World Trade Organization: Status of Issues to Be Considered at Singapore
Ministerial Meeting (Stmnt. for the Rec., 09/27/96, GAO/T-NSIAD-96-243).

GAO discussed the implementation of the Uruguay Round agreements and the
World Trade Organization's (WTO) operations in the context of the
upcoming Singapore ministerial meeting. GAO noted that: (1)
implementation of the Uruguay Round agreements is complex, and the
Singapore meeting will provide WTO member countries with the opportunity
to take stock of their implementation efforts; (2) limitations and
variations in the amount of information reported by member countries has
made it difficult for WTO committees and working groups to oversee
implementation of the agreements and a new dispute settlement mechanism;
(3) implementation of the WTO Agreement on Textiles and Clothing has
been a major area of contention between exporting and importing
countries; (4) the United States has many concerns regarding the
implementation of commitments to liberalize agricultural trade, and has
indicated that it will propose further agricultural reform negotiations;
(5) it is not clear whether efforts to liberalize trade in the services
sector will be successful, since WTO member countries have been unable
to reach final agreements covering some sectors; and (6) it is expected
that WTO members will begin work on the next generation of trade issues
in such areas as environmental protection, investment rules, competition
policy, labor standards, and bribery and corruption at the Singapore
meeting.

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

 REPORTNUM:  T-NSIAD-96-243
     TITLE:  World Trade Organization: Status of Issues to Be Considered 
             at Singapore Ministerial Meeting
      DATE:  09/27/96
   SUBJECT:  Foreign trade agreements
             International trade regulation
             Restrictive trade practices
             International economic relations
             Foreign trade policies
             International organizations
             Clothing industry
             Agricultural industry
IDENTIFIER:  United States-Canada Free Trade Area Agreement
             
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Cover
================================================================ COVER


Before the Subcommittee on Trade, Committee on Ways and Means, House
of Representatives

For release on Delivery
Expected at
12:00 p.m., EDT
Friday,
September 27, 1996

WORLD TRADE ORGANIZATION - STATUS
OF ISSUES TO BE CONSIDERED AT
SINGAPORE MINISTERIAL MEETING

Statement For The Record by JayEtta Z.  Hecker, Associate Director,
International Relations and Trade Issues, National Security and
International Affairs Division

GAO/T-NSIAD-96-243

GAO/NSIAD-96-243T


(711225)


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

  EU - European Union
  CFTA - U.S.-Canada Free Trade Agreement
  GATT - General Agreement on Tariffs and Trade
  GATS - General Agreement on Trade in Services
  ILO - International Labor Organization
  NAFTA - North American Free Trade Agreement
  OECD - Organization for Economic Cooperation and Development
  SPS - sanitary and phytosanitary
  STE - state trading enterprises
  TBT - Technical Barriers to Trade Agreement
  TMB - Textiles Monitoring Body
  TRIMS - Trade-Related Investment Measures
  USTR - Office of the U.S.  Trade Representative
  WTO - World Trade Organization

STATEMENT FOR THE RECORD BY
JAYETTA Z.  HECKER, ASSOCIATE
DIRECTOR INTERNATIONAL RELATIONS
AND TRADE ISSUES NATIONAL SECURITY
AND INTERNATIONAL AFFAIRS DIVISION
============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to have the opportunity to provide this statement for
the record for your hearing on September 11, 1996.  Based on our past
and ongoing work, I have some observations about the implementation
of the Uruguay Round agreements and the operations of the World Trade
Organization (WTO) in the context of the upcoming Singapore
ministerial meeting.  WTO is a multilateral organization that, among
other things, serves as a forum for international trade negotiations
and oversees the administration of the Uruguay Round agreements. 
After providing a brief overview of some issues expected to be raised
at Singapore, my statement will discuss in more detail the status of
(1) general implementation issues, (2) issues related to WTO
agreement on textiles and clothing, (3) implementation of the
agriculture agreements, (4) ongoing negotiations involving trade in
services and market access, (5) new issues that may be taken up by
the WTO in Singapore, and (6) new member accessions to the WTO. 

The first biannual WTO ministerial meeting will take place from
December 9 to 13, 1996, in Singapore.  The meeting is a forum for
reviewing implementation of the Uruguay Round agreements and for
discussing new issues.  The U.S.  Trade Representative (USTR)
believes that this meeting will be an important test of the WTO's
credibility as a forum for continuous consultation, negotiation, and
liberalization.  Some foreign government and WTO officials told us
that they hope these regularly scheduled, more focused WTO
ministerial meetings will replace the series of multiyear, exhaustive
negotiating "rounds" of the past.  However, other officials expressed
doubt that much progress could be made toward future trade
liberalization without the opportunities for trade-offs created by
having a number of important issues under negotiation at one time. 


   OVERVIEW
---------------------------------------------------------- Chapter 0:1

The Uruguay Round agreements generally went into force on January 1,
1995.  Implementation of these agreements is complex, and it will
take years before the results can be fully assessed.\1

The ministerial level meeting in Singapore provides WTO member
countries the first opportunity to "take stock" of how well they have
implemented the Uruguay Round agreements so far.  The many committees
and working groups that constitute the organization will report to
ministers through the WTO General Council about their activities and
plans.  Members may also debate how best to further expand trade
liberalization.  Our work highlights the following issues that are
expected to be topics at Singapore: 

  -- In general, assessing the new and complex Uruguay Round
     agreements will create a challenge for the ministers.  Numerous
     WTO bodies were formed to oversee implementation by the member
     governments.  These committees and working groups, together with
     a Secretariat that facilitates the work of the members,
     experienced early difficulties with the information generated by
     numerous notification requirements, in part because of
     limitations in members' reporting and in the unevenness of
     information that was provided.  WTO members have already invoked
     the new process for settling disputes 53 times on a wide range
     of issues, with the United States filing the most cases.  The
     USTR has stated that it believes the dispute settlement process
     is an effective tool to open other nations' markets. 

  -- Implementation of the WTO Agreement on Textiles and Clothing has
     been a major area of contention between the exporting and
     importing countries, and it is expected to be the subject of
     further debate at Singapore.  Textile exporting countries allege
     that the United States and other importing countries have
     delayed lifting quotas and integrating textile trade into normal
     WTO/General Agreement on Tariffs and Trade 1994 (GATT) rules. 
     The importing countries, in turn, have voiced concern about the
     lack of access to exporting countries' textile markets and the
     adequacy of measures they have adopted to prevent quota
     circumvention. 

  -- Since liberalizing agricultural trade was a key objective for
     the United States during the Uruguay Round, monitoring the
     implementation of commitments is essential to securing
     anticipated U.S.  gains.  In addition, U.S.  officials have
     indicated that they would like to begin preparations for further
     agricultural reform negotiations starting in 1999.  At
     Singapore, three separate WTO committees are expected to provide
     reports on progress in the reduction of agricultural subsidies;
     improvements in market access; the use of measures to protect
     human, plant, and animal health; and efforts to make state
     trading enterprise activities (STE) more transparent (open). 
     The United States has implementation concerns in many of these
     areas and many reasonably expect a divergence of views among
     trading partners. 

  -- Whether the ongoing efforts to liberalize trade in the services
     sector will be successful is not yet clear.  Individual
     negotiations have been conducted to progressively open trade and
     investment.  Thus far, however, members have been unable to
     reach final agreements covering the financial,
     telecommunications, and maritime service sectors.  Similarly, it
     is unclear whether WTO members will reach agreement to improve
     market access in those sectors where USTR has negotiating
     authority because of some countries' expected opposition to
     further tariff reductions. 

  -- At Singapore, proposals are expected for WTO members to begin
     work on the next generation of trade issues.  However, because
     these issues include areas heretofore outside the scope of
     detailed trade negotiations--environmental protection,
     investment rules, competition policy, labor standards, and
     bribery and corruption--it is unlikely members will reach
     consensus on the WTO's role.  Of these issues, only environment
     is on the WTO agenda already, but members have not decided how
     to reconcile environmental concerns with trade objectives.  USTR
     strongly supports discussing labor standards as part of the WTO
     agenda.  USTR may begin to address bribery and corruption issues
     indirectly as it seeks to expand participation in the Agreement
     on Government Procurement.  However, many other members are just
     as strongly opposed to including these two issues.  On the other
     hand, the United States is not yet prepared to agree to a
     negotiating program for competition policy and would prefer
     discussions on investment policy to take place primarily in the
     Organization for Economic Cooperation and Development (OECD). 


--------------------
\1 According to the WTO Secretariat, the almost 500 pages of text
comprise 19 agreements, 24 decisions, 8 understandings, and 3
declarations.  There are also approximately 24,000 pages of specific
market access commitments. 


   GENERAL IMPLEMENTATION ISSUES
---------------------------------------------------------- Chapter 0:2

In earlier testimony\2 we noted that it will take time and resources
to (1) completely build the WTO so that members can address all its
new roles and responsibilities; (2) make members' national laws,
regulations, and policies consistent with new commitments; (3)
fulfill notification requirements and then analyze the new
information; and (4) resolve differences about the meaning of the
agreements and judge whether members have fulfilled their
commitments.  It is critical that USTR monitor implementation of the
agreements to ensure that other WTO members are honoring their
commitments and thus that the agreements' expected benefits are being
realized.  USTR and the Departments of Commerce and Agriculture have
created specific units to try to monitor foreign government
compliance with trade agreements, including those of the Uruguay
Round. 


--------------------
\2 See International Trade:  Implementation Issues Concerning the
World Trade Organization (GAO/T-NSIAD-96-122, Mar.  13, 1996). 


      THE NEW ORGANIZATION
-------------------------------------------------------- Chapter 0:2.1

In general, the ministers at Singapore will be reviewing the progress
of the WTO in fulfilling its mandate.  Some observers have been
concerned about the creation of this international organization and
its scope and size.  The "new" WTO was based on a similar
"provisional" GATT organizational structure that had evolved over
decades.  The Uruguay Round agreements created some new bodies;
however, these bodies address new areas of coverage, for example, the
Councils for Trade in Services and for Trade-Related Aspects of
Intellectual Property Rights.  Other bodies, such as the WTO
Committee on Antidumping Practices, were "reconstituted" from
previous GATT committees but were given new responsibilities by the
Uruguay Round agreements and now have broader membership.  The WTO
Secretariat, headed by its Director General, facilitates the work of
the members.  The work of the bodies organized under the WTO
structure is still undertaken by representatives of the approximately
123 member governments, rather than the Secretariat.  Early meetings
of some WTO committees were focused on establishing new working
procedures and work agendas necessary to implement the Uruguay Round
agreements. 


      NOTIFICATIONS
-------------------------------------------------------- Chapter 0:2.2

The ministers will be judging the progress of members in implementing
numerous agreements to date, based on information collected from the
many notification requirements placed upon member governments.  These
notifications are aimed at increasing transparency about members'
actions and laws and therefore encourage accountability. 
Notifications take many forms.  For example, one provision requires
members to file copies of their national legislation and regulations
pertaining to antidumping measures.  WTO committees began reviewing
the notifications they received from member governments in 1995.  The
information provided allows members to identify general problems with
implementing the terms of the agreements, as well as monitor each
others' specific activities and, therefore, to enforce the
agreements. 

Limitations in members' reporting may make it difficult for the
ministers to assess progress in some areas.  The WTO Director General
noted some difficulties with members' fulfilling their notification
requirements in his report in December 1995.  Some foreign government
and WTO Secretariat officials told us in 1995 that the notification
requirements had placed a burden on them and that they had not
foreseen the magnitude of information they would be obligated to
provide.  The WTO Secretariat estimated that the Uruguay Round
agreements specified over 200 notification requirements.  It also
noted that many members were having problems understanding and
fulfilling the requirements within the deadlines.  While developing
countries reportedly faced particular problems, even the United
States missed some deadlines for filing information on subsidies and
customs valuation laws. 

To address concerns about notifications, WTO formed a working party
in February 1995 to simplify, standardize, and consolidate the many
notification obligations and procedures.  This working party may make
recommendations for changes for the ministers to consider. 


      DISPUTE SETTLEMENT
-------------------------------------------------------- Chapter 0:2.3

The WTO dispute settlement mechanism is intended to be a central
element in providing security and predictability to this multilateral
trading system.  Through it, members have a system to resolve
disputes that result from violations of WTO obligations or impairment
of benefits from WTO agreements.  The new dispute resolution
mechanism incorporates several objectives that were particularly
important to the United States--time limits for each step in the
dispute settlement process and elimination of a country's ability to
block the adoption of resolutions from dispute settlement panel
reports.  The new Dispute Settlement Understanding established time
limits for each of the four stages of a dispute:  consultation, panel
review, appeal, and implementation.  Also, unless there is unanimous
opposition in the WTO Dispute Settlement Body, the panel or appellate
report is to be adopted.  Further, the recommendations and rulings of
the Dispute Settlement Body can neither add to or diminish the rights
and obligations provided in the Uruguay Round agreements nor directly
force members to change their laws or regulations.  However, if
members choose not to implement the recommendations and rulings, the
Dispute Settlement Body may authorize trade retaliation. 

From January 1, 1995, to August 30, 1996, formal WTO dispute
settlement procedures have been invoked in 53 instances.  Most of the
cases are still in progress--35 are either in the consultation phase,
under panel review, or on appeal.  Of the 18 closed cases, 16 have
been settled or abandoned, and 2 have been closed after a final
appeal. 

The United States has availed itself of the dispute settlement
mechanism more than any other member.  The United States has
initiated 17 cases on a variety of issues including patent protection
in India, Portugal, and Pakistan; meat import restrictions in South
Korea and the European Union (EU); and restrictions on the
importation of magazines into Canada.  There are currently four
pending cases against actions or measures taken by the United
States--two involve import restraints concerning textile and apparel
products, one relates to an antidumping investigation of tomatoes
from Mexico, and the other concerns the Cuban Liberty and Democratic
Solidarity Act of 1996. 

As of the end of August 1996, dispute settlement panels have reached
decisions involving five cases.  The two closed cases, which were
combined into a single panel, involved a challenge by Venezuela and
Brazil to a U.S.  Environmental Protection Agency regulation setting
forth the methods by which importers of gasoline were to determine
characteristics of gasoline imported and sold in the United States in
1990.  The panel found that the regulation was inconsistent with a
GATT 1994 provision concerning national treatment of imported
products.  On appeal, the dispute settlement Appellate Body modified
the panel's report but upheld the panel's conclusion.  The other
three cases, also combined into one panel, were brought by the United
States, Canada, and the EU against Japan's liquor tax.  The panel
found the Japanese tax to be inconsistent with GATT 1994, on national
treatment grounds.\3 Japan has filed an appeal, which is currently
pending. 

It is unclear to what extent the ministers at the WTO Singapore
meeting will analyze the implementation of the new dispute settlement
process and what criteria they would use to do so.  USTR officials
view this process as a success, in part because complaints can be
resolved even before a panel hears the case.  In addition, USTR has
recently testified that the new mechanism is proving to be a very
effective market-opening tool.  However, it may be difficult to
objectively evaluate the results of a dispute settlement process.  We
observed in our previous work on 5 years of dispute settlement under
the U.S.-Canada Free Trade Agreement (CFTA)\4 that it may take many
years before a sufficiently large body of cases accrues to permit
statistically significant observations about the process.  In that
report we focused on the possible effects of panelists' backgrounds,
the types of U.S.  agency decisions appealed, and the patterns of
panel decision-making.  We learned that any effort to evaluate the
functioning of the dispute settlement process presents significant
analytical challenges. 


--------------------
\3 National treatment is the act of treating a foreign product or
supplier no less favorably than domestic products or suppliers. 

\4 See U.S.-Canada Free Trade Agreement:  Factors Contributing to
Controversy in Appeals of Trade Remedy Cases to Binational Panels
(GAO/GGD-95-175BR, June 16, 1995). 


   IMPLEMENTATION OF THE AGREEMENT
   ON TEXTILES AND CLOTHING
---------------------------------------------------------- Chapter 0:3

Implementation of the Agreement on Textiles and Clothing is likely to
be the subject of debate at the Singapore ministerial meeting.  In
the Uruguay Round negotiations, the United States and other developed
countries agreed to liberalize textile trade despite potential
economic losses in exchange for commitments from certain developing
countries to, for example, increase market access in key sectors and
improve protection of intellectual property rights.\5

Under the Uruguay Round Agreement on Textiles and Clothing, textile
quotas are to be phased out over a 10-year period beginning in
January 1995.  Because of the 10-year phase-out, the effects of the
textiles agreement will not be fully realized until 2005, after which
textile and apparel trade will be fully integrated into WTO and its
disciplines (practices).  Integration is to be accomplished by (1)
completely eliminating quotas on selected products in four stages and
(2) increasing quota growth rates on the remaining products at each
of the first three stages.  By 2005, all bilateral quotas maintained
under the agreement on all WTO members are to be removed. 

During the first stage of product integration (1995 through 1997),
virtually no quotas were removed by the United States and other major
importing countries.  The United States is the only major importing
country to have published a list of products to be removed from quota
for all three stages; other countries, such as the EU and Canada,
have only published their integration plan for the first phase. 
Under the U.S.  integration schedule, 89 percent of all U.S.  apparel
products under quota in 1990 and 67 percent of textile and apparel
products combined will not be integrated into normal WTO rules until
2005.  Importer and retailer representatives have expressed concern
about the delay in lifting the majority of textile and apparel quotas
until the end of the phase-out period.  However, U.S.  officials have
pointed out that the Statement of Administrative Action accompanying
the U.S.  bill to implement the Uruguay Round agreements provided
that "integration of the most sensitive products will be deferred
until the end of the 10-year period."

During the phase-out period, the safeguards provision of the textiles
agreement permits a country to impose a new quota only when it
determines that increased imports of a particular textile or apparel
product are seriously damaging, or present an actual threat of
serious damage to, its domestic industry.  The agreement further
provides that any quotas imposed during the phase-out period be
reviewed by a newly created Textiles Monitoring Body (TMB) within
WTO, which is to supervise the textile agreement's implementation. 
TMB consists of individuals from 10 countries, including the United
States. 

The United States and Brazil are the only WTO members thus far to
have imposed new quotas on imports they found were harming their
domestic industries under the agreement's safeguard procedures.\6 In
1995, the United States issued 28 requests for consultations (or
"calls") to impose quotas and has issued 2 calls thus far in 1996 to
a total of 19 countries(11 WTO members and 8 nonmembers).\7 Brazil
has issued calls to four countries to date. 

As of August 1996, TMB had reviewed the imposition of seven quotas
(where no agreement was reached with the exporting country).  All of
these quotas had been imposed by the United States.  TMB found that
the threat of serious damage to domestic industry had been
demonstrated in one case.  In three cases, TMB found that the threat
of serious damage had not been demonstrated, and the quotas were
subsequently rescinded; in three other cases, TMB could not reach
consensus.  TMB has not published details about the reasons for its
decisions.  Three of the cases TMB reviewed were subsequently brought
before the Dispute Settlement Body by the countries subject to the
U.S.  safeguard action.  The United States rescinded one action, and
the other two cases are currently pending. 

WTO members will review implementation of the textiles agreement at
the Singapore ministerial meeting.  In July 1996, major exporting
countries, led by Pakistan, asked the WTO's Committee on Trade in
Goods to examine10 items of concern to them regarding the agreement's
implementation, including importing countries' delays in lifting
quotas, the number of quotas imposed since the agreement took effect
(with a clear concern regarding the number of U.S.  quotas), and the
need to improve transparency in TMB processes.  Further, they asked
the Committee to identify and assess the elements necessary for
"faithful implementation of the agreement." The United States and the
EU oppose the exporting countries' request and have asked the
Committee to review two different issues--the ease of access to
developing countries' textiles markets and the adequacy of measures
adopted by these countries to prevent quota circumvention.  (The
agreement states that all member countries are to improve access to
their textiles markets and to take measures to prevent quota
circumvention.) The Committee on Trade in Goods is scheduled to
report on the textile agreement's implementation to the WTO General
Council in early November. 


--------------------
\5 See The General Agreement on Tariffs and Trade:  Uruguay Round
Final Act Should Produce Overall U.S.  Economic Gains (GAO/GGD-94-83,
July 29, 1994). 

\6 We recently prepared a report reviewing how the United States is
implementing the textiles agreement that should be released shortly. 
See Textile Trade:  Operations of the Committee for the
Implementation of Textile Agreements (GAO/NSIAD-96-186). 

\7 Six of the 28 calls had originally been made in 1994 and were
unresolved; they were reissued in 1995 under the new textiles
agreement. 


   IMPLEMENTATION OF AGRICULTURAL
   COMMITMENTS
---------------------------------------------------------- Chapter 0:4

Liberalizing agricultural trade was a key U.S.  objective during the
Uruguay Round.  The United States anticipated that better rules and
disciplines on government policies in this area would foster a more
market-oriented trading system and improve the competitive position
of the U.S.  agriculture sector.  Therefore, monitoring other
members' implementation of their Uruguay Round agricultural
commitments is essential to securing anticipated U.S.  gains. 

Several important issues are likely to be discussed at the
ministerial meeting, as the reports of two WTO committees and one WTO
working party focus on, or relate to, agricultural trade.  First, the
WTO Committee on Agriculture will report on implementation of the
agriculture agreement, including any aspects needing additional
attention or review.  This Committee's report is expected to address
two other issues:  (1) a decision to review the impact of the
agreement on net food-importing countries and (2) preparations
necessary to resume the agreement's required negotiations in 1999. 
Second, the WTO Committee on Sanitary and Phytosanitary (SPS)
Measures will report on implementation of the SPS agreement.  Third,
the WTO Working Party on State Trading Enterprises will report on its
efforts to better document and understand the role of STEs in WTO. 


      COMMITTEE ON AGRICULTURE
-------------------------------------------------------- Chapter 0:4.1

The Committee on Agriculture will address implementation of the
agriculture agreement, which requires WTO members to reduce levels of
support provided through export subsidies and domestic support and to
begin opening their markets by converting import quotas to tariffs
and reducing average tariff levels.  The agreement provides a 6-year
implementation period, meaning reductions in support and increase in
market access are to be achieved gradually.  To ensure members meet
their commitments, they are required to provide periodic
notifications to the Committee, which reviews progress toward
implementation and provides a forum for members to debate their
concerns.  Discussions of how the agreement is being implemented in
certain countries have already occurred within the Committee and will
be reported on at the ministerial meeting.  These include such issues
as delays in starting the implementation process, inappropriate
administration of market access commitments, and failure to meet
export subsidy commitments.  One implementation issue was discussed
outside the Committee under the dispute settlement process, when the
United States requested consultations with the EU to resolve its
concerns about EU implementation of market access commitments for
grain imports. 

In addition to implementation issues, the Committee's report is
expected to address its responsibility for monitoring WTO members'
commitment to review levels of food aid available to net
food-importing countries.  This commitment recognized that
least-developed and net food-importing developing countries might
experience negative effects from Uruguay Round agricultural reform if
it affected the availability of food supplies from external sources
at reasonable terms and conditions.\8 WTO members agreed to establish
appropriate mechanisms to ensure that agricultural reform does not
have an adverse impact on the provision of sufficient levels of food
aid.  The recent rise in global commodity prices and the near-record
lows in international grain reserves have increased the cost of food
imports for some countries.  Some least-developed and net
food-importing countries have already indicated they are concerned
about the impact of agricultural reform on their countries, but U.S. 
officials do not believe the limited reforms implemented so far are
responsible for shortages or price increases.  Still, net
food-importing countries expect action to be taken within the
Committee to review food aid levels and establish a sufficient level
of aid to meet legitimate needs.  The Committee is considering
whether and how such a review should be conducted and hopes to
resolve this issue before the ministerial meeting.  However, if
resolution is not achieved within the Committee, the issue is likely
to be discussed at the World Food Summit in November 1996 and again
in Singapore. 

A third issue the Committee will likely address is the commitment
that WTO members have made to begin negotiations for continued
agricultural reform one year before the end of the implementation
period (or in 1999).  The Cairns Group countries seek a specific work
program to prepare for the negotiations.\9 The EU, Japan, South
Korea, and Switzerland are reluctant to begin discussing the next
round of negotiations roughly2 years after agreeing to their original
Uruguay Round commitments.  U.S.  officials have indicated that,
although their primary focus is on implementation of the agreement,
preparing for negotiations to resume is also important. 


--------------------
\8 See the Decision on Measures Concerning the Possible Negative
Effects of the Reform Programme on Least-Developed Countries and Net
Food-Importing Developing Countries. 

\9 The Cairns Group consists of 14 countries that are exporters of
agricultural products:  Argentina, Australia, Brazil, Canada, Chile,
Colombia, Fiji, Hungary, Indonesia, Malaysia, New Zealand, the
Philippines, Thailand, and Uruguay. 


      COMMITTEE ON SPS MEASURES
-------------------------------------------------------- Chapter 0:4.2

The second Committee report that will address agricultural issues is
the Committee on SPS Measures.  The SPS agreement recognizes that
members have a right to adopt measures to protect human, animal, and
plant life or health.  However, it requires, among other things, that
such measures be based on scientific principles and not act as
disguised trade restrictions.  The United States was a key supporter
of this agreement, recognizing that the lack of sufficient
disciplines on the use of SPS measures could undermine the intent of
the agriculture agreement if members were allowed to replace tariffs
and quotas with unscientific animal and plant health or food safety
measures.  The United States has signalled its intent to use WTO
channels to challenge unscientific SPS measures.  For example,
through WTO consultations in 1995, the United States persuaded South
Korea to modify its practice for determining product shelf-life,
which was adversely affecting U.S.  meat and other exports.  Also, in
May 1996, the United States requested a dispute settlement panel be
convened to review the EU's long-standing ban on hormone-treated
meat, which has substantially blocked U.S.  beef imports since 1989. 


      WORKING PARTY ON STES
-------------------------------------------------------- Chapter 0:4.3

Finally, the Working Party on STEs will report on its efforts to
better understand STEs, an undertaking which is relevant not only to
agricultural trade but also to other sectors.  In our work, we define
STEs as governmental or nongovernmental enterprises that are
authorized to engage in trade and are owned, sanctioned, or otherwise
supported by the government.\10 For example, the Australian
government has notified the WTO that the Australian Wheat Board meets
the criteria for being considered an STE.  While STEs are recognized
in GATT as legitimate trading entities, their activities are subject
to GATT disciplines.  In order to provide some transparency over STE
activities, members must report regularly about their STEs'
structures and functions.  However, as we noted in August 1995,
compliance with this reporting requirement has been poor, and
information about STE activities has been limited.\11 In our June
1996 report, we developed a framework by which one could assess an
export STE's potential to distort trade.\12 This framework helps
clarify that being sanctioned by the government does not necessarily
mean that an STE is distorting trade; rather, a key factor is the
presence of direct or indirect subsidies that can give an STE a
greater potential to distort trade.  We reported that another factor
in evaluating the trade-distorting effect of STEs (or private
commercial firms) is share of the world market. 

The working party on STEs is developing an illustrative list of STE
attributes and practices in WTO and continues to study the
questionnaire used to collect information about them.  The United
States is working within the forum to develop a modified
questionnaire that would help make STE activities more transparent. 
U.S.  government and agricultural industry officials hope to
negotiate additional disciplines on STEs when agricultural
negotiations resume in 1999. 


--------------------
\10 STEs were defined in the Uruguay Round as "governmental and
nongovernmental enterprises, including marketing boards, which have
been granted exclusive or special rights or privileges, including
statutory or constitutional powers, in the exercise of which they
influence through their purchases or sales, the level or direction of
imports or exports."

\11 See State Trading Enterprises:  Compliance with the General
Agreement on Tariffs and Trade (GAO/GGD-95-208, Aug.  30, 1995). 

\12 See Canada, Australia, and New Zealand:  Potential Ability of
Agricultural State Trading Enterprises (GAO/NSIAD-96-94, June 24,
1996). 


   ONGOING NEGOTIATIONS IN
   SERVICES AND MARKET ACCESS
---------------------------------------------------------- Chapter 0:5

Negotiations in several service sectors and on market access for
certain goods were left unfinished at the end of the Uruguay Round
and may be discussed by ministers at Singapore.  USTR has pursued
trade liberalization and market access in these areas since the
Uruguay Round, but in many cases the outcome of these efforts remains
uncertain.  For example, within the framework of the General
Agreement on Trade in Services (GATS), negotiations covering the
financial, telecommunications, and maritime service sectors have not
yet resulted in final agreements.  In addition, USTR hopes to achieve
further market access through new tariff reductions for a variety of
goods but has testified that considerably more work remains to build
"the necessary international consensus" for making such reductions. 

The WTO financial services agreement covers the banking, securities,
and insurance sectors, which are often subject to significant
domestic regulation and therefore engender complex negotiations.  In
June 1995, the United States made commitments to guarantee foreign
financial institutions currently operating in the United States the
right to continue to do so.  However, the United States took a
"most-favored-nation exemption," that is, held back making guarantees
about otherwise discriminating against foreign financial service
providers.  (Such exemptions are allowed under GATS.) Specifically,
the United States did not guarantee nondiscriminatory treatment for
new foreign firms to establish businesses or already established
foreign firms wishing to expand services in the U.S.  market.  The
U.S.  exemption in financial services was taken because U.S. 
negotiators, in consultation with the private sector, concluded that
other members' offers to open their markets to U.S.  financial
services firms, especially those of certain developing countries,
were insufficient to justify broader U.S.  commitments (with no
most-favored-nation exemption or other limitations).\13 At the end of
1997, members, including the United States, will have an opportunity
to modify or withdraw their commitments.  Thus, the final outcome and
impact of the financial services agreement are still uncertain.  USTR
has testified that negotiations for a financial services agreement
are expected to resume in the first half of 1997, and the ministers
may discuss this at Singapore. 

WTO members were also not able to reach agreement on a basic
telecommunications services agreement by the original deadline
ofApril 30, 1996, and negotiations were subsequently extended to a
new deadline of February 15, 1997.  The United States has noted that
while some members made offers that matched that of the U.S.  offer
in terms of openness, many others did not, thus the United States
would not accept the agreement.  In addition, the United States has
said that in order for the extended negotiations to succeed, "more
and better" offers must be made by members, including both developed
and developing nations. 

Similarly, negotiations for a multilateral maritime services
agreement were unsuccessful and were suspended in June 1996 until the
year 2000, when negotiations for all services sectors will be
reopened.  When suspending the negotiations, participating members
agreed to refrain from applying new measures that would affect trade
in this area during this time.  The United States has said that other
participating members to the negotiations did not offer "to remove
restrictions so as to approach current U.S.  openness in this area."
The United States did not submit an offer in maritime services
because USTR believed that other countries were not serious about
liberalization. 

Efforts to improve market access in certain sectors through
additional tariff reductions are also unresolved.  USTR is seeking an
agreement covering a variety of information technology products, such
as multimedia personal computers, supercomputers, and semiconductors,
that will reduce tariffs in this area to zero by the year 2000. 
However, USTR has indicated that support from EU member states for
such an agreement is still uncertain.  In addition, USTR plans to
pursue further tariff reductions at Singapore for several products,
including wood products, white distilled spirits, nonferrous metals,
oilseeds and oil products, and certain chemical and pharmaceutical
products, but expects opposition in some of these areas from several
major trading partners. 


--------------------
\13 However, the United States was generally satisfied with the
offers made by the EU, Japan, and other developed countries and has
concluded some bilateral agreements that go beyond the GATS
commitments. 


   EMERGING ISSUES
---------------------------------------------------------- Chapter 0:6

Members are debating what work should be done by WTO on new issues
related to international trade at Singapore.  As tariff and nontariff
barriers to trade are reduced, other areas (traditionally seen as
domestic) have drawn attention as potential international trade
barriers.  These include (1) environmental protection, (2) investment
rules, (3) competition policy, (4) labor standards, and (5) bribery
and corruption issues.  Although these are not traditionally
discussed as trade policy topics, they reflect a broader concept of
what some WTO members believe are factors affecting market access
opportunities in a global economy.  For example, some WTO members
believe that enforcing certain environmental and labor standards can
be a disguise for protectionist policies.  Also, activities such as
price-fixing, market sharing, and noncompetitive procurement
practices can lead to market distortions and reduce access for
foreign competitors.  The WTO has begun to address some of these
issues, but no consensus has been reached on the extent to which they
should be dealt with in the WTO.  Some of these negotiations in new
areas could be quite controversial, based on the previous experience
with including areas like agriculture and services in the Uruguay
Round negotiating agenda. 


      TRADE AND ENVIRONMENTAL
      PROTECTION
-------------------------------------------------------- Chapter 0:6.1

Of the emerging issues, environment has developed the furthest within
the WTO.  At Marrakesh in 1994, members decided to establish a
Committee on Trade and Environment.  Trade and environment issues
overlap because some government measures to balance economic growth
with environmental concerns are perceived as protectionist and may
conflict with WTO obligations.  At the same time, some trade policies
may impede the development of sound environmental policies.  In the
past, GATT dispute panels have ruled against measures that conflicted
with national treatment principles or that appeared to apply to areas
outside a country's sovereign jurisdiction.  The United States
believes that free trade and environmental protection policies can be
mutually supportive and plans to convey this message at the Singapore
ministerial meeting, in keeping with the 1992 United Nations
Declaration in Rio de Janeiro.\14

The WTO Committee on Trade and Environment is to identify the
relationship between trade and environmental measures and make
appropriate recommendations within the context of open and equitable
trade.  The Committee is expected to present a report at Singapore,
but it is unclear what the report will include because of the complex
issues and divergent views.  Members generally agree that promoting
free trade and environmental protection is not inherently
contradictory; however, they have not agreed on specific ways to
address these issues.  Several items are under discussion, including
ecolabeling programs;\15 the relationship between multilateral
environmental agreements and the WTO; and the effect of environmental
measures on market access, particularly in relation to developing
countries. 

Ecolabeling programs have received a great deal of attention by the
Committee.  Some members believe these programs act as trade
barriers, and members have not reached an agreement about whether or
not ecolabeling programs need greater transparency.  USTR firmly
believes that all forms of ecolabeling are subject to the WTO's
Technical Barriers to Trade (TBT) Agreement, which requires
transparency and public participation when applying product
standards.  Other members, however, have expressed doubts about
whether all ecolabeling programs are covered by the TBT agreement. 
USTR anticipates the WTO Committee will need to discuss this and
other issues after Singapore. 


--------------------
\14 The United Nations Conference on Environment and Development
hosted the "Earth Summit" in 1992 in Rio de Janeiro, Brazil. 

\15 Ecolabeling programs, most of which are voluntary, allow
businesses to obtain a label indicating a product is environmentally
friendly or safe (e.g., U.S.  tuna cans with a "dolphin safe" label). 


      TRADE AND INVESTMENT RULES
-------------------------------------------------------- Chapter 0:6.2

Investment rules are another topic that could be discussed at
Singapore.  International investment has grown with the globalization
of the world economy.  Various multilateral and bilateral investment
agreements exist to help promote an open international investment
environment, for example the (North American Free Trade Agreement). 
Still, restrictions on foreign investment impede international trade
in goods and services because investment and trade are interrelated. 
Therefore the Uruguay Round agreements also addressed investment
issues.  For example, the WTO's Agreement on Trade-Related Investment
Measures (TRIMS) and GATS both have rules to facilitate market
access.  However, the United States achieved only some of its Uruguay
Round objectives for investment issues.  The TRIMS agreement is
limited to a few selected measures that apply only to trade in goods. 
GATS covers investment practices only in a limited sense, through
broad provisions concerning the ability to provide a service in a
foreign market through a commercial presence.  Further, GATS covers
only specific service sectors, including business services and
construction and engineering services. 

Countries are debating in which forums to pursue further
liberalization in investment.  Therefore, any Singapore proposals to
establish a work program for WTO on investment issues will have to
take into account negotiations in other forums.  Most notable is the
OECD, whose members are working to establish a Multilateral Agreement
on Investment in 1997 that would be open to both OECD and non-OECD
members.  Nevertheless, the EU and Canada favor discussing investment
rules in the WTO because its membership is larger than the OECD. 
There is a wide divergence of views among other members; some
lesser-developed members oppose negotiations in the WTO, according to
USTR.  On the other hand, the United States and other nations would
like to continue focusing on the OECD negotiations rather than
negotiating in the WTO, believing that (1) the OECD has the potential
to achieve a higher standard of liberalization (that is, on a par
with NAFTA and U.S.  bilateral investment treaties) than the WTO
could and (2) some WTO members are not ready for such an agreement. 
Still, the United States supports creating a modest work program to
educate WTO members on these issues. 


      TRADE AND COMPETITION POLICY
-------------------------------------------------------- Chapter 0:6.3

National competition or antitrust policies of other countries can
affect opportunities and benefits for U.S.  exporters and consumers. 
For example, price-fixing, market sharing, and other monopolistic
business practices have been recognized as potential trade barriers. 
By distorting market competition, these practices can diminish market
access opportunities, consumer choices, and other intended benefits
of liberalized trade.  Anticompetitive practices can also lead to
trade disputes.  For example, the United States has initiated two WTO
dispute settlement proceedings against Japan in cases involving
photographic films and paper and distribution services. 

The United States and its major trading partners have not reached a
consensus on how competition policy and the enforcement of antitrust
law should be handled within the WTO.  One issue is whether any
possible work program should focus on the practices of private firms
or on government actions (or the lack thereof) that restrict
competition, and/or on both.  The EU and Japan have recently proposed
that competition be added to the WTO program for future work at the
Singapore ministerial meeting.  USTR believes more work and study
must occur within the U.S.  government, including consultation with
Congress and the private sector, before determining whether any sort
of negotiating program in the WTO is appropriate.  USTR has
emphasized that the United States will not accept any initiative in
the WTO that would threaten U.S.  antitrust or antidumping laws.  The
United States has participated in creating guidelines and in
undertaking studies of competition policy issues at the OECD, along
with Japan and EU member states. 


      TRADE AND LABOR STANDARDS
-------------------------------------------------------- Chapter 0:6.4

WTO members are currently considering the role of labor standards in
the international trade regime.  The desire to link international
trade and labor issues is not new, but labor issues have been the
province of the International Labor Organization (ILO), a specialized
agency of the United Nations created in 1919.  ILO, whose purpose is
to improve working conditions and living standards for workers
throughout the world, provides a forum for consideration of various
labor issues including the establishment of core labor standards,
which currently vary from country to country. 

At the conclusion of the Uruguay Round negotiations, several members,
most notably the United States and some members of the EU, proposed
that labor issues be formally brought into the world trading system. 
However, other WTO member countries in both the developed and the
developing world have been concerned that mandated international
labor standards may either inhibit their economic development or act
as protectionist barriers to their exports.  The United States, based
on a provision of the Uruguay Round Agreements Act, recommended that
the WTO establish a working party to examine the relationship between
trade and internationally recognized worker rights.\16 The U.S. 
proposal does not envision negotiations but seeks to begin
discussions limited to how core labor standards and trade can be
mutually supportive in promoting growth and development.  Thus far,
no consensus currently exists either on bringing labor issues into
the WTO, or on developing potential linkages between the WTO and ILO,
a possible first step. 


--------------------
\16 Congress provided guidance for U.S.  negotiators in the act by
specific reference to 1984 amendments to the U.S.  Generalized System
of Preferences legislation.  This legislation defined internationally
recognized worker rights to include (1) the right of association, (2)
the right to organize and bargain collectively, (3) a minimum age for
the employment of children, (4) prohibition of forced labor, and (5)
acceptable conditions of work.  See Public Law 98-573, sec.  503,
Oct.  30, 1984, 19 U.S.C.  sec.  2462 (a) (4). 


      TRADE AND BRIBERY AND
      CORRUPTION
-------------------------------------------------------- Chapter 0:6.5

The United States has proposed indirectly addressing bribery and
corruption issues at Singapore by encouraging WTO members to enhance
transparency in government procurement.  Bribery and corruption
increase the cost and risk of conducting business in foreign
countries.  The difference in the way that U.S.  and foreign laws
treat these activities can also reduce U.S.  companies' access to
foreign markets.  For example, U.S.  legislation passed in 1977
prohibits U.S.  companies from engaging in bribery of foreign public
officials.\17 In contrast, some other countries do not have criminal
penalties for engaging in the bribery of foreign public officials,
and in some countries businesses are allowed to take tax deductions
for bribery expenses.  Other multilateral organizations have already
taken steps to address bribery and corruption, with U.S. 
encouragement.  For example, OECD members have agreed to criminalize
the acceptance and payment of bribes.  Members of the Organization of
American States have entered into a treaty that would make this
conduct criminal.  The OECD has also recommended that member
countries eliminate tax deductions for the payment of bribes.  The
Association of Southeast Asian Nations foreign ministers in a recent
forum on the WTO agenda rejected the U.S.  proposal to include
corruption and other "social clauses" that they did not consider
trade related. 

The United States is promoting efforts to reduce bribery by foreign
companies and government officials by encouraging WTO members to sign
the Agreement on Government Procurement.  To date, only 22
industrialized countries, including the United States, have done so;
and none of the least developed countries are signatories.  The
provisions of the new agreement, which went into effect in 20
countries on January 1, 1996, promote transparency in government
procurement procedures and require that countries not discriminate
against foreign or foreign-owned suppliers or otherwise allow
practices that would preclude competitive procurement. 


--------------------
\17 See Foreign Corrupt Practices Act of 1977, Public Law 95-213,
Dec.  19, 1977, 15 U.S.C.  sec.  78dd-2. 


   ACCESSION OF NEW MEMBERS
---------------------------------------------------------- Chapter 0:7

The accession of new members to the WTO is an important part of the
WTO's work agenda and an issue of great interest to the United
States.  Although existing WTO members account for about 90 percent
of world trade, important U.S.  trading partners, including China,
Taiwan, Saudi Arabia, and Russia, are not WTO members.  Nonmember
states or separate customs territories may apply for admission to the
WTO.  A working party composed of WTO members negotiates with the
applicant concerning its domestic laws and obligations to join the
WTO, a process that can require considerable time.  For example,
China's and Bulgaria's requests for accession date from 1986. 
Separately, applicants may undertake bilateral negotiations with
individual WTO members over tariff and market access commitments. 
After these negotiations are concluded, the working party submits a
Protocol of Accession and a report to the Ministerial Conference for
approval.  Accession is approved by a two-thirds majority vote of WTO
members. 

The United States expects the Singapore ministerial meeting to
address the broad range of accession applications--rather than single
out any particular application for attention.  USTR reports there are
31 countries whose applications for accession have been accepted;
active negotiations are under way on about 20 of them.  Four nations
have completed accession negotiations since the WTO entered into
force.\18

The United States supports accession of countries capable of and
willing to (1) undertake WTO obligations and (2) provide commercially
viable market access commitments for goods and services to the WTO. 
The United States also uses the negotiations to address outstanding
bilateral trade issues covered by the WTO.  For example, USTR reports
that Taiwan\19 has made significant concessions in its bilateral
negotiations with the United States over market access, services, and
government procurement.  Nevertheless, significant issues remain
outstanding. 

The accession of China to the WTO is an issue of intense U.S. 
interest.  China gained observer status to the GATT in 1982 and
requested accession to the GATT in 1986.  The United States and other
nations have insisted that China's accession be approved on the basis
of China's willingness to make commercially viable commitments that
provide greatly expanded market access and ensure compliance with WTO
obligations.  U.S.-China bilateral negotiations are ongoing, and a
WTO working party meeting on China's accession is scheduled for
October 1996. 


--------------------
\18 These are Ecuador, which was admitted as a member in January
1996; Mongolia, which has not yet been admitted but whose accession
was approved in June; and Bulgaria and Panama, whose accession
packages were completed in July. 

\19 This WTO accession application is formally identified as either
"Chinese Taipei" or "The Customs Territory of Taiwan, Penghu, Kinmen,
and Matsu."


-------------------------------------------------------- Chapter 0:7.1

This concludes my statement for the record.  Thank you for permitting
me to provide you with this information. 


*** End of document. ***