31 October 1996
markets - domestic and worldwide - remain the key to U.S. economic growth Back
The United States continues to be the
world's largest trading nation in exports and imports of goods and services. Over the past
decade, trade has become increasingly important for the U.S. economy with the ratio of
trade to GDP in 1995 reaching 23.6 per cent, up from 17.2 per cent in 1985 and 20.6 per
cent in 1990. A new WTO Secretariat report on the trade policies and practices of the
United States notes that the U.S. invests less as a share of GDP than its industrial
counterparts but with very efficient resource allocation, capital productivity is high, a
factor that underpins U.S. prosperity. The report stresses the need to keep markets
securely open as a major element in maintaining U.S. productivity growth.
The report confirms that WTO commitments are at the
centre of U.S. trade policy. The application of the Uruguay Round Agreements and the
consolidation of trade remedy measures under WTO dispute settlement procedures have
stabilized many elements in U.S. trade policy that at times were perceived by some as
unpredictable and unilateralist. In parallel to the implementation of its WTO commitments,
the United States has continued with regional, bilateral and unilateral trade initiatives.
The report observes that the U.S.' multi-track approach to international trade policy can
be a source of tension within the multilateral system. The WTO report and a policy
statement by the Government of the United States, will be the subject of two days of
discussion at the WTO's Trade Policy Review Body on 11 and 12 November 1996.
Commitments made by the U.S. during the Uruguay
Round include a trade-weighted tariff reduction of some 35 per cent by 1999. Full tariff
elimination on U.S. imports has been agreed for steel, pharmaceuticals, paper, furniture,
medical equipment, farm equipment, construction equipment, beer and spirits. By the end of
the Uruguay Round implementation period, some 70 per cent of U.S. tariff lines will be
subject to most-favoured-nation (m.f.n.) rates of 5 per cent or less. Duty-free treatment
will cover 40 per cent of tariff lines. As concerns agriculture, quantitative import
restrictions on agricultural products have, as required by the WTO Agreements, been
converted to tariffs and tariff quotas; however, above-quota tariffs remain high and
tariff quotas are not always filled. Agricultural and food products accounted for some 11
per cent of U.S. merchandise exports in 1995, following an increase in the value of
exports - due mainly to rising world market prices - by some 30 per cent since 1992. The
U.S. has converted domestic price support to direct income support and has reduced its
overall level of support to agriculture.
The report discusses changes in U.S. anti-dumping
and countervailing legislation, and notes that it is too early to assess whether these
changes will facilitate affirmative findings. The number of anti-dumping and
countervailing investigations launched in the U.S. has dropped sharply, perhaps due to the
continuing U.S. economic recovery. Three safeguard investigations were conducted in 1995
and 1996 with one investigation concluding that imports caused injury to the domestic
The use of "Section 301" legislation is
now closely tied to multilateral dispute settlement, at least for WTO members and in areas
subject to WTO rules and disciplines. The United States is the most active user of WTO
dispute settlement provisions; it has requested consultations under WTO dispute settlement
provisions on 19 cases covering 17 measures, while U.S. trading partners have raised nine
complaints against eight U.S. measures. Since its last trade policy review in 1994, the
U.S. has initiated 16 "301" investigations and concluded agreements covering two
previous investigations. Seven of the 301 actions initiated in 1996 and two earlier
investigations (European Union, bananas; and Japan, photographic film and paper) have been
referred to the WTO Dispute Settlement Body.
In separate developments, the U.S. has enacted the
Cuban Liberty and Democratic Solidarity (LIBERTAD) Act and the Iran and Libya Sanctions
Act. The extra-territorial aspects of these laws have been criticised by U.S. trading
partners and cases against the LIBERTAD Act (Helms-Burton Act) have been filed under the
North-American Free Trade Agreement (NAFTA) and the WTO.
Voluntary export restrictions administered by U.S.
trading partners have been phased out. A new automotive agreement with Japan does not set
quantitative targets for U.S. exports but provides for bilateral monitoring of various
qualitative commitments, while a Memorandum of Understanding, which seeks to liberalize
access to the Korean vehicle market, is to be implemented on an m.f.n. basis. A new
co-operation agreement with Japan on semi-conductors reaffirms market principles and
establishes a consultative framework open to industry associations whose governments are
committed to tariff elimination.
The report notes that the U.S.' technical
regulations are generally based on international norms and privately developed standards;
however, there are a limited number of mandatory environmental process standards enforced
at the border, notable examples being "dolphin-friendly" tuna fishing methods
and turtle-excluder devices used in harvesting shrimp.
The U.S. has a well developed and enforced system of
intellectual property protection based on constitutional provisions. The TRIPS Agreement
increased the duration of protection and resurrected protection for works that had fallen
into the U.S. public domain. The report states that the United States monitors bilaterally
the protection for intellectual property extended by all its trading partners,
Irrespective of whether a bilateral agreement is in force, the U.S. is required to
identify countries that deny adequate and effective protection for intellectual property
rights or fair and equitable market access to U.S. persons that rely on intellectual
The report notes that textile and clothing
production has realized significant productivity gains on the basis of greater capital
intensity in the U.S. market and outward processing operations in Mexico, the Caribbean
and Central America. In addition to import tariffs well above the manufacturing average,
the United States maintains country specific import quotas under the WTO Agreement on
Textiles and Clothing and has issued 25 safeguard quota calls on WTO members. Removal of
import quotas is to be conducted in four phases and the allocation of all textile and
clothing products to each phase has been published. The most sensitive products have been
left to the last phase, to be implemented in 2005. The report also notes significant
changes which have been made in the rules of origin used for the administration of import
quotas. The origin of a product is now specified to be the place where it is assembled and
not the place where the textile components are cut.
The WTO report notes that services have gained an
increasing share of U.S. output, generating about two-thirds of GDP, or some four times
the share of manufacturing, and accounting for 65 per cent of employment in 1995.
Cross-border supply of foreign services has become less important than establishment as a
mode of delivery. While Western Europe is the U.S.' largest trading partner for
cross-border trade in services with approximately 60 per cent, Japan is the largest
individual destination, taking in 15.5 per cent of U.S. services exports. The report notes
that productivity increases in services are likely to be a decisive factor in raising
total U.S. productivity growth and standards of living. Recent developments in the
telecommunications, financial and professional services sectors have enhanced such
prospects. The benefits to the United States of maintaining and improving on an efficient,
open and competitive services sector are thus evident.
The report concludes that while an open, predictable
world trading system is crucial for the well-being of the U.S. economy, an open,
predictable U.S. market is also vital for the world's trading system. It is, therefore,
essential that the United States and its partners utilize the system to maintain
multilateralism as the key to future developments and discourage pressures for increased
bilateralism or unilateralism.
Notes to Editors:
The WTO Secretariat's report, together with a report
prepared by the United States, will be discussed by the WTO Trade Policy Review Body
(TPRB) on 11 and 12 November 1996.
The WTO's TPRB conducts a collective evaluation of
the full range of trade policies practices of each WTO member at regular periodic
intervals and monitors significant trends and developments which may have an impact on the
global trading system.
The two reports, together with a report of the
TPRB's discussion and of the Chairman's summing up, will be published in due course as the
complete Trade Policy Review of the United States and will be available from the WTO
Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
The reports cover the development of all aspects of
the U.S.' trade policies, including domestic laws and regulations, the institutional
framework, trade policies by measure and by sector. Since the WTO came into force, the
"new areas" of services trade and trade-related aspects of intellectual property
rights are also covered. Attached are the summary observations from the Secretariat and
government reports. Full reports will be available for journalists from the WTO
Secretariat on request.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon
(1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990 & 1996), Costa
Rica (1995), Côte d'Ivoire (1995), Czech Republic (1996), Dominican Republic (1996),
Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992), Ghana
(1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993),
Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 and 1995), Kenya (1993),
Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico
(1993), Morocco (1989 & 1996), New Zealand (1990 & 1996), Nigeria (1991), Norway
(1991 & 1996), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993),
Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South
Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996),
Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992
& 1994), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe
Secretariats report: summary Back to top
TRADE POLICY REVIEW BODY: UNITED
Report by the Secretariat Summary Observations
The United States in World Trade
The U.S. economy has performed well since the last
Trade Policy Review of the United States. Growth has been above the average in industrial
countries, inflation has remained moderate and the unemployment rate is at a low for the
decade. Concurrently, the federal budget deficit has narrowed substantially, to its lowest
share of gross domestic product since 1979. The external current account deficit has
widened slightly but this is attributable to increased investment, improving the prospects
for future growth.
The U.S. economy has a high degree of allocative
efficiency. It invests less, as a share of output, than its industrial counterparts but
capital productivity is well above the OECD average, a factor that underpins U.S.
prosperity. One important element in maintaining productivity is the openness of the U.S.
economy, which helps to keep economic actors under constant pressure to allocate resources
efficiently. This also means that it is in the United States' own best interest to keep
its markets securely open.
Trade has become increasingly important in U.S.
economic activity. The ratio of U.S. trade to GDP has risen from 17.2 per cent in 1985, to
20.6 per cent in 1990 and to 23.6 per cent in 1995. This increased involvement in trade
tends to serve as a counter-cyclical buffer. In the early 1990s, exports cushioned the
impact of the U.S. recession, demonstrating the importance for the United States that its
producers have secure, liberal access to foreign markets, within a strong, rules-based
multilateral system. Subsequently, as U.S. growth improved, net imports accommodated
excess domestic demand, allowing lower inflation, and interest rates, than might otherwise
have been the case.
Since the last Review, the services sector has
assumed an increasing share of U.S. output. In part, this reflects differential inflation
rates in the goods and services sectors, with higher rates in the latter; in recent years,
productivity growth in manufacturing has exceeded that of GDP. However, with services
accounting for about two-thirds of GDP, or some four times the share of manufacturing, it
is clear that productivity growth in services is a determining factor in U.S. living
standards. The benefits to the United States of maintaining and improving on an efficient,
open and competitive services sector are thus evident. This is especially the case for
"input" services such as finance, communications and transport, where
productivity gains can significantly lower costs in other sectors, such as manufacturing.
Within this framework, it is also noteworthy that the cross-border supply of foreign
services to the United States is now less important than establishment as a mode of
delivery, emphasizing the ongoing interest of the United States in maintaining a liberal
foreign direct investment régime.
The United States continues to be the world's
largest single trading nation in goods and services, with some 15 per cent of merchandise
and 16 per cent of services exports. The European Union remains the largest market for
U.S. merchandise exports but there is an ongoing shift in the direction of U.S. trade
toward east Asia, which is now the most important source of imports. The composition of
U.S. merchandise trade has also continued to move from primary toward manufactured
products, in spite of rapidly growing agricultural exports. Growth of manufacturing
exports has been broad-based, with increased shares for exports of office machines,
telecommunications equipment, chemicals, iron and steel products and automotive products.
The share of manufactures in merchandise imports has also increased, led by office
machines and telecommunications equipment, non-electrical machinery, and chemicals; the
share of automotive products has declined.
U.S. markets and sources for goods and for services
are, in general, closely correlated. While Western Europe as a group is the U.S. largest
trading partner for cross-border trade in services, accounting for approximately 60 per
cent of imports and exports, Japan is the largest individual destination, with 15.5 per
cent of U.S. services exports. Transportation is the largest component of services
exports, with over 50 per cent; however, exports of business services, royalties and
licensing fees have grown rapidly, respectively doubling and increasing by 63 per cent
Institutional and Legal Framework
The United States is an original signatory to all
the WTO Multilateral Trade Agreements and to the Plurilateral Agreements except for the
International Dairy Agreement. U.S. commitments under the Agreements are implemented in
domestic law by the Uruguay Round Agreements Act (URAA). The U.S. WTO Schedule on goods
provides for bindings on all but two tariff lines, and commitments under the GATS are
widespread. The URAA also implemented the recommendations of GATT Panels concerning
Section 337 of the 1930 Tariff Act and m.f.n. treatment for non-rubber footwear imports
from Brazil, and authorizes certain future tariff cuts that may be agreed under
negotiations that started in the context of the Uruguay Round.
The United States applies m.f.n. treatment to all
but six countries: Afghanistan, Cuba, Laos, the Democratic People's Republic of Korea,
Serbia and Montenegro and Vietnam. Since the passage of the Uruguay Round Agreements Act,
Congress has enacted permanent m.f.n. status for Hungary and Romania. Russia receives
m.f.n. treatment being deemed to be in full compliance with the Jackson-Vanik Amendment of
the 1974 Trade Act. Countries currently subject to Jackson-Vanik waivers are Albania,
Armenia, Belarus, China, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Tajikistan,
Turkmenistan, Ukraine and Uzbekistan. Iran, Iraq and Libya retain m.f.n. status although
imports are prohibited under U.S. economic embargoes.
Recently, the United States has enacted significant
reform measures in both agriculture and telecommunications. These measures, which serve to
remove many domestic restrictions, go beyond those undertaken in the WTO and could act to
significantly improve efficiency in the respective sectors. The changes could impact on
U.S. trade, and on world markets, with the United States a leader in both areas.
In a separate development, the U.S. has enacted the
Cuban Liberty and Democratic Solidarity (LIBERTAD) Act (the Helms-Burton Act) and the Iran
and Libya Sanctions Act. The former allows U.S. citizens to take private action in U.S.
courts to obtain compensation from companies "trafficking" in confiscated
property that it is in Cuba, and claims to which are owned by those U.S. nationals; it
also authorizes the State Department to refuse U.S. visas to such companies' executives,
their spouses and their minor children. The President has deferred the right to file suit
against foreign companies using the expropriated property of U.S. nationals until February
1997. The Iran and Libya Sanction Act authorizes trade sanctions against foreign companies
investing in Iran and Libya. The extra-territorial aspects of these laws have been
criticised by U.S. trading partners and cases against the Helms-Burton Act have been filed
under NAFTA and in the WTO.
The United States is one of the most active users of
the WTO dispute settlement provisions. Currently, the United States has requested
consultations on 19 cases covering 17 measures and is involved in around two-thirds of all
dispute cases raised to date. In one case, a mutually agreed solution was found in
consultations and duly notified to the WTO; four panels have been established, and three
others have been requested once, but not yet established. One panel report, whose findings
were subsequently appealed by Japan, has been affirmed by the Appellate Body
Nine complaints have been raised in the DSB against
U.S. measures. In three cases, the measures have been withdrawn. The adverse ruling of one
panel, covering two cases, was appealed by the United States. The U.S. authorities have
indicated their intention to implement the recommendation of the Appellate Body, which
partly confirmed the Panel's decision; consultations between the parties are continuing.
The United States played a key rôle in the services
negotiations in the Uruguay Round; to a great extent, the efforts of U.S. negotiators and
the interest of U.S. industries behind them determined the course of the negotiations in
this new area. Key sectors of interest to the United States in promoting international
negotiations included telecommunications, financial services, air transport, some
professional services, and audiovisual services. The United States has also participated
in all of the post-Uruguay Round negotiations, but the results have so far been mixed. In
the financial services negotiations concluded in July 1995, the United States took a GATS
Article II exemption enabling it to apply non-m.f.n. treatment to foreign financial
service suppliers with respect to new entries and new activities. The United States did
not revise its commitments regarding the movements of natural persons in the negotiations
concluded also in July 1995. In the extended negotiations on basic telecommunications, the
United States submitted an offer providing unrestricted market access and national
treatment to foreign services and foreign service suppliers in its local
telecommunications market. In the negotiations on maritime transport, the United States
did not submit an offer.
While overall public expenditure is a lower share of
GDP in the U.S. than in most other OECD countries, federal and State procurement of goods
and services have a potentially significant effect on trade. Buy-American or buy-State
provisions have been eased to some extent, although they remain together with national
security provisions, serious constraints on external competition.
The United States is a signatory to the plurilateral
Government Procurement Agreement which entered into force on 1 January 1996. The U.S.
commitments under the Agreement go significantly beyond those it undertook in the Tokyo
Round Agreement, notably by extending procurement obligations to public utilities covering
many States and by including public works and services. Access to U.S. procurement is
extended, on a reciprocal basis, to other signatories. The effects of exceptions contained
in the Agreement, such as set-asides for small and minority-owned businesses, have not
changed, but have became more transparent as the coverage of the Agreement has widened. In
the context of Title VII of the 1988 Omnibus Trade and Competitiveness Act, the U.S.
authorities monitor the government procurement practices of their trading partners. The
United States is advocating a new agreement in the WTO context to create greater
transparency in government procurement.
Regional Trade Agreements
The U.S.-Israel Free Trade Agreement has been fully
implemented. Under the Agreement, some important U.S. food and beverage imports from
Israel are still subject to import tariffs; in 1994, 44 per cent of imports from Israel
received trade preferences, as compared to 67 and 88 per cent of its imports from Canada
and Mexico, respectively, under NAFTA.
NAFTA has been implemented on schedule, except that
the deadline for non-conforming State measures on investment and non-financial services
was shifted from 31 December 1995 to 31 March 1996. U.S. tariffs on imports from Canada
and Mexico are now substantially lower than m.f.n. tariffs, although some agricultural
imports at below m.f.n. rates are subject to tariff quotas. Elimination of import tariffs
on a number of "sensitive" products is delayed to the end of the transition
period, ending 1 January 2008.
Under Chapter 19 of the Agreement, NAFTA panels may
review anti-dumping and countervailing measures taken. Approximately 20 per cent of all
measures taken have been reviewed under this provision. Bilateral consultations under the
dispute settlement provisions of Chapter 20 of the NAFTA have also been used and one panel
has been established, to deal with the status of Canadian dairy import tariffs. The panel
advised that the WTO-negotiated tariffs were the relevant rates.
The United States has a large number of bilateral
agreements with enforceable provisions on increasing market access or reducing trade
barriers. These agreements primarily cover intellectual property rights, investment, and
product-specific market access. In the area of intellectual property rights the United
States generally seeks shorter transition periods than those specified in the TRIPS
Agreement, as well as pipeline protection for pharmaceuticals and agricultural chemical
products. Since 1991, the United States has, as a policy, only concluded investment
agreements with countries which agreed to an intellectual property right agreement.
Commitments made by U.S. trading partners under
bilateral agreements have often been integrated into their WTO undertakings. This has most
notably been the case for bilateral agreements covering agricultural products, textile and
clothing items and commitments under the plurilateral Government Procurement Agreement.
Market access agreements, generally negotiated in
the context of a WTO dispute settlement or a "Section 301" investigation, have
generally not required substantial changes in U.S. policies. An important exception is the
U.S.-Canada Softwood Lumber Agreement. Following lengthy discussions, Canada agreed to tax
exports above specified volumes to the United States; and the United States committed
itself not to use anti-dumping, countervailing and Section 301 measures against Canadian
softwood lumber exports.
Trade Policy Features and Trends
Permanent trade policy instruments
U.S. commitments under the Uruguay Round imply a
trade-weighted tariff reduction of some 35 per cent by 1999, with some exceptions
(advanced or retarded). Full tariff elimination on U.S. imports has been agreed for steel,
pharmaceuticals, paper, furniture, medical equipment, farm equipment, construction
equipment, beer and spirits; partial elimination for wood and scientific equipment;
participation in tariff harmonization for chemicals and non-ferrous metals; and
participation in "substantial" tariff reductions for electronics, ceramics,
photographic and cinema goods. By the end of the Uruguay Round implementation period, some
70 per cent of U.S. tariff lines will be subject to m.f.n. rates of 5 per cent or less,
and duty-free treatment will cover 40 per cent of tariff lines. Quantitative import
restrictions on agricultural products have been converted to tariffs and tariff quotas,
while restrictions applied to textiles and clothing are to be eliminated over a ten year
The United States administers a variety of trade
preferences under the NAFTA, U.S.-Israel Free Trade Agreements, the Caribbean Basin
Economic Recovery Act, the Andean Trade Preference Act and the Generalized System of
Preferences. GSP was temporarily suspended in 1994 and again in 1995-1996, but was
recently renewed, with retroactive effect. GSP benefits have, in the period, been
withdrawn from various exporting countries on grounds of income or competitive need;
benefits may also be withdrawn or restored on grounds including intellectual property
protection and protection of workers' rights.
Rules of origin governing preferential treatment
vary by Agreement, while differing rules are used to administer country-specific textile
quotas, anti-dumping duties and government procurement preferences. Significant changes
have been made in rules of origin applied to textiles and clothing, inter alia
changing the origin of a product from the place were the textile was cut to the assembly
point; this latter tends to make quotas more restrictive for countries that specialize in
assembly of clothing items.
Voluntary export restrictions administered by U.S.
trading partners have been phased out under implementation of the Uruguay Round Agreement.
In November 1995, Congress lifted the ban on exports of Alaskan oil. The Administration
seeks to facilitate exports by speeding up the administration of export licences and
export controls, while some exports have been decontrolled, including semiconductors,
mobile telephones and some software.
The United States has a market-driven system of
standards development, policed by product liability laws. Technical regulations are based
on international norms and privately developed standards. Conformity assessment is tested
by accredited firms in both the United States and abroad. There exists a limited number of
mandatory environmental process standards enforced at the border; notable examples are
dolphin-friendly tuna fishing methods and turtle-excluder devices used in harvesting
The United States has a well developed and enforced
system of intellectual property protection, based on constitutional provisions. The
Uruguay Round Agreements Act increased the duration of protection and resurrected
protection for works that had fallen into the U.S. public domain. Parallel importation of
patented or copyright goods may be prevented by the rightholder, but anti-trust law
discourages unreasonable conduct in this area.
The Uruguay Round Agreements Act made significant
changes in the method of calculation for anti-dumping and countervailing duties, injury
assessment for these and safeguard measures, and in the procedures to obtain exclusion
orders for imports that infringe intellectual property rights. It is too early to assess
the effects of these changes on the ease or otherwise with which domestic producers may
obtain protection from "unfair" competition or surges of imports.
Recently, the number of anti-dumping and
countervailing investigations launched in the United States has dropped sharply, perhaps
in accord with the continuing U.S. economic recovery. Three safeguard investigations were
conducted in 1995 and 1996; only one concluded that imports caused injury to the domestic
industry. The number of exclusion orders on grounds of intellectual property rights
infringement declined from 51 at the end of 1992 to 46 in 1994, rising to 49 at end-1995.
The use of "Section 301" is now closely
tied to multilateral dispute settlement, at least for WTO members and in areas subject to
WTO rules and disciplines. Investigations may be triggered in the context of
"Super" 301, "Special" 301, Title VII of the Omnibus Trade and
Competitiveness Act of 1988, and Sections 1374 and 1377 of the Telecommunications Trade
Act of 1988. Since the last Review, the United States has initiated 16 "301"
investigations and concluded agreements covering two previous investigations. Sanctions
were applied once, briefly, in the case of intellectual property protection by China.
Except for the dispute with China, a non-WTO member, all seven 301 actions initiated
during 1996 and two earlier investigations (European Union, bananas and Japan,
photographic film and paper) have been referred to WTO dispute settlement.
Agricultural and food products accounted for some 11
per cent of U.S. merchandise exports in 1995, following an increase in the value of
exports by some 30 per cent since 1992 in the face of rising world market prices. In this
favourable environment, the agricultural provisions of the WTO and NAFTA Agreements were
implemented and the Federal Agricultural Improvement Act (FAIR) Act of 1996 was enacted,
converting domestic price support to direct income support; the overall level of support
to agriculture has fallen.
With the rise in world agricultural prices, U.S.
export subsidies have declined to levels well below WTO commitments; the FAIR Act has also
eliminated funding for certain export subsidies. Tariffication of quantitative
restrictions often implies, as in other WTO members, prohibitive duty levels. In-quota
tariffs for m.f.n. imports are, on average, some 10 per cent, much lower than the mean of
some 50 per cent for out-of-quota imports but well above the simple average U.S. tariff
rate of 6.3 per cent. Tariff quotas have generally been underutilized.
The WTO Agreement on Sanitary and Phytosanitary
Measures has had an immediate impact on U.S. agricultural trade. The United States has
adjusted its own sanitary and phytosanitary (SPS) measures on meat imports from Uruguay
and changes affecting imports from Argentina are under consideration. The U.S. Department
of Agriculture has invited comment on the liberalization of a selection of other
outstanding SPS restrictions. On the other hand, the authorities consider SPS restrictions
as an important barrier to U.S. exports and have requested five WTO consultations
concerning four measures: one was settled during consultations and one panel has been
established. SPS measures are also an important point of concern in U.S. trade relations
with non-WTO members, including China.
The Federal Agricultural Improvement Reform (FAIR)
Act of 1996 replaces most product-specific payments and guaranteed prices by annual
domestic support payments, delinked from production or acreage and declining over seven
years, with total payments capped at US$35.6 billion. The main crops covered are wheat,
maize, sorghum, barley, oats, upland cotton and rice. Farmers are free to shift to other
crops, except in the case of fruit and vegetables, unless there is a history of planting
such crops. Land set aside provisions have been eliminated except for a "conservation
reserve", which idles 14.7 million hectares of environmentally vulnerable land.
Although it is too early to assess the impact of the Act it is expected that the increased
supply originating from reduced land setasides and greater flexibility in production will,
over time, raise the capacity of U.S. farmers to respond to changes in international
Manufacturing value added has outpaced GDP growth
since 1992, based on sharp productivity increases of over 3 per cent a year in the period
1992-95. Manufacturing exports in 1995 were some 32 per cent higher than in 1992 and
foreign direct investment in manufacturing has continued to be important.
Textile and clothing production has realized
significant productivity gains on the basis of greater capital intensity in the U.S.
market and outward processing operations in Mexico, the Caribbean and Central America. In
addition to import tariffs well above the manufacturing average, the United States
maintains country specific import quotas under the WTO Agreement on Textiles and Clothing
(ATC) and has issued 25 safeguard quota calls on WTO members. The United States has
implemented the first phase of the ATC and has, as required by its legislation, published
the products to be classified in the remaining three phases, with the most sensitive
products classified in the last phase; no products under quota appeared in the first
phase, while categories imported from the OECD countries, including Mexico, were well
represented. As required by the ATC, quota growth has been increased for WTO members;
however, the changes in rules of origin noted above are likely to affect the pattern of
Tariffs in most manufacturing sectors other than
textile and clothing and a small number of other items such as trucks, are low by
comparison to both historical and international levels. In some areas, including notably
pharmaceuticals and semiconductors, the United States is committed to tariff elimination.
Outward processing is significant in the semiconductors sector. Quantitative trade
measures, such as "voluntary export restrictions" by U.S. trading partners have
been phased out since the last Review; a new automotive agreement with Japan does not set
quantitative targets for U.S. exports but provides for bilateral monitoring of various
qualitative commitments, while a Memorandum of Understanding, seeking to liberalize access
to the Korean vehicle market, is to be implemented on an m.f.n. basis. A new co-operation
agreement with Japan on semiconductors reaffirms market principles and establishes a
consultative framework open to industry associations whose governments are committed to
Compliance costs with technical regulations -
notably high for pharmaceutical products and rising in the automobile and other
manufacturing sectors - and the accreditation of foreign suppliers or testing agencies
have received more attention. U.S. federal authorities have supported bilateral
initiatives that lead to the international recognition of conformity assessment tests;
compliance testing requirements may have contributed to the shift from merchandise trade
to foreign direct investment.
Private services generated 66 per cent of U.S. GDP
and 65 per cent of employment in 1995. As noted above, productivity increases in the
sector are a decisive factor in total U.S. productivity growth and, therefore, standards
of living. Recent developments in the telecommunications, financial and professional
services sectors have enhanced the prospects for productivity growth in these sectors.
Protective policies continue in maritime transport while air transport is subject to
liberalization on a basis of bilateral reciprocity under "Open Skies
Within the general regulatory environment, some
deviations from the principles of national treatment and m.f.n. exist. Legislation
permitting such deviations, granting the authorities the powers of applying differential
treatment to foreign suppliers or against foreign investment or ownership (amounting in
some cases to absolute or conditional prohibitions) exists in certain areas of
telecommunications, financial, air and maritime transport services sectors. However, new
legislation passed in 1996 will open telecommunications and radio/TV networks to greater
competition. A new bilateral agreement with Japan on insurance and other financial
services is to be applied on an m.f.n. basis by both parties to all WTO members.
While an open, predictable world trading system
continues to be crucial for the well-being of the U.S. economy, the converse is also true;
an open, predictable U.S. economy is crucial for the health of the world trading system.
During the past two years, the U.S. application of the Uruguay Round Agreements and the
consolidation of trade remedy measures under WTO dispute settlement procedures have
stabilized many elements that previously appeared unpredictable and unilateralist in U.S.
policy; the Administration has also showed restraint in using the instruments available
and has accepted WTO rulings. However, elements of U.S. trade legislation, even under the
WTO, continue to cause concern for certain trading partners. Thus, the backloading of
textile and clothing liberalization remains problematic for many developing countries,
even though conditions of access have improved; access to government procurement remains
restricted in various areas; and although the right to file suit under the Cuban Liberty
and Democratic Solidarity (LIBERTAD) Act of 1996 has been deferred and, so far, no
sanctions have been announced against companies investing in Iran or Libya, the
extraterritorial application of U.S. trade laws has attracted significant attention.
The United States continues to use three main tracks
in its trade policy making: multilateral agreements concluded on a m.f.n. basis (as in the
Uruguay Round); regional agreements; and unilateral pressure to open third-country markets
(with bilateral resulting agreements normally applied on an m.f.n. basis). In some ongoing
areas of multilateral negotiations, concerns about the lack of "adequate"
reciprocity by some partners have governed U.S. actions. While there is no doubt that U.S.
trade policy is firmly founded in the WTO system, the interaction among these various
tracks remains a source of tension within the system. It is therefore crucial that the
United States and its partners utilize the system to maintain multilateralism as the key
to future developments and discourage pressures for increased bilateralism or
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TRADE POLICY REVIEW BODY: UNITED
Report by the Government
The United States in the
High-income countries like the United States as well
as middle and lower income economies all pursue many of the same economic goals: more
rapid expansion of productivity, higher-wage employment, increased living standards, and
strengthened economic growth. These shared aspirations create a common interest between
the United States and other members of the World Trade Organization in faithfully
implementing agreements already reached as well as in moving ahead where possible in
removing remaining distortions and impediments to global trade and investment flows.
The United States government has focused on trade
policy as one of the principal tools available to it to achieving the national economic
goal of expanded domestic economic opportunity. Various studies have shown the wages of
U.S. jobs directly and indirectly supported by (goods) exports to be 13 per cent to 16 per
cent higher than the average wage in the U.S. economy -- a premium no doubt reflecting
both higher labor productivity in export-oriented sectors as well as the usually
expansionary postures of such industries within the national economy.
Fairly traded imports likewise benefit the United
States in expanding the range of choice in the U.S. market, in making available for
purchase imported goods and services at lower cost than they could be produced at home, in
providing low cost, high quality inputs into U.S. domestic production, and fostering
healthy competition in the U.S. economy.
These effects of imports, together with those of
exports, increase average U.S. labour productivity, expand national purchasing power,
raise domestic living standards and increase attractive opportunities for employment and
investment. In addition, the expansion of trade through the removal of distortions and
impediments has had a positive impact on the rate of economic growth.
The United States has pursued a consistent policy of
seeking a world of increasingly open markets and expanded trade since the first Reciprocal
Trade Agreements Act of the U.S. Congress in 1934. In the 1930's, constrained by global
political conditions, U.S. trade policy focused especially on the negotiation of
reciprocal tariff reducing agreements with other countries in the Western Hemisphere.
During and immediately following the Second World War, however, U.S. policy focused on the
creation of a rules-based, truly multilateral trading system geared toward the removal of
impediments and the creation of opportunity for all. Through 50 years and 8 successful
multilateral trade rounds under the GATT, our support for the multilateral trading system
and its key importance to achievement of a truly open and fair global trading system has
In an era of low-cost, instantaneous communication,
efficient transportation and globalized production, the multilateral system remains as
relevant to our trade and economic interests as ever. Past achievements under the
multilateral trade system have helped create and shape the modern American economy into
one characterized by unprecedented levels of output and rapidly expanding economic
opportunity. Likewise, American policy is based on the belief that if the promise of the
Uruguay Round and a generalized movement toward more open markets -- both internal and at
the border -- around the globe is to realize its full potential, an expanded and further
strengthened multilateral trading system must be its foundation.
The United States has pursued a consistent trade
policy based on this global view. Our policy is clearly motivated on our view of national
self interest, but the endurance of this policy over so many years also reflects the
profound belief of the United States that open global markets benefit all trade partners.
The expansion of trade through the removal of barriers and distortions is a "positive
sum" endeavor, in which the gains from better use of national resources and the
enhancements to investment and growth are available to each country, not at the expense of
others, but rather in addition to the gains reaped by others.
The U.S. government is strongly committed to
building a world of truly open markets with the World Trade Organization as the
centerpiece of the requisite open market disciplines. Despite the high level of per capita
output and income already achieved in the United States, the U.S. public has legitimate
concerns about job security and living standards; about how to assure expanded economic
and attractive employment opportunities in the future; about how to spread such
opportunities more widely among the population; and, how to prepare better for the
material responsibilities of an aging population. While a number of purely domestic
economic initiatives have been pursued in order to address these concerns, the U.S.
government has also considered trade policy as an integral part of efforts to develop U.S.
national economic interests and help to meet these public concerns. In working to expand
the scope of open markets globally as well as to invest at home in people and knowledge,
as well as plants and equipment, the government is fully committed to contributing to the
creation of economic opportunity and prosperity in the United States and abroad.
The United States Economic and Trade Environment
The United States is the world's largest importing
and exporting nation. It is also the largest investor worldwide and the largest recipient
of foreign direct investment. Depending on the estimate, the United States continues to
account for 20 to 25 per cent of real global production. As such, its economic performance
and policies have a significant impact on the world economy and the global trading system.
Recent U.S. economic performance has been impressive and U.S. trade has grown rapidly.
The U.S. economy, which has recently entered the
sixth year of economic expansion, has done well since the last review. From the second
quarter of 1994 to the second quarter of 1996 (latest available data), real gross domestic
product expanded by more than 4.6 percent. Real non- residential fixed investment expanded
by over 17 percent, while investment's producer durable equipment component is up by 20
per cent in real terms in just two years. Non-agricultural employment expanded by 5.5
million jobs net, and the rate of unemployment has fallen from 6.2 percent to 5.4 percent
in 1996's second quarter. There has been no discernible upward pressure on the current
moderate rate of price inflation and the federal budget deficit has fallen for the fourth
year in a row to its lowest dollar level since 1981.
Similarly, U.S. trade has experienced strong growth.
The value of U.S. goods and services exports (excluding earnings on investment) grew by 24
percent between the second quarter of 1994 and the same period of 1996. On an annualized
basis, U.S. exports of goods and services were running at an annual rate of over $845
billion in the first seven months of 1996.
Reflecting strong U.S. demand, particularly for
investment, goods and services, U.S. imports rose by 22 percent between the second quarter
of 1994 and the same period of 1996. Imports of goods and services on an annualized basis
were running at a rate of over $935 billion in 1996's first seven months. These figures
reflect the U.S. position as the world's largest exporting and importing nation.
Trade likewise continued its rise relative to the
total value of U.S. gross national product (GNP). Exports plus imports on their broadest
balance-of-payments definition (goods, services and earnings on investment) rose from $1.8
trillion (annual rate) in the second quarter of 1994 to $2.25 trillion (annual rate) in
the second quarter of 1996, or from an amount equal 26.4 percent of value of GNP to about
30 percent of the value of GNP. The corresponding figure for 1970 was 13 percent.
Estimates of the total number of jobs supported by
U.S. exports are not available on a quarterly basis. On an annual basis, however, U.S.
employment supported by exports has risen from 10.3 million in 1994 to an estimated figure
of 11.4 million for 1996, based on extrapolated seven month data. This 1.1 million
increase in export-supported jobs in two years represents roughly 20 percent of the
overall 5.5 million two-year increase in civilian employment cited above (though the time
periods are not identical).
Research on the U.S. economy has suggested that
export-supported jobs are more highly remunerated than the U.S. national average while
jobs in import-competing sectors on average tend to have remuneration below the U.S.
national average. Trade expansion for the United States therefore can be expected to
somewhat shift the composition of job creation over time toward higher paying jobs. This
factor and recent strong trade growth are likely to have contributed to the recent
findings of the President's Council of Economic Advisers that over two-thirds of U.S.
full-time job growth between February 1994 and February 1996 occurred in
industry/occupation groups paying above median wages.
The two-year time frame of our trade policy reviews
is, of course, of too short a duration to draw strong, empirically-based conclusions about
the effects of most recent developments like the Uruguay Round. However, the recent,
on-going good performance of the U.S. economy reflects at least in part the
pro-competitive structural posture of the U.S. economy, both internally and at the border.
The United States has one of the world's most pro-competitive markets internally -- a
stance that has been strengthened over the last several decades through the economic
deregulation of a number of important sectors of the economy -- and has in recent years
been cited by some outside authorities as the world's most competitive major economy. In
addition, the United States has one of the world's most open markets with respect to
imports and investment and also enjoys higher levels of average labor productivity and
real per capita income than any other major economy in the world. U.N. trade data show
that in 1994 the United States imported slightly more manufactured products than the
European Union, Japan and Canada combined.
These factors, we believe, are closely connected:
the already high, and still increasing, level of U.S. openness to trade and competition,
and the corresponding high level of economic achievement and recent strength of economic
performance. The 50 years of effort toward building a truly open multilateral trading
system, while not complete, have contributed substantially to our own economic success and
to that of other countries that did not offset such pro-competitive forces either through
a failure to open borders or through internal restrictions and regulations countermanding
the effects of freer trade. Furthermore, we believe that the more widespread global
movement toward freer markets internally and at the border over the last decade is one of
the most positive economic developments of our generation. These forces over time promise
the extension of better economic opportunities and improved living standards for billions
of the world's citizens, in a process in which each nation's gain comes not at the expense
of, but in harmony with the gains of others.
The United States is committed to exercising its
influence and leadership in working with other countries to reinforce these strongly
pro-competitive developments. Our economic interests complement those of our trading
partners and the global economic welfare. The ultimate goal, and the ultimate vehicle, is
a WTO that is comprehensive both in membership and in its coverage of all barriers and
distortions restricting global trade.
Trade Policy Developments, 1994-1996
The Uruguay Round and WTO implementation
The most significant demonstration of the
competitiveness and openness of the U.S. market lies in its implementation of the Uruguay
Round. In an important demonstration of bipartisan commitment and determination, the
Congress approved the results of the negotiation and establishment of the WTO in the
Uruguay Round Agreements Act (URAA). President Clinton signed the URAA on December 8,
1994. The United States continues to give the highest priority to full and effective
implementation of the Uruguay Round Agreements.
The United States had much to gain from opening
foreign markets through the Uruguay Round. Trade agreements that permanently change the
rules and structure of trade, like the Uruguay Round Agreements, are really investments in
long term growth. A study by GATT at the time of the Uruguay Round's conclusion estimated
that by the year 2005, the Round would result in an increase in global production by as
much as $510 billion (constant 1990 dollars) per year, with the United States accounting
for $122 billion of this gain. Our own work suggested that the Round could add 0.15 to 0.3
percentage points per year to the U.S. GDP growth rate over a decade, with GDP growth
enhancements being experienced throughout the global trading system.
American exports of goods and services in the first
year of Uruguay Round implementation were buoyant--up nearly 13 percent from 1994. As a
result, U.S. jobs supported by exports increased by over 600,000 (estimated) in 1995.
While many factors contributed to this growth, the Uruguay Round would have to be included
as a contributory element. The Uruguay Round helped, not only as a result of specific
barrier reductions, but also because U.S. business began planning and investing on the
basis of the fully implemented agreement. By bringing a higher degree of certainty to the
open world trading system and a guaranteed blueprint for future staged market openings,
the Round provided significant incentives for U.S. businesses to expand their production
in preparation for the increased world demand.
In fact, U.S. non-residential fixed investment was
up in real terms by 10.1 percent in 1994 and an additional 6.1 percent in 1995 -- strong
rates for the relatively advanced stage of the U.S. economic recovery. Anticipation of
continued strong growth in foreign markets for U.S. exports -- due in part to the
successful conclusion of the Uruguay Round -- undoubtedly contributed to this
growth-enhancing investment strength in the United States.
Since the entry into force of the Uruguay Round
agreements, United States policy has been to focus on ensuring the effective and timely
implementation of the multilateral agreements. The various manifestations of this policy
range from an active participation in the deliberations of the many WTO committees and
councils to an aggressive use of the WTO's new dispute settlement mechanism. Where WTO
Members have been slow to implement their Uruguay Round obligations, the United States has
been quick to criticize such inaction. Where problems have arisen in the systemic
implementation of the Uruguay Round's results, the United States has worked constructively
with others to try to remedy the difficulties. Where obligations have been ignored or
side-stepped, the U.S. has initiated action under the DSU.
The central role of the WTO in U.S. economic policy
is also reflected in the resources which the United States devotes to the negotiations
with the very large number of countries seeking to accede to the WTO. In these
negotiations, American insistence on accession only on viable commercial terms has set the
standard for others to emulate.
Finally, in the period leading up to the Singapore
Ministerial conference, the United States has put forward several initiatives for further
liberalization within the multilateral trading system. At the same time the United States
has sought to ensure that other initiatives to weaken the rules agreed in the Uruguay
Round or proposals which distract from the effective implementation of the WTO agreements
do not gain undeserved credibility. In the U.S. view, the WTO must remain a
consensus-based organization and the WTO can only succeed as a credible institution over
the long term if its work program is seen to be beneficial to all of its diverse
The United States recognizes the primacy of the
WTO's multilateral trade system and believes that the first test of this conviction is the
full consistency of regional arrangements with the WTO's multilateral rules. With this in
mind, and in order to capture and expand the benefits of an expanding global trading
system, the United States is actively embarked on an agenda of trade expansion in
The United States' trade expansion agenda in this
area focuses on the expansion of trade in key markets, in part through the negotiation of
new trade agreements, but also by enforcing compliance with current agreements (including
WTO agreements) and pursuing regional trade expansion in Asia, South America and Europe.
Such regional trade initiatives include the NAFTA, the FTAA, and APEC. At the same time,
we seek to maintain and improve our ties with Europe through the Transatlantic Initiative.
As noted above and without exception, the regional
initiatives in which the United States is involved look to the WTO as providing a solid
foundation to go further. In an earlier GATT Trade Policy Review of the United States, the
U.S. delegation made clear that the WTO system is seen as the base upon which regional
arrangements might be built, provided that such arrangements go further in the cause of
liberalization. This is fully in line with the fact that the GATT had historically
recognized the "desirability of increasing freedom of trade by the development,
through voluntary agreements, of closer integration between the economies of the countries
party to such agreements" (Article XXIV) as long as the agreements did not result in
increasing external barriers of the parties. The United States supports regional
agreements that are consistent with WTO rules. We see such agreements as challenging the
multilateral system to keep pace with the interests and needs of Members, and contributing
to the WTO system in the form of innovation and strengthened disciplines.
Regional agreements often achieve deeper and broader
economic integration than multilateral agreements; as neighbors, members often have
interests in common. They can become models for future multilateral liberalization in new
areas, such as services, investment, environmental and labour standards. The following
regional initiatives are each examples of this potential.
The North American Free Trade Agreement
In January of 1994, the United States began to
implement the NAFTA, the world's largest free trade area: 380 million people producing
nearly $8 trillion dollars worth of goods and services. NAFTA increases opportunity for
all three partners --Mexico, Canada and the United States -- to expand trade and enhance
growth. The foreign trade partners of the NAFTA countries are likely to benefit as well
from stronger growth in North America, as NAFTA acts to enhance the size of the NAFTA
market and purchasing power of NAFTA countries. Since the Agreement's entry into force on
January 1, 1994, the U.S. government has worked to ensure that its provisions are
implemented swiftly. Cooperative agreements on labor and the environment are included in
the NAFTA package.
NAFTA has helped sustain North America on a course
toward free trade during a period of difficulties. From 1993 to 1996 (levels annualized
from the first seven months), U.S. exports to its NAFTA partners increased by 33 percent,
despite the international liquidity crisis beginning in Mexico in December of 1994. U.S.
exports to the world over the same period increased by 35 per cent. NAFTA is also the
first comprehensive trade agreement accompanied by agreements on labor and environmental
issues related to trade. These provisions ensure that expanded trade supports the
improvement of labor and environmental conditions and the enforcement of national labor
and environmental laws in North America.
The Free Trade Agreement of the Americas
In December of 1994, the leaders of 34 countries of
the Western Hemisphere met in Miami for the first hemispheric summit since 1967, when
President Johnson met with 19 Latin American leaders at Punta del Este. At Miami,
President Clinton and 33 other leaders committed to "conclude the negotiations of the
"Free Trade Area of the Americas" (FTAA) no later than 2005." It is clear
that the FTAA will support and enhance our commitment to the multilateral system. It is
premised on the success of the Uruguay Round, and on further contributions toward and
commitments to the multilateral system. In June of 1995, trade ministers from throughout
the hemisphere pledged that trade liberalization should be consistent with WTO disciplines
and comprehensive in scope. In March of 1996, trade ministers reaffirmed this pledge and
agreed that approaches for constructing the FTAA must include consistency with GATT
Article XXIV and its Uruguay Round Understanding and with GATS Article V. The increase in
growth and improved access to new ideas that will result from liberalized trade brought
about by the FTAA will also strengthen democracy in the region, and promote development.
The trade ministers of the Hemisphere will next meet in May of 1997 in Belo Horizonte,
Brazil, for the third Western Hemisphere Trade Ministerial.
The Asia Pacific Economic Co-operation Forum
Over the past two years the United States has
continued its active involvement in the Asia Pacific Economic Cooperation (APEC) Forum,
which includes the larger developing and developed economies in the Pacific Rim.
The United States considers APEC to be an important
vehicle for building a regional economic structure to ensure that promotion of prosperity
and stability is continued over the long term. After growing from the original dozen
countries in 1989 to 18 countries on both rims of the Pacific, APEC is a unique
combination of the world's biggest existing markets and the world's biggest emerging
markets. According to the World Bank, trade liberalization in the Pacific Rim countries
would provide enormous gains -- not only to the region but to the rest of the world.
APEC leaders met in Bogor, Indonesia in 1994 and
agreed to dismantle barriers over the next 25 years that have impeded trade and investment
between their economies. Last year in Osaka, APEC began to initiate implementation in the
Bogor Declaration. As the culmination of a full year's efforts, leaders of the 18 APEC
economies approved the Osaka Action Agenda on trade and investment liberalization,
facilitation and co-operation. This year in Manila, the Ministers and Leaders will press
forward on individual and collective actions to reach the trade liberalization goals set
forth at Bogor and Osaka, as well as plans for co-operation in labour, capital,
technology, infrastructure, and the environment.
The New Transatlantic Agenda
The U.S.-European relationship, one of the most
durable in the world, is further strengthened by the Transatlantic Agenda, an initiative
which seeks to deepen transatlantic relations by initiating specific joint U.S.-EU actions
to address global economic, political, humanitarian and environmental challenges more
effectively. This is a key component of United States efforts to meet the challenges posed
by the post-Cold War reality, including the need to build a strong transatlantic community
of democratic, free market economies.
The emphasis on joint action is a recognition of the
fact that many global challenges are transnational and can only be satisfactorily
addressed if the United States and EU act together; in an age of increasing budgetary
stringency, neither the United States nor the EU has the financial means to solve certain
The Joint Action Plan also specifically includes
strengthening the multilateral trade and investment system by; consolidating the
newly-created World Trade Organization (WTO); exploring ways to reduce tariffs, including
an effort to eliminate tariffs on information technology products; starting work on new
international rules for intellectual property rights and government procurement; and
agreeing to work together in the OECD to conclude a multilateral agreement on investment
Domestic regulatory developments affecting trade
Among the more notable structural developments in
the U.S. economy are deregulation efforts that provide increased incentives for active
pursuit of market openness in both multilateral and regional fora. Domestic regulatory
developments in the two years since the last review of the United States are significant.
They include regulatory reform in the public sector, and increased recognition of the
costs and benefits of deregulation and promotion of competitiveness in several important
In addition to taking steps to make its private and
regulated sectors more competitive and efficient, the United States has been engaged in an
effort to make its public sector more efficient. The National Performance Review has
focused on making government agencies more performance- and customer-oriented, eliminating
outdated programs and promoting new ones designed for the 21st century. For example, the
Department of Agriculture has reduced the number of its agencies from 43 to 29 and is in
the process of closing or consolidating 1200 field offices. As a percentage of total
employment, Federal employment is smaller today than at any time since the early 1930's.
The "reinvention" of government has been
accompanied by a philosophical change, as the United States has sought to change its
regulatory systems from rules-based, to performance-based, regulations. In facilitating
compliance rather than acting as a disciplinarian, the Federal government has encouraged
innovation and cost-effectiveness. Regulatory systems affected include pension systems,
regulations affecting the banking and communications sector, and those affecting the
environment. This is regulatory reform that responds to fundamental changes in the
economy, promoting non-discriminatory competition and innovation, but also retaining
safeguards designed to protect consumers, and the environment.
As the authors of the Report on the United
States have correctly observed, "the United States is among the world's most open
economies, which helps to keep economic actors under constant competitive pressure not to
misallocate resources." The pace of the domestic deregulation initiated in the 1970's
has continued, reinforcing America's free-market orientation and entrepreneurial
traditions, and complementing its open trade policy with regulatory changes that enhance
markets and promote competition. An open international trade system allows all nations to
use their resources most efficiently, thus maximizing real incomes and living standards.
Responsible deregulation spurs competition, and improves economic efficiency, thereby
expanding economic opportunity.
Regulatory reforms in the 1970's and 1980's
demonstrated that removing regulatory elements that needlessly distort markets and limit
competition yields more efficient performance in industries such as air transport,
trucking, and long-distance telephone service. The momentum of this regulatory reform has
recently expanded to new areas, such as telecommunications, where the United States
experienced an explosion of technology and new service venues, and financial services.
Over the past three years, the United States has
modernized and strengthened the competitiveness of its financial system. Legislation and
regulatory reform have eliminated barriers to financial innovation, promoted open
competition in financial services, and reduced the costs -- while improving the quality --
of depository institution regulation.
Regulatory reform has been achieved without
compromising safety and soundness, jeopardizing the federal deposit insurance funds, or
impairing protections for consumers and communities. Legislative barriers to competition
have been removed, allowing for full interstate banking and branching. Previously, both
bank holding companies and individual banks faced severe restrictions on their ability to
operate on an interstate basis.
The United States' commitment to the multilateral
system and to economic reform is evident in the reforms introduced in the Federal
Agricultural Improvement and Reform Act of 1996. For the next seven years, income support
to farmers will be completely delinked from commodity prices. A declining level of
payments will be made based solely on historical program participation and the number of
farmers who sign up for the new contracts. Planting decisions and commodity prices will be
determined by market forces, not government incentives. This decision, along with export
subsidy caps approved by Congress, will leave U.S. agricultural support expenditures well
below U.S. Uruguay Round commitment levels.
Future Developments in United States Trade Policy
As emphasized at the beginning of this
statement, U.S. policy is based strongly on the premise that the removal of barriers and
distortions to global trade enhances higher wage job creation, incomes, living standards
and growth potential, in the United States as well as in the economies of our trade
partners. In efforts to reduce barriers and expand trade, the U.S. interest is in the
resulting promotion of economic opportunity and expansion.
Given our strong sense of its broad effects and
objectives, U.S. trade policy has been consistent over many decades in its pursuit of more
open global markets. Those efforts, however, have had to be tailored to specific
conditions and challenges which have evolved over time. At the present time, we would
emphasize two over-riding factors.
First, rapidly changing technologies in
communications, transportation and other areas are increasing the global potential for
welfare-enhancing trade in goods and services. With this tremendous expansion of trade
potential, however, has come a substantial increase in the complexity of the trade policy
issues with which the global trading community must deal. This complexity comes both from
an expanded scope for trade and increased potential for non-traditional trade and
trade-related measures to restrict or distort trade flows. The Uruguay Round represents a
major step forward in matching global trade structures and disciplines to current
realities of international trade. But, while recognizing the importance of our efforts to
make the WTO as effective as possible, we must also recognize that much work which was
begun and even well advanced in the Uruguay Round, remains to be done in the years ahead.
Second, the movement over the last 10 years of many
low and middle income countries around the globe to freer markets at home and more
outward, less restrictive policies at the border is of fundamental importance in the
shaping of future trade flows and issues. Some 85 percent of the world's population lives
in countries with low and middle per capita incomes. With freer markets and greater
outward orientation many of these countries are or will soon be experiencing high rates of
growth in output, incomes and trade. Needless to say, from a U.S. perspective, this is one
of the most positive developments imaginable on the global economic front -- for the new
economic opportunities that will be generated for large segments of the world's population
where such opportunities have been scarce, as well as for the expansion of
welfare-enhancing trade potential these developments create for high-income countries like
the United States. Substantial efforts on the trade policy front, however, will be
required to help encourage and nurture such trends, to address remaining barriers, and
hasten adjustment in all our economies. Because of our belief in the importance of trade,
our sense of the challenges ahead and our understanding of the centrality of the WTO to
economic progress, we are, as we have been, committed to efforts to maintain and expand
the momentum of the multilateral system, through the WTO and other international
institutions. The United States remains fully committed to active participation in the
multilateral system and to work with our trading partners to ensure full implementation of
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