12 November 1996
POLICY REVIEW BODY: REVIEW OF UNITED STATES
TPRB'S EVALUATION Back to top
The Trade Policy Review Body of the
World Trade Organization (WTO) conducted its fourth review of the United States' trade
policies on 11 and 12 November 1996. The text of the Chairman's concluding remarks is
attached as a summary of the salient points which emerged during the two-day discussion.
The review enables the TPRB to conduct a collective
examination of the full range of trade policies and practices of each WTO member country
at regular periodic intervals to monitor significant trends and developments which may
have an impact on the global trading system.
The review is based on two reports which are
prepared respectively by the WTO Secretariat and the government under review and which
cover all aspects of the country's trade policies, including: its domestic laws and
regulations; the institutional framework; bilateral, regional and other preferential
agreements; the wider economic needs and the external environment.
A record of the discussions and the Chairperson's
summing-up, together with these two reports, 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.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992 & 1996),
Cameroon (1995), Canada (1990, 1992 & 1994), the Czech Republic (1996), Chile (1991),
Colombia (1990 & 1996), Costa Rica (1995), Côte d'Ivoire (1995), the 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 & 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 & 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia
(1996) and Zimbabwe (1994).
TRADE POLICY REVIEW BODY: REVIEW OF
CONCLUDING REMARKS BY THE CHAIRPERSON Back
This meeting of the Trade Policy Review Body has now
completed the fourth review of the United States' trade policies and practices. These
remarks, which are made on my own responsibility, summarize the main points of discussion.
They are not intended to substitute for the collective evaluation and appreciation of U.S.
trade policies and practices. Details of the discussion will be reflected in the minutes
of the meeting.
The discussion developed under four main themes: (i)
Economic conditions and regional trading arrangements; (ii) U.S. strategies for conducting
trade policies; (iii) trade policy measures; and (iv) sectoral issues.
A very large number of questions has been raised in
written form; many of these cover overlapping issues. We look forward to receiving the
replies from the United States.
Economic conditions and regional trading
WTO members complimented the United States on its
strong economic performance, characterized by high growth and low inflation. Noting the
rising share of trade in U.S. GDP, they emphasized the key rôle played by securely open
markets for goods, services and investment in U.S. economic development and resource
allocation. Binding of market access conditions by the United States was also regarded as
important to the world trading system. The United States was thus urged to exercise
leadership in the WTO to bring negotiations on financial services, telecommunications and
maritime transport to a successful conclusion.
During the period under review, net imports had
increased and the current account had widened somewhat. It was recognized that this net
import expansion was taking place during a period of slack demand in other developed
markets, thus helping to stabilize world economic conditions. Some fears were expressed
that a rising current account deficit might contribute to renewed protectionist pressure
in the United States.
Some members commented on the importance of services
to the U.S. economy, recognizing that productivity gains in that sector were crucial to
improvements in living standards. In that context, they noted the shift in the delivery of
service imports from cross-border to establishment and asked if this was related to State
Members remarked that, in the period under review,
regionalism had not been a main motor for the expansion of U.S. foreign trade; trade with
Canada and Mexico had increased at a similar pace as that with other trading partners.
In response, the representative of the United States
emphasized the importance of open markets in helping to assure efficient production
structures. The benefit to the United States came from the connection between an open,
competitive domestic environment and open borders. He added that many in the United States
had endured stress in restructuring the economy; these adjustment pressures had led to the
United States, over many years, urging consideration in the WTO of core labour standards.
In addressing concerns that the U.S.
saving-investment imbalance, and associated trade and current account deficits, might
erode public support for open trade policies, he noted that the trade deficit as a share
of GDP was now less than half the level of its previous peak in 1987. Moreover, there had
been considerable progress in reducing the federal budget deficit, which was the
Government's most direct link with savings and therefore the trade deficit. A recent rise
in the trade deficit reflected U.S. economic expansion, in which investment had played a
greater rôle than in the past. In this expansion, the United States had also been a
significant pole of attraction for foreign capital.
On services, the representative noted that internal
deregulation in a number of sectors had raised, and would continue to raise sectoral
productivity. Success in GATS negotiations would also help. He believed that the openness
of the U.S. foreign investment régime, and the practical requirement for a local presence
to deliver many services, underlay the shift from cross-border transactions to foreign
investment, rather than State investment incentives.
On regional trade links, the representative said
that the overall benefits of NAFTA might be considerably larger than originally thought.
NAFTA was likely to have created more trade than any potential diversionary effect,
because of the huge market and its support for wider economic reforms; specifically, the
low level of the U.S. m.f.n. tariff meant that the margin of NAFTA preference was slight,
and the rapid growth of U.S. imports from most suppliers in recent years was evidence that
any diversion was much less than growth.
Strategies for conducting trade
Members noted the strong interaction in U.S. trade
policy making between multilateralism, bilateralism and unilateralism. Evidence that WTO
commitments were at the centre of U.S. trade policy making was seen in its frequent use of
dispute settlement provisions; however, a general dissatisfaction with the continued
unilateralism inherent in "Section 301" legislation was expressed. Members
inquired when the United States planned to implement the Appellate Body ruling concerning
"Standards for reformulated and conventional gasoline" which was adopted by the
Dispute Settlement Body.
Questions were raised about the implementation of
the WTO Agreements at the State and local level, including the notification of sub-federal
subsidies by the United States.
Members noted that the United States was currently
without "fast-track" authority for trade negotiations. Participants asked the
U.S. delegation to comment on the impact of the absence of such authority.
The large number of bilateral agreements concluded
by the United States was a matter of concern. Questions were raised whether such
agreements were implemented on a m.f.n. basis and whether all were notified to the WTO.
The representative of Japan stated that the bilateral U.S.-Japan measures under the
Framework Agreement involved policy changes by both the United States and Japan and were
implemented on a m.f.n. basis. The representative of Canada noted that the possibility of
U.S. use of its trade remedy law had played a rôle in reaching the bilateral Softwood
Lumber Agreement. Participants stressed that reciprocity clauses contained in bilateral
agreements could be fundamentally at odds with the m.f.n. provisions of the multilateral
A number of delegations expressed their objections
to the unilateral use of trade policy instruments for non-trade-policy objectives. In this
context, the "Helms-Burton Act" and the Iran-Libya Trade Sanctions Act were
particularly mentioned and the WTO consistency of these measures was strongly questioned.
The extra-territorial use of environmental standards applied to imports of tuna and shrimp
was also criticized. Some members queried the non-trade conditions for application of GSP
Concerning trade in services, participants stressed
the importance of an open trading environment for the development of an efficient services
sector and noted with regret that the United States had introduced a broad m.f.n.
exemption to its financial services offer in 1995.
Although members welcomed the liberalization under
the new telecommunications legislation, several noted possible deviations from m.f.n.
treatment to foreign services providers, as contained in reciprocity clauses, as well as
concern with the application of the "public interest" test by the Federal
Communications Commission. It was also noted that COMSAT had a monopoly on key satellite
Participants expressed disappointment that the
United States had not submitted an offer under the Maritime Transport Negotiations. They
noted various restrictive measures applied to domestic and international maritime
transport services. It was also stated that the United States had taken unilateral
measures under domestic legislation, as well as violating its standstill commitment by
lifting a ban on exports of Alaskan oil under the condition that it be shipped on U.S.
flagged and manned vessels.
Concerning the movement of persons, members noted
the restrictive use of immigration and residence provisions applied by the United States.
In reply, the U.S. representative emphasized that
good trade agreements should involve an exchange of benefits. "Free ridership"
was not helpful, and leadership required clear identification of priorities. Enforcement
of trade agreements was important in ensuring adherence.
In this context, he saw Section 301 as a means for
communication of exporters' concerns: he emphasized that Section 301 was integrally linked
to the multilateral dispute settlement mechanism. Since the entry into force of the WTO,
all Section 301 actions concerning WTO members had been pursued under the DSU.
The representative declined to comment on the
extra-territorial application of U.S. legislation, as this was under consideration in
Dispute Settlement procedures.
The representative noted that the U.S. aim in
services negotiations was to achieve substantive commitments to market access and national
treatment by a wide range of countries. The United States would thus continue its active
rôle in telecommunications and financial services, through putting in good offers early.
In turn, meaningful down-payments were required from other Members, providing real access
to foreign service providers and reflecting fully the principles of market access,
national and most-favoured-nation treatment.
He stated that the renewal of fast-track negotiating
authority would require extensive consultations with the new Congress, yet to be formed;
the U.S. would keep Members informed of progress in this regard.
While welcoming the low average of U.S. tariffs,
Members noted the high tariff peaks in particular sectors. It was noted that zero-for-zero
initiatives would contribute to further reduction of tariff averages. Questions were
raised about increases in the rate of the customs user fee, and whether the fee
substituted for declines in tariff revenue.
Developments in U.S. anti-dumping and countervailing
legislation and their application to specific cases were raised by many participants.
While welcoming the reduction in the number of new cases, members questioned the U.S.
concept of "fair" trade, the definition of "national industry", the
use of de minimis provisions, the timeframe for application of the sunset clause,
the use of anti-circumvention measures, and the relationship of AD/CVD measures to
competition policy. The high cost of anti-dumping and countervailing measures to the U.S.
economy and trading partners was emphasized.
Members also saw a lack of consistency between rules
of origin and labelling requirements used to administer preferential treatment under
various regional trade agreements. In this context, the U.S. delegation was invited to
comment on the status of a U.S. Treasury proposal to unify the rules of origin.
Members commended the United States for its
commitment to expanding procurement coverage under the plurilateral Government Procurement
Agreement and for seeking greater transparency in this area. However, many questions were
raised concerning conditions of access to U.S. government procurement.
"Buy-American" and "Buy-State" provisions were criticised as being
wide ranging and non transparent. Members considered that set-asides for small and
minority-owned businesses were becoming more important over time and sought clarification
on these areas.
Standards and technical regulations were raised by
many members as an area of concern. Issues raised included the application of
environmental process standards to imports of tuna, shrimp and gasoline. The question of
the Corporate Average Fuel Economy (CAFE) Act was also critically noted.
In reply, the U.S. representative recalled the
contribution made by the United States to overall tariff liberalization; these efforts
would continue, inter alia, through the proposed Information Technology Agreement.
Binding of tariffs on a broad basis by all Members was very important.
He welcomed the improvements in anti-dumping and
countervailing provisions contained in the WTO Agreements. A revision of anti-dumping and
countervailing regulations underway would increase the level of clarity of U.S.
procedures. Anti-circumvention provisions were, in his view, consistent with the
enforcement provisions of the relevant Agreements and Ministerial Decisions. It was not
easy to say why the level of new investigations had declined, as this was largely
determined by private sector actions.
The representative noted in passing that only a few
Members had undertaken WTO disciplines in Government procurement. The United States was
committed to liberalization in this area: the transparency negotiation to be proposed at
Singapore could be a stepping stone for wider membership of the GPA. U.S. policies were
predictable and transparent, even when Buy American preferences applied. Restrictions
under these provisions and set-aside procedures applied to a small share of procurement
covered by the successive Agreements: their importance had in some cases been exaggerated.
National security exceptions were maintained in the same framework as those by other
trading partners. 37 States had agreed to GPA commitments.
The United States was participating actively in WTO
work on rules of origin; U.S. policies on adoption of uniform rules and application of
preferential rules were consistent with WTO obligations. The representative also
emphasized the linkages, both domestically and multilaterally, that the United States
sought to promote between trade and environmental issues, referring particularly to recent
international conventions on protection of sea turtles and dolphins.
The enactment of the Federal Agricultural
Improvement and Reform (FAIR) Act was welcomed. However, Members noted the high average
level of tariffs applied to products for which quantitative restrictions had been
tariffied under the WTO Agreement on Agriculture. Although much lower tariffs were applied
to imports under tariff quota, many of these quotas remained underutilized, leading to
questions concerning the allocation of quotas to trading partners. Members expressed
regret that export subsidies continued to be available under the FAIR Act - and even
expanded in some areas -and queried the targeting of certain export subsidy provisions on
particular regions. SPS measures and proposed changes to these measures were also
The U.S. implementation of its commitments under the
WTO Agreement on Textiles and Clothing (ATC) was an important issue for many participants.
It was noted that tariffs in this sector remained high. Some Members expressed
considerable disappointment that no items previously under quota had been included in the
first integration phase and that the U.S. integration of textile and clothing products
over four phases, as required by the ATC, was heavily backloaded. It was considered that
this violated the spirit of a gradual phasing-in of the products covered by the Agreement
and could inhibit the adjustment process in the U.S. market. The change in the rules of
origin applied to textiles and clothing was also criticized as being disruptive to
international trade, while the use of the safeguard provisions of the ATC was considered
by some members to be excessive.
In reply, the U.S. representative noted that the
FAIR Act would move the U.S. agricultural sector towards a more market-oriented approach,
going beyond obligations agreed in the Uruguay Round. The further influence of such
measures as loan rates, subsidies and tariff quotas on prices and production was
significantly reduced. On loan rates, there was no price floor or government stock
accumulation; international market conditions would determine the extent to which the
United States applied export subsidies, with world trade liberalization the key to
eventual elimination or suspension of export subsidies.
On textiles and clothing, the representative noted
that the sectors were among the most sensitive in the U.S. economy; clothing, in
particular, employed many economically vulnerable American workers. The U.S. market was
the world's largest, with high import penetration. The United States had made great
efforts to ensure that both sectors were part of the Uruguay Round package and that the
U.S. Congress implemented the Uruguay Round fully, as negotiated, with appropriate
phase-in provisions. The United States had scrupulously abided by its commitments and, at
a minimum, would continue to do so. Going beyond currently announced plans was not out of
the question but any such consideration would depend on the willingness of other countries
involved in textiles and clothing to undertake commensurate additional efforts. He added
that the United States had notified a comprehensive product integration schedule for the
full transition period - beyond what was required in the Agreement - so as to ensure
stability in the U.S. market and for its partners.
On rules of origin for textiles and clothing, when
the United States codified its rules it had provided 18 months for public comment. The
system was completely transparent, and the overwhelming majority of U.S. rules were in
line with those used by other major importers. The U.S. use of safeguards was in accord
with the ATC and had been reviewed by the Textiles Monitoring Body and dispute settlement
There were significant challenges ahead to the
successful transition to an integrated, quota-free textiles and clothing sector, as
required by the Agreement. First, the United States would need to be sure that its trading
partners' markets were as open to U.S. exports as the U.S. market was to imports. Second,
the United States would need to ensure that disciplines in the Agreement on quota
circumvention were effective and adequate to remedy the significant problem.
Overall remarks Back to top
Members noted various positive developments in the
U.S. economy over the past two years, including a significantly increased volume and share
of trade. They particularly welcomed the passage of the Uruguay Round Agreements Act, the
entry into force of the plurilateral Government Procurement Agreement, the substantial
reform measures in the agricultural and telecommunications sectors, and a decrease in use
of anti-dumping measures.
However, continuing concerns were expressed on a
number of issues. Contradictory signals were noted. Despite the stated commitment to
multilateralism, and frequent invocation of WTO dispute settlement procedures, a resort to
unilateral approaches is still in evidence. A continuing emphasis on strict bilateral
reciprocity sits uneasily with the stated attachment to multilateralism. Criticisms of
legislative provisions with extra-territorial effect were widely shared.
Among the sectoral issues raised, a strong concern
about the United States textile régime was registered by textile-exporting countries. In
the services sector, it was hoped that the United States would demonstrate a strengthened
commitment to completing the unfinished business of the Uruguay Round.
Members are conscious of the weight which the United
States carries within the world trading system and the leverage which it consequently
exercises. They seek reassurance that the relative restraint in resort to trade remedies
which characterizes periods of economic buoyancy will prove durable. Most importantly,
they are concerned to ensure that the United States is a consistent and reliable proponent
of multilateralism, with a long term commitment which will be strong enough to withstand
pressures that may arise.