[Federal Register Volume 64, Number 87 (Thursday, May 6, 1999)]
[Notices]
[Pages 24439-24446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11413]
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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Report on Trade Expansion Priorities Pursuant to Executive Order
13116 (``Super 301'')
AGENCY: Office of the United States Trade Representative.
ACTION: Notice.
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SUMMARY: Notice if hereby given that the 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 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 No. 13116 of
March 31, 1999.
DATES: The report was submitted on April 30, 1999.
FOR FURTHER INFORMATION CONTACT: Demetrios Marantis, Assistant General
Counsel, Office of the U.S. Trade Representative, 600 17th Street,
N.W., Washington, DC 20508, 202-395-3581.
SUPPLEMENTARY INFORMATION: The text of the USTR report is as follows.
Identification of Trade Expansion Priorities Pursuant to Executive
Order 13116
Last month, the United States Trade Representative (USTR) released
the President's 1999 Trade Policy Agenda and the 1999 National Trade
Estimate Report on Foreign Trade Barriers (NTE Report). This report
builds on the prior two reports and is submitted pursuant to Executive
Order 13116 of March 31, 1999. The ``Super 301'' provisions of the
Executive Order direct the USTR to review U.S. 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.
I. Trade Expansion Priorities and Priority Foreign Country
Practices
In preparing this report, USTR has reviewed the 1999 Trade Policy
Agenda to identify U.S. trade expansion priorities and the 1999 NTE
Report and public comments submitted to USTR to assess foreign country
practices that we seek to eliminate. Based on this review, USTR has
determined that the U.S. trade expansion priorities include the
launching of a new, multilateral round of global trade negotiations;
ensuring that WTO Members fully implement existing commitments; ongoing
strategic enforcement of U.S. rights under bilateral, regional, and
multilateral trade agreements and under U.S. trade laws; and
integrating China and other economies into the world trading system.
The USTR is not identifying any ``priority foreign country practices''
within the meaning of the Executive Order at this time, but does find
that a number of practices warrant the initiation of WTO dispute
settlement proceedings or other actions in the context of our bilateral
trade relationships.
A. The Third Ministerial Conference and the New Round
Ambassador Charlene Barshefsky, the United States Trade
Representative, will chair the WTO's Third Ministerial Conference in
Seattle, Washington, November 30--December 3, 1999. The event, which
will be the largest trade meeting ever held in the United States, will
set the agenda for the WTO for the next decade and launch a new round
of global trade negotiations. The Administration has engaged in an
extensive consultative process to develop this agenda, involving the
broadest range of citizens concerned about trade. Broadly speaking, the
agenda will: set a negotiating agenda and work program; provide for
institutional reform, including transparency, and ensure that the WTO
will continue to be a forum for on-going trade liberalization and
reform, by delivering results at Seattle.
At the meeting, Trade Ministers from around the world will focus on
the important issues facing the trading system and the new economy of
the 21st century. As a starting point, the United States joins other
nations in emphasizing the important issue of implementation of
existing agreements--from agriculture to textiles. As we approach
January 1, 2000, the majority of transition periods in the Agreements
on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
Trade-Related Investment Measures (TRIMS), and Customs Valuation will
expire for most developing countries. Ensuring compliance with these
Agreements will be an important feature of our work as we shape the
WTO's forward agenda.
Beyond implementation, the negotiations, to begin in early 2000,
will be comprised of a new round of liberalization commitments in
services trade, a new phase in agriculture policy reform and market-
opening undertakings, and other negotiations on topics to be agreed at
the meeting, possibly a new round of industrial tariff and non-tariff
negotiations. Certain Members have also identified foreign direct
investment and competition policy as possible topics for negotiation.
The important relationship of trade and the environment, as identified
in President Clinton's May 1998 address before the WTO, is an area that
will require further work in the WTO, as will forging the consensus on
addressing trade and labor.
Launching the round will also require attention to institutional
improvements within the WTO to facilitate trade, to improve the
participation of less developed economies in the world economy, and to
coordinate effectively with other international bodies such as the IMF
and World Bank. The United States seeks to strengthen public confidence
in the WTO as an institution by improving its transparency and
openness, particularly in WTO dispute settlement proceedings, including
the review of the system that is to be completed before the Seattle
meeting. Civil society must be able to contribute to the work of the
WTO, to ensure both that the WTO hears many points of view including
those from business, labor, environmental, consumer and other groups,
and that its work will rest on the broadest possible consensus.
Finally, the U.S. vision for the new round requires that we set an
agenda that accommodates rapid technological developments and addresses
the broadest range of concerns. The Ministerial, and the time prior to
the meeting itself, provide the United States the opportunity to
showcase the relevance of the WTO to the information revolution, the
development of electronic commerce, and other rapidly changing, high-
technology fields. We seek to reach agreements expanding the product
coverage in the landmark Information Technology Agreement (ITA) and
expand on the 1998 Ministerial Declaration on Electronic Commerce which
calls on WTO Members to refrain from imposing customs duties on
electronic transmissions. We also intend to strengthen the system to
contribute to the Administration's wider policy of eradicating the
potential for bribery and corruption and promoting economic efficiency,
by completing an agreement on transparency in government
[[Page 24440]]
procurement at the Seattle meeting. Expanding market access
opportunities, including through early agreements to liberalize tariffs
in sectors first identified in APEC (i.e., chemicals, energy and
environment-related goods, medical and scientific equipment, forest
products, fish, gems and jewelry, and toys), remains a priority.
B. Implementation of Existing WTO Commitments
Full implementation of existing WTO agreements is critical to
ensuring that the United States achieves the full benefit of what it
bargained for in the Uruguay Round of multilateral trade negotiations,
as well as to maintaining public confidence in an open trading system
and building public support for the new round of negotiations. There
are five critical aspects of WTO implementation: compliance with WTO
commitments that entered into effect in January 1995; compliance with
WTO commitments that are subject to transition periods or phase-in
provisions, many of which will enter into effect by January 1, 2000;
acceptance of the protocols on basic telecommunications services and
financial services and implementation of the corresponding commitments;
compliance with accession protocols; and compliance with the rulings
resulting from WTO dispute settlement proceedings in a timely and
complete manner.
The primary means of enforcing WTO commitments that have entered
into effect is the WTO dispute settlement mechanism, which is discussed
in further detail below. In the coming months, one of USTR's top
priorities will be to focus on Members' preparations for the phase-in
by January 1, 2000 of commitments in three critical areas:
Intellectual Property Protection--WTO developing country
members are required to implement most of their commitments under the
Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS) by the end of this year. We are monitoring this closely and are
prepared to both assist countries in developing laws and enforcement
mechanisms at their request and invoke dispute settlement procedures in
the event members fail to meet their obligations.
Customs Valuation--More than 50 countries are required to
fully implement the obligations of the Agreement on Customs Valuation--
a critical obligation in realizing market access. Full and effective
implementation of this Agreement will head off disputes in the future.
The United States is also concerned about implementation of existing
customs valuation obligations, which is discussed in further detail
below.
Trade Related Investment Measures (TRIMs)--December 31,
1999, is the deadline established in the TRIMs Agreement for developing
countries to eliminate measures which they notified as inconsistent
with the TRIMs Agreement. Throughout the remainder of 1999, the United
States will be monitoring steps taken by those countries due to come
into compliance by this deadline, and will be prepared to bring dispute
settlement cases for measures which have not been removed by the agreed
deadline.
In addition, USTR will work bilaterally and within the Council for
Trade in Services to ensure the full implementation of Members'
commitments under the Fourth Protocol to the General Agreement on Trade
in Services (GATS), i.e., the Basic Telecom Agreement, which entered
into force on February 5, 1998, and the Fifth Protocol to the GATS,
i.e., the Financial Services Agreement, which entered into force on
March 1, 1999. The United States will continue to insist that all
countries that failed to meet the deadline for acceptance of these two
agreements bring their commitments into force as soon as possible. For
the Basic Telecom Agreement, those countries are: Brazil, Dominica,
Guatemala, Papua New Guinea, and the Philippines. For the Financial
Services Agreement, those countries are: Australia, Bolivia, Brazil,
Bulgaria, Costa Rica, Dominican Republic, El Salvador, Luxembourg,
Ghana, Honduras, Jamaica, Kenya, Nigeria, Nicaragua, the Philippines,
Poland, Slovenia, and Uruguay.
USTR will continue to use WTO committees and bilateral mechanisms
to address implementation issues. For example, the United States will
work through the WTO Committee on Agriculture to seek compliance with
the various obligations under the Agriculture Agreement, including
those on tariff-rate quotas, domestic support and export subsidies.
Likewise, the United States will be vigilant in its enforcement of
textile quotas and implementation of textile market access requirements
overseas. Preventing circumvention is a high priority as well. Last
year, we reached an important new agreement with Hong Kong on measures
to improve information-sharing and strengthen cooperation to prevent
circumvention, and we are working with Macau, China and others on
similar initiatives.
In addition, we will continue to work with other WTO Members under
the aegis of the Committee on Antidumping Practices and its Ad Hoc
Group on Implementation to secure better adherence to WTO rules and
procedures governing the conduct of antidumping investigations and
administrative reviews. The increased use of these remedies by a
growing number of WTO Members with different legal systems and levels
of experience poses special challenges to U.S. exporters. The United
States expects strict compliance with the WTO Antidumping Agreement's
substantive obligations, as well as its rules which guarantee
transparency and due process, so that these remedies can remain a fair
yet effective complement to ongoing trade liberalization.
C. Strategic Enforcement of WTO Rights and U.S. Trade Laws
One of this Administration's top trade expansion priorities is
vigorous monitoring and enforcement of trade agreements, which includes
the active use of the WTO dispute settlement process and strategic
application of U.S. trade laws.
1. WTO Dispute Settlement Process
Since the WTO's creation in 1995, the United States has filed more
complaints--44 to date--than any other WTO Member and has participated
as a third party in a number of other cases. Our overall record of
success is very strong. We have prevailed in 22 of the 24 U.S.
complaints acted upon so far, either by successful settlement or panel
victory. These favorable rulings and settlements have involved an array
of sectors within the fields of manufacturing, agriculture, services,
and intellectual property.
a. WTO Disputes
As a result of this year's review of its trade expansion
priorities, and its monitoring of compliance with U.S. trade
agreements, the Administration will take the following actions to
enforce U.S. rights under those agreements:
EU--Avionics. The United States will request WTO consultations with
the European Union (EU) on French government subsidies for avionics
equipment under the WTO Agreement on Subsidies and Countervailing
Measures. In an effort to displace U.S.-sourced flight management
systems, the French government, with European Commission approval, has
agreed to grant 140 million French francs (approximately 40 percent of
the projected costs) between 1997-1999 for a project involving Sextant
Avionique of France and Smiths Industries of the United Kingdom to
jointly develop a
[[Page 24441]]
new flight management system adapted to Airbus aircraft. The aid takes
the form of a ``reimbursable advance payment'' to be repaid on a
percentage of sales of the new system; however no repayment is required
if the program is unsuccessful.
India--Auto TRIMs. The United States will request WTO consultations
with India on its new auto policy. Last year, India implemented new
measures governing investments in the automotive industry. All new and
existing firms wishing to operate auto manufacturing investments in
India are required to sign a standardized agreement with the Government
of India that contains local content and foreign exchange balancing
requirements. The Indian program would inhibit the free flow of trade
and investment and is inconsistent with India's obligations under the
WTO Agreement on Trade-Related Investment Measures (TRIMs). According
to the American Automobile Manufacturers Association (AAMA) the
approximate size of the vehicle market in India in 1998 was 604,000
units. A large portion of vehicles sold in India are produced locally.
Auto parts sales into India are also reduced by these measures.
Korea--Barriers to the Import and Distribution of Foreign Beef. In
response to a 1989 GATT panel ruling, Korea agreed to phase out its
import restrictions on beef. However, Korea simply replaced its ban
with a temporary quota and comprehensive restrictions on the ability to
import and distribute beef, including a requirement that imported beef
be sold in separate retail establishments. These and other barriers
prevented U.S. exporters from fully utilizing the 1997 and 1998 minimum
market access commitments Korea had made for beef. In 1998, the
underfill of Korea's beef import quota was approximately 60 percent.
The U.S. Government has worked to establish a market-driven beef
import system in Korea by seeking the elimination of Korean Government
measures that impede the entry and distribution of foreign beef. In
September and November 1998, the U.S. and Korean Governments held two
rounds of talks, and convened again in January 1999, in an attempt to
conclude an agreement providing for liberalized beef trade. In the
absence of an agreement, the United States requested WTO dispute
settlement consultations on February 1, 1999. On April 28, the United
States requested the establishment of a WTO dispute settlement panel on
Korea's beef import and distribution system after WTO consultations
held on March 11 and 12 failed to resolve the U.S. concerns.
Customs Practices: The benefits of market access commitments are
undermined when countries engage in certain customs practices, such as
the use of minimum reference prices to determine the customs value of
an imported good. The WTO Customs Valuation Agreement (CVA) stipulates
that the transaction price is the primary basis for customs valuation
determinations, and the U.S. Government is working to ensure that
countries comply fully with their obligations under the CVA. We are
actively pursuing the issue of reference prices in the WTO Committee on
Customs Valuation and are closely examining reports of non-compliance
with CVA commitments, particularly in those countries with current
obligations, such as Brazil, India and Mexico. We are soliciting
additional information on these practices and, as appropriate, will
subsequently pursue dispute settlement consultations with the relevant
countries that do not satisfactorily address these concerns.
b. Dispute Settlement Rules
USTR's review of trade expansion priorities has shown that, while
the WTO dispute settlement system generally works well, improvements in
the rules governing compliance with panel and Appellate Body reports
are necessary. The EU's failure to implement a WTO-consistent banana
regime following WTO dispute settlement proceedings, and its impending
failure to eliminate its import ban on meat produced with hormones,
illustrate how a Member that fails to implement WTO dispute settlement
rulings can continue causing harm to U.S. exporters for an extended
period of time. The United States is seeking improvements in the rules
governing implementation of panel and Appellate Body reports in the
context of this year's review of the WTO Dispute Settlement
Understanding (DSU), and there is ongoing review regarding other
possibilities for improvement.
In the interim, we will continue to exercise our rights to suspend
concessions with respect to the trade of a Member that fails to
implement WTO recommendations. On April 19, the United States suspended
concessions in the amount of $191.4 million against the EU because of
its failure to implement a WTO-consistent banana regime. USTR is now
preparing to take similar action against EU imports if the EU does not
implement WTO findings against its meat import ban by May 13, 1999,
which is the deadline for implementation in that dispute.
2. U.S. Trade Laws
The U.S. trade laws are a vitally important means of ensuring
respect for U.S. rights and interests in trade. We will continue to
challenge aggressively market access barriers abroad using Section 301,
Special 301, Section 1377, Super 301 and Title VII 1 to open
foreign markets and ensure fair treatment for our goods and services,
protect U.S. intellectual property rights, and ensure compliance with
telecommunications agreements. These provisions work in tandem with
dispute settlement procedures, and also assist us in completing and
enforcing agreements with trading partners that are not WTO Members or
in areas not covered by WTO rules. In addition, this Administration is
fully committed to using U.S. antidumping, countervailing duty, and
safeguards laws and will insist that America's trading partners play by
the rules.
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\1\ These provisions can be found in: Sections 301-310 of the
Trade Act of 1974 (``Section 301''); Section 182 of the Trade Act of
1974 (``Special 301''); and Section 1377 of the Omnibus Trade and
Competitiveness Act of 1988 (``Section 1377''). The procedures set
forth in Section 310 of the Trade Act of 1974 (``Super 301'') and
Title VII of the Omnibus Trade and Competitiveness Act of 1988
(``Title VII'') were re-instituted by Executive Order 13116 of March
31, 1999.
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Section 301: On April 29, USTR initiated an investigation under
Section 301 of the Trade Act of 1974, as amended, regarding Canadian
regulations affecting tourism in the U.S.-Canada border region.
Measures maintained by the Province of Ontario generally prohibit U.S.
fishermen from keeping the fish they catch on lakes lying across the
Minnesota-Ontario border if the U.S. fisherman does not spend the night
in an Ontario commercial establishment or otherwise contribute to the
Ontario tourist industry. Canadian federal measures impose work permit
requirements on U.S. fishing guides who conduct tours on those lakes.
These measures discriminate in favor of Canadian tourist
establishments.
Special 301: Through the Special 301 process, USTR systematically
monitors levels of intellectual property protection around the world.
Each year, USTR identifies those foreign countries that deny adequate
and effective protection of intellectual property rights or fair and
equitable market access for U.S. persons that rely on intellectual
property protection. As a result of the 1999 Special 301 review, USTR
placed 17 trading partners on the ``Priority Watch List'' and 37
trading partners on the ``Watch List'', and announced the initiation of
WTO dispute settlement
[[Page 24442]]
proceedings involving Argentina, Canada and the European Union. See
USTR Announces Results of Special 301 Review, released April 30, 1999,
for further information concerning the protection of U.S. intellectual
property rights.
Section 1377: This year's review, which was completed on March 30,
1999, focused on compliance with the WTO Basic Telecommunications
Agreement by WTO Members, particularly the EU, Mexico, Japan and
Germany. The review indicated that the WTO agreement has increased
market access for U.S. telecommunications companies in foreign markets,
but that ongoing enforcement of the agreement is needed to ensure
continued growth in world-wide competition for telecommunications
services. See USTR Press Release 99-29, March 30, 1999 for further
information on this year's 1377 review.
Title VII: The Title VII report gives USTR the means to identify
foreign countries that have failed to comply with their obligations
under the WTO Agreement on Government Procurement (``GPA''), Chapter 10
of NAFTA, or other agreements relating to government procurement; or
otherwise discriminated against U.S. products and services when making
government purchases. In addition, USTR is directed to consider a
number of other factors in making its determination of whether to
identify a country in the Title VII report. The Title VII report,
released simultaneously with this report and the Special 301 report,
builds upon the information found in the President's 1999 Trade Policy
Agenda and the 1999 NTE Report on Foreign Trade Barriers so as to be
more flexible and effective in achieving its goal of eliminating unfair
procurement practices. In the past, Title VII has been a useful and
effective tool in challenging foreign governments' procurement
barriers. For details on this year's report, see Title VII report,
released on April 30, 1999.
Steel: It is critically important that we promote free and fair
trade abroad and that we effectively enforce our trade laws in order to
give Americans the confidence needed to keep our markets open. In
response to the substantial increase in U.S. steel imports beginning in
April 1998, the Administration responded with a comprehensive and
effective set of actions which were outlined in the President's Steel
Report to the Congress of January 7, 1999. Thanks to these measures,
steel imports began to drop after November 1998. The Administration is
committed to aggressively enforcing U.S. trade law to address the
adverse impact that unfairly traded steel imports have on U.S. steel
companies and U.S. jobs. In the report, the Administration stated its
willingness, if needed, to self-initiate trade cases with respect to
steel imports from Japan--the single largest source of the import
surge--if imports did not return to appropriate pre-crisis levels. With
respect to the antidumping cases filed by U.S. industry and workers
concerning imports of carbon flat-rolled products, the Commerce
Department expedited these investigations and, with respect to imports
from Japan and Russia, invoked the critical circumstances provision
with a view to retroactive application of the antidumping margins.
Additionally, the Administration invoked, for the first time, the
market disruption article of the 1992 U.S.-Russia Trade Agreement to
negotiate a restraint agreement on imports into the United States from
Russia of all steel products not already subject to restraints or
dumping orders.
The Administration also expanded discussions on steel issues with
Korea, the third largest source of the 1998 steel import surge, with
the objective of substantial progress toward eliminating Korean
government involvement in the steel sector. U.S. industry has long-
standing concerns with the Korean government's support for Korean steel
producers, for example, through directed lending, which has resulted in
uneconomic steel capacity expansions in Korea. For example, the U.S.
and Korean governments conducted an exchange of letters in August 1998
and April 1999 regarding steel.
These actions, grounded in U.S. trade law and fully consistent with
U.S. international obligations, resulted in a sharp reduction of
unfairly traded steel imports beginning in December 1998. Active import
monitoring is underway with a view to prompt application of U.S. trade
laws should injurious import growth resume.
D. Integrating Other Economies Into the WTO System
The WTO is engaged in accession negotiations with 30 separate
economies, including China, Chinese Taipei, Russia, Ukraine, and
Vietnam. Their accession to the WTO will make the trading system nearly
universal. It will remove a source of distortion and frustration in
trade for the United States and will give the newly-acceding members a
greater stake in stability and prosperity beyond their borders--thus
strengthening peace in the next century. To support both domestic
reform and the rules of the trading system, these countries must be
brought into the WTO on commercially meaningful terms. The result must
be enforceable commitments to open markets in goods, services and
agricultural products; transparent, non-discriminatory regulatory
systems; and effective national treatment at the border and in the
domestic economy.
In the months to come, we will negotiate intensely with all
acceding economies, including China--the largest prospective WTO
Member. We have made important progress with China in the past two
years, particularly during the visit of Premier Zhu Rongji in April
1999, and intensive negotiations are continuing.
E. Bilateral/Regional Trade Expansion Priorities and Trade Practices of
Concern
1. Africa
President Clinton's Partnership for Economic Growth and Opportunity
in Africa, announced and adopted in 1997, established a vigorous U.S.
trade policy approach toward sub-Saharan Africa. The key objectives of
the Partnership Initiative include: Support for economic reforms
underway in the region; enhanced U.S.-sub-Saharan African trade and
investment ties; support for Africa's full integration into the
multilateral trading system; and support for sustainable economic
development. The Partnership Initiative also aims to strengthen U.S.
economic engagement with countries of sub-Saharan Africa.
USTR is also committed to facilitating greater African integration
into the global economy by helping African nations and their regional
organizations develop greater capacity to expand trade and investment
protection. At the recently concluded U.S.-Africa Ministerial in
Washington D.C., the USTR underscored the resolve of the United States
and Africa to build capacity to promote broader participation by
African countries in the multilateral trading system. Specifically, the
United States agreed to continue technical assistance workshops in
Africa on the WTO. The United States and African participants also
agreed on the need for multilateral institutions to more effectively
coordinate and cooperate with the WTO on trade and investment issues
affecting African countries and to support African Economic Community
(AEC) permanent observer status in the WTO, pending the decision of the
WTO on modalities for observership. African and U.S. representatives
will establish a mechanism for regular consultations on WTO and related
matters, in Geneva and Washington, as preparation for the WTO
Ministerial advances.
[[Page 24443]]
USTR recently hosted roundtables with African Trade Ministers on
mechanisms to strengthen U.S.-Africa cooperation in the WTO and in the
GSP Program and U.S. market access requirements. In 1997, USTR enhanced
the Generalized System of Preferences Program (GSP) by adding over
1,700 new tariff lines for least developed countries, 29 of which are
in Africa. True to President Clinton's vision, USTR's unprecedented
engagement with African countries has resulted in trade agreements,
incentives for reform and regional integration, and initiatives to
enhance Africa's participation in the global trading system.
2. Asia--Pacific
The Clinton Administration has developed a wide-ranging program of
bilateral, regional and multilateral initiatives to reduce barriers to
U.S. exports of goods, services, and investment in the Asia-Pacific
region. The major trade policy priorities for this important economic
region are:
To harness the momentum for reform generated by the
financial crisis to promote economic recovery and the type of trade
policy changes that the United States has consistently advocated:
Enhanced market access, transparency, economic deregulation and
investment decisions based upon market disciplines. Such trade policies
complement firmly the goals of financial market stabilization, as
evidenced by the strong emphasis on structural reform in the
International Financial Institution (IFI)'s programs. The United States
is actively pursuing these objectives both through bilateral and
multilateral channels, in particular, the Asia Pacific Economic
Cooperation (APEC) forum;
To realize the commitment of APEC members to long-term
trade and investment liberalization through improved assessment and
implementation of individual and collective APEC action plans and
special initiatives such as EVSL (Early Voluntary Sectoral
Liberalization); and
To secure full implementation of WTO obligations by APEC
members. This aspect of USTR's work will assume heightened importance
over the coming year given the obligation of developing countries to
fully implement the WTO agreements on TRIPS, TRIMs, and Customs
Valuation as of January 1, 2000. This requirement should greatly
strengthen our efforts to address inadequate protection of intellectual
property rights, trade-distorting investment requirements, and
inefficient and corrupt customs practices which have been pervasive
problems throughout the region.
Priority issues for three of our largest trading partners in the
region--China, Japan, and Korea--are outlined in the relevant sections
below.
3. Canada
Agriculture: Even though Canada is our largest trading partner and
our second largest agricultural market, Canada continues to have
restrictive policies limiting market access to key U.S. agricultural
products. In 1998, the United States exported over $7 billion while
importing $7.7 billion of agricultural products. In December 1998, we
took an important step toward reducing these restrictions by concluding
an initial bilateral market access package opening opportunities for
American grain farmers, cattle ranchers and other agricultural
producers. We are closely monitoring implementation of the December
agreement and have already witnessed improved access for cattle and
rail shipments of wheat. For example, over 51,000 head of cattle moved
into Canada in the first three months of 1999, compared to only 1,000
head of cattle in all of 1998. In addition, over 225,000 tons of wheat
and barley were transshipped through Canada on the rail system.
Nevertheless, Canada still maintains a number of policies that restrict
access of U.S. agricultural products, including grain. We pressed the
government of Canada in March 1999 concerning unequal access to
Canadian grain handling facilities and the Canadian Wheat Board,
excessive monitoring by the Canadian Grains Commission on wheat
imports, and unequal access to rail cars and rail rates. We are
continuing frequent discussions with Canada on these and other related
issues to provide U.S. producers improved market access for
agricultural products. We hope these issues will be resolved in the
near term.
Magazines: USTR continues to seek a negotiated settlement with
Canada on its continued discriminatory practices against U.S.
magazines. In 1997, the United States successfully challenged Canada's
protectionist magazine regime in the World Trade Organization. By the
WTO deadline, October 1998, Canada terminated its longstanding ban on
split-run imports, eliminated the 1995 special excise tax on split-
runs, and modified its discriminatory postal rates and postal subsidies
for magazines. However, Canada introduced Bill C-55, which simply
accomplishes the same result as the import ban and excise tax--keeping
U.S. and other foreign-produced split run magazines from competing in
the Canadian market. If negotiators are unsuccessful in resolving this
dispute and Bill C-55 is enacted, the United States will take action of
an equivalent commercial effect to protect its interests.
4. China
China remains a major focus of our bilateral trade initiatives. We
are actively monitoring China's implementation of our trade agreements
on intellectual property rights, textiles, and market access. Obtaining
strengthened protection and enforcement of trademarks, copyrights and
other intellectual property rights (IPRs), enhanced market access and
national treatment for products that depend on intellectual property,
such as pharmaceuticals and motion pictures, are key objectives. In
addition, we are addressing issues relating to market access and
investment in the telecommunications and direct marketing sectors. We
will follow up on recent progress on resolving sanitary and
phytosanitary (SPS) issues with China to ensure that China's government
fully implements our market opening agreements, which will allow U.S.
exports of meat, citrus fruit, and Pacific Northwest wheat.
While we are working bilaterally to open up particular sectors of
China's market, we are also working in the multilateral context to
achieve broad-ranging reform of China's trade regime through
negotiations on China's accession to the WTO. Recently, we have made
significant progress on the market access aspects of these
negotiations, including on agriculture, services, and industrial goods.
Reaching agreement on these issues as well as on application of WTO
rules to China will mark an important step forward in China's overall
accession process.
5. Europe
With the U.S.-EU trade and investment relationship being the
largest and most complex in the world, the United States is very
committed to strengthening trade relations with the EU. USTR will
address problems in our trade relations both bilaterally and through
the new multilateral negotiating round President Clinton has proposed.
The United States hopes to make progress through the Transatlantic
Economic Partnership (TEP) initiative begun last year. The TEP Action
Plan calls for bilateral U.S.-EU consultations and/or negotiations in
several specific issue areas: technical trade barriers, agriculture
(including biotechnology and food safety), intellectual property,
government procurement, services, electronic commerce, environment,
labor and advancing shared values such
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as transparency, environmental protection, and participation for civil
society. The initiative also encompasses enhanced U.S.-EU cooperation
on multilateral trade issues. USTR also is working to ensure the
protection of U.S. interests as the EU expands to include Central and
Eastern European nations.
Nevertheless, the United States has a number of serious concerns
regarding certain EU activities related to trade. Our decision to
request WTO consultations with the EU on its action affecting U.S.
flight management systems (the ``avionics case'') underscores U.S.
determination to challenge the EU's use of those measures which
advance, in a manner inconsistent with trade rules, EU commercial
interests at the expense of those of its trading partners. The United
States also has serious concern with the continued lack of a
transparent and timely EU approval process for foodstuffs containing
genetically modified organisms (GMOs). The United States hopes to work
in coming weeks and months with the European Commission and EU Member
States to address this problem, but will take action if the uncertainty
and arbitrariness reflected in recent EU actions in this area continue
to undermine U.S. exports.
The United States also remains extremely concerned about the EU's
failure to implement WTO dispute settlement rulings regarding its
discriminatory bananas and beef hormones regimes. EU inaction
undermines the credibility of the WTO dispute settlement mechanism and
sends a disturbing message about the EU's willingness to abide by the
commitments it has undertaken. In light of the five rulings in the past
six years against the EU's banana import policy, most recently on April
6, the United States expects the EU to implement a WTO-consistent
banana program as soon as possible. The United States also expects the
EU to lift its WTO-inconsistent ban on meat produced with growth
hormones by the May 13 deadline granted to the EU to comply with the
WTO panel findings against its hormones policy. The United States has
engaged in discussions with the European Commission regarding
implementation of the EU's WTO obligations in both instances.
6. Japan
The United States attaches utmost importance to opening Japan's
markets to U.S. goods and services. To this end, the Clinton
Administration has consistently emphasized the need for major
structural reform and deregulation to open Japan's economy to
competition; monitoring and enforcing existing trade agreements
covering key sectors; the negotiation of new trade agreements; and
addressing concerns through regional and multilateral fora. The
Administration remains determined to press Japan to take the necessary
steps to dismantle the numerous trade and regulatory barriers that have
sheltered the Japanese economy from foreign competition for far too
long.
Insurance: The United States and Japan concluded bilateral
insurance agreements in 1994 and 1996 designed to open to competition
the world's second largest insurance market, with annual premium
revenues of $329 billion in JFY 1997. In December 1997, Japan agreed to
bind certain key commitments from these agreements under the WTO
Financial Services Agreement.
The bilateral agreements have had some positive impact. For
example, in September 1997 the Ministry of Finance granted the first
ever license for direct marketing of risk-differentiated automobile
insurance to a U.S. firm. Nevertheless, the Administration is seriously
concerned that Japan has not fully implemented all of the specific
deregulation actions called for under our bilateral insurance
agreements, including reform of its rating organizations and timely
approval of product applications. In addition, the United States is
extremely concerned with the diminution of the ``third sector''
safeguards caused by increased activity on the part of Japanese
insurance firms and subsidiaries in this market segment critical to
U.S. insurers. Since all of the primary sector deregulation criteria
had not yet been fulfilled, USTR announced on July 1, 1998, that the
United States does not support the initiation of the two-and-one-half
year clock regarding termination of the third sector safeguards. The
Administration is prepared to utilize all of the tools at our disposal
to ensure the full benefits to U.S. industry from our bilateral
Insurance Agreement.
The U.S. underscored its concerns regarding both primary and third
sector issues at consultations with Japan under the bilateral
agreements held on April 16 in Washington. These consultations also
included a constructive regulator-to-regulator exchange between
representatives of the National Association of Insurance Commissioners
and select state insurance commissioners, and Japan's Financial
Supervisory Agency. It is essential that both governments expeditiously
resolve outstanding issues. The U.S. has proposed that the next
insurance talks take place in Tokyo this summer.
Autos and Auto Parts: The United States and Japan concluded an
agreement in 1995 to eliminate market access barriers and significantly
expand sales opportunities in the automotive sector. Although initial
results in many areas were satisfactory, recent progress toward
achieving the Agreement's key objectives has been disappointing. Sales
in Japan of autos produced by the Big Three in North America declined
34.5 percent in 1998, after declining 20 percent in 1997. Exports of
U.S.-made auto parts to Japan fell 7.5 percent in 1998, the first drop
since 1991, and the continued fall off in new orders of U.S. auto parts
by Japanese manufacturers suggest that this decline is likely to
continue. These trends are the result of a variety of factors,
including Japan's recession, which has inhibited consumer spending and
business investment and weakened the yen, and continuing market access
and regulatory issues.
To address these concerns, the U.S. Government presented Japan at
the annual review of the Automotive Agreement in October 1998 with 11
proposals, including measures to strengthen and improve access to
dealerships, the main distribution channel to Japan's automotive
market. The U.S. Government also urged Japan to eliminate unnecessary
regulations in the auto parts aftermarket that limit the ability of
independent garages to compete for high-profit vehicle inspection and
repair business. While Japan has agreed to implement some of these
proposals, the U.S. Government will continue to urge Japan at all
levels to take concrete steps to achieve additional progress under the
Agreement. In addition, the United States will continue to monitor
developments regarding Japan's new fuel economy regulations to ensure
that this rulemaking process is fully transparent and that foreign
vehicle manufacturers receive treatment no less favorable than that
offered to domestic manufacturers, recognizing the important
environmental concerns that underlie these regulations.
Flat Glass: The 1995 U.S.-Japan Flat Glass Agreement has helped
American firms to a limited extent, but the basic problem remains the
same: U.S. glass manufacturers still have a minuscule share of the
Japanese flat glass market, despite the fact that Japanese companies
and distributors readily acknowledge the competitiveness of U.S. glass.
While Japan committed in the agreement to take measures to facilitate
access by foreign companies to the Japanese glass
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distribution system, major Japanese distributors still do not carry
foreign glass in meaningful quantities. The three dominant Japanese
producers continue to exert tight control of the domestic glass
distribution system in many ways, including majority ownership of glass
distributors, equity and financing ties, employee exchanges, and
purchasing quotas. Indeed, there is evidence that their control is
increasing, as they use Japan's tight credit market to impose closer
financial ties on the most important glass distributors.
Japan recently agreed with the United States to examine these
issues in surveys of the sector by the Japan Fair Trade Commission
(JFTC) and the Ministry of International Trade and Industry. The former
will be particularly important in this regard, and it is therefore
imperative that the JFTC scrutinize the core problems in a thorough and
credible way. Japan has also agreed to U.S. proposals to hold
government-industry consultations on access to and the state of Japan's
flat glass market this Spring and to allow U.S. Government
representatives to attend the Japanese Government's periodic meetings
with flat glass distributors to remind them of the objectives and
provisions of the agreement. This progress notwithstanding, the
principal impediments to genuine market access in the flat glass sector
remain. The United States will continue to urge Japan to take actions
to remove these barriers.
7. Korea
Korea is one of the United States' major trading partners but has
been described as one of the toughest markets in the world for doing
business. In response to its financial crisis, the Kim Dae Jung
administration has implemented structural reforms aimed at putting the
Korean economy on a more open, market-oriented basis. Resistance to key
trade reforms remains, however, and many issues have arisen on Korea's
compliance with its international obligations.
The Administration is focused on eliminating Korean barriers to
entry and distribution of U.S. products using U.S. trade law, WTO
dispute settlement procedures, negotiation and enforcement of bilateral
trade agreements, and close coordination with other countries. In
addition, the Administration will, through an interagency process,
closely monitor Korea's implementation of its trade-related
stabilization commitments.
Over the past year, the Administration has made solid progress
toward opening the Korean market to U.S. goods. In October 1998, we
successfully concluded a Memorandum of Understanding (MOU) with the
Government of the Republic of Korea to improve market access for
foreign motor vehicles. Under this MOU, Korea agreed to (1) bind in the
WTO its 80 percent applied tariff rate at 8 percent; (2) lower some of
its motor-vehicle-related taxes and to eliminate others; (3) adopt a
self-certification system by 2002; (4) streamline its standards and
certification procedures; (5) establish a new financing mechanism to
make it easier to purchase motor vehicles in Korea; and (6) continue to
actively and expeditiously address instances of anti-import activity
and to promote actively a better understanding of free trade and open
competition. This MOU was negotiated after Korea's motor vehicle trade
barriers were named as a ``priority foreign country practice'' in the
1997 Super 301 report and USTR initiated a section 301 investigation of
such barriers. On October 20, 1998, with the conclusion of the MOU, the
USTR decided to terminate this investigation and to monitor Korea's
implementation of the measures in the MOU to eliminate those barriers.
The first formal review of Korea's implementation of the 1998 MOU was
held on April 29 and 30, 1999. The Administration will continue to work
closely with the Korean Government to ensure that the provisions in the
1998 MOU are fully and faithfully implemented in a manner that
substantially increases market access for foreign motor vehicles in
Korea and establishes conditions so that the Korean motor vehicle
sector operates according to market principles.
In addition, the Deputy U.S. Trade Representative concluded an
exchange of letters in August 1998 on the operation and sale of Hanbo
Steel, and the U.S. Government initiated comprehensive discussions with
Korea on broader steel issues of concern to U.S. industry. In April
1999, the Deputy U.S. Trade Representative concluded another letter
exchange with the Korean Government to address issues of concern and
interest to U.S. industry relating to POSCO, Hanbo, and competition in
the Korean steel sector generally.
In July 1998, a WTO dispute settlement panel ruled in favor of the
United States and the European Communities (EC) by finding Korea's
taxes on alcoholic beverages to be discriminatory. In January 1999, the
WTO Appellate Body upheld this panel decision, and the panel and
Appellate Body reports were adopted on February 17, 1999. The United
States and the EC have requested arbitration to determine the length of
the period within which Korea will come into compliance with the
reports.
Pharmaceuticals: One of the top trade expansion priorities on the
U.S.-Korea trade agenda is Korea's treatment of foreign, research-based
pharmaceuticals. Korea does not now provide imported drugs with
national treatment with respect to listing and pricing on the Korean
national health insurance reimbursement schedule, and the current
reimbursement system discourages hospitals and other large end-users
from buying imported drugs. Dispensers of imported products also must
comply with additional administrative procedures for reimbursement.
U.S. pharmaceutical producers face other market access barriers in
Korea including non-science-based requirements for clinical testing. In
addition, the United States has raised concerns about Korea's regime
for protecting test data against unfair commercial use. Finally, lack
of coordination between Korean health authorities and Korean IPR
authorities allows manufacturers of patent infringing products to gain
approval for the launch of their products into the Korean market to the
commercial detriment of the holders of the patents.
In response to high-level bilateral consultations and a letter from
the Deputy U.S. Trade Representative, the Korean Government has
indicated that it is taking steps to address some of the U.S.
Government's and industry's concerns about treatment of foreign
pharmaceuticals. The Administration will continue its active efforts to
further advance progress on our pharmaceuticals trade issues until U.S.
concerns are fully and satisfactorily addressed. Specifically, the U.S.
Government will engage the Korean Government on U.S.-Korea
pharmaceuticals-related trade issues and a Bilateral Investment Treaty
(BIT), in an out-of-cycle Special 301 review on TRIPS consistency, and
in other fora.
8. Mexico
Since 1994, trade with Mexico has largely been governed by the
North American Free Trade Agreement (NAFTA). Mexico is also a WTO
Member. As a result, U.S. trade and investment relations with Mexico
are subject to a set of comprehensive disciplines setting high
standards of openness and providing for effective resolution of
disputes covered by these agreements. By any measure, NAFTA has
contributed to the increased trade between the United States and
Mexico. During NAFTA's first five years, U.S.
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merchandise exports to Mexico increased by 90 percent, with imports
from Mexico increasing by 137 percent. As is to be expected from such a
large trading relationship, the United States does continue to have
concerns about Mexico's trade practices in some areas. The most
important of these concern Mexico's enforcement of its intellectual
property laws, telecommunications policy, and market access for high
fructose corn syrup.
Mexico has committed to implement and enforce advanced levels of
intellectual property protection and has just enacted new legislation
to this effect. However, as noted in USTR's Special 301 Report issued
today, piracy and counterfeiting remain major problems, with current
enforcement action inadequate to deter piracy. Mexico has been added to
the Special 301 Watch List.
Regarding telecommunications, the United States is concerned that
ongoing regulatory processes are non-transparent and potentially
ineffective. USTR's Section 1377 Report, released on March 30,
expressed doubts about Mexico's implementation of its commitments under
the WTO agreement with respect to international services and
interconnection rates. The Mexican government has said it will review
its international service and interconnection/universal service
regulations in 1999. USTR will conduct an out-of-cycle examination by
July 30 regarding the progress of Mexico's ongoing regulatory process,
and expects that Mexico will respond favorably to the requests from all
the new entrants to permit International Simple Resale (ISR)
immediately. At that time USTR will take appropriate action including,
if warranted, the initiation of WTO dispute settlement proceedings, to
assure that new competitors in the market are treated fairly.
The United States continues to raise its concerns regarding the
Mexican Government's application of antidumping measures on U.S.
exports of high fructose corn syrup (HFCS). A dispute settlement panel
was established by the World Trade Organization in November 1998 and
hearings were held in April 1999. A decision is expected late this
year. U.S. exporters are also challenging Mexico's measure under the
Chapter 19 provisions of the NAFTA and last year filed a Section 301
petition with USTR, alleging that the policies and practices of the
Government of Mexico are unreasonable and deny fair and equitable
market opportunities for U.S. exporters. USTR accepted the petition for
review on May 15, 1998.
9. Middle East
Building upon our Free Trade Agreement with Israel, the United
States has inaugurated a program that aims to bolster the peace
process, while advancing American interests. Starting with a framework
of bilateral trade and investment consultations in the region and a
newly inaugurated industrial zones program, the United Sates will help
the Middle Eastern countries work toward a shared goal of increased
intra-regional trade. Most recently, the USTR expanded the first
Jordan-Israel Qualifying Industrial Zone, designated another, and
completed a Trade and Investment Framework Agreement with Jordan.
10. Western Hemisphere
The Miami and Santiago Summits of the Americas called on us to
complete work on a Free Trade Area of the Americas no later than the
year 2005. This year, also in accordance with Summit directions, the
United States intends to achieve concrete progress toward the FTAA in
the work of our nine Negotiating Groups (market access, agriculture,
services, investment, government procurement, intellectual property,
anti-dumping and countervailing duties, competition policy, and dispute
settlement) and through business facilitation measures. In addition,
the FTAA has initiated a private sector-public sector experts group on
electronic commerce to advise the ministers on how electronic commerce
can benefit the countries of this hemisphere, especially in the context
of the FTAA negotiations. The ministers also have established a
government committee on the participation of civil society, which has
solicited the views of the different sectors of society concerning the
FTAA and will analyze them for the consideration by the ministers at
the next FTAA ministerial in Toronto in November 1999.
At the same time, the Clinton Administration will seek approval
from Congress for an expanded and improved Caribbean Basin Initiative
with duty-free treatment for products currently excluded from the
program. The Administration seeks to use the program to promote the
adoption by beneficiary countries of sound trade and investment policy
reforms that will prepare them for the obligations and responsibilities
of the FTAA.
Demetrios J. Marantis,
Assistant General Counsel, Section 301 Committee.
[FR Doc. 99-11413 Filed 5-5-99; 8:45 am]
BILLING CODE 3190-01-P
