remove resolved
issues.  It is not clear whether the Animal and Plant Health
Inspection Service system and FAS efforts related to the USDA survey
are duplicative. 

In addition to lacking centralized information about SPS measures and
their efforts to address them, the U.S.  government does not have a
regular process by which entities jointly evaluate complaints about
foreign SPS measures to determine which measures the U.S.  government
should address.  Trade entities evaluate foreign SPS measures for
their compliance with WTO provisions, while regulatory entities
evaluate foreign SPS measures for their technical or scientific
basis.  However, we found that differences of opinion regarding the
consistency of certain foreign SPS measures to relevant WTO
provisions or their technical legitimacy may exist among federal
entities or between federal entities and the affected industry.  The
lack of a regular process that ensures that entities with both trade
and technical expertise collectively evaluate foreign SPS measures
creates the potential that limited government resources may be
allocated to addressing measures some federal entities do not regard
as problematic. 


         NO PROCESS TO DETERMINE
         PRIORITIES
-------------------------------------------------------- Letter :4.2.2

Responsible federal entities receive more complaints about foreign
SPS measures than they are able to work on, but the U.S.  government
does not have a systematic process to prioritize its efforts.  We
found that responsible federal entities have had different views
about which SPS measures should be addressed and in what order.  Some
entities have made their own decisions about which measures they
would address, which sometimes conflicted with the decisions of other
entities.  Officials from both trade and regulatory entities provided
examples of instances in which they had requested help from another
entity to address one of their issues, but the other entity did not
respond in a timely way or did not appear to place as much importance
on the issue.  Some USDA officials expressed concern that industry
pressure has played a larger role in determining what USDA addresses
than has objective analysis of individual measures and their impact
on trade. 

During most of our review, federal entities lacked objective criteria
to help them decide which foreign SPS measures should be addressed
and prioritize their efforts.  In February 1997, USTR developed
provisional criteria to help TPSC members determine which of a small
subset of measures should be raised for discussion in WTO SPS
committee meetings.  The criteria included the following factors: 
(1) domestic producers requested government assistance to address the
measure; (2) the measure appears to be inconsistent with the WTO SPS
agreement or other WTO provisions or involves the non-use or improper
use of international standards, guidelines, and recommendations; (3)
bilateral technical discussions or WTO consultations have taken place
but have not achieved progress toward resolution; and (4) agencies
agree that addressing the measure in the WTO SPS committee will
promote resolution of the issue and will not damage other U.S. 
bilateral interests.  In an August 1997 meeting, USTR officials
identified other factors that are not among the list of provisional
criteria.  For example, they told us the TPSC considers whether
sufficient scientific evidence exists to refute the measure and
whether U.S.  efforts to address the measure will undermine U.S. 
regulatory interests. 

USDA officials told us the Department does not have formal criteria
for determining which foreign SPS measures responsible agencies
should address or establishing priorities, but FAS officials
identified unofficial criteria they believe are useful.  These
included the estimated impact of the measure on U.S.  exports, an
assessment of the industry's interest in resolving the measure, and
the availability of conclusive scientific evidence (or whether
additional research must be conducted and, if so, whether the
research can be funded and the amount of time required for its
completion). 

The Secretary's Special Assistant told us the Working Group on
Agricultural Trade Policy will establish official criteria to help
evaluate SPS measures and determine USDA priorities and resource
allocation.  The Special Assistant said it is possible USTR's and
USDA's criteria will differ, but said this is appropriate because
USDA's efforts are focused on evaluating hundreds of measures to
determine which ones USDA should address and in what order while
USTR's efforts are focused on evaluating a smaller subset of measures
to determine which ones the United States should raise to the more
formal WTO level. 


         NO GUIDANCE TO DETERMINE
         UNIFIED APPROACH
-------------------------------------------------------- Letter :4.2.3

No guidance exists to help federal entities overcome differences of
opinion and develop a unified approach for addressing individual SPS
measures.  In determining how to deal with any individual SPS
measure, several key decisions must be made regarding the U.S. 
position about a measure, the substance and timing of U.S. 
communication with the foreign government, the data the U.S. 
government will supply or the research it will undertake, the
agreements or solutions that are acceptable, and the appropriateness
of invoking dispute settlement procedures.  Several U.S.  officials
also said the U.S.  position about a foreign measure must avoid
undermining U.S.  regulatory interests. 

As our review of federal efforts to address six foreign SPS measures
shows, various combinations of federal entities and actions may be
employed to address such measures.  However, federal entities have
had difficulty agreeing about what specific actions should be taken
in individual cases and what resolutions are acceptable.  Federal
entities have also had different opinions about whether the approach
being followed is effective or needs to be changed. 

In its NAFTA implementation report, the USDA Inspector General found
that USDA entities did not always develop a strategy before meeting
with officials of other NAFTA governments to discuss trade issues.\34
It reported concerns that USDA's objectives for such meetings were
not clear.  The Inspector General found that differing perspectives
among trade and regulatory authorities about the correct approach may
have hampered strategy formulation.  It also found that USDA trade
and regulatory entities differed in their viewpoint about whether
bilateral issues should be discussed at meetings of the NAFTA SPS
committee--FAS considered this to be a key function of the committee,
whereas regulatory entities were reluctant to discuss issues in the
committee until they had thoroughly pursued bilateral negotiations. 
The Inspector General concluded that departmental guidance is needed
to overcome these differences of opinion about approach and ensure
that coordinated strategies are developed. 

Like the Inspector General, we found that trade and regulatory
authorities, as well as industry representatives, sometimes had
different opinions about the appropriateness of a foreign measure or
the country's reason for establishing it.  Therefore, they were
likely to disagree about the best negotiating approach to resolve the
issue.  In such instances, government and industry officials often
expressed concern that the lack of agreement hampered effective
decision-making and progress.  We found differences of opinion (such
as among government entities, among industry officials, and between
the government and industry) throughout the six SPS measures we
reviewed.  In these cases, and others that we discussed with federal
and industry officials, we found that trade authorities and industry
officials were more likely to characterize a foreign measure as an
unfair trade barrier and favor moving quickly to trade policy
discussions with foreign trade authorities.  Meanwhile, regulatory
authorities were more likely to emphasize the technical complexity of
the issue and favor thorough technical discussions with foreign
regulatory authorities. 

We found that conflicting perspectives between trade and regulatory
authorities were not unusual.  For example, some trade authorities
and industry officials expressed frustration that regulatory
authorities seemed to lack a sense of urgency regarding trade matters
and were willing to engage in technical discussions for many months
and years.  They expressed concerns that regulatory authorities
lacked negotiating expertise, which sometimes precluded them from
obtaining the most advantageous result for the U.S.  industry.  Some
regulatory authorities expressed frustration that trade authorities
and industry officials did not seem to understand that deliberate and
lengthy technical and scientific processes were often necessary to
adequately and properly address foreign regulatory authorities'
stated concerns about U.S.  products.  They stated that, as
regulatory authorities, they respected foreign authorities' efforts
to ensure adequate protection for human, animal, and plant life and
health. 

Several U.S.  government and industry officials observed that in
certain limited circumstances, such as when a foreign SPS measure has
threatened a large amount of U.S.  exports, responsible federal
entities have responded quickly and cohesively.  These officials
suggested that such cases were unique because high-level officials
from a single entity assumed responsibility for directing federal
efforts and assigning roles to trade and regulatory authorities. 

In response to internal concerns about USDA's efforts, several of the
responsible USDA agencies began to meet on a monthly basis in October
1996 to discuss SPS issues affecting U.S.  trade, facilitate the
exchange of information between the agencies, coordinate joint action
to resolve issues, identify medium- and long-term priorities, and
improve team building.  However, we were unable to determine whether
the meetings have achieved their stated purposes because, although we
requested thorough documentation of the meetings and their results,
USDA could only provide a limited number of meeting minutes.  Based
on the minutes we did review, the meetings appeared to be focused
more on the exchange of information about current efforts than on
developing priorities and strategies for addressing SPS measures. 


--------------------
\34 See Implementation of Agricultural Provisions of NAFTA. 


         NEED FOR INVOKING DISPUTE
         SETTLEMENT IS DEBATED
-------------------------------------------------------- Letter :4.2.4

In addition to differences of opinion about the best approach to
address a foreign SPS measure, federal entities have debated whether
and when WTO or NAFTA dispute settlement procedures should be invoked
to resolve problems over certain SPS measures.  This debate occurs at
several levels.  Within USDA, responsible entities have had
difficulty agreeing that they have done all they can to resolve an
SPS issue and that dispute settlement is probably the appropriate
next step.  This may stem from underlying disagreements about whether
current efforts are working or different opinions about whether
scientific evidence against a particular measure is strong.  When
USTR and USDA determine that a more formal process should be
considered to address a measure, such as the WTO SPS committee or WTO
consultations or dispute settlement, the debate expands to include
relevant members of the TPSC.  USTR officials said the TPSC discusses
the issue according to the provisional criteria USTR established, but
said substantial debate among TPSC members still occurs. 

The debate about whether to refer SPS cases to the WTO for dispute
settlement occurs not only among federal entities but between federal
entities and the private sector, as shown by several of the SPS cases
we reviewed.  Dispute settlement procedures were invoked regarding
Korean shelf-life standards and the EU ban on hormones and were
considered as a possible approach regarding the Japanese ban on
tomatoes.  In several of these cases, we found evidence of debate
among federal entities about whether dispute settlement was the
appropriate course of action.  In several cases, industry officials
told us they were disappointed that the government was slow to decide
about moving to dispute settlement.  For example, some industry
officials told us they expected USTR to invoke dispute settlement
procedures in the EU hormone case immediately following the WTO's
implementation in January 1995.  Filing this case was delayed until
May 1996, however, in part because of indications during 1995 that
the EU might revise the measure.  Similarly, some industry officials
told us they intended to insist that USTR invoke dispute settlement
procedures in the Japanese case if it was not resolved by early 1996. 
While dispute settlement was considered and the possibility may have
been mentioned to Japanese officials, it was not pursued.  This case
was ultimately resolved over a year later, in April 1997.  In the
Korean shelf-life case, USTR engaged in WTO consultations within 6
months of the WTO's implementation, and the case was resolved. 


         COORDINATED GOALS,
         OBJECTIVES, AND
         PERFORMANCE MEASUREMENTS
         LACKING
-------------------------------------------------------- Letter :4.2.5

Responsible federal entities have not developed coordinated goals,
objectives, and performance measurements for programs designed to
address SPS measures.  In response to the Results Act, USTR and USDA
prepared strategic plans to outline their agencies' overall goals and
objectives as required by the act.\35 These plans identified foreign
SPS measures as a key issue that the United States faces in its goal
to expand agricultural exports and contained broad goals for
addressing SPS measures.\36 The plans also recognized the need to
coordinate with other responsible entities in addressing SPS
measures.  More specific and better-coordinated goals, objectives,
and performance measurements, however, are critical to forming the
integrated approach for addressing SPS measures that our work has
shown is needed. 

The principles underlying the Results Act provide guidance that the
multiple responsible agencies can use to develop coordinated goals,
objectives, and performance measurements and to improve the
management of individual agency and overall federal efforts related
to SPS measures.  For example, the act focuses on clarifying
missions, setting program goals, and measuring performance toward
achieving those goals.  In addition, the act's focus on results
implies that federal programs contributing to the same or similar
results, often referred to as "cross-cutting programs," should be
closely coordinated to ensure that goals are consistent and, as
appropriate, program efforts are mutually reinforcing.  This means
that federal agencies are to look beyond their organizational
boundaries and coordinate with other agencies to ensure their efforts
are aligned. 

In our work examining implementation of the Results Act, we
identified several critical issues that need to be addressed if the
act is to succeed in improving management of federal agencies.  Among
these is the need to improve the management of cross-cutting program
efforts by ensuring that those programs are appropriately
coordinated.\37 The recognition in USTR's and USDA's strategic plans
of the need to coordinate with other agencies in addressing SPS
issues is an essential first step for developing a more integrated
approach.  The difficult challenge that lies ahead is for the
multiple agencies with responsibility for addressing SPS issues to
undertake substantive coordination to ensure that their
responsibilities are effectively managed and their agency goals and
objectives are complementary. 

The next phase of implementation of the Results Act requires agencies
to develop annual performance plans that are linked to their
strategic plans.  These plans are to contain annual performance
goals, performance measurements to gauge progress toward achieving
the goals, and the resources agencies will need to meet their goals. 
The development of annual plans may provide the multiple federal
agencies with SPS-related responsibilities the next opportunity to
develop coordinated goals, objectives, and performance measurements
for addressing SPS issues. 


--------------------
\35 The Results Act required agencies to submit strategic plans to
Congress by September 30, 1997.  The plans, which were to cover a
period of at least 5 years forward from the fiscal year in which they
were submitted, were to contain (1) mission statements, (2) long-term
general goals and objectives, (3) strategies that agencies would use
to achieve their goals and objectives, and (4) any key external
factors that could affect the achievement of these goals.  Agencies
were to consult with Congress and solicit the views of other
stakeholders in the development of their plans.  Additional guidance
from the Office of Management and Budget directed agencies to consult
with each other about their plans' treatment of cross-cutting
functions (see "Office of Management and Budget Circular A-11," part
2,
sec.  200.15). 

\36 For our overall analysis of a draft of USTR's strategic plan, see
The Results Act:  Observations on USTR's September 1996 Draft
Strategic Plan (GAO/NSIAD-97-199R, July 18, 1997).  For our overall
analysis of several drafts of USDA's strategic plan, see Results Act: 
Observations on USDA's Draft Strategic Plan (GAO/T-RCED-98-17, Oct. 
1, 1997). 

\37 Managing for Results:  Building on Agencies' Strategic Plans to
Improve Federal Management (GAO/T-GGD/AIMD-98-29, Oct.  30, 1997). 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

Agricultural industry and U.S.  government officials increasingly
regard foreign SPS measures that are or appear to be inconsistent
with WTO provisions as important issues that must be addressed in
order to protect U.S.  trade interests.  Although the WTO and NAFTA
established rules to govern the use of SPS measures in trade, the
process of determining whether measures comply with the agreements
and developing strategies to address potentially unfair measures is a
complex undertaking.  In light of the U.S.  process that involves
multiple federal entities with varying responsibilities for
addressing foreign SPS measures, we believe a more organized,
integrated, strategic approach with unified and clearly defined
objectives would be beneficial. 

The Results Act offers a useful framework to help federal entities
with SPS responsibilities not only to manage their own efforts but
also to work together to address foreign SPS measures.  By clarifying
their respective SPS-related missions, USTR, USDA, and other
responsible entities could begin to overcome structural weaknesses
that stem from the participation of multiple agencies with unclear
roles and overlapping or closely related areas of responsibility.  By
following the act's guidance to set program goals and measure their
performance toward these goals, USTR, USDA, and the other federal
entities could address problems related to inadequate data about SPS
measures and the lack of a process to evaluate measures, prioritize
federal efforts, and agree on unified approaches.  Finally, by
undertaking more substantive coordination on this cross-cutting
issue, the various agencies could begin to ensure their individual
efforts are complementary and not unnecessarily duplicative. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :6

We recommend that the U.S.  Trade Representative and the Secretary of
Agriculture, in consultation with the Commissioner of Food and Drugs,
the Administrator of EPA, and the Secretary of State--or their
designees--should work together to develop coordinated goals,
objectives, and performance measurements for addressing foreign SPS
measures that appear to be inconsistent with the WTO SPS agreement. 
The Government Performance and Results Act and implementing guidance
provide a framework for federal agencies to consult on such
cross-cutting programs. 

Further, given USDA's substantial role in identifying and addressing
SPS measures, the Secretary of Agriculture should (1) develop
centralized, aggregated data on the number of SPS measures that have
been identified, which ones are being addressed, and which ones have
been resolved; and (2) establish a more systematic process by which
USDA entities evaluate complaints they receive about SPS measures,
determine which ones they should address, prioritize their efforts,
develop unified approaches, and determine when to recommend
consideration of dispute settlement procedures to USTR.  This process
should be developed and implemented in consultation with the U.S. 
Trade Representative, the Commissioner of Food and Drugs, the
Administrator of EPA, and the Secretary of State, or their designees. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

We received comments on a draft of this report from USTR, USDA, FDA,
and State (see apps.  V-VIII); EPA indicated it did not have any
comments on the report.  The agencies provided a range of views and
identified several key issues that the report should address.  For
example, USDA and State said the report provided an accurate,
comprehensive review of the federal process to address foreign SPS
measures.  However, USTR and USDA said the report should reflect
recent initiatives they have adopted regarding these issues.  To
address this concern, we updated the report to include information
about the TPSC process USTR leads and the formation of a USDA Working
Group on Agricultural Trade Policy, among other things. 

While USTR did not offer any comments concerning our recommendations,
USDA, FDA, and State did.  All three agreed with the thrust of the
recommendations.  However, FDA and State suggested that the first
recommendation should ensure that USTR and USDA consult with other
agencies in setting goals, objectives, and performance measurements
for addressing SPS measures.  In response, we revised the first
recommendation to emphasize the need for these agencies to work
together to develop coordinated goals, objectives, and performance
measurements for addressing SPS measures. 

USTR and FDA also suggested that the report should address the need
for balance between export interests and domestic health and food
safety interests and the important role regulatory agencies play in
ensuring that U.S.  trade positions do not undermine U.S. 
regulation.  We agree with their comments and added information in
the report to recognize the importance of domestic concerns for
federal efforts to address foreign SPS measures. 

The following individual comments were also made: 

USTR said our report exaggerated the usefulness of tracking lists in
drawing definitive conclusions about the WTO-legality of SPS measures
and their impact on trade.  It said that considerable resources have
been devoted to such a project, but the results have been of limited
use in assessing or managing these issues.  We disagree.  As we note
in the report, USDA officials said that in spite of certain
weaknesses, the data they developed on foreign SPS measures improved
their understanding of the problem.  Thus, we continue to believe
that the U.S.  government's data collection and tracking efforts
related to foreign SPS measures could be improved.  Without better
data, executive branch agencies do not know the size of the problem
and therefore cannot reasonably assure that they have properly
prioritized their efforts or determined the level of resources
needed.  Moreover, they cannot assess the effectiveness of their
efforts to address the problem. 

FDA said that it sees the roles of the various regulatory agencies
involved in resolving SPS disputes as complementary rather than
overlapping.  In response, we changed our description of regulatory
agencies' responsibilities from "overlapping" to "closely related."
However, we noted that we had found evidence of coordination problems
among the regulatory agencies in our past work on the U.S.  system
for ensuring domestic food safety.  FDA also said that the report
should recognize that the process outlined in the WTO SPS agreement
for determining that other countries' SPS-related systems are
equivalent can be done on a unilateral as well as a mutual basis.  We
modified our description of this process to reflect FDA's input. 

USTR, USDA, and FDA also suggested a number of technical revisions to
our draft.  In addition, we received technical comments from the WTO
Secretariat.  We have incorporated these suggestions in the report
where appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To address the extent of foreign SPS measures and their impact on
U.S.  exports, we reviewed USDA, private sector, and academic
analyses of the history and impact of technical barriers to trade,
including SPS measures.  We discussed these issues with knowledgeable
government, private sector, and academic officials.  We also examined
the impact of six foreign SPS measures that we reviewed in detail. 

To address the federal structure and approach for addressing foreign
SPS measures, we developed information on the U.S.  trade and
regulatory structures for agricultural products, including entities'
missions, staff levels, and budgetary resources related to SPS
issues.  We developed information on U.S.  government actions taken
to address six foreign SPS measures that have blocked or continue to
block U.S.  exports.  We also discussed U.S.  government efforts with
trade and regulatory officials that have been active in addressing
questionable foreign SPS measures and reviewed internal USDA
assessments of U.S.  efforts to address questionable foreign SPS
measures.  Finally, we discussed the U.S.  government's effectiveness
with agricultural trade associations. 

More information about our scope and methodology is contained in
appendix IV.  We conducted our work at USDA, USTR, FDA, EPA, and
State.  Our work at USDA covered the Office of the Secretary; the
Agricultural Marketing Service; the Animal and Plant Health
Inspection Service; the Agricultural Research Service; the Economic
Research Service; FAS; the Food Safety and Inspection Service; the
Grain Inspection, Packers and Stockyards Administration; and the
Office of the General Counsel. 

We performed our review from January 1996 to October 1997 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :8.1

As agreed with you, we plan no further distribution of this report
until
30 days after its issue date, unless you publicly announce its
contents earlier.  At that time, we will send copies to appropriate
congressional Committees, the U.S.  Trade Representative, the
Secretary of Agriculture, the Commissioner of Food and Drugs, the
Administrator of EPA, and the Secretary of State.  Copies will be
made available to others upon request. 

This review was done under the direction of JayEtta Z.  Hecker,
Associate Director.  If you or your staff have any questions
concerning this report, please contact Ms.  Hecker at (202) 512-8984. 
Major contributors to this report are listed in appendix IX. 

Benjamin F.  Nelson
Director, International Relations
 and Trade Issues


TRADE AGREEMENT IS IN FORCE, BUT
IMPACT OF PROVISIONS VARIES
=========================================================== Appendix I

The World Trade Organization (WTO) Agreement on the Application of
Sanitary and Phytosanitary Measures (SPS agreement) represents the
first time that comprehensive multilateral rules were enacted
specifically to cover the use of sanitary and phytosanitary (SPS)
measures in agricultural trade.\1 The agreement became effective on
January 1, 1995.  U.S.  and WTO officials said some of the provisions
have had an immediate impact on trade, such as those that enable
members to challenge SPS measures in dispute settlement.  These
officials said other provisions, such as those encouraging broader
harmonization of SPS measures, require work to be done by WTO members
before they are likely to have a substantial impact on trade. 


--------------------
\1 Under the General Agreement on Tariffs and Trade (GATT), which
governed international trade from 1947 to 1995, members were
permitted to adopt measures necessary to protect human, animal, or
plant life or health, provided that such measures were not applied in
an arbitrary or unjustifiably discriminatory manner and did not
constitute disguised restrictions on international trade.  In GATT's
Tokyo Round (1973-79), at least 36 GATT members agreed to additional
rules to govern the use of standards, including most SPS standards
(the Agreement on Technical Barriers to Trade).  However, members
were given great discretion to deviate from international standards
when applying SPS measures and were not required to cite scientific
evidence or judgment in the dispute settlement process.  Chapter 7 of
the North American Free Trade Agreement (NAFTA) also contains
provisions regarding the use of SPS measures in agricultural trade
among its members. 


   RELEVANT PROVISIONS OF THE
   AGREEMENT
--------------------------------------------------------- Appendix I:1

The WTO agreement established members' rights and obligations
regarding SPS measures in relation to trade.  WTO member countries
have the right to maintain SPS measures that protect the health and
safety of their population and agricultural sector and to determine
acceptable levels of risk.  However, members should not apply SPS
measures or determine risk levels in a way that is arbitrary or
constitutes a disguised restriction to trade.  Therefore, the
agreement requires SPS measures to be based on scientific principles,
including an assessment of relevant risks.\2

In addition to these criteria, the agreement encourages progress
toward achieving three objectives:  (1) broad harmonization of SPS
measures through greater use of international standards, (2)
recognition among members that their SPS measures may differ but
still be considered "equivalent" provided they achieve the same level
of protection, and (3) adaptation of SPS measures to recognize pest-
and disease-free regions.\3 Provisions that address harmonization
encourage members to participate in international organizations that
establish SPS standards, particularly the Codex Alimentarius
Commission, the International Office of Epizootics, and the
International Plant Protection Convention.  Figure I.1 summarizes
selected provisions of the agreement. 

   Figure I.1:  Summary of
   Selected Provisions of SPS
   Agreement

   (See figure in printed
   edition.)

\a Technical factors include relevant processes and production
methods and relevant inspection, sampling, and testing methods. 


--------------------
\2 In assessing risks, members are directed to take various factors
into account, including available scientific evidence; relevant
processes and production methods; relevant inspection, sampling, and
testing methods; prevalence of specific diseases or pests; existence
of pest- or disease-free areas; relevant ecological and environmental
conditions; and quarantine or other treatment.  In addition, in
assessing the risks to animal and plant life or health, members shall
take into account as relevant economic factors the potential damage
in terms of loss of production or sales in the event of the entry,
establishment, or spread of a pest or disease; the costs of control
or eradication in the territory of the importing country; and the
relative cost-effectiveness of alternative approaches to limiting
risk. 

\3 Annex A(6) of the SPS agreement defines a pest- or disease-free
area as "an area, whether all of a country, part of a country, or all
or parts of several countries, as identified by the competent
authorities, in which a specific pest or disease does not occur."
According to U.S.  Department of Agriculture (USDA) officials, SPS
measures typically do not recognize that imports from part of a
country may be safe even if imports from the entire country are not. 


   DISPUTE SETTLEMENT
--------------------------------------------------------- Appendix I:2

Disputes arising under the SPS agreement are subject to the WTO
dispute settlement mechanism, which provides for consultations and
review by a WTO dispute settlement panel.  The agreement authorizes
such panels to seek expert advice on scientific or technical issues. 
As anticipated, member countries have begun to use these mechanisms
to resolve disputes about SPS measures.  For example, on behalf of
the United States, the U.S.  Trade Representative (USTR) has invoked
WTO dispute settlement procedures regarding five SPS measures or
groups of measures since the agreement became effective.\4 Two of
these cases have had positive outcomes for the United States, while
the other cases have not been resolved yet.\5 A WTO official said
that, while increased use of the dispute settlement process was
anticipated, the growing number of cases has strained the WTO
Secretariat's limited resources.  USDA and USTR officials said that
countries generally prefer to resolve issues informally, but the
dispute settlement mechanism is an important tool for cases where
informal resolution cannot be achieved. 


--------------------
\4 The SPS measures the United States has challenged in the WTO
include the European Union (EU) measures affecting meat and meat
products, Korean shelf-life requirements for meat and bottled water,
Korean testing and inspection requirements for agricultural imports,
Japanese measures on fruit and vegetable imports, and an Australian
ban on salmon imports.  The United States also initiated technical
consultations once under NAFTA, requesting a review of Mexican
measures banning U.S.  sweet cherries. 

\5 On July 20, 1995, the United States and Korea notified the WTO
that they had reached agreement about modifications to Korea's
shelf-life requirements.  On June 30, 1997, a WTO dispute settlement
panel found the EU hormone ban was inconsistent with WTO provisions;
the EU filed an appeal regarding this decision on September 24, 1997. 
Following the NAFTA consultations, USDA announced on February 20,
1997, that Mexico would begin importing U.S.  sweet cherries in
accordance with a work plan agreed to by both sides. 


   ADMINISTRATIVE ASPECTS
--------------------------------------------------------- Appendix I:3

For administrative purposes, the SPS agreement established an SPS
committee, comprised of member countries, that is responsible for
overseeing implementation of the agreement and facilitating
consultations among members on specific SPS measures.\6 For example,
as part of its responsibility, the WTO committee is expected to
develop guidelines on risk management and monitor progress toward
harmonization of SPS standards.  USDA officials said they are
particularly interested in using the committee as a way to raise
their concerns about specific SPS measures and have done so in
several WTO committee meetings.\7

Another administrative provision requires member countries to publish
information about their SPS measures and notify other members before
implementing any new measures or modifications that are not based on
international standards.  The purpose of advance notification is to
allow member countries time to adapt their products or processes to
the new requirement and to comment on the measure.\8


--------------------
\6 NAFTA also established an SPS committee for the members to discuss
their responsibilities under the agreement and to consult on
implementation issues. 

\7 The United States has also discussed specific SPS measures in
NAFTA SPS committee meetings. 

\8 According to USDA, between January 1, 1995, and April 30, 1997,
information on 530 SPS measures in 46 of 131 members had been
reported to the WTO.  A USDA official said no SPS measures are
actually reported in accordance with NAFTA because Canada, Mexico,
and the United States provide information to the WTO instead. 


   INITIAL IMPACT AND NEED FOR
   FURTHER INTERPRETATION
--------------------------------------------------------- Appendix I:4

According to U.S.  and WTO officials, some of the SPS agreement's
provisions have had an immediate impact, while the impact of other
provisions remains to be seen.  These officials said members
currently appear to be more focused on provisions that enable them to
resolve disputes over SPS measures, such as the requirements that SPS
measures be based on scientific evidence and risk assessment, than on
provisions that encourage harmonization and the recognition of
equivalent systems and pest- or disease-free regions.  USDA and WTO
officials said that while the latter provisions could help minimize
trade disputes, the practices they encourage are not currently
widespread.  Moreover, many years of bilateral or multilateral
discussion may be needed before SPS measures are broadly harmonized
or equivalent systems and pest- or disease-free regions are broadly
recognized, therefore progress in these areas is likely to be slow. 
One example supports that viewpoint--the United States and the EU
negotiated for 3 years before reaching a partial agreement about the
equivalence of their respective inspection systems for animal
products.\9

U.S.  and WTO officials also said that the interpretation of certain
provisions will be clarified through the dispute settlement process. 
For example, a USDA official said members may have different
interpretations regarding whether a country's right to determine an
acceptable level of risk is stronger than its obligation to base risk
assessment on scientific evidence.  A WTO official characterized the
SPS agreement as a framework agreement that articulates certain rules
and objectives but does not specify how they should be achieved.  In
such cases, it is up to the members to decide how the provisions
should be interpreted. 


--------------------
\9 The U.S.-EU discussions covered meat, poultry, seafood, dairy,
egg, and pet food products, among others.  The two countries were
unable to reach agreement about the equivalence of their poultry
production and inspection systems. 


U.S.  APPROACH, RELATED
ACTIVITIES, AND RESOURCES FOR
ADDRESSING FOREIGN SPS MEASURES
========================================================== Appendix II

U.S.  efforts to address individual SPS measures are an important
component of overall activities related to SPS issues.  The U.S. 
government addresses individual measures through technical- and
trade-based approaches.  In addition, federal entities perform other
activities that are related to SPS issues, such as certifying that
U.S.  exports are healthy and safe and participating in international
organizations that set SPS-related standards.  Within USDA, the staff
and budget resources allocated to all SPS activities have generally
increased since 1994.  Approximately one-quarter of USDA's
SPS-related staff resources have been allocated to addressing foreign
SPS measures in technical or trade negotiations, the main focus of
this report, while about three-quarters of its SPS-related staff
resources have been allocated to other activities. 


   U.S.  APPROACH FOR ADDRESSING
   SPS MEASURES
-------------------------------------------------------- Appendix II:1

USDA officials told us the U.S.  approach for addressing foreign SPS
measures varies depending on the measure, because each case has
unique aspects.  Based on our review of federal efforts to address
six SPS measures and our discussions with responsible U.S. 
officials, we found that individual approaches have similar elements. 
We developed a framework comprised of three phases to help explain
how federal entities have addressed SPS measures (see fig.  II.1). 

   Figure II.1:  Three Phases of
   Federal Efforts to Address
   Individual SPS Measures

   (See figure in printed
   edition.)

\a The SPS agreement and NAFTA are only binding on WTO and NAFTA
members, respectively.  However, several U.S.  trading partners that
are not WTO members, including China and Russia, have applied to join
the WTO and would be expected to comply with the SPS agreement if
they become members. 

During the first phase (identification), the U.S.  government
attempts to learn more about an identified SPS measure and determine
whether the measure is a minor problem that can be fixed quickly or a
more serious problem that will take some time to resolve.\1

During the second phase (technical exchange), regulatory entities
usually lead U.S.  government efforts, but trade entities may play a
supporting role.  This phase can last several months or years,
depending on how often the two sides meet and what actions they agree
to take. 

During the third phase (trade negotiations), trade entities usually
lead U.S.  government efforts, but regulatory entities may play a
supporting role.  Trade negotiations are often viewed as "elevating"
the U.S.  approach to a higher political level and sometimes become
necessary when the U.S.  government concludes the foreign government
is not responding to technical arguments.  In a few cases where
neither technical exchange nor trade negotiations have achieved
resolution, the U.S.  government has decided to request formal WTO or
NAFTA consultations or review by a dispute settlement panel. 

Based on our review of six measures and our discussions with
responsible federal officials, federal efforts to address individual
SPS measures may include primarily technical exchanges, primarily
trade negotiations, or a combination of the two.  In addition, it
appears that SPS measures may be resolved at any point during the
three phases we identify and some disagreements are resolved more
quickly than others depending on the circumstances. 


--------------------
\1 According to USDA officials, minor problems can occur if the
export certificates accompanying U.S.  exports are incorrect.  These
types of problems usually affect certain shipments of a product
rather than all exports of a product and can generally be fixed
quickly by providing corrected paperwork. 


   OTHER SPS-RELATED ACTIVITIES
-------------------------------------------------------- Appendix II:2

Our review focused on U.S.  government efforts to address foreign SPS
measures, but federal entities perform other activities related to
SPS issues that are designed to facilitate existing trade or
generally enhance global dialogue about SPS measures and their
relation to trade.  For example, the overall U.S.  system for
ensuring food safety and protecting animals and plants from pests or
diseases facilitates exports by providing safe, healthy products. 
U.S.  regulatory entities, such as the Food and Drug Administration
(FDA) and USDA's Food Safety and Inspection Service (FSIS) and Animal
and Plant Health Inspection Service (APHIS) are the lead agencies in
this process.  In addition, APHIS and FSIS routinely certify the
health and safety of U.S.  exports to facilitate their entry into
foreign markets.  Sometimes, as a result of technical exchanges or
trade negotiations, these agencies certify that U.S.  products
conform to specific requirements agreed to by the United States and
the foreign government. 

U.S.  trade and regulatory officials participate in several
international trade organizations or agreements that have developed
or continue to develop trade rules regarding SPS measures.  These
include the WTO, NAFTA, and a preparatory working group on SPS
measures for negotiations on a Free Trade Area of the Americas.  U.S. 
regulatory officials represent the United States in several
international and regional organizations, including the Codex
Alimentarius Commission, the International Office of Epizootics, and
the International Plant Protection Convention, that facilitate
discussion of technical issues with a view toward developing
international SPS standards.  Finally, under the auspices of the WTO,
U.S.  government officials have participated in training seminars to
help developing country officials understand their WTO SPS
obligations. 


   USDA STAFF AND BUDGET RESOURCES
-------------------------------------------------------- Appendix II:3

Because most federal efforts related to SPS issues are initiated or
managed by USDA, we asked the Secretary of Agriculture's Special
Assistant for International Trade to provide information about USDA
entities' staff and budget resources devoted to export-related SPS
issues from 1994 to 1997.  In some cases, the entities were able to
provide full-time staff years that are devoted to these issues; in
other cases, entities had to estimate the full-time equivalent
because their staff work on other issues as well.  We also identified
four functional categories that summarize the various USDA activities
and asked the entities to indicate which functional categories cover
most of their activities.  These categories are (1) negotiations, (2)
export certification, (3) technical work, and (4) participation in
international organizations. 

In responding to our request, the Secretary's Special Assistant
observed that the majority of USDA's export-related SPS staff years
are allocated to activities that facilitate exports such as the
issuance and review of export certificates.  These activities take
place solely within regulatory entities.  Table II.1 shows the actual
or estimated full-time staff years that USDA entities allocated to
all SPS activities from fiscal years 1994 to 1997 and the functional
categories each entity covers.  The Special Assistant also observed
that staff years devoted to the topic of this report, technical or
trade negotiations with other countries, and the establishment of
related policies accounted for less than one-fourth of the
export-related SPS staff years allocated in 1997.  Table II.2 shows
the staff years that APHIS, the Foreign Agricultural Service (FAS),
and FSIS reported they allocated to technical or trade negotiations
from fiscal years 1994 to 1997.  Table II.3 shows the estimated
budget resources these entities allocated to all SPS-related
activities during the same period. 



                                    Table II.1
                     
                      USDA Entities' SPS Functions and Full-
                        time Staff Years Allocated to All
                     Export-related SPS Issues, Fiscal Years
                                     1994-97

      Func                                                              % change
Enti  tion        FY '94        FY '95        FY '96        FY '97  FY '94 to FY
ty    s      staff years   staff years   staff years   staff years           '97
----  ----  ------------  ------------  ------------  ------------  ------------
APHI  EC,          175.0         190.0         200.0         209.0         + 19%
 S     IO,
       N,
       T
FAS   IO,           23.0          44.0          49.0          49.0         + 113
       N
FSIS  EC,           55.0          60.0          70.0          82.0          + 49
       IO,
       N,
       T
GIPS  EC,            5.0           5.0           5.1           5.1           + 2
 A     N,
       T
ARS   N, T          32.0          32.0          32.0          32.0             0
OSEC  Guid             0             0           0.5           0.5           n/a
       ance
================================================================================
Tota                 290           331         356.6         377.6         + 30%
 l
--------------------------------------------------------------------------------
Legend

ARS = Agricultural Research Service
OSEC = Office of the Secretary (of Agriculture)
EC = Issuance and review of export certificates
GIPSA = Grain Inspection, Packers and Stockyards Administration
IO = Participation in international trade and SPS standard-setting
organizations, including establishing related USDA or agency export
policies
N = Bilateral negotiation with trading partners about SPS measures
with the goal of export facilitation.  Can include establishing
related USDA or agency export policies
N/A = not applicable
T = Performance of technical work, including risk assessments,
research, and other technical support

Source:  USDA. 



                               Table II.2
                
                  APHIS, FAS, and FSIS Full-time Staff
                 Years Allocated to Technical or Trade
                   Negotiations, Fiscal Years 1994-97

                     FY '94    FY '95    FY '96    FY '97     % change
                      staff     staff     staff     staff    FY '94 to
Entity                years     years     years     years       FY '97
-----------------  --------  --------  --------  --------  -----------
APHIS                    36        37        38        42        + 17%
FAS                      23        44        49        49        + 113
FSIS                      3         3         3         3            0
----------------------------------------------------------------------
Note:  We attribute all FAS staff years to trade negotiations because
this is FAS' primary SPS-related function. 

Source:  USDA. 



                                    Table II.3
                     
                       USDA Entities' Budget Resources for
                     Export-related SPS Issues, Fiscal Years
                                     1994-97

                              (Dollars in thousands)

              FY '94         FY '95         FY '96         FY '97       % change
Entit         budget         budget         budget         budget   FY '94 to FY
y          resources      resources      resources      resources            '97
-----  -------------  -------------  -------------  -------------  -------------
APHIS        $11,068        $12,450        $13,182        $15,741          + 42%
FAS            1,449          2,860          3,283          3,381          + 133
FSIS           3,507          3,561          4,036          4,274           + 22
GIPSA            168            174            187            192           + 14
ARS            9,962         10,062         10,164         10,266            + 3
OSEC               0              0             61             62            n/a
================================================================================
Total        $26,154        $29,107        $30,913        $33,916          + 30%
--------------------------------------------------------------------------------
Source:  USDA. 


FEDERAL EFFORTS TO ADDRESS SIX
FOREIGN SPS MEASURES
========================================================= Appendix III

To enhance our understanding of the U.S.  government structure and
approach for addressing foreign SPS measures, we developed
information on six cases where another country's SPS measure(s) have
blocked or continue to block U.S.  agricultural exports to that
country.  The six cases involved various commodities and countries,
including U.S.  wheat exports to China, potential U.S.  tomato
exports to Japan, U.S.  beef and veal exports to the EU, U.S.  peach
and necterine exports to Mexico, certain U.S.  meat product exports
to Korea, and U.S.  poultry exports to Russia.  Information about how
we selected these cases and developed information about them is
contained in appendix IV. 

Of the six measures we examined, three have been long-standing, two
of which have been resolved (although in one of these cases renewed
U.S.  exports are not assured).  The oldest measure is the Chinese
"zero tolerance" for wheat imports found to contain tilletia
controversa kuhn (TCK), a common smut fungus.  The Chinese ban was
established in 1973 and began to affect U.S.  wheat exports from the
Pacific Northwest in 1974.  The second measure is the Japanese ban on
the importation of U.S.  tomatoes because of concern that such
tomatoes could be a host for tobacco blue mold (TBM).  That ban was
lifted for 25 varieties of tomatoes on April 25, 1997.  The third
measure is the EU ban on the use of growth-promoting hormones in
livestock, which was implemented in 1989.  On June 30, 1997, a WTO
dispute settlement panel found the ban to be inconsistent with the
SPS agreement.  However, the EU filed an appeal regarding this
decision on September 24, 1997. 

The three other SPS measures we examined are more recent, and all
three have been resolved.  The first measure is Mexican preshipment
requirements, dating back to 1991, for U.S.  peaches and nectarines. 
The second measure is a 1994 Korean requirement limiting the
shelf-life on certain frozen meat products to 30 days.  The third
measure is the Russian ban on U.S.  poultry in 1996 due to concerns
about food safety and poultry disease issues. 

Five of these six measures resulted in disruption of an ongoing U.S. 
export market.  In one case, there was a brief but total ban on U.S. 
exports (poultry to Russia); while in two cases, there was a partial
ban on U.S.  exports (beef to the EU and wheat to China).  In the
other two cases, foreign requirements caused U.S.  exports to drop
significantly (certain meat products to Korea and peaches and
nectarines to Mexico).  The sixth measure did not disrupt an ongoing
market but, rather, resulted in the exclusion of U.S.  exports from a
market (tomatoes to Japan). 


   WHEAT TO CHINA
------------------------------------------------------- Appendix III:1

The Chinese "zero tolerance" for TCK was established in 1973, just 1
year following the resumption of diplomatic relations between the
United States and China.  According to the Agricultural Research
Service (ARS), the disease caused by TCK reduces plant height by up
to 50 percent, replaces kernels of grain with useless spores in the
seed head, and gives wheat a fishy odor.  Since 1974, China has
banned wheat shipped from the states of the Pacific Northwest, an
area where TCK is known to occur, but has continued to import wheat
shipped from other U.S.  ports.  However, in the summer of 1996,
China rejected several shipments of U.S.  wheat, shipped from Gulf
ports, that Chinese officials said were found to contain TCK. 

The impact of the Chinese ban on U.S.  wheat exports is difficult to
determine.  U.S.  exports of wheat to China have fluctuated
significantly during the more than 20 years that the United States
has exported wheat to China.  Figure III.1 shows China's wheat
imports from 1982 to 1992.  According to a USDA official, it is not
clear that overall U.S.  wheat exports to China have decreased as a
result of the Chinese ban.  Even if the ban were not in place, it is
not clear that China would have bought more wheat from the United
States and less wheat from other wheat exporters, such as Canada. 
USDA's Economic Research Service (ERS) concluded in December 1993
that CEROILS, the Chinese state trading agency that purchases all
China's wheat imports, relies on pricing more than on other factors
when making wheat purchase decisions. 

   Figure III.1:  China Wheat
   Imports, Calendar Years 1982-92

   (See figure in printed
   edition.)

Source:  USDA. 

The Chinese ban on wheat with TCK is the longest-standing SPS measure
that we examined.  There have been intermittent discussions between
the United States and China during the last 24 years, including joint
research efforts, but the positions of the two countries have
remained substantially unchanged. 

The Chinese government states that it is very concerned with food
security and cannot risk having TCK become established in China.  For
this reason, China maintains its official "zero" tolerance of TCK. 
In practice, however, China has accepted some level of risk.  For
example, during 1988, China accepted wheat from the Pacific Northwest
on an experimental basis but stopped this practice because it
continued to detect TCK in these shipments.  China also reported
finding TCK in U.S.  wheat shipped from a Gulf port in 1989; USDA
retested this shipment but did not find TCK.  In the late 1980s,
China established a schedule in its contracts with U.S.  exporters to
discount the price of wheat when TCK is found.  (One wheat exporter
told us that in 1995, it had shipped 2 million tons of wheat to China
on over 40 vessels and had only one $3 claim on one vessel.)

The U.S.  government has stated that there is minimal risk of TCK
becoming established in China from imported wheat because climatic
conditions in China are not conducive to allowing TCK spores to
germinate.  According to a Grain Inspection, Packers and Stockyards
Administration (GIPSA) official, although data indicate that China
has been importing wheat with some low levels of TCK for years, China
continues to state that TCK does not exist in that country. 
Furthermore, U.S.  officials said that one or two other countries
have voiced some concern about TCK, but China is the only country
that prohibits the import of wheat with TCK.  In short, the U.S. 
position is that China's zero-tolerance for TCK is not based on sound
science.  The U.S.  position is that China can safely accept some
minimal level of exposure to TCK and not risk damage to its wheat
production. 

Several USDA agencies have been involved in attempts to resolve the
TCK issue with China over the last 20 years.  Agencies that have had
major roles at various times have included APHIS, FAS, the Federal
Grain Inspection Service (which later was combined with another
agency to become GIPSA), ARS, and the Agricultural Marketing Service
(AMS).  The Office of the Secretary of Agriculture has also been
involved, and special task forces have been established over the
years. 

Discussions between U.S.  and Chinese officials remained at a
technical level for many years.  A prominent issue the two sides
discussed during the early 1990s was how to correctly distinguish TCK
spores from those of other diseases that did not concern China so
that U.S.  wheat shipments were not detained or rejected
inappropriately.  ARS and AMS played important roles in conducting
joint research with Chinese scientists to develop a common
spore-identification methodology.  The two sides have also discussed
options that would allow U.S.  wheat to enter China freely at
southern ports that are physically distant from China's main
wheat-production regions.  In 1993, the Chinese offered to allow U.S. 
wheat to enter at Hainan Island, but the United States considered
this option unacceptable because grain processing facilities on the
island were inadequate. 

More recently, the issue has been discussed primarily at a trade
level.  Since 1986, China has been seeking to join the WTO and, at
various times, some U.S.  officials have stated that the TCK issue
will have to be resolved before the United States can support China's
bid for membership.  The United States and China signed a memorandum
of understanding in 1992, according to which China promised that all
SPS standards and testing requirements would be based on sound
science and administered in a manner that does not impede trade or
create barriers to imported products.  The U.S.  position is that
China must honor that agreement in order to gain access to the WTO. 
Although Chinese officials have continuously identified the TCK issue
as a technical problem, a GIPSA official said that U.S.  efforts to
resolve the issue through technical exchanges have not produced
results and expressed the opinion that the issue can only be resolved
through a political solution. 


   TOMATOES TO JAPAN
------------------------------------------------------- Appendix III:2

For at least 14 years, Japan has blocked the import of U.S.  tomatoes
because of concerns that such products were a host for TBM. 
According to U.S.  officials, Japan based this concern on citations
in scientific literature published in 1933 and 1989 that identified
tomatoes as a possible host for TBM.  On April 25, 1997, USDA
announced that Japan had lifted its ban and would allow the
importation of 25 varieties of U.S.  tomatoes.  According to the
announcement, U.S.  industry estimated that the size of the Japanese
market for U.S.  tomatoes could reach approximately $50 million
annually. 

The U.S.  position was that TBM does not infest tomatoes.  According
to APHIS officials, although TBM is present in the United States,
there have been no incidents of TBM reported in California, where
tomato growers were interested in exporting to Japan.\1

Negotiations between the two countries since 1983 were primarily
technical in nature, with APHIS taking the lead for the United
States.  FAS' role was more limited and involved prompting movement
on the case with Japanese officials.  In addition, ARS co-sponsored a
study with industry groups to test whether tomatoes could be
inoculated with TBM.  USTR was consulted regarding the prospects for
taking the case to the WTO.  The U.S.  Ambassador to Japan brought
the case up to the Japanese agriculture minister. 

APHIS began discussing the TBM issue as early as 1983 during annual
bilateral meetings with Japan's Ministry of Agriculture, Forestry and
Fisheries (MAFF).  Although APHIS presented available research that
suggested tomatoes were not a host for TBM, Japanese officials
remained unconvinced.  During 1991, Japan suggested the United States
should conduct additional research to demonstrate that tomato plants
could not be infected with TBM, even when inoculated with the fungus. 

In response, APHIS submitted a research proposal that MAFF accepted. 
ARS conducted the research funded jointly by APHIS and the tomato
industry.  The results of this research, which conclusively supported
the U.S.  position, were provided to MAFF in 1995.  However, through
1996, Japanese authorities repeatedly asked the U.S.  government for
additional data and scientific research.  The Japanese also asked the
U.S.  side to correct the USDA Agricultural Handbook (an American
Phytopathological Society publication), which made a reference to TBM
on tomatoes. 

In June 1996, APHIS asked the FAS Administrator to meet with Japanese
officials and explain that the United States was prepared to bring
the case before the WTO if there were further delays by the Japanese. 
Later that year, MAFF indicated its intention to remove the ban. 
However, according to Japanese regulations, Japanese authorities had
first to obtain comments from and hold public hearings involving
Japanese producer groups before making a final decision on whether to
lift the ban.  Japan initially delayed implementation because of
resistance among Japanese tomato growers but finally lifted the ban
for 25 varieties of tomatoes in April 1997. 

Both U.S.  industry and government sources have complained about the
slow pace of progress in the negotiations.  One industry spokesman
said that while the Japanese appeared to stall and drag out the
negotiations, APHIS' practice of waiting for formal annual bilateral
meetings to raise outstanding concerns did not facilitate rapid
progress either. 


--------------------
\1 Tomato growers in Florida and other states subsequently expressed
an interest in exporting to Japan. 


   BEEF TO THE EU
------------------------------------------------------- Appendix III:3

On January 1, 1989, implementation of an EU ban on the use of
growth-promoting hormones in livestock and on imports of meat from
animals so treated caused U.S.  beef and veal exports to drop from
about $120 million in 1988 to less than $10 million in 1989.  The ban
applied to all meat but primarily affected U.S.  exports of edible
organ meats, the export value of which dropped from $85 million in
1988 to $0.5 million in 1989.  U.S.  sales of edible organ meat to
the EU remain limited, at only $1 million in 1995. 

The U.S.  position on the hormone ban is that the measure is
inconsistent with the WTO SPS agreement because, among other things,
it is not supported with scientific evidence or risk assessment, it
is not necessary for the protection of human health, and it ignores
relevant international standards.\2 Further, the United States argued
that the measure is designed to protect domestic producers from
competition.  The U.S.  complaint about the EU ban was an important
test of the SPS agreement on strengthened rules and procedures for
dealing with food safety and health measures that restrain trade and
of the WTO's dispute settlement process. 

Concerns in Europe about hormone use and its impact on human health
began in 1980 when a health scandal in Italy had raised suspicions
about school lunches containing veal that may have contained hormone
residues.  An EU Council Directive of July 1981 prohibited the use of
hormones, except for therapeutic purposes.  The EU set up a
scientific working group (the Lamming Committee) to determine whether
the use of five specific hormones (three natural and two synthetic)
as growth promotants posed any health risk.\3 The Lamming Committee
concluded that the three natural hormones would not present any
harmful effects to the health of the consumer.  In June 1984, the EU
proposed allowing the use of the three natural hormones. 

In October 1985, however, the European Parliament adopted a
resolution claiming that scientific information about the five
hormonal substances was "far from complete." It endorsed a ban on the
two synthetic hormones and rejected the proposed authorization of the
three natural hormones, with a continued exception for therapeutic
purposes.  In December 1985, an EU Council Directive banned the use
of natural hormones except for therapeutic purposes, the use of
synthetic hormones, and the importation of meat from animals to which
any hormones had been administered.  The directive was to take effect
on January 1, 1988, but was delayed 1 year. 

Much of the negotiations between the United States and the EU
concerning the hormone ban have been conducted by trade officials and
have been very formal.  In September 1986, the United States
challenged the EU hormone ban under the GATT Agreement on Technical
Barriers to Trade and in 1987 requested that the matter be referred
to a group of technical experts.  The EU blocked formation of the
technical group, and the dispute went unresolved.  USTR subsequently
developed a retaliation list of EU commodities on which there would
be sanctions but suspended application of the list for a year until
the scheduled implementation of the EU ban.  In January 1989,
however, the EU directive went into effect, and the United States
reacted by applying the retaliation list that had been suspended. 

During the 1990s, both sides looked to the Uruguay Round negotiations
on SPS measures to provide some new basis for deciding the issue. 
After the SPS agreement was implemented in 1995, USTR and USDA again
tried to resolve this issue.  During 1995, USDA officials met several
times with EU officials but were unable to obtain resolution.  In
late 1995, the EU held its Scientific Conference on Growth Promotion
in Meat Production.  The conference concluded there was no evidence
of health risk from the five hormones approved for use in the United
States.  However, following the conference, the EU reaffirmed its
commitment to maintaining the ban. 

In January 1996, the United States requested WTO consultations with
the EU.  Consultations were on held March 27, 1996, but failed to
resolve the dispute.  The United States requested that the WTO
Dispute Settlement Body establish a panel to review the case, which
was done on May 20, 1996.  The U.S.  complaint addressed the three
natural hormones, the two synthetic hormones, and a sixth hormone.\4
FDA had a major role in developing the technical aspects of the U.S. 
complaint.  On June 30, 1997, the panel found the EU ban to be
inconsistent with the SPS agreement.  The EU filed an appeal
regarding this decision on September 24, 1997. 


--------------------
\2 In 1995, the Codex Alimentarius Commission adopted standards on
five of the hormones banned by the EU.  Codex determined that three
natural hormones (estradiol, progesterone, and testosterone) are
unlikely to pose a human health hazard.  Codex also established usage
standards for two synthetic hormones (trenbolone and zeranol) that
would protect human health.  The EU's measure is stricter than Codex
standards. 

\3 The three natural hormones the Lamming Committee studied were
estradiol, progesterone, and testosterone.  The two synthetic
hormones studied were trenbolone and zeranol. 

\4 The hormones addressed by the U.S.  complaint were estradiol,
progesterone, testosterone, trenbolone, zeranol, and melengestrol
acetate. 


   PEACHES AND NECTARINES TO
   MEXICO
------------------------------------------------------- Appendix III:4

In 1991, the Mexican government established a ban on imports of
several types of fresh fruit, including U.S.  peaches and nectarines,
because of their susceptibility to being attacked by the Oriental
fruit moth (OFM).  At the same time, Mexico identified several other
pests of concern related to U.S.  peach and nectarine imports. 
Before 1991, U.S.  peach and nectarine exports to Mexico were not
subject to any restrictions.  Since 1992, U.S.  peaches and
nectarines have been exported to Mexico in accordance with the
requirements of a work plan agreed to by U.S.  and Mexican government
officials.  For example, the work plan requires U.S.  peaches and
nectarines to be treated and inspected before shipment.  USDA
officials said the quantity of U.S.  peaches and necatrines exported
to Mexico, measured in metric tons, dropped by almost 40 percent
between 1991 and 1996.  In addition, industry officials told us that
the cost associated with treating the fruit for OFM is high. 

In 1991, the plant health agency of Mexico's department of
agriculture told APHIS officials that the agency believed
phytosanitary requirements needed to be established for fresh fruit
imports from the United States in order to protect Mexico from
exposure to certain pest risks, including OFM.  Mexican officials
asserted that OFM is not found in Mexico. 

APHIS officials told us they consider the Mexican concern about OFM
and the associated treatment requirements to be legitimate.  FAS
officials said they agreed with APHIS' position.  However, industry
officials said they question a basic premise of the Mexican
phytosanitary measure, namely, that OFM does not exist in Mexico.\5
Furthermore, the officials said they believe that the treatment and
inspection measures that are required to allow peaches and nectarines
to enter Mexico are excessive. 

APHIS was the primary U.S.  agency involved in the Mexican case, and
it assumed the lead in technical negotiations with its Mexican
counterpart.  ARS provided substantial technical support to APHIS. 
FAS officials also had a supporting role in the resolution of the
case.  In addition to U.S.  government entities, the California
Department of Food and Agriculture played a fairly large role in
developing the annual work plans. 

Technical negotiations between APHIS and Mexican plant health
authorities began in late 1991.  First APHIS convinced the Mexicans
to reduce the number of pests that concerned them from eight to
three.  Between 1992 and 1995, the two sides developed annual work
plans that would allow U.S.  peaches and nectarines to be exported to
Mexico.  (Such work plans exist for certain Mexican products being
exported to the United States.) The work plan requires the fruit to
be fumigated with methyl bromide before shipment.  In 1993, the work
plan was modified at the request of the Mexican government to require
that the U.S.  industry pay for Mexican inspectors to be stationed in
the United States to monitor the fumigation process.  (APHIS
inspectors are similarly stationed in Mexico.) Shipments are to be
accompanied by an APHIS-issued phytosanitary certificate attesting
that all requirements have been met.  In 1995, a permanent work plan
was adopted, although there have been slight modifications to the
work plan since then.  For example, in 1997, APHIS persuaded Mexico
to accept an alternative treatment method to methyl bromide for 10
percent of the peaches and nectarines being exported to Mexico.\6

Although U.S.  industry was pleased with the U.S.  government
response to the Mexican requirements when they first went into
effect, the Mexican case is perhaps the best example of one where
there has been strong disagreement between U.S.  government and
industry officials about the legitimacy of a foreign SPS measure. 


--------------------
\5 Industry officials cited a British report that showed OFM was
found in Mexico.  However, APHIS officials told us they had examined
the report and its supporting material and found the conclusion about
OFM's existence in Mexico to be erroneous. 

\6 Methyl bromide is a highly effective fumigant that is widely used
in agricultural production to control a broad spectrum of pests.  It
has been identified by scientists as an ozone-depleting substance. 
In 1993, EPA issued regulations to phase out the production and
importation of methyl bromide in the United States.  See Pesticides: 
The Phaseout of Methyl Bromide in the United States (GAO/RCED-96-16,
Dec.  15, 1995). 


   CERTAIN MEAT PRODUCTS TO KOREA
------------------------------------------------------- Appendix III:5

In February 1994, Korea began to enforce a 30-day shelf-life
requirement on cooked frozen meat products, specifically sausages
exported to Korea.  The permitted shelf life had been 90 days for the
4 years before 1994.  According to U.S.  officials, by limiting the
shelf life of these products to
30 days, Korean authorities effectively denied U.S.  products access
to the Korean market, since it took at least 35 days for shipments to
reach Korea and roughly 30 days for the sausages to clear port. 
Following WTO consultations in 1995, Korea agreed to accept the
manufacturer-determined shelf life by July 1, 1996.  Imports of
sausages from the United States to Korea in 1993 totaled $7.4
million.  In 1994, such imports had dropped to $4 million, a decrease
of 45 percent. 

According to U.S.  officials we interviewed and documents we
reviewed, there were two major elements in the Korean position
regarding the need to establish the 30-day shelf-life requirement. 
First, Korean experts maintained that cooked sausages were
susceptible to infection by microorganisms when the condition of the
sausages fluctuated between frozen and unfrozen states, as was often
the case for frozen food distributed in Korea.  Second, since there
was no international standard on the shelf life of cooked frozen
sausages, Korean authorities surveyed the practices of major advanced
countries.  Korean authorities argued that while a number of those
countries allowed manufacturers to determine the shelf life of their
products, it would be premature for Korea to do the same, given the
level of development of its food manufacturing industry. 

The U.S.  government position was that Korea's 30-day shelf-life
requirement was unscientific.  U.S.  authorities argued that
scientific and regulatory data supported a shelf life of about 1 year
for cooked frozen sausages.  U.S.  officials also argued that
allowing manufacturers to set their own shelf life is a
well-established practice around the world. 

USTR and FAS had major roles in resolving this case.  FSIS and FDA
provided technical support to USTR and FAS.  The U.S.  Ambassador to
Korea and FAS and USTR officials met with Korean health authorities
soon after the case came to the attention of the U.S.  government in
March 1994.  Over the next few months, USTR, USDA, and embassy
officials communicated their disappointment about Korea's decision to
Korean health and foreign affairs authorities. 

In November 1994, a U.S.  industry group filed a petition about the
Korean measure with USTR under section 301 of the Trade Act of 1974
(19 U.S.C.  2411).  In January 1995, following discussions about the
section 301 case, the Korean government reversed itself on shelf-life
requirements for certain meat products.  However, Korea's proposal
was unsatisfactory to the United States because a system for
manufacturer-determined shelf life for these products would not take
effect until 1998. 

Under the auspices of the WTO, in May 1995, USTR requested
consultations with Korea on the shelf-life requirements.  The
consultations addressed shelf-life requirements not only for chilled
and frozen meat products but also for a number of other products. 
According to USTR, damage estimates due to multiple Korean shelf-life
requirements ranged from $240 million in 1994 to as much as $1
billion annually by 1999. 

The consultations led to an agreement, on July 20, 1995, whereby
Korean authorities agreed to phase out their government-mandated
shelf-life system and accept the manufacturer-determined shelf-life
for imported products.  The new system became effective for all
dried, packaged, canned, or bottled products on October 1, 1995, and
for chilled, vacuum-packed pork and beef and all frozen food on July
1, 1996.  According to a WTO official, the system for other products
was to be phased in over time.  After the agreement was announced,
USTR and FAS officials said they monitored Korea's implementation to
ensure it adhered to the agreement.  These officials said Korea's
initial notification to the WTO of its new measures in July 1995 did
not appear to be consistent with the agreement reached, but a
subsequent notification in September 1996 seemed to comply with the
agreement. 


   POULTRY TO RUSSIA
------------------------------------------------------- Appendix III:6

In 1996, the Russian poultry ban threatened a U.S.  market that had
been growing dramatically since the collapse of the Soviet Union,
from about $84 million in 1993 to about $608 million in 1995 (see
fig.  III.2).  Russia has become the largest single market for U.S. 
poultry exports--U.S.  poultry exports to Russia represented about 26
percent of total U.S.  poultry exports in 1995.  Poultry exports have
also become the largest single U.S.  export to Russia.  Because the
ban was in effect for only about a week before the United States and
Russia reached an agreement, and because U.S.  poultry exports to
Russia had increased somewhat during January and February of 1996 in
anticipation of the ban's taking effect, total U.S.  poultry exports
to Russia actually increased during 1996.  Nonetheless, the potential
loss from a long-term ban was quite substantial. 

   Figure III.2:  U.S.  Poultry
   and Poultry Product Exports to
   Russia, Calendar Years 1993-96

   (See figure in printed
   edition.)

Source:  USDA, Foreign Agricultural Trade Statistics of the United
States, various issues. 

The case had its origins in a shipment of "off-condition" chicken
received by a Russian importer in June 1995.  In November 1995,
Russian veterinary health officials stated they had concerns about
the U.S.  system for ensuring the safety of U.S.  poultry exports and
demanded that all U.S.  processing and cold storage facilities
involved in the export of chicken to Russia be inspected by Russian
veterinarians. 

After consulting with industry officials, USDA officials agreed to
the Russian inspection of U.S.  facilities, even though an inspection
of such magnitude was unusual.  Shortly before the arrival of the
Russian veterinarians in January 1996, Russia provided standards by
which the U.S.  facilities were to be judged.  USDA and industry
officials said the standards were very strict and were not similar to
the existing U.S.  poultry processing system.  After inspecting about
50 of the more than 300 plants that were to be reviewed, a top
Russian health official announced in February 1996 that none of the
U.S.  facilities had met Russian standards. 

Following this announcement, U.S.  (APHIS, FSIS, and FAS) and Russian
officials engaged in technical negotiations to attempt to resolve the
problem.  The negotiations addressed food safety and animal disease
issues and lasted for several weeks.  The U.S.  position was that the
U.S.  system produces a safe and wholesome product and the Russian
import requirements were unreasonable.  U.S.  officials argued that
processing and inspection systems could differ but still offer the
same degree of protection.  On February 16, 1996, Russian officials
announced that a ban on U.S.  poultry imports would go into effect
within 30 days unless Russian concerns were addressed.  U.S. 
officials who participated in the talks said it became clear to them
that technical negotiations were not going to resolve the problem. 

Following indications by Russian officials that they would ban U.S. 
poultry imports, the Office of the Vice President became involved,
and USTR took the lead in the negotiations.  The Russian ban was
announced on March 16, 1996.  Negotiations between the United States
and Russia followed, and a resolution was announced about 1 week
later, on March 25, 1996.  The two sides reached agreement, among
other things, on an updated export certificate and a framework for
periodic inspections of U.S.  poultry processing and cold storage
facilities.  According to U.S.  officials, in this case, the Office
of the Vice President had a unique channel to work through--a
committee set up between the Vice President and the Russian Prime
Minister that held semiannual meetings to discuss bilateral issues. 

U.S.  industry, which was willing to make certain concessions to
protect its market, was heavily involved in developing the U.S. 
negotiating position.  U.S.  industry has noted, however, that the
ban could perhaps have been avoided had higher level and/or
appropriate U.S.  officials been involved earlier in the
negotiations.  Some U.S.  officials also expressed concern that
allowing Russian veterinarians to come to the United States with the
purpose of inspecting all the processing plants that exported poultry
to Russia may have set an expensive precedent for both the federal
government and the agricultural industry. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix IV

The objectives of our work were to provide Congress with information
and analysis on (1) the extent to which foreign SPS measures may
unfairly restrict U.S.  agricultural exports and (2) the federal
structure and approach for addressing such measures.  Our work does
not address other countries' concerns about U.S.  SPS measures or
federal efforts to ensure the safety of domestically produced and
imported food. 

To address the extent of foreign SPS measures and their impact on
U.S.  agricultural exports, we

  -- reviewed USDA and academic literature that addressed (1) the
     history of technical barriers to agricultural trade, including
     SPS measures; and (2) the impact of certain SPS measures on
     trade;

  -- discussed the extent and impact of SPS measures with (1)
     appropriate trade and regulatory officials at USDA, USTR, FDA,
     the Environmental Protection Agency (EPA), and the Department of
     State; (2) representatives of agricultural trade associations
     for beef, fruits, pork, poultry, seeds, vegetables, wheat, and
     other commodities; (3) officials from the National Association
     of State Departments of Agriculture and selected state
     departments of agriculture; and (4) academic experts at the
     University of California;

  -- reviewed USDA and private sector analyses of how other
     countries' SPS measures impact U.S.  exports;

  -- attended the 1996 and 1997 USDA Agricultural Outlook
     Conferences, as well as the National Association of State
     Departments of Agriculture's 1996 Legislative Conference, where
     the primary issues facing U.S.  agricultural exports were
     discussed; and

  -- reviewed selected official records of meetings from 1991 to 1996
     of USDA's Agricultural Policy Advisory Committee (APAC) and
     multiple Agricultural Technical Advisory Committees (ATAC) for
     various commodity groupings to track changes in the level of
     concern expressed about the impact of foreign SPS measures. 

To describe and analyze the federal structure and approach for
addressing foreign SPS measures, we

  -- reviewed studies of the U.S.  trade structure for agricultural
     products and the U.S.  regulatory structure for food safety and
     animal and plant health to determine which entities were
     responsible for this issue;

  -- reviewed responsible entities' relevant statutory authorities,
     mission statements, organizational charts, budgets, and staff
     levels, particularly related to addressing foreign SPS measures;

  -- interviewed relevant officials in USDA's Office of the
     Secretary; at eight USDA agencies; USTR; FDA; EPA; and State to
     discuss their Department's or agency's role in addressing
     foreign SPS measures, activities their Department or agency has
     undertaken to address specific foreign measures, their working
     relationships with other responsible entities, the extent to
     which responsible entities have coordinated their efforts, and
     how key decisions were made in individual cases;

  -- attended or reviewed documentation of USDA interagency meetings
     held to coordinate and share information about the status of
     efforts to address foreign SPS measures;

  -- reviewed structural and procedural limitations of the current
     approach as well as possible changes that could address certain
     problems with high-level USDA officials and agency staff,
     including the Special Assistant for International Trade to the
     Secretary of Agriculture and the FAS Administrator;

  -- reviewed nonpublic agency documents that identified specific
     problems and suggested possible solutions, including a report by
     the USDA Office of Inspector General that examined USDA's
     response to NAFTA implementation;

  -- reviewed documentation of several USDA agencies' computer data
     bases that are used to track and manage SPS-related activities;

  -- attended APAC and ATAC meetings where concerns about the U.S. 
     government approach to address SPS measures were discussed with
     USDA and USTR officials;

  -- interviewed and obtained documentation from representatives of
     agricultural trade associations that have requested U.S. 
     government assistance to address SPS measures to assess their
     experiences, what problems they encountered, and how satisfied
     they were with U.S.  government efforts; and

  -- reviewed agricultural trade association documents that
     identified specific problems in the current structure and
     approach and suggested possible solutions. 

To further support this objective, we developed information on U.S. 
government actions to address six foreign SPS measure(s) that have
threatened, constrained, or blocked or continue to block U.S. 
agricultural exports.  To select the six measures, we examined a
variety of factors and attempted to develop a group of measures that
would allow us to address a range of issues, including (1)
commodities affected, (2) countries establishing the measures, (3)
duration of the measures (from a few months to many years), (4)
impact of the measures on trade (from relatively small to relatively
large), (5) status of U.S.  efforts to resolve the case (from
resolved to unresolved), (6) coverage by multilateral rules
(involving WTO members, NAFTA members, and nonmembers of either
agreement), and (7) the extent of participation of responsible U.S. 
government entities in addressing the measure. 

The measures we examined included

  -- a Chinese stated "zero tolerance" on wheat infected with the TCK
     fungus, a measure in effect since 1973 that has primarily
     affected certain northwestern U.S.  states where the fungus is
     known to occur;

  -- a Japanese ban (encountered as early as 1983) on imports of U.S. 
     tomatoes because of Japanese government concerns that tomatoes
     carried TBM;

  -- a 1989 EU ban on imports of hormone-treated meat that blocks
     U.S.  beef and veal exports;

  -- 1991 measures adopted in Mexico to establish multiple
     preshipment requirements for imports of fresh U.S.  peaches and
     nectarines;

  -- a 1994 change to a Republic of Korea shelf-life standard that
     adversely affected U.S.  meat product exports; and

  -- a brief 1996 Russian ban on U.S.  poultry exports due to Russian
     dissatisfaction with U.S.  inspection processes and disease
     certifications. 

For each measure, we developed a chronology of U.S.  government and
industry actions taken to address the measure, from the time the U.S. 
government first learned about the measure until the measure was
resolved, or if unresolved, to the present time.  To do so, we
conducted interviews with agency officials who had been involved in
addressing the measure; obtained any documents these officials could
provide to demonstrate their or their entity's actions, including
chronologies, trip reports, memos, meeting minutes, press releases,
and the text of any agreements reached with the foreign government;
and reviewed reporting cables between State (headquarters) and
embassy officials located abroad during 1994-96 that discussed these
cases, including information about meetings with foreign officials
and their results.  We also met with agricultural trade association
officials who had been involved in these cases to discuss what
actions they had taken and ascertain their opinions of U.S.  efforts. 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE U.S.  TRADE
REPRESENTATIVE
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the U.S.  Trade Representative 's
memorandum dated September 9, 1997. 

GAO COMMENTS

1.  We updated our discussion of USTR's Government Performance and
Results Act (Results Act) strategic plan based on the final version
that had not been completed when the draft report was sent to USTR
for comment.  We also added information about organizational
developments at USTR and the interagency Trade Policy Staff Committee
(TPSC) that USTR leads.  Information throughout the report is based
on discussions held with USTR and USDA officials continuously through
October 1997 and documents gathered from both agencies.  However, we
continue to believe that our assessment of the overall U.S.  approach
and the need for coordinated goals, objectives, and performance
measurements is accurate.  First, the TPSC process is not a
substitute for coordinated management of overall federal efforts. 
While this process is an important component of the federal approach,
it is focused on obtaining interagency consensus on a limited number
of SPS issues that the United States may raise for discussion in the
WTO SPS committee and possibly refer to dispute settlement. 
According to USTR and USDA officials, the number of issues addressed
in the TPSC process is a small subset of the hundreds that USDA
entities address, which accounts for the report's focus on USDA's
SPS-related activities.  Second, we found only broad goals related to
SPS measures in USTR's Results Act plan, rather than the "specific
negotiating goals" that USTR said it contained.  In our view, these
broad goals are not sufficient to ensure the more integrated approach
for addressing SPS measures that we believe is necessary. 

2.  We added information about the important role the regulatory
agencies play not only in addressing foreign SPS measures but also in
ensuring that U.S.  trade policy does not undermine U.S.  regulatory
interests.  However, the focus of this report is, as requested, on
the facilitation of U.S.  agricultural exports. 

3.  We discussed our response to this issue in the section of the
letter entitled "Agency Comments and Our Evaluation." See page 35. 




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
AGRICULTURE
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)

See comment 4. 


The following are GAO's comments on the Department of Agriculture's
letter dated September 11, 1997. 

GAO COMMENTS

1.  The report identifies several SPS measures that have been
resolved or regarding which the U.S.  government has made progress,
including five of our six case studies, and discusses how federal
entities have used the provisions of the WTO SPS agreement in their
negotiations to address SPS measures.  However, we continue to
believe that federal entities cannot measure the degree of their
success because they lack adequate data on the size and potential
impact of the problem, the status of their efforts to address the
problem, and the effect of their efforts on U.S.  exports.  Moreover,
we believe that federal efforts to address SPS measures are hampered
by the structural and procedural weaknesses we identify. 

2.  We clarified that our assessment of the U.S.  approach applied to
the entire scope of federal efforts, not just to measures that might
be referred to the WTO.  As noted in our response to USTR's comments
(app.  V,
comment 1), we updated our discussion of recent organizational
initiatives but continue to believe our overall assessment of the
federal approach is accurate. 

3.  We understand that informal mechanisms may be a valuable and
integral part of any system.  However, our review demonstrates that,
in the absence of high-level, unified management, the ad hoc and
informal nature of USDA's efforts to address SPS measures has caused
coordination, communication, and prioritization problems.  USDA notes
in its comment letter that increased written guidance is needed to
document its informal processes.  We encourage USDA to focus this
guidance on how federal entities can best use such processes. 

4.  We added information about monthly strategy meetings held to
discuss SPS issues and the planned formation of the Working Group on
Agricultural Trade Policy.  Based on information USDA officials
provided, the working group appears to be an appropriate step toward
improving USDA's management of Departmentwide efforts to address SPS
measures, provided the plan is implemented and maintained and the
working group's effectiveness is periodically evaluated. 




(See figure in printed edition.)Appendix VII
COMMENTS FROM THE FOOD AND DRUG
ADMINISTRATION
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the FDA's letter dated August 22,
1997. 

GAO COMMENTS

1.  We added information to the report to more completely reflect the
role that regulatory agencies play, not only in providing technical
expertise to help evaluate foreign SPS measures, but also in
developing and evaluating U.S.  trade positions to ensure they do not
undermine U.S.  regulatory interests.  We also added information to
indicate that the potential impact on U.S.  regulatory interests is
one of several factors that are considered when determining which
foreign SPS measures the United States will raise for discussion in
the WTO SPS committee. 

2.  We discussed our response to this issue in the section of the
letter entitled "Agency Comments and Our Evaluation." See page 35. 

3.  We discussed our response to this issue in the section of the
letter entitled "Agency Comments and Our Evaluation." See page 35. 

4.  We modified the recommendation to suggest that USTR and USDA
consult with FDA, EPA, and State in the development of coordinated
goals, objectives, and performance measurements for addressing SPS
measures. 




(See figure in printed edition.)Appendix VIII
COMMENTS FROM THE DEPARTMENT OF
STATE
========================================================== Appendix IV



(See figure in printed edition.)


The following is GAO's comment on the Department of State's letter
dated August 20, 1997. 

GAO'S COMMENT

1.  We modified the recommendation to suggest that USTR and USDA
consult with FDA, EPA, and State in the development of coordinated
goals, objectives, and performance measurements for addressing SPS
measures.  Although we recognize that State has played an important
role in addressing foreign SPS measures, it does not have the same
degree of responsibility for identifying, evaluating, and conducting
negotiations on these issues that USTR and USDA have. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IX

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Phillip J.  Thomas
Shirley A.  Brothwell
Kimberly M.  Gianopoulos
Stanton J.  Rothouse
Michael J.  Avenick
Rona Mendelsohn

OFFICE OF THE CHIEF ECONOMIST,
WASHINGTON, D.C. 

Daniel E.  Coates

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Herbert I.  Dunn

LOS ANGELES REGIONAL OFFICE

Juan Gobel
Patricia Czares



RELATED GAO PRODUCTS
============================================================ Chapter 0

U.S.  Agricultural Exports:  Strong Growth Likely But U.S.  Export
Assistance Programs' Contribution Uncertain (GAO/NSIAD-97-260, Sept. 
30.  1997). 

Agricultural Inspection:  Improvements Needed to Minimize Threat of
Foreign Pests and Diseases (GAO/RCED-97-102, May 5, 1997). 

Food-Related Services:  Opportunities Exist to Recover Costs by
Charging Beneficiaries (GAO/RCED-97-57, Mar.  20, 1997). 

World Trade Organization:  Status of Issues to Be Considered at
Singapore Ministerial Meeting (GAO/T-NSIAD-96-243, Sept.  27, 1996). 

Agricultural Research:  Information on Research System and USDA's
Priority Setting (GAO/RCED-96-92, Mar.  28, 1996). 

Food Safety:  New Initiatives Would Fundamentally Alter the Existing
System (GAO/RCED-96-81, Mar.  27, 1996). 

International Trade:  Implementation Issues Concerning the World
Trade Organization (GAO/T-NSIAD-96-122, Mar.  13, 1996). 

Pesticides:  The Phaseout of Methyl Bromide in the United States
(GAO/RCED-96-16, Dec.  15, 1995). 

International Trade:  Canada's Restrictions on Certain Salmon Imports
(GAO/GGD-95-117, Apr.  20, 1995). 

U.S.-Canadian Food Safety:  Opportunities for Sharing Information and
Coordinating Inspections (GAO/RCED-95-45, Nov.  22, 1994). 

U.S.-Chilean Trade:  Pesticide Standards and Concerns Regarding
Chilean Sanitary Rules (GAO/GGD-94-198, Sept.  28, 1994). 

The General Agreement on Tariffs and Trade:  Uruguay Round Final Act
Should Produce Overall U.S.  Economic Gains (GAO/GGD-94-83a and b,
July 29, 1994). 

North American Free Trade Agreement:  Assessment of Major Issues
(GAO/GGD-93-137a and b, Sept.  9, 1993). 


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