[Federal Register Volume 61, Number 196 (Tuesday, October 8, 1996)]
[Notices]
[Pages 52827-52835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25763]
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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Report on Trade Expansion Priorities Pursuant to Executive Order
12901 (``Super 301'')
AGENCY: Office of United States Trade Representative.
ACTION: Notice.
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SUMMARY: Notice is hereby given that the Acting United States Trade
Representative (USTR) has submitted the report on United States trade
expansion priorities published herein to the Committee on Finance of
the United States Senate and the Committee on Ways and Means of the
United States House of Representatives pursuant to the provisions
(commonly referred to as ``Super 301'') set forth in Executive Order
12901 of March 3, 1994, as extended by Executive Order No. 12973 of
September 27, 1995.
DATE: The report was submitted on October 1, 1996.
FOR FURTHER INFORMATION CONTACT: Irving Williamson, Chairman, Section
301 Committee, Office of the U.S. Trade Representative, 600 17th
Street, N.W., Washington, DC 20508, (202) 395-3432.
SUPPLEMENTARY INFORMATION: The text of the USTR report is as follows:
Identification of Trade Expansion Priorities Pursuant to Executive
Order 12901; October 1, 1996
This report is submitted pursuant to Executive Order No. 12901 of
March 3, 1994, as extended by Executive Order No. 12973 of September
27, 1995. Under the Executive Order the United States Trade
Representative (USTR) is required, by September 30, 1996, to ``review
United States trade expansion priorities and identify priority foreign
country practices, the elimination of which is likely to have the most
significant potential to increase United States exports, either
directly or through the establishment of a beneficial precedent.'' The
Executive Order permits the USTR to include, if appropriate, ``a
description of foreign country practices that may in the future warrant
identification as priority foreign country practices.'' The USTR may
also include ``a statement about other foreign country practices that
were not identified because they are already being addressed by
provisions of United States trade law, existing bilateral trade
agreements, or in trade negotiations with other countries and progress
is being made toward their elimination.''
[[Page 52828]]
Trade Expansion Priorities
President Clinton's top trade expansion priority continues to be
ensuring economic prosperity for the American people by expanding U.S.
exports of goods and services. The President is committed to achieving
this goal by negotiating agreements that afford access to foreign
markets, ensuring that U.S. trading partners comply with their trade
agreement obligations, ensuring that U.S. trade laws are vigorously
enforced, and that we continue to expand international trade rules to
cover sectors of greatest interest to U.S. exporters.
Priority Foreign Country Practices
President Clinton's commitment to the enforcement of trade
agreements and U.S. trade laws has been clear from the beginning of his
Administration. Through vigorous application of U.S. trade laws and
active enforcement of U.S. rights under the new dispute settlement
procedures of the WTO, the Administration has effectively opened
foreign markets to U.S. goods and services. The President also has
successfully used the incentive of access to the U.S. market to
encourage improvements in workers' rights and reform of intellectual
property laws and practices in other countries. The more than 40
enforcement actions already taken are outlined in the attachment to
this report.
Under President Clinton's direction, the Office of the USTR has
negotiated close to 200 trade agreements--including the World Trade
Organization (WTO) agreements, and many other market-opening agreements
that expand opportunities for U.S. companies and workers. These
agreements, combined with aggressive export promotion and enforcement
of U.S. trade laws, have helped increase U.S. exports of goods and
services substantially. In the first seven months of 1996, U.S. exports
of goods and services were running at an annual rate of $845 billion,
some 37 percent higher than in 1992.
For purposes of this report, the Administration has decided not to
identify any priority foreign country practices. The most significant
foreign trade barriers are already being addressed through
Administration's ongoing strategy of actively monitoring and enforcing
trade agreements, strategically applying U.S. trade laws, and invoking
WTO dispute settlement. Enforcement action is ongoing, not just in
response to an annual review. Since 1993, the Administration has
enforced its agreements by deploying all available trade enforcement
tools at its disposal. The USTR has used the leverage of Section 301 of
the Trade Act of 1974 and the ``Super 301'' annual review eleven times
to resolve significant problems in foreign markets; used Section 1377
of the Omnibus Trade and Competitiveness Act of 1988 to gain compliance
with telecommunications trade agreements with three major trading
partners; addressed discrimination in foreign government procurement
practices in five cases under Title VII of the Omnibus Trade and
Competitiveness Act of 1988; and invoked the dispute settlement
procedures of the WTO to protect the interests of U.S. producers and
manufacturers in 20 cases, including the three new WTO disputes
initiated as a result of this annual review. The Administration has
also used the ``Special 301'' provisions in U.S. trade law to improve
intellectual property protection in more than fifteen major markets,
and has used the benefits of the Generalized System of Preferences
program to encourage several developing countries that benefit from
that program to improve intellectual property protection or to afford
all workers internally recognized worker rights. In addition, the
Administration is constantly using the leverage of U.S. trade laws to
secure market opening agreements and to eliminate specific trade
barriers, without having to formally invoke the provisions of those
laws.
New Section 301 and WTO Enforcement Actions
As a result of the 1996 annual review, the Administration is
initiating the following new actions:
Indonesia's national auto policy: Indonesia has recently
expanded a domestic auto policy that offers tax and tariff incentives
to increase the local ownership of automotive companies in Indonesia
and the local content of the automobiles they manufacture. Indonesia's
national car policy grants tax and tariff benefits to ``national car''
automobile manufacturers based on the percentage of domestic content in
their vehicles. This policy adversely affects U.S. experts of autos and
auto parts to Indonesia. Therefore, the USTR will request consultations
under WTO dispute settlement procedures in the context of an
investigation under Section 301 of the Trade Act of 1974. Further steps
under WTO dispute settlement procedures will depend on the outcome of
the consultations on these measures.
Brazil's auto program: Brazil offers auto manufacturers
reduced duties on imports of assembled cars and other benefits if they
export sufficient quantities of parts and vehicles and promise to meet
local content targets in their Brazilian plants. The program adversely
affects U.S. exports of auto parts in Brazil. In August 1996 the USTR
invoked WTO dispute settlement procedures and held consultations with
Brazil on these measures. As a result, Brazil has agreed to enter into
intensive talks with the United States, with the goal of removing the
discriminatory impact of its practices on U.S. exports. The USTR will
initiate a Section 301 investigation of these measures, and further
steps under WTO dispute settlement procedures will depend on the
outcome of the talks with Brazil.
Australia's export subsidies: Australia provides
significant export subsidies despite its obligations under the WTO
Agreement on Subsidies and Countervailing Measures. In response to a
section 301 petition, the USTR will invoke WTO settlement procedures in
the context of an investigation under Section 301 to challenge
Australian export subsidies that adversely affect U.S. manufacturers of
leather for automobile upholstery.
Argentina's import duties: Argentina maintains specific
import duties on textiles, apparel and footwear that exceed the 35% ad
valorem tariff rate to which Argentina committed under the WTO
agreements. Argentina also maintains other WTO-inconsistent import
barriers. Therefore, the USTR will invoke WTO dispute settlement
procedures in the context of an investigation under Section 301.
Strategic Enforcement and Automotive Trade
A top priority of the Clinton Administration has been monitoring
implementation of the WTO agreements to ensure that the members of the
WTO are living up to their Uruguay Round commitments and complying with
the WTO rules. In the course of these monitoring efforts, the United
States has focused in particular on foreign practices that could pose
serious problems to the international trading system if they
proliferate in many markets. Therefore, the Clinton Administration has
adopted a strategic enforcement strategy--aimed not only at challenging
existing barriers but also at preventing the future adoption of similar
barriers around the world. Successful challenges to such measures will
establish beneficial precedents not only for the United States but for
all WTO members.
Application of the Administration's strategic enforcement strategy
is particularly appropriate in the
[[Page 52829]]
automotive sector, where trade-related investment measures effect U.S.
exports in many countries. Manufacturing of autos and auto parts is a
key industry for the United States and access to foreign markets is
important for its future growth. The U.S. auto industry has made
enormous strides in competitiveness and productivity. As a result of
USTR's monitoring of compliance with WTO agreements, the USTR has
identified practices that are inhibiting U.S. exports of autos and auto
parts and the creation of the jobs associated with those exports. In
many cases such practices appear to be consistent with WTO rules,
including those under the WTO Agreement on Trade-Related Investment
Measures (TRIMs).
In addition to initiating the actions in the auto sector mentioned
above, the Administration is pursuing the following other practices
affecting the auto sector:
Bilateral agreement with Japan: In 1995, the United States
and Japan negotiated an agreement on market access for foreign
automobiles, which addresses the full range of market access barriers
regarding sales of autos and auto parts in Japan and to Japanese
companies outside Japan. In September 1996, the U.S. and Japan held the
first follow-up meeting under the agreement. Results under the
agreement in its first year have been very good. Sales of U.S.-made Big
Three vehicles in Japan were up more than 40 percent in the first half
of 1996, and Japanese purchases of U.S. auto parts are rising steadily.
However, full implementation of the agreement remains critical. Among
other issues, the United States is concerned about an apparent
slackening in the pace of new dealership relationships between the Big
Three and Japanese auto dealers, as well as deregulation with respect
to the auto parts replacement market in Japan. The United States and
Japan will meet regularly during the year to assess progress under the
agreement on the basis of quantitative and qualitative factors.
Bilateral agreement with Korea: The United States
concluded a bilateral trade agreement with Korea in 1995 to open the
auto market for U.S. automakers. The agreement reduced discriminatory
taxes that disadvantage the types of autos U.S. manufacturers produce,
eliminated and streamlined auto standards that act as barriers to
market access, permitted U.S. advertisers equal access to television
time, and allowed foreign majority ownership of auto retail financing
entities. Since that agreement was concluded, domestic producers have
identified other measures that continue to impede market access. Market
penetration by foreign automobiles still remains at less than one
percent. In addition, the protected Korean market has provided a
sanctuary for Korean manufacturers, allowing them to charge higher
prices to their domestic consumers so that they can pursue an
aggressive export strategy abroad. USTR is conducting a thorough review
of U.S. access to Korea's auto market, including whether additional
bilateral commitments are necessary to further open the Korean market,
and whether existing barriers violate Korea's obligations under the WTO
agreements. USTR officials will raise these issues with Korean
officials in Seoul in mid-October.
China's Automotive Industry Policy: China imposes local
content requirements, import restrictions and export performance
requirements and other trade distorting measures in its autos sector
that are inconsistent with WTO rules. The United States is addressing
these measures bilaterally and in the context of negotiations on the
accession of China to the WTO, to ensure that such measures are not
maintained. The WTO working party on China's accession request meets
again in Geneva at the end of October.
Auto TRIMs monitoring: USTR will carefully monitor and
consider action with respect to practices in other major auto markets
such as (a) India, where import licensing, domestic content and export
performance requirements affect market access; (b) Argentina, where
local content requirements have been increased since Argentina notified
the WTO of its auto regime pursuant to the TRIMs agreement; and (c)
Malaysia, which maintains a national auto program which must be phased
out in accordance with the TRIMs Agreement. The next meeting of the WTO
Committee on Trade-Related Investment Measures will be held in Geneva
on October 10.
Other Bilateral Priorities That May Warrant Identification as
Priority Foreign Country Practices in the Future
Japan Market Access for Insurance: The Administration is
continuing negotiations with Japan concerning its implementation of the
insurance agreement reached between the United States and Japan in
1994. The core of the dispute centers on the linkage between
deregulation of Japan's primary life and non-life insurance markets and
the entry of Japanese insurance firms into the so-called ``third
sector,'' a segment of the market consisting of such products as
personal accident and cancer insurance, which are the areas of greatest
strength for foreign firms. The agreement provides that ``radical
change in the business environment'' in the third sector will be
avoided until significant deregulation of the primary sectors, and a
``reasonable period'' for medium to small and foreign insurance
providers to compete in the primary sectors. On September 30, 1996, the
U.S. and Japan reached an interim agreement regarding the conditions
under which the new subsidiaries of the major Japanese life and non-
life companies may offer products in the third sector upon the start-up
of their business on October 1, 1996. These conditions will restrict
entry by the subsidiaries into the third sector until the two
governments reach, before the end of the year, an overall agreement on
``avoiding radical change'' in the third sector and substantial
deregulation of the primary sectors. In addition to temporary
restrictions in the third sector, the interim agreement provides some
important initial primary sector deregulation. However, significantly
more primary sector deregulation will be necessary as part of an
overall resolution of this issue, consistent with the 1994 agreement.
Japan telecommunications: In October 1994, the United
States and Japan entered into a bilateral agreement to increase access
and sales of foreign telecommunications products and services in the
Japanese government procurement market. In May 1996, Japan's National
Police Agency (NPA) selected two Japanese companies to develop the
specifications for a new telecommunications system. When a foreign
company challenged this decision under Japan's government procurement
bid protest mechanism, the Japanese Government cited the ``order and
safety'' exception of the WTO Government Procurement Agreement as the
basis for denying any review of this issue. The United States
Government has serious concerns about the use of the order and safety
exception in this case, and serious concerns about the procedures and
manner in which the Japanese Government has conducted this procurement.
The two governments held consultations on this issue on September 17,
1996, but made no progress toward resolving the issue. Accordingly, the
United States is consulting with industry representatives on
appropriate next steps. USTR officials will meet with Japanese
officials at the end of October on implementation of the bilateral
telecommunications agreement.
Japan Market Access for Paper and Paper Products: In the
April 1992 U.S.-
[[Page 52830]]
Japan paper agreement, Japan agreed to take GATT-consistent measures to
increase substantially market access in Japan for foreign paper and
paperboard products. Nevertheless, a number of structural barriers
continue to impede the U.S. paper industry's ability to export into the
nearly $40 billion Japanese paper market, which is the world's second
largest. The market is restricted by a variety of systemic impediments,
including: (1) Exclusionary business practices, (2) the complex and
essentially closed Japanese paper distributions systems, (3)
interlocking relationships between Japanese producers, distributors,
merchants, converters, and corporate end-users, (4) non-transparency in
corporate purchasing practices, and (5) inadequate enforcement of the
Japanese Anti-Monopoly Act (AMA). The United States is continuing to
press Japan to fully implement the agreement and address the
outstanding barriers. Further consultations will take place in the near
future.
China Market Access for Agricultural Products: China
continues to apply phytosanitary standards to U.S. exports of citrus
fruit and wheat, particularly wheat from the Pacific Northwest, that
are not based on scientific principles and which act as a virtual ban
on these exports. Under the 1992 U.S.-China Market Access Memorandum of
Understanding, China committed to remove by October 1993 any non-
science-based phytosanitary standards on a number of agricultural
items, including citrus and wheat. China is a major potential market
for U.S. citrus and wheat producers. Despite further commitments on the
part of China and repeated efforts by the United States to negotiate a
resolution of these issues, China has yet to remove these non-science-
based restrictions. The United States and China have accelerated
discussions at senior levels of both governments, with the next round
of talks to be held in late October. These issues are also being
addressed in the context of WTO accession negotiations.
Korea telecommunications: In July 1996, the USTR
identified Korea as a ``Priority Foreign County'' under Section 1374 of
the 1988 Omnibus Trade and Competitiveness Act for failure to address
market access barriers to U.S. telecommunications products and
services. The United States seeks to address a range of Korean
practices and obtain commitments by the Korean government to refrain
from interfering in private sector procurement, to provide
nondiscriminatory access and regulatory transparency in the
telecommunications services sector, and to protect intellectual
property rights. The United States seek to conclude a bilateral
understanding to resolve these outstanding issues but, absent an
agreement, will pursue vigorously all options available under U.S.
trade law. The Administration has made clear its intention not to use
the full year provided under the statute for these negotiations. The
next round of consultations will be held in late October .
Germany--electrical equipment. In April 1996, the
Administration identified Germany under Title VII of the 1988 Omnibus
Trade and Competitiveness Act for its failure to comply with market
access procurement requirements in the heavy electrical equipment
sector. The imposition of trade sanctions provided under Title VII was
delayed until September 30, 1996, because consultations suggested a
resolution was possible given additional time. On September 25, the
German Cabinet approved going forward with legislative reform of the
procurement remedies system. The Economics Ministry has also agreed to
undertake certain monitoring and outreach actions prior to enactment of
the legislation. Accordingly, the USTR has decided to continue the
suspension of sanctions while it monitors closely Germany's progress
toward making the necessary reforms, and monitors upcoming procurements
involving U.S. bidders. The USTR will review the situation on December
1, 1996. If there has been insufficient progress and problems facing
U.S. firms persist, USTR will impose sanctions.
Ecolabeling Directive: The EU Ecolabeling Directive sets
forth a scheme whereby EU member states will grant voluntary
environmental labels based on criteria approved by the European
Commission for products in specific sectors. While the United States
supports the concept of ecolabeling and appreciates the EU's attempts
to address problems regarding ecolabeling criteria, the United States
continues to be concerned that the EU process for developing criteria
for certain paper and textile products has not been sufficiently
transparent. The EU has committed to improve meaningful participation
by non-EU interests, but there is still room for improvement. The
United States has urged that the EU ecolabeling program provide
meaningful and accurate information to consumers on the environmental
impacts of products, and that ecolabeling criteria not be based on a
single approach to environmental protection without giving adequate
attention to other potentially comparable approaches. Bilateral
discussions with the EU under the auspices of the New Transatlantic
Agenda will be held on October 28-29 and will focus on the shared
environmental objectives of ecolabeling programs.
EU design--restrictive standards: Use of design standards
rather than performance-based standards increasingly creates an
impediment to U.S. exports to the EU. The United States has raised its
concern with such standards both bilaterally and in the WTO. In
particular, the USTR has objected to European standards which, by
prescribing non-safety-related design characteristics for gas appliance
connectors, preclude the use of U.S.-made connectors in Europe.
Progress in obtaining product approvals and/or changes to these
standards in certain EU member states may be negated by the recent
decision of a European regional standards body to establish a technical
committee to develop a European-wide standard for gas connectors. U.S.
firms have also expressed concern that the EU may adopt a design-
restrictive standard for asphalt shingles that would effectively
preclude U.S. exports. To prevent the adoption of further standards-
related trade barriers, the United States is continuing bilateral
discussions with member state and Commission officials, with the next
meetings scheduled for mid-October.
Saudi Arabia International Conformity Certification
Program (ICCP): Saudi Arabia has implemented mandatory certification
requirements that affect a wide range of U.S. exports to Saudi Arabia.
The certification program fails to meet fundamental obligations, such
as transparency and nondiscrimination, that the Saudi government would
have to meet as a member of the WTO. The United States has raised its
concerns with the certification program, both bilaterally and in the
context of Saudi Arabia negotiations to accede to the WTO. Bilateral
consultations with Saudi officials were held on September 30 and will
resume in Geneva in early November.
Multilateral Priorities
Trade in Services. The General Agreement on Trade in Services
(GATS) is the first legally enforceable multilateral agreement covering
trade and investment in the services sector. Market access concessions
agreed under the GATS provide assurances of open markets and
nondiscriminatory treatment for U.S. services exporters. Effective U.S.
participation in further negotiations on opening services
[[Page 52831]]
markets under the GATS is a high priority.
Telecommunications Market Access Negotiations: The WTO
Agreement provides for continuing market access negotiations in the
basic telecommunications services sector. These negotiations cover
local, long-distance, and international basic telecommunications
services. In these negotiations, the United States has sought to ensure
that U.S. firms may provide basic telecommunications services in
foreign markets both through facilities-based competition--including
the right to build, own, and operate domestic and international network
facilities--and through resale of services on existing networks. The
United States has also sought to ensure that U.S. companies can compete
in foreign markets on reasonable and nondiscriminatory rates, terms,
and conditions. The United States has offered to open its telecom
market if other nations would open their markets. Unfortunately, the
United States did not obtain a critical mass of high quality offers
from its trading partners by April 30, 1996, which was the original
deadline for these talks. Rather than accept a bad deal--or walk away
from the good offers tabled by some countries--the United States won
support for an extension of the telecom talks to February 15, 1997. The
additional time will allow other nations to significantly improve their
market-opening offers, a precondition to any eventual agreement.
Finanical Services Market Access Negotiations: Financial
services are at the heart of the world's economy, facilitating all
commerce and making possible the creation, allocation and preservation
of capital which is fundamental to economic activity. A country that
isolates its financial sector cannot be a full participant in, or
beneficiary of, the global economy. The United States has a
competitive, world-class financial services industry. For these reasons
the Administration has placed the highest priority on a meaningful
conclusion of the financial services negotiations that are to take
place in 1997 in the WTO. The United States seeks an agreement that
provides, on a nondiscriminatory basis, substantially full market
access to, and national treatment in, the world's major financial
markets, including those in Asia and Latin America, and seeks
guarantees that rights now enjoyed by U.S. financial services providers
in foreign markets will continue.
Trade Restrictions Imposed for Balance of Payments Purposes. The
Uruguay Round produced stronger GATT disciplines on the invocation and
maintenance of trade restrictions (quotas or tariff surcharges) imposed
for balance of payments (BOP) reasons. The United States has worked in
the WTO Balance of Payments Committee to ensure that BOP measures are
imposed and maintained only in response to legitimate balance of
payments problems, not as a method to protect specific industries or
sectors. As a result, 8 of the 13 countries that maintained BOP
measures at the end of the Round will have eliminated all such measures
by the end of 1996. Further, in 1995 Brazil was denied BOP cover for
import quotas designed to protect its auto industry. At forthcoming
meetings of the BOP Committee in October and November 1996 and during
1997, the United States will seek to ensure that the remaining BOP
measures are eliminated where legitimate balance of payments problems
do not exist.
WTO Dispute Settlement Proceedings
During the past year the United States has accelerated its use of
the dispute settlement provisions of the World Trade Organization (WTO)
to address significant foreign trade barriers. Since the WTO began
operation 21 months ago, the United States has decided to invoke the
new WTO dispute settlement procedures in 20 cases to enforce the WTO
agreements--14 in 1996 alone--including the three new WTO disputes to
be initiated as a result of the 1996 Super 301 annual review. This
vigorous use of WTO enforcement provisions far exceeds that of any
other country. By comparison, Canada and the European Communities have
invoked WTO dispute settlement procedures in 8 and 7 disputes
respectively.
The WTO dispute settlement procedures have already yielded positive
results: The United States won the first case that it took to the WTO,
involving Japan's taxes on liquor imports; USTR has signed a settlement
agreement in one case, involving EU imports of grains; in one case the
defending party has already changed its practice as a result of a U.S.
complaint (Portugal's term of protection for patents); and we are close
to settlement on at least two others, involving Japan's protection for
sound recordings, and Turkey's discriminatory box office tax on foreign
films.
Early WTO successes
Japan--liquor taxes. The United States won the first case it
referred to a WTO dispute settlement panel when the panel found that
Japan's liquor tax law violates WTO rules by favoring the domestic
liquor shochu.
Japan--sound recordings. After the United Stats invoked
WTO dispute settlement procedures against Japan for denying protection
to millions of dollars' worth of U.S. sound recordings made between
1946 and 1971, Japan agreed to change its law, and consultations are
continuing on Japan's plans for implementing such a change.
EU--grain imports. The United States invoked WTO dispute
settlement procedures to enforce the EU's WTO obligation to limit the
duties it applies to imports of grains so that a duty does not result
in a duty-paid import price in excess of a specified level. Before a
panel was established, a settlement was reached in conjunction with the
U.S.-EU settlement on EU enlargement. The United States remains
concerned about the EU's implementation of this settlement agreement,
and will continue to monitor it closely.
Turkey--film tax. Turkey has taxed box office receipts
from foreign films at a higher rate than receipts from domestic films.
In WTO consultations, Turkey agreed to eliminate the tax
discrimination.
Portugal--patent protection. After the United States used
WTO dispute settlement procedures to challenge Portugal's patent law,
which failed to provide the required minimum 20 years of patent
protection, Portugal changed its system to implement its obligations
under the WTO TRIPs agreement.
Ongoing Disputes
In addition to the three new dispute settlement proceedings already
cited in this report, the United States is also addressing the
following barriers in the WTO:
Brazil--auto imports. The United States and Brazil held
consultations under WTO dispute settlement procedures in August to
address Brazil's auto regime that adversely affects exports of U.S.
autos and auto parts. Brazil has agreed to enter into intensive talks
to address U.S. concerns.
Pakistan--patent protection. Pakistan has failed to comply
with its WTO obligation to establish a ``mailbox'' mechanism through
which persons may file patent applications for pharmaceutical or
agricultural chemical products and receive exclusive marketing rights
for such products under some circumstances. The Untied States has
referred the matter to a WTO dispute settlement panel to enforce this
obligation.
India--patent protection. India has failed to implement
its WTO obligation to establish a ``mailbox'' mechanism through which
persons may file patent applications for pharmaceutical or
[[Page 52832]]
agricultural chemical products and receive exclusive marketing rights
for such products under some circumstances. At WTO consultations
requested by the United States, India agreed that it is legally
obligated to establish mailbox and exclusive marketing rights systems,
but it has not yet taken the required action.
Japan--photographic film and paper. The United States has
invoked WTO dispute settlement procedures and requested a panel to
address various laws, regulations and requirements of the Government of
Japan affecting the distribution, offering for sale and internal sale
of imported consumer photographic film and paper. The measures include
a number of laws, regulations and administrative actions, originating
in Japan's strategy of liberalization countermeasures in this sector,
and inhibiting sales of imported film and paper. Japan's photographic
film and paper market is valued at about $2.8 billion per year.
Japan--distribution services. The United States has
invoked WTO dispute settlement procedures regarding measures affecting
market access for distribution services, applied by the Government of
Japan pursuant to or in connection with Japan's Large Scale Retail
Stores Law and other laws, and will refer the matter to a panel if it
is not resolved through further consultations. These measures affect
market access in Japan for a variety of U.S. products, including film.
Hungary--agricultural export subsidies. The United States,
joined by Argentina, Australia, Canada, New Zealand and Thailand, is
consulting with Hungary under WTO dispute settlement procedures
concerning Hungary's lack of compliance with its scheduled commitments
on agricultural export subsidies.
Canada--magazine imports. The United States has asked a
WTO dispute settlement panel to find that Canada's import ban and
special excise tax on foreign magazines with content targeted at
Canada, and Canada's postal rates discriminating against foreign
magazines, are inconsistent with Canada's WTO obligations.
EU--meat imports. The United States has asked a WTO panel
to find that the EU's restrictions on imports of meat from animals
treated with growth hormones are inconsistent with its WTO obligations.
Australia--salmon imports. The United States has invoked
WTO dispute settlement procedures concerning Australia's ban on imports
of untreated fresh, chilled or frozen salmon. The ban is allegedly
imposed for phytosanitary reasons, even though a draft risk assessment
found in 1995 that imports of eviscerated fish are not a basis for
concern about the transmission of fish diseases to Australia's fish
stocks. The Australian government is in the process of reconsidering
the scientific basis for the restrictions.
EU--banana imports. The United States, Guatemala,
Honduras, Mexico and Ecuador have asked a WTO panel to find that the
EU's practices relating to the importation, sale and distribution of
bananas are inconsistent with its WTO obligations. The practices
adversely affect the services exports of U.S. banana marketing
companies.
Korea--shelf-life requirements. Following WTO
consultations concerning Korea's food regulations, which contained
arbitrary shelf-life restrictions that inhibited or precluded U.S.
exports of many agricultural products, Korea agreed to convert to a
manufacturer-determined shelf-life system for most beef, pork, poultry
and other foods. Korea also agreed to remove other barriers to U.S.
meat exports. Korea is the third largest market for U.S. agricultural
exports. The United States has recently informed Korea of problems that
have arisen in implementing the shelf-life agreement and is consulting
on those matters. The United States will refer these issues to a WTO
dispute settlement panel if these problems are not expeditiously
addressed.
Korea--import clearance. After consultations under WTO
procedures concerning Korea's unjustifiably long and burdensome import
clearance process for agricultural products, Korea revised its
inspection procedures for fresh fruit and vegetables, and stated its
intention to reform its food inspection and sanitation system. Since
Korea's actions did not resolve the import clearance problems, the
United States held further consultations with Korea and is now awaiting
detailed information requested in September from Korean officials on
specific reforms to its import clearance procedures. The United States
will refer the matter to a WTO panel if Korea does not implement the
needed changes.
NAFTA Dispute Settlement Proceedings
The United States continues to make use of the dispute settlement
provisions of the North American Free Trade Agreement (NAFTA) to
address the following significant foreign trade barriers:
Canada--dairy and poultry tariffs. Following the Uruguay
Round, Canada raised its tariffs on several agricultural products. It
applies those higher tariffs to U.S. exports of dairy, poultry, eggs,
barley and margarine. The United States has asked a NAFTA panel to find
that Canada's application of these tariffs on imports from the United
States is inconsistent with the NAFTA prohibition against the
imposition of new or increased tariffs or the imposition of tariffs in
excess of Canada's NAFTA tariff schedule.
Mexico/Small Package Delivery. Mexico has denied a U.S.
firm the ability to operate large trucks in its small package delivery
service even though Mexican firms engaged in the same business can do
so, despite Mexico's obligation under the NAFTA to accord U.S. firms
national treatment in this service sector. Consultations with Mexico
under NAFTA procedures are continuing.
Attachment--Trade Enforcement: An Active Record
Section 301 and Super 301
Section 301 of the Trade Act of 1974 is the principal U.S. statute
for addressing foreign unfair practices affecting U.S. exports of goods
or services. Section 301 may be used to enforce U.S. rights under
international trade agreements and may also be used to respond to
unreasonable, unjustifiable or discriminatory foreign government
practices that burden or restrict U.S. commerce. Under Section 301 the
USTR may take action against such practices, including withdrawing
trade agreement concessions and imposing duties, fees or restrictions
on imports. In addition, as part of the ``Super 301'' process, the U.S.
Trade Representative annually reviews U.S. trade expansion priorities
and identifies those priority foreign country practices the elimination
of which is likely to have the most significant potential to increase
U.S. exports.
The Administration has actively used the leverage of Section 301
and Super 301 to eliminate foreign unfair trade practices and open
foreign markets to American goods and services. Indeed, event the
threat of imposition of retaliatory measures under Section 301 has, in
many instances, resulted in improved market access for American
exporters. For example:
China--intellectual property protection. Employing the
leverage of possible trade sanctions, the USTR used Section 301 to
reach agreement in February 1995 with China on enforcement of its
intellectual property protection laws, and in June 1996 to secure
effective enforcement of that agreement.
[[Page 52833]]
Canada--Country Music Television. As a result of a Section
301 investigation of Canadian government practices regarding the
authorization for distribution via cable of U.S.-owned programming
services, U.S. and Canadian firms reached a settlement in March 1996
that will restore market access.
EU--banana imports. As the result of a Section 301
petition filed with USTR by Chiquita Brands International, Inc., and
the Hawaii Banana Industry Association, the United States reached
agreement with Colombia and Costa Rica in January 1996 regarding their
actions affecting exports of bananas to the European Union (EU). The
United States has also invoked WTO dispute settlement procedures,
jointed by Ecuador, Guatemala, Honduras and Mexico, to challenge the
EU's import practices, which discriminate against U.S. banana
distribution services.
EU--enlargement. As a result of the enlargement of the EU
to include Austria, Finland and Sweden among its member states, U.S.
exports of semiconductors and certain other products were subject to
higher tariffs. With Section 301 retaliation and WTO dispute settlement
rules as leverage, USTR negotiated an agreement with the EU in November
1995 to lower the EU's tariffs on semiconductors and hundreds of other
products. The tariff reductions will result in an estimated $4 billion
in savings for U.S. companies over the next ten years.
Korea--auto imports. In conjunction with its annual
``Super 301'' review, the United States negotiated an agreement with
Korea in September 1995 to increase access to the Korean market for
U.S. passenger vehicles. The agreement reduced by 15 percent the
overall tax burden on autos with larger engines, liberalized many
Korean standards and certification procedures lifted some restrictions
on advertising and retail financing, and provided the Korean
Government's assurances that it would no longer promote an anti-import
bias among consumers.
Korea--steel exports. In July 1995, in response to a
Section 301 petition from the Committee on Pipe and Tube Imports, the
United States reached agreement with Korea on a mechanism to discuss
Korea's economic trends and data on steel sheet and pipe and tube
products, and Korea agreed to notify the United States in advance of
Korean government measures that control steel production, pricing or
exports.
Korea--meat imports. In response to a Section 301 petition
filed by the National Pork Producers Council, the American Meat
Institute, and the National Cattlemen's Association, the United States
negotiated an agreement with Korea in July 1995 on measures to
eliminate non-science-based shelf-life requirements and thereby open
the Korean market to U.S. meat and other food products. The agreement
requires Korea to notify the WTO as it implements each stage of the
agreement.
Japan--auto and auto parts imports. In May 1995 the United
States proposing using Section 301 to increase tariffs on luxury cars
from Japan, after determining that Japanese policies discriminate
against imports of U.S. autos and auto parts. The two governments
subsequently reached a results-oriented agreement on measure Japan will
take in this sector, including deregulation. The agreement has led to
positive results as shown by increased purchases of auto parts by
Japanese transplants, deregulation of the Japanese aftermarket for
replacements parts, and an increased number of Japanese dealerships
displaying foreign cars.
Canada--beer imports. After the United States imposed
retaliatory duties on Canadian beer pursuant to Section 301, the United
States and Canada in August 1993 settled a longstanding dispute over
access for U.S. beer to the Canadian market.
Japan--wood product imports. after the United States noted
in the 1994 and 1995 Super 301 reports that Japan was not fully
implementing the U.S.-Japan bilateral agreement on market access for
wood products, cooperation on this issue improved significantly. In an
exchange of letters in July 1996, Japan confirmed that it has taken
important additional steps toward implementation of the agreement.
Japan has also made deregulation of the housing sector and improved
market access for building materials a high national priority.
Taiwan--medical device imports. In conjunction with its
annual Super 301 review, the United States obtained a commitment from
authorities on Taiwan to address concerns raised by the United States
regarding discrimination against U.S. exports of medical devices by
requiring cost data from foreign manufacturers not required from
domestic firms and by establishing, through non-transparent procedures,
arbitrary price controls that favor domestic producers.
``Special 301''--Intellectual Property Protection
Under the ``Special 301'' provisions in U.S. trade law, USTR has at
least once a year identified countries that deny adequate and effective
protection to foreign intellectual property rights or deny fair and
equitable market access for persons that rely on intellectual property
protection. Countries that have the most onerous or egregious practices
and whose practices have the greatest adverse impact on the relevant
U.S. products have been designated as ``priority foreign countries''
and were subject to Section 301 investigations. Other countries with
particular problems of protection or enforcement of intellectual
property rights have been placed on a ``watch list'' or ``priority
watch list'' and are monitored closely for progress. Major progress has
been made as a result of using Special 301:
China--intellectual property protection. As noted above,
the USTR reached agreement in February 1995 with China on enforcement
of its intellectual property protection laws, and in June 1996 to
secure effective enforcement of that agreement.
Brazil. In April 1996, Brazil enacted a new, long-awaited
industrial property law, providing patent protection and greater market
access for products relying on such protection. This new legislation is
a direct result of earlier commitments made by Brazil in February 1994
to settle a Section 301 investigation.
Taiwan. The Special 301 provisions of U.S. trade law have
been used continuously since 1992 to obtain steady progress by
authorities on Taiwan in improving the legislative framework available
to protect intellectual property rights and the enforcement of those
rights in the Taiwan judicial system. In 1994 Taiwan made significant
strides in passing intellectual property rights legislation. In April
1996, Taiwan issued an 18-point action plan for enhanced protection,
which covered all major remaining areas of concern.
Thailand. After the United States identified Thailand as a
``priority foreign country'' under the Special 301 provisions of U.S.
trade law in 1993, Thailand made steady progress in its protection of
intellectual property, including increased enforcement efforts and the
enactment of a new copyright law in 1994. In addition, action on a new
law establishing intellectual property law courts in nearly complete,
and Thailand is in the process of drafting a new patent law.
The Philippines. As a result of the Special 301 process,
the Philippines signed an agreement in April 1993 that made commitments
to improve protection of copyrights, patent and trademarks, and to
improve enforcement. Since that time, the Philippines has intensified
its enforcement efforts, and enactment of
[[Page 52834]]
new legislation bringing the country's intellectual property laws in
compliance with the WTO agreement on intellectual property should be
completed soon.
Bulgaria. The United States reached an agreement
committing Bulgaria to join major international intellectual property
conventions and to put in place effective procedures to protect
intellectual property rights.
Singapore. Singapore agreed to provide a level of patent
protection consistent with WTO obligations by December, 1995.
India. India agreed to take steps to protect copyright
works.
Japan. The United States and Japan concluded two bilateral
agreements to provide more effective patent protection for U.S.
inventors.
Ecuador. USTR concluded a comprehensive bilateral
agreement obligating Ecuador to provide equivalent levels of
intellectual property protection and enforcement to that required of
NAFTA parties.
Trinidad and Tobago. USTR concluded a comprehensive
bilateral agreement obligating Trinidad and Tobago to provide
equivalent levels of intellectual property protection and enforcement
to that required of NAFTA parties.
Jamaica. USTR concluded a comprehensive bilateral
agreement obligating Jamaica to provide equivalent levels of
intellectual property protection and enforcement to that required of
NAFTA parties.
Estonia. USTR concluded a Trade and Intellectual Property
Rights Agreement that is now awaiting approval by the Estonian
legislature.
Latvia. USTR concluded an Agreement on Trade and
Intellectual Property Rights Protection.
Lithuania. USTR concluded a Trade and Intellectual
Property Rights Agreement now awaiting approval by the Lithuanian
legislature.
Telecommunications Trade (Section 1377)
Under Section 1377 of the Omnibus Trade and Competitiveness Act of
1988 the USTR has reviewed annually the operation and effectiveness of
U.S. telecommunications trade agreements, and taken action where non-
compliance was found.
Korea. The Administration has used the annual Section 1377
review continuously to address persistent barriers to access by U.S.
telecommunications equipment and service suppliers to the Korean
market. In 1993, 1995 and 1996 the United States and Korea concluded
understandings on a range of issues pertaining to market access for
equipment, procurement practices, standards, and intellectual property
protection. Under the 1996 review the Administration initiated talks
with Korea regarding compliance with existing agreements as well as
areas not previously covered, including services and non-interference
by the government in private sector procurement.
Japan. During the 1996 Section 1377 review, the United
States and Japan resolved issues relating to procurement by Nippon
Telegraph and Telephone (NTT) and NTT's Personal Handy Phone
subsidiary, thus providing access to the Japanese market for U.S.
suppliers. Previously, Section 1377 was used to enforce the 1989 Third
Party Radio and Cellular Telephone Agreement with Japan. The 1994
review had identified a violation of the cellular portion of that
agreement, which was resolved when Japan signed a new agreement in
March 1994, providing comparable market access to U.S. cellular
telephone systems.
Foreign Government Procurement (Title VII)
Under Title VII of the Omnibus Trade and Competitiveness Act of
1988, USTR has annually reviewed compliance by foreign governments with
the Government Procurement Code, and identified countries that were
discriminating in government procurement against United States goods
and services.
Japan--telecommunications and medical technology.
Following identification of Japan under Title VII, in October 1994 the
United States and Japan reached agreement on government procurement of
telecommunications products and services and medical technology
products and services. The United States continues to monitor Japan's
compliance with both agreements and to assess tangible progress in
Japanese procurement practices in these two sectors.
Japan--construction. USTR identified Japan under Title VII
in April 1993 for discriminatory practices in its public sector
construction market. Japan averted sanctions scheduled to go into
effect as of January 20, 1994, by announcing a plan to reform its
public sector construction market, including measures to expand
transparent and non-discriminatory procedures and adopt an open and
competitive bidding system. Japan also agreed to monitor foreign access
and engage in annual consultations. Since the signing of the most
recent U.S.-Japan Public Works Agreement in 1994, U.S. firms have
experienced little overall improvement in accessing the Japanese public
works market. Consequently, in April 1996, Japan was placed on the
Title VII watchlist due to continued concern over the implementation of
both the 1994 Public Works Agreement and the 1991 Major Projects
Arrangements.
EU--telecommunications. Title VII trade sanctions were
imposed for the first time by the Clinton Administration, against the
EU for its discriminatory government procurement practices in the
telecommunications sector.
EU--electrical equipment. Following U.S. announcement of
its intention to impose sanctions, the United States and the EU reached
a historic agreement in May 1993 on access to EU government procurement
of heavy electrical equipment, opening a $20 billion market to U.S.
companies. The agreement was expanded in April 1994 to cover the
electrical utility sector and subcentral government entities, doubling
to $100 billion the bidding opportunities available to U.S. and EU
firms under the GATT Government Procurement Code.
WTO Dispute Settlement--Early Successes
The WTO dispute settlement mechanism is proving to be a very
effective tool to open markets for U.S. exporters. The United States
insisted on tough new dispute settlement rules because we bring--and
win--a significant number of cases before dispute settlement panels.
And we settle a lot of disputes by initiating the dispute settlement
process. Indeed, enforceability of the dispute settlement rules has
made settlement of disputes a much more frequent, speedy and useful
outcome. Before, the WTO, the global trading rules did less to benefit
American workers. The process is already working to our benefit:
Japan--liquor taxes. In July 1996 the United States won
the first case it referred to a WTO dispute settlement panel when the
panel found that Japan's liquor tax law violates WTO rules by favoring
the domestic liquor shochu. Japan is the United States' second largest
export market for whisky.
Japan--sound recordings. After the United States invoked
WTO dispute settlement procedures against Japan for denying protection
to millions of dollars' worth of U.S. sound recordings made between
1946 and 1971, Japan agreed to change its law, and consultations are
continuing on Japan's plans for implementing such a change.
EU--grain imports. The United States invoked WTO dispute
settlement procedures to enforce the EU's WTO obligation to limit the
duties it applies
[[Page 52835]]
to imports of grains so that a duty does not result in a duty-paid
import price in excess of a specified level. Before a panel was
established, a settlement was reached in conjunction with the U.S.-EU
settlement on EU enlargement. The United States remains concerned about
the EU's implementation of this settlement agreement, and will continue
to monitor it closely.
Turkey--film tax. Turkey has taxed box office receipts
from foreign films at a higher rate than receipts from domestic films.
In WTO consultations, Turkey agreed to eliminate the tax
discrimination.
Portugal--patent protection. After the United States used
WTO dispute settlement procedures to challenge Portugal's patent law,
which failed to provide the required minimum 20 years of patent
protection, Portugal changed its system to implement its obligations
under the WTO TRIPs agreement.
Using Access to the U.S. Market to Encourage Improvements in Worker
Rights and Intellectual Property Rights Protection
Congress has provided, and in 1996 renewed, the Generalized System
of Preferences (GSP) program of duty-free access for some imports from
developing countries. The Clinton Administration has used the GSP
program to integrate developing countries into the international
trading system in a manner commensurate with their development. The
Administration has encouraged GSP beneficiary countries to eliminate or
reduce significant barriers to trade in goods, services, and
investment; to afford all workers internationally recognized worker
rights; and to provide adequate and effective means for foreign
nationals to secure, exercise, and enforce intellectual property
rights.
Pakistan. In March 1996 the Administration announced its
intention to partially suspend Pakistan's GSP benefits as a result of
child labor and bonded labor problems in Pakistan.
Thailand. The Administration restored GSP benefits to
Thailand in 1995 only after Thailand made significant improvements in
intellectual property protection.
Maldives. The Administration suspended GSP benefits for
the Maldives in July 1995, for failure to provide worker rights.
El Salvador, Dominican Republic and Honduras. The
Administration used GSP country practice reviews to obtain improvements
in worker rights.
Guatemala and Thailand are being monitored for further
progress on worker rights improvements.
Poland and El Salvador. The Administration concluded in
October 1996 reviews after progress on intellectual property rights was
achieved.
Irving Williamson,
Chairman, Section 301 Committee.
[FR Doc. 96-25763 Filed 10-7-96; 8:45 am]
BILLING CODE 3190-01-M
