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WORLD TRADE ORGANIZATION 27

II. World Trade Organization

Overview1

The World Trade Organization is the result offifty years of American leadership andcommitment to an open world trading system,governed by the rule of law. This work datesback to the foundation of the GeneralAgreement on Tariffs and Trade, or GATT, in1948: an event reflecting the personalexperiences of Presidents Roosevelt andTruman and their European counterparts in theGreat Depression and World War II. Theseleaders had seen the Smoot-Hawley Act inAmerica and similar protectionist policiesoverseas deepen the Great Depression andcontribute to the political upheavals of the1930s. Fifteen years later, they realized that byreopening world markets they could promotegrowth and raise living standards. In tandemwith a strong and confident security policy, asopen markets gave nations greater stakes instability and prosperity beyond their borders,they believed a fragile peace would strengthen.

The work they began has now entered into itssixth decade, and the faith they placed in openmarkets and the rule of law has been abundantlyvindicated. Through eight Rounds ofnegotiations, and as 112 new Members joinedthe 23 founders of the GATT, we abandoned theclosed markets of the Depression era and helpedto foster a fifty-year economic boom, during

which the world economy grew six-fold and percapita income tripled. The United States, as theworld’s largest exporter and importer, benefitsperhaps most of all: the efficiency of ourindustries and the high living standards of ourfamilies reflect both the gains we receive fromopen markets abroad, and the benefits of ourown open-market policies at home.

The creation of the World Trade Organizationon January 1, 1995 was the next step in theevolution of the multilateral trading systemsince the GATT’s founding. The WTO wasestablished as part of the results of the UruguayRound, the last set of trade negotiationsconducted under the auspices of the GATT. TheUruguay Round was completed with PresidentClinton’s leadership at the end of 1993. Extension of the GATT to the WTO was part ofthe President’s broader overall strategy tostrengthen the American economy, to helpcreate higher-wage jobs and to raise livingstandards. The record shows how successfulthis strategy has been: we are now celebratingthe longest economic expansion in Americanhistory, with 14.4 million new jobs since theWTO entered into force in 1995.

Congress debated and then approved the resultsof the negotiations in the Uruguay RoundAgreements Act (URAA), which was signedinto law on December 8, 1994. This Actrequired a series of annual reports on theoperation of the WTO, culminating in a reviewafter the fifth year. The five-year reviewcontained in this chapter confirms how vitalU.S. participation in the global trading system isto America’s long-term economic and strategic

1This Chapter and Annex II to thisreport are provided pursuant to the reportingrequirements contained in sections 122, 124 and125 of the Uruguay Round Agreements Act.

1999 ANNUAL REPORT28

interests, continued prosperity and strengtheningthe rule of law around the world. This chapterdescribes the WTO’s operations in 1999 and itsactivities and accomplishments since itscreation in 1995.

While work remains – both to create neweconomic opportunities through tradeliberalization and to improve the WTO itself –the WTO is the continuation of 50 years ofsuccessful trade policy. It is fundamentallyimportant to the remarkable record of growthand job creation America has built in the pastfive years. Continued U.S. participation andleadership in the WTO is essential to safeguardU.S. interests in the future.

The WTO is a crucial vehicle for maximizingthe advantages from, and managing our interestsin, a global economy. To ensure that Americansreceive fair treatment in the global economy, theUnited States has negotiated a framework ofclear, transparent rules that: prohibitdiscrimination against American products;safeguard Americans against unfair trade; andafford commercial predictability. As theworld’s largest exporter and importer, we needsuch a system more than any other country. Consider the alternative – no one would suffermore than America’s workers, businesses andfarm families in a world of closed markets,abusive trade practices, and the risinginternational tensions trade conflicts can causein difficult times.

Thus, over the past fifty years, through eightnegotiating Rounds, Americans have led inopening markets and developing the rules oftoday’s WTO. And the past five years since thecreation of the WTO have clearly demonstratedits benefits. American exports have risen bywell over $200 billion, contributing to theeconomic growth we have enjoyed andexpanding high-skill, high-wage jobopportunities.

Key WTO Accomplishments in the Past FiveYears Include:

� Market Access: The Uruguay Roundnegotiations cut tariffs substantially, bya full third in the manufacturing sector. It offered agricultural exportersopportunities through the firstenforceable commitments to reducebarriers and limit the use of exportsubsidies. U.S. services providers, fromaccounting and other professionalservices to finance, telecommunicationsand others, gained real exportopportunities for the first time in thehistory of the trading system. Newentrants into the global marketplace,particularly small and medium-sizedenterprises, also benefit from these newmarket openings and innovations.

� Intellectual Property Rights Protection: In the 21st century, economies will relyon innovation and ingenuity to promoteeconomic development and investment– both human and capital. This is whyWTO Member governments agreed to afar-ranging set of rules to protect andenforce intellectual property rights,including copyrights, patents andtrademarks. To ensure that innovationand technology continue to serve asengines of growth in rich and poorcountries alike, the WTO providesstrong protection and a system of rulesthat applies to all.

� Dispute Settlement: The WTO created aset of procedures that can settle tradedisputes promptly, eliminating many ofthe shortcomings of the earlier GATTsystem where the process could beprolonged indefinitely. Improvementsto the system are still warranted,notably with respect to the transparencyof the dispute procedures. Since theWTO’s creation in 1995 the United


States has filed more complaints – 49 todate – than any other WTO Member,and we are involved as a third party in anumber of other cases. Our overallrecord of success is very strong. TheUnited States has prevailed in 23 of the25 complaints acted upon so far, eitherby successful settlement or panelvictory. These favorable rulings andsettlements have involved an array ofsectors within manufacturing,agriculture, services, and intellectualproperty.

� Expansion of the Rule of Law: In thepast five years, the 50 year-old tradingsystem has been transformed from alimited set of rules and disciplines thatapplied to the United States and a fewof our trading partners, to a system withspecific rules applicable in full to allMembers. Thus the WTO eliminatesthe potential for “free riders” on thebenefits of an open trading system.

� Creation of a Dynamic Forum for TradeLiberalization: The WTO is a systemresponsive to rapid changes in the 21st

century world economy. After itscreation in 1995, the WTO first set inmotion and then realized agreements infinancial services, basictelecommunications services andinformation technology. These openednew markets and produced gains largerin scope than the results of the UruguayRound. The WTO has laid thegroundwork for further advances bysetting a built-in agenda to continue toliberalize and reform areas likeagriculture and services, and initiatingfurther work on electronic commerceand other emerging trade issues.

� High Technology andTelecommunications: The WTO haskept the trading system at the cutting

edge of technological development,benefitting both business and consumers– whether in electronic commerce, ortelecommunications goods and services. According to the FCC, rates paid byU.S. consumers for international servicehave declined significantly since theAgreement on BasicTelecommunications came into effect. From 1996 to 1998, the average price ofan international long distance calldropped from 74 cents per minute to 55cents per minute. On highlycompetitive routes, such as the U.S.-UKroute, prices fell even moredramatically, to as low as 10 cents perminute. Although aggregate data for1999 are not yet available, allindications are that the trend towardlower rates has continued and that thecurrent average price is well below 55cents per minute.

� Global Membership: Growing inmembership from 119 in 1995 to 135 in1999, with another 30 applicantsseeking to negotiate entry, the WTO isbecoming more universal. The fall ofthe Berlin Wall brought new urgency tointegrate former command economiesinto the trading system. Despite muchmore stringent requirements formembership than were used in theGATT, acceptance of WTO rules hasbecome an integral part of a country’ssuccessful strategy for growth anddevelopment – making WTOmembership a key element in thereformist policies of newly emergingmarket economies in Central andEastern Europe, and of countries in Asiaand in the Middle East. Consistent withthe Administration’s initiatives forAfrica, an important new dimension isthat many more African nations nowparticipate meaningfully in the system.


� Force for Global Economic Stability:The WTO has also strengthened theworld’s ability to address economiccrises. During the financial crisis of1997 and 1998, for example, the respectWTO members showed for open marketcommitments helped to prevent a cycleof protection and retaliation similar tothat of the Depression era, ensuringaffected countries the access to marketsthey needed for recovery, andminimizing damage to Americanfarmers and manufacturing exporters.

� Greater Openness and Accountability: In its first five years, the WTO hastaken steps to ensure greatertransparency in its operations, bymaking a majority of its documentsavailable to the public, by creating auser-friendly Internet website, and byreaching out to the non-governmentalcommunity (through symposia andother means) to solicit their views. AllWTO Ministerial meetings held thus far– in Singapore, Geneva and Seattle –have included participation by non-governmental organizations (NGOs). These initial steps lay the foundation forfurther enhancing the openness andaccountability of the WTO, whichremains a critical U.S. objective,including in particular for WTO disputesettlement.

As these points indicate, the WTO – includingthe 50 plus years of the trading system itrepresents – has become an important institutionfor managing our interests in the globaleconomy. Other institutions, such as the WorldBank, International Monetary Fund andInternational Labor Organization, as well asdomestic policies also play an important role inaddressing the variety of issues arising fromglobalization. As the challenges of globalizationhave increased in all facets of economicactivity, the WTO and its system of rules have

become much more vital for securing, managingand promoting America’s interests in the worldeconomy. That makes it imperative for theUnited States to exercise leadership and visionto strengthen and improve the WTO and toutilize its provisions to open markets andsafeguard America’s trade interests andeconomic future in the 21st century.

As trade has become more important to the U.S.domestic economy and in our relations withother countries, it is only natural that the WTOshould be subject to greater scrutiny. In 1970,trade (exports + imports) was valued at 13percent of U.S. GDP; in 1999 it exceeded 30percent of GDP. While the WTO can respondby doing a better job in explaining its practicesand procedures to the public, and by reformingprocedures outmoded in this era of rapidcommunication, it is also not surprising that anew organization such as the WTO encounterssome misconceptions.

Contrary to the criticisms that have been made:

� The WTO has not eroded the sovereignright of the United States to pass its ownlaws: The United States benefits byhaving a set of rules to hold othercountries accountable for their tradeactions. But neither the WTO nor itsdispute settlement panels have anypower to compel the United States tochange its laws and regulations. Onlythe United States can decide how it willrespond to WTO dispute settlementreports; and only the Congress canchange U.S. law. In the relatively fewcases where the United States hasdefended one of its statutes orregulations and has not prevailed, wehave responded in a manner that did notinfringe upon U.S. sovereignty, or alterany statute.

� The WTO has not limited the ability ofthe United States to set its own high


environment and health standards: TheWTO agreements explicitly recognizethe right of all WTO Members toestablish the levels of environment,health, safety and consumer protectionthey deem appropriate, even when suchlevels of protection are higher thanthose provided by internationalstandards. No WTO panel has everdeclared that a U.S. environmental orhealth or safety statute is inconsistentwith a WTO agreement. Generally, allthe WTO’s rules require is thatauthorities opt for a less trade-restrictiveregulation when they can, and avoiddiscriminating by imposing a higherstandard for foreign products than fordomestic products.

� The WTO has not relegated U.S.interests to a bloated internationalSecretariat of faceless bureaucrats: The WTO is a “member-driven”organization. WTO Members like theUnited States take responsibility formonitoring compliance with theAgreements and setting the course forthe Organization. The WTO is staffedby a Secretariat of international civilservants headed by a Director-General. Unlike many other institutions, theSecretariat does not operate with a highdegree of independence, and serves atthe direction of the membership. TheWTO is not a specialized UN agency,reflecting the strong views of itsMembers that it should not be includedin the UN structure. And like the earlierGATT, the WTO takes decisions byconsensus, despite the fact that there arehighly-limited provisions for voting incertain instances.

� The WTO has not hindered thedevelopment prospects of poorercountries: The WTO’s system of ruleshelps countries to move from failed

inward-looking policies of importsubstitution and protectionism topolicies based on openness, competitionand outward-oriented growth. Theformer policies perpetuated poverty andinequality, and indirectly abetted anti-democratic forces. With the WTO,trade has become a key part of thesolution to long-term structuralproblems resulting from decades ofmismanagement. The record is clear:developing nations that have adopted anoutward orientation and abided by therules-based system have been mostsuccessful.2

Much work lies ahead, of course. We intend towork at the WTO to further open markets toAmerican goods and services; to enforce thecommitments our trading partners have made;reform the WTO to improve transparency andaccess to civil society; and to ensure that itcontributes to our work to promoteenvironmental protection and internationallyrecognized core labor standards worldwide. Much of this work will be complex anddifficult. WTO Members were, for example,unable to launch a new Round of tradenegotiations in 1999, reflecting the fact thatthese issues are complex and often lead tonegotiating deadlock.

But after five years, the record of the WTO isone of success. American workers andcompanies depend on open markets around theworld; American living standards, especially forthe poorest, depend on our own open marketpolicies. The WTO is our strongest guaranteethat these policies will remain in place. TheUnited States is the world’s largest exporter –which in turn accounts for 11.7 millionAmerican jobs. The institution and its rules

2 See in particular, the World BankWorld Development Report 1987 and 1997. See also the IMF’s World Economic Outlook,May 1993.


provide the best possible foundation for a worldwhich is open, responsive to the rule of law, andable to offer new opportunities and higher livingstandards to its people.

The record of the past fifty years should give usa great deal of confidence. Taken as a whole,the multilateral trading system has promoted therule of law, created new opportunities forworldwide economic growth, and createdopportunities for Americans. This amplyjustifies the decision Congress took five yearsago to support creation of the WTO as asuccessor to the GATT. It should remind ushow significant will be the rewards of success aswe take up the challenges of the new century.

A. Economic Assessment

Aided by more open markets and the expansionof trade, including through the WTO, the U.S.economy has flourished during the first fiveyears of the World Trade Organization andimplementation of the Uruguay Round results. From the fourth quarter 1994 through the fourthquarter 1999, real U.S. GDP grew at a strongaverage annual rate of 3.9 percent. Likewise,real industrial production in the United Stateshas increased by nearly 29 percent in the last 5years, more than in any of the other country ofthe G-7 grouping. According to World Bankdata, U.S. average per capita GDP has beenrising relative to the handful of other highincome countries, exceeding the average for thatgroup by over 40 percent in 1998. This excellentgrowth of the economy has, in part, reflected thestrong role of investment in this expansion withreal gross domestic investment having risen atan annual rate of 7.9 percent, or double the rateof GDP growth. Increases in such investmentaccounted for over 30 percent of GDP growthbetween 1994 and 1999.

Nearly 14.4 million new jobs were createdbetween December 1994 and January 2000 andthe unemployment rate dropped from 6.1percent in 1994 to 4.0 percent in January 2000 –

the lowest level since 1969. The growth in theproductivity of U.S. workers accelerated from1.8 percent annually in the 1990-1994 period to2.2 percent in 1994-1998, hitting 3.3 percentbetween third quarter 1998 and third quarter1999. After stagnating in the earlier part of the1990s, real hourly labor compensation, in partreflecting stronger productivity growth, rose atan average annual rate of 2.5 percent from thefirst quarter of 1996 to the third quarter of 1999. In addition, a recent Council of EconomicAdvisers and Department of Labor study foundthat (1) the strong growth of employment since1993 has been dominated by jobs that theevidence suggests are higher paying; and (2) thebenefits of enhanced compensation for U.S.workers have been widely shared.

Open markets in general, and the World TradeOrganization and Uruguay Round Agreementsin particular, have acted in a number of ways tohelp the U.S. economy achieve such successover the last five years. The lowering of foreignbarriers to U.S. exports contributed to the 36percent increase in U.S. exports between 1994and 1999, despite the effects of the Asianfinancial crisis and slow growth andrecessionary conditions experienced by manyU.S. trade partners. The number of U.S. jobssupported by exports increased by 1.4 millionfrom 1994 to an estimated level of 11.7 millionin 1998 (latest year available), and jobssupported by goods exports in the United Statesare estimated to pay between 13 percent and 16percent more than the U.S. national averagewage.

The more open markets that the Uruguay Roundsupported at home and abroad also helpedAmerican workers by stretching further thepurchasing power of pay checks with highquality, competitively priced imports and byincreasing the range and quality of goodsavailable in our markets. As domestic demandsurged in the United States in 1998 and 1999,open markets and the availability of high quality


imports also helped stem any incipientinflationary pressures.

Finally, market opening agreements under theWTO helped expand demand for the products ofAmerica’s high-tech and other competitivesectors beyond levels that could be supported bythe U.S. market alone – thus helping raise therevenues and level of investment in many of theUnited States most technologically advancedsectors, and contributing directly to theremarkable growth of the economy in recentyears.

Academic studies recently reviewed by theCouncil of Economic Advisers (in its report“America’s Interest in the World TradeOrganization: An Economic Assessment,”November 16, 1999) confirm the economicbenefits of the Uruguay Round Agreements tothe United States. These studies estimate anannual income gain to the United States ofbetween $27 billion and $37 billion (1992dollars), with full implementation of theRound’s results. While sizeable, these figuresonly partially estimate the economic benefitsderiving from the Uruguay Round. Thesestudies take incomplete or no account ofreductions in non-tariff barriers to trade ingoods and services, of beneficial rules changes,such as the WTO’s strengthened disputesettlement mechanism, or of the growth effectsof more open markets because such benefits aredifficult to quantify.

Other aspects of the Uruguay Round and theWTO, likewise not readily quantifiable, alsohave proven beneficial to the United States. Wedraw attention to three such areas where recentagreements achieved since conclusion of theUruguay Round have strengthened the systemglobally and provided benefits to Americaninterests. Much of the fastest growth in the U.S.economy is occurring in information technologyproducts, telecommunication services andfinancial services where productivity and outputhas been greatly enhanced by advanced

computer and telecommunications equipmentand services. Favoring the rapid advance ofthese technologies and industries, and the jobsthat they support, is the ability to financeresearch and development on a sales base that isglobal, rather than national, in size. Unquestionably, developments in the WTO–and in particular the landmark agreementscovering these three sectors – expand marketaccess and help the United States to financeresearch and investment and to achieve ormaintain preeminence in many high technologysectors.

The Information Technology Agreement (ITA),for example, includes 52 countries representingover 95 percent of trade in the ever expanding$600 billion global market for informationtechnology products. Under the ITA,participants will eliminate tariffs, largely by theyear 2000, on products of interest to the UnitedStates such as computers, computer equipment,semiconductors, telecommunicationsequipment, semiconductor manufacturingequipment and computer based-analyticalinstruments. The Agreement on BasicTelecommunications has opened up over 95percent of the world telecommunicationsmarkets. The market access opportunitiesopened up by this Agreement cover the fullrange of innovative services and technologiespioneered in the United States that continue to propel growth in this sector. The FinancialServices Agreement, covering an overwhelmingshare of the global trade from 102 countries, isopening world financial services’ marketsencompassing $38 trillion in global domesticbank lending, $19.5 trillion in global securitiestrading and $2.1 trillion in world wide insurancepremiums. Financial services is one of theUnited States’ most competitive industries,contributing importantly to the growth of U.S.employment opportunities. Also, more recentwork on electronic commerce has included anagreement to a moratorium on the imposition ofcustoms duties on electronic transmissions. Such market opening agreements expand the


sales base for U.S. high-tech and high-techrelated sectors, helping the firms involved tobetter finance the large outlays of capitalrequired to sustain technology-based growth.

A more detailed discussion of the economicbenefits of the Uruguay Round and WTO for theUnited States in the last five years is found atthe end of this chapter.

B. Work for 2000

The WTO will remain at the center of theformation and execution of U.S. trade policy. Itprovides a strong foundation of rules anddisciplines on which the United States willcontinue to build the trade agenda for the future– bilaterally, regionally and multilaterally.

The WTO faces a number of challenges in thecoming year, from proceeding on the built-inagenda for agriculture and services, toimplementing prior agreements, bringing in newMembers, improving the ability of the leastdeveloped countries to participate, reforming itsinstitutions, and expanding the scope ofnegotiations in pursuit of a new Round. Meeting these challenges is a responsibility thatall WTO Members share. None of these areeasy or simple; but others have shoulderedequally difficult tasks in the past.

Pursuit of the Built-In Agenda Negotiations: The core elements of the negotiating agenda areagriculture and services. These are the sectorsin which markets remain most distorted andclosed, and in which the opening of trade willmean perhaps most to future prospects for risingliving standards, technological progress, andsustainable development. The WTO GeneralCouncil set the initial negotiating meetings forthe mandated negotiations in the first quarter of2000, starting with special sessions of theCommittee on Agriculture and the Council forTrade in Services. Work will include thedevelopment of negotiating proposals this year,a matter on which the United States will be

consulting the private sector in the days ahead. The work has just begun, and theAdministration will soon publish a notice in theFederal Register seeking comments from allinterested parties as we begin the process ofdeveloping proposals for these negotiations. But our view of the initial steps are as follows:

In agriculture, the WTO Agreement onAgriculture, with binding commitments onmarket access, export subsidies and domesticsupport, provides the basis on which to pursuefurther agricultural reform. Useful preparatorywork has already been accomplished throughthe WTO Committee on Agriculture over thelast three years, where countries have identifiedkey issues and their interests.

We are now working with other countries toensure discussions in Geneva focus onsubstantive reform proposals. Our work lastyear enabled us to identify general negotiatingobjectives, such as eliminating export subsidies;reducing tariffs; expanding market accessopportunities for products subject to tariff-ratequotas, including better disciplines on theadministration of those TRQ’s; reducing trade-distorting domestic support levels; and ensuringthat the operation of agricultural state tradingentities are more market-oriented. We alsowant to ensure access for biotechnologyproducts.

The Administration is in the process ofdeveloping proposals to implement theseobjectives. While specific negotiating timelines have not been established by the UruguayRound, the expiration of the agricultural “peaceclause” in 2003, and continued domestic farmreform efforts in the United States, Europe andother countries, should help to move thenegotiations forward.

In services, the Administration has started todevelop negotiating proposals for a wide rangeof sectors where our companies have strongcommercial interests, including energy services,


environmental services, audiovisual services,express delivery, financial services,telecommunications, professional services,education and training, private healthcare, traveland tourism, and other sectors. U.S. companiesare poised to be among the primarybeneficiaries from stronger servicescommitments in the WTO.

Broadly speaking, U.S. objectives are to removerestrictions on services trade and ensure non-discriminatory treatment. We also need toensure that the commitments we obtainaccurately reflect our companies’ range ofcommercial activities. For example, the GATSdefinition of environmental services does notinclude recycling services, an area where U.S.companies are leaders. We will address thisissue in the new negotiations.

U.S. proposals must also reflect the manydifferent means U.S. service providers use tomeet the needs of their foreign customers. Thisincludes U.S. companies that establishoperations overseas – for example, as a branchor subsidiary; that deliver their serviceselectronically by phone, fax, or the Internet; orthat depend on individual personnel to “export”services – for example, Americans that performshort-term consultancy services in a foreigncountry.

Implementation: Monitoring and compliance ofexisting agreements will remain a high priorityfor the Administration. The year 2000 marksthe end of transitions in some Agreementscentral to the functioning of WTO rules in areassuch as intellectual property rights protection,customs valuation, trade-related investmentmeasures and industrial subsidies. CertainWTO Members, particularly less advancedcountries, had been given extra time to bringtheir trade regimes into compliance with therules agreed in the Uruguay Round.

For market access as well, the bulk of marketaccess opportunities agreed in the Round is

nearing full implementation, culminating in thelargest global tax cut in history, through whichtariffs on manufacturing products were cut byone-third. Thus, implementation of, andcompliance with, the Uruguay RoundAgreements will remain a central part of theU.S. agenda in the WTO for the coming year.

Expanding the Agenda: Beyond the mandatednegotiations and implementation, the UnitedStates has pressing needs to address marketaccess concerns in non-agricultural products,electronic commerce, issues related to trade andthe environment, trade facilitation, and perhapsother topics as well. For this reason, we willcontinue to work with our trading partners tobuild the necessary consensus for a new Round. However, to be successful, all countries must beflexible.

The WTO also must look ahead and respond tothe challenges of a new economy that is drivenby rapid technological developments andgrowth in the high technology sector. Since theconclusion of the Uruguay Round, the WTO hasmade impressive gains in this field. Beginningin 2000, as a result of the InformationTechnology Agreement concluded in 1996,tariffs fall to zero on a range of informationtechnology products valued at over $600 billion(e.g., semiconductors, computers andtelecommunications equipment) in 52 countriesthat account for well over 90 percent of worldtrade in such products.

In 1997, the WTO successfully complementedthis breakthrough on the equipment side ofinformation technology by concluding the BasicTelecommunications Services Agreement,which has led to dramatic reductions in the costsof such services around the globe and coversmore than 95 percent of the global market fortelecommunications. Also in 1997, the WTOcompleted historic negotiations in trade infinancial services covering $18 trillion in globalsecurities assets, $38 trillion in global domestic


bank lending and $2.2 trillion in world wideinsurance premiums.

With these Agreements in place, the WTObegan to focus carefully on the promise ofelectronic commerce to enhance developmentand growth prospects. In 1998 WTO Memberssignaled the importance of preventing theestablishment of barriers to electroniccommerce by agreeing to a moratorium onduties for electronic commerce transactions. Ina relatively short period of time, WTO Membershave seen the importance of electroniccommerce to their trade regimes, particularlyfor the less advanced Members, and toleveraging the benefits of the trading system forsmall and medium-sized enterprises.

Strengthening the WTO and its Ability toAddress Citizens’ Concerns, including on Laborand the Environment: Another element for theWTO’s agenda must be to maximize publicconfidence in the WTO’s ability to address theissues of trade and the environment and tradeand labor in a manner that is compatible withbroader U.S. objectives. Ministers have tackledthese issues in a variety of ways during theWTO’s short tenure. In establishing the WTO,the United States sought, and Members agreed,to create a Committee on Trade andEnvironment. Since 1995, the Committee hasprovided an important venue for discussionbetween representatives of government and thetrade and environment communities regardingthe intersection of trade and environment issues.

Similarly, on trade and labor, at the WTO’s firstministerial meeting in Singapore in 1996, tradeministers for the first time committed to theobservance of core labor standards and toencourage continued collaboration between theWTO and the International Labor Organization. The issues of trade and environment and tradeand labor will continue to command attention inthe year ahead. As part of the broader efforts tolaunch a Round, the United States will continue

efforts to build a consensus on addressing theseissues in the WTO’s work program.

Institutional reform, particularly the need forgreater transparency – both internally andexternally – also will be an important agendaitem for the WTO in the coming year. Thus, theyear ahead will continue to find the UnitedStates urging its trading partners to makeadditional progress in enhancing theaccountability and openness of the institution,and taking actions to promote transparency.

The United States has been at the forefront ofefforts to improve public understanding of andaccess to the WTO. The United States has madeprogress and seeks additional action by WTOMembers to provide better and easier means toobtain access to information and documentsfrom the WTO, including dispute settlementproceedings; greater interaction with the NGOcommunity; and an extended range ofopportunities to ensure more effective outreachto citizens and consumers. We have argued thattransparency provides all countries a means ofaddressing problems of corruption in areas likecustoms and procurement.

The WTO and its Members will have to findadditional ways to explain the value of whatmakes the WTO different – i.e., unlike otherinternational institutions, the WTO is andshould remain an inter-governmental, member-driven institution, whose Members takedecisions on the basis of consensus.

As the WTO has become a much largerinstitution, with membership expanding from119 in 1995 to 135 in 1999, suggestions havebeen renewed to improve the WTO’s internalconsultative processes. The United States willwork with its trading partners to improve theWTO’s operation in this regard, withoutdisturbing the fundamental requirement ofdecision-making by consensus. It is clear thatimprovements can be made to ensure that theWTO remains an inclusive institution reflecting


the concerns and interests of its Members atvarying levels of development.

Expanding WTO Membership: One of theWTO’s remarkable achievements over the pastfive years has been the steady effort of countriesat all levels of development to negotiate entryinto the WTO. Nine accession negotiationshave been completed since the WTO wasestablished in 1995. The former SovietRepublics of Latvia, Estonia and the KyrgyzRepublic are now WTO Members. Accession tothe WTO takes hard work and commitment. Inthe coming year, the United States looksforward to expanding the membership of theWTO further, from bringing in major economiessuch as China, to making substantial progresswith a range of partners from the Middle Eastand Eastern Europe and Asia. Early in 2000, theUnited States looks forward to Jordan andGeorgia joining the WTO once their respectiveparliaments have ratified their accessionagreements.

Conclusion: The WTO has given the world acrucial source of economic stability in a verydifficult time. During the recent financial crisis,often overlooked is the fact that countries’binding WTO commitments served to helpresist a protectionist response to the crisis. Thishelped avert the cycle of protection andretaliation of the sort that occurred in the 1920sand 1930s, a cycle which would have deniedaffected countries the markets they need torecover, and hurt our own farmers and workersas well.

The system of WTO rules has repeatedlydemonstrated its worth in helping governmentsrespond to rapid changes in the global economy,as the recovery from the recent financial crisishas shown. The Clinton Administration willcontinue to pursue a vigorous agenda in theWTO to fashion a trading system that keepspace with rapid developments in the 21st

century; one that responds to the concerns of

citizens about the WTO’s accountability, and itsproper role in the global economy.

C. The WTO’s 3rd MinisterialConference, November 30 -December 3, 1999

In May 1998, President Clinton joined otherleaders in celebrating the 50th anniversary of thepost-World War II trading system. In hisspeech, he challenged U.S. trading partners toliberalize world trade further on terms bettersuited to the fast-paced global economy. Hisaddress focused on the need to continue to openmarkets around the world and to further developthe WTO as an institution that is responsive toand responsible for the needs and interests ofvarious constituencies; one that workseffectively with other international institutionslike the international financial institutions andother international organizations such as theILO. One option for reaching these goals,favored by most of the WTO’s Members in1999, was to begin a new Round of multilateraltrade negotiations at the WTO’s 3rd MinisterialConference.

The United States hosted and chaired theWTO’s 3rd Ministerial Conference in Seattle,Washington, from November 30 - December 3,1999. A total of approximately 3,000 delegates,2,700 members of the press and 1,500 NGOrepresentatives were accredited to the 1999Ministerial Conference.

Most WTO Members agreed that the Round tobe launched at the Ministerial would consist, ata minimum, of the mandated negotiations tofurther liberalize trade in services andagriculture, along with other to-be-specifiedtopics. Delegations approached this task withgood will but did not reach a consensus on thelaunch of a new Round.

At various points since the creation of theGATT, governments have made politicallydifficult choices to serve the greater good. At


times, they also have reached deadlocks. Creation of the GATT in 1948, for example,built on a failure to set up an “InternationalTrade Organization” in 1947. The creation ofthe WTO five years ago followed a failedattempt to launch a Round in 1982, a mid-termbreakdown in 1988, and failures to conclude theRound in 1990 and 1992. The more recentnegotiations on financial services andtelecommunications also broke down in 1996and 1997, in all cases to be followed by success. In each instance, governments reviewed theirpositions, and were ultimately able to move theagenda forward.

A preparatory process for the 3rd MinisterialConference was organized in Geneva. WTOMembers agreed on the need to proceed with themandated negotiations from the built-in agenda. Most also agreed that the negotiations needed tobe relatively short and that the scope of thenegotiations needed to be broadened beyond thebuilt-in agenda. WTO Members were nearconsensus on the proper treatment of electroniccommerce, the agenda for negotiations onservices, and several issues relating to trade andthe environment.

Even in the late stages, however, the preparatoryprocess did not narrow the differences betweenWTO Members on a number of other importantissues. These differences contributed to adifficult preparatory process in Geneva. However, the prevailing view at the conclusionof the preparatory process was that onceMinisters convened and political decisions weremade on the basic features of the negotiations,agreement to launch the Round could bereached. Ultimately, of course, the differencescould not be bridged in the preparatory processor in the time available to ministers during theConference, with divisions on agricultureproving to be the litmus test for broaderagreement to launch negotiations.

Major points of disagreement included:

� Agriculture: The EU, Japan and Korearesisted a commitment to thoroughreform of agricultural trade. The built-in agenda negotiations envisionedfurther reductions in export subsidies,strengthened rules on domestic support,reductions in tariffs and the expansionof market access opportunities forproducts subject to tariff-rate quotas.

� Implementation of ExistingAgreements: A number of developingcountries, including some of the mostadvanced, requested broad exemptionsfrom previous commitments. Likewise,certain of our trading partners sought touse the debate on implementation toreopen agreements like textiles orantidumping, confusing in some casesthe problems with implementation witha more basic dissatisfaction over theresults of the Uruguay Round.

� Market Access: Questions herecentered on the breadth of negotiationson market access, whether they could besupplemented with early provisionalresults as was suggested by the APECsectoral initiatives in the industrialsector, and to what extent industrialmarket access would result inimprovements in current or existingmarket access.

� Investment and Competition Policy: The EU and Japan in particular arguedfor negotiation of broad new rules in theareas of investment and competitionpolicy, but found relatively littlesupport.

� Labor: Extensive consultations wereheld at the Ministerial on various waysto address this issue in the WTO’s workprogram. The United States called for


establishment of a Working Group inthe WTO; others proposed a broaderforum engaging other internationalorganizations such as the ILO.

� Environment: Broad agreementemerged to confirm sustainabledevelopment as a guiding principle forthe negotiations, to pursue tradeliberalization in areas that holdparticular promise for yielding bothtrade and environmental benefits and touse the Committee on Trade andEnvironment to identify and considerthe environmental implications of thenegotiations. Differences emergedhowever regarding proposals to addresssubsidies that contribute to over-fishing,and others to modify WTO rules.

The issues outlined above remain to be resolved. With the launch of the built-in agendanegotiations, we will continue to work with ourWTO partners in an effort to build consensustoward the launch of a new Round.

D. Preparations for the 1999WTO Ministerial Conference

Preparations for the Ministerial meeting werethe responsibility of the WTO’s GeneralCouncil, meeting in special session, under thedirection of Chairman John Weekes of Canada,followed by Chairman Ali Mchumo ofTanzania, and Director-General Mike Moore,after his appointment on September 1, 1999. All WTO Members were free to participate inthe preparations. The Council received 235submissions from Members during the course ofits preparations for the Ministerial, covering allthe major trade issues of concern to Members.

The General Council then systematicallyreviewed the issues, as called for in theMinisterial Declaration of May 1998, focusingon: (i) implementation of existing agreements;(ii) the mandated negotiations; (iii) work

mandated under existing agreements anddecisions taken; (iv) any recommendations onthe work program agreed at the SingaporeMinisterial Meeting in 1996; (v)recommendations on the follow-up to the HighLevel Meeting for the Least DevelopedCountries; and (vi) other matters proposed andagreed by Members.

These preparations were conducted in threephases. First, from September 1998 to Februaryof 1999, WTO Members engaged in an issueidentification process. Second, from February1999 through July, they tabled specificnegotiating proposals. Finally, from September1999 to the actual Ministerial Conference, theyworked to draft a Ministerial Declaration forconsideration and adoption by Ministers. Inorder to conduct the preparations in a muchmore open and transparent fashion, the WTO forthe first time used its website to publishproposals submitted by delegations (169 of the235 proposals were submitted by delegations asderestricted documents).

The United States was an active participant inthe preparations for the Ministerial, submittingproposals in phases one and two, and draftingproposals for Declaration text in the course ofinformal consultations that began in the fall of1999.

Proposals Tabled by the United States

� Advancing the WTO’s Contribution toTrade Facilitation

� Agriculture-Biotechnology� Agriculture-Domestic Support� Agriculture-Export Competition� Agriculture-Market Access� Agriculture- Objective and Overall

Framework � Fisheries Subsidies� Further Negotiations As Mandated by

the General Agreement on Trade inServices (GATS)

� Implementation Issues (two proposals)


� Mandated Negotiations and the Built-inAgenda

� Non-industrial Market Access� Singapore Work Program Issues and

Other Issues of Concern to Members:Industrial Market Access, Trade andLabor, Trade and Environment,Transparency and Openness, andTechnical Assistance

� Technical Assistance/Capacity Building(original and revised proposals)

� Trade and Sustainable Development� Trade and Labor� Transparency in Government

Procurement (proposal and draft text)� Transparency in WTO Work

E. Consultations on the Agendafor the Third Ministerial

U.S. Domestic Consultations: The 1998Annual Report called attention to a Trade PolicyStaff Committee (TPSC) solicitation for publiccomment on the elements for the ThirdMinisterial agenda. The Administrationreceived nearly one hundred replies to thissolicitation, copies of which are available in theUSTR reading room. These submissions, alongwith an extensive process of consultations thatextended beyond the private sector advisorycommittees established pursuant to Section 135of the Trade Act of 1974, provided the initialviews used by U.S. negotiators in setting theU.S. priorities. These views were supplementedin 1999 by three important events. In thespring, the Trade Policy Staff Committee heldhearings in Atlanta, Chicago, Dallas, LosAngeles, and Washington D.C. and solicitedpublic comments about the development of theagenda. The comments filed for these hearingsare also available in the USTR reading room. The Department of Agriculture and the Officeof the U.S. Trade Representative also heldhearings around the country to solicit views onthe upcoming agriculture negotiations. Citiesvisited included: Winterhaven, Indianapolis,Austin, Richland, Kearney, Des Moines,

Sacramento, Newark, Burlington, Bozeman,Memphis, and Minneapolis. Information fromthese hearings is available at the USDA website(www.fas.usda.gov). Finally, the U.S.International Trade Commission (ITC) wasrequested to provide advice to the U.S. TradeRepresentative for the market accessnegotiations. Such advice is required before theUnited States can engage in negotiations. TheITC published a notice for comment and heldhearings to prepare its report to the U.S. TradeRepresentative.

Meetings Hosted by the WTO: In addition tothe discussions held in the General Council, theUnited States and other WTO Members soughtto broaden the debate on the WTO’s forwardagenda by calling for WTO-sponsored meetingswith the NGO community. In the lead up to theMinisterial meeting, there was a high-levelmeeting on trade and the environment andanother on trade and development. Details fromthese meetings can be found on the USTRwebsite, and the simulcast remains availablefrom the WTO. Finally, on the eve of theMinisterial meeting, the WTO convened ameeting with NGO participants in Seattle. Notwithstanding that the start of this meetingwas disrupted as a result of demonstrations,once convened, it provided non-governmentalrepresentatives a day-long opportunity to sharetheir views on the full range of pressing mattersbefore the WTO Members.

High Level Symposium on Trade and theEnvironment: In his speech to the WTO inMay 1998, President Clinton called on the WTO“to provide strong direction and new energy tothe WTO’s environmental efforts in the years tocome.” As a result of U.S. leadership, the WTOheld a High Level Symposium on Trade andEnvironment on March 15 -16, 1999. A high-level delegation of 22 U.S. officials participatedin the symposium, which brought togethersenior officials from trade and environmentministries, as well as representatives from non-governmental organizations, the business


community, academia, and other internationalorganizations such as the World Bank and theUnited Nations, to engage in an open dialogueon the trade and environment relationship. Specifically, the agenda addressed the linkagesbetween trade and environmental policies, theinteraction between the trade and environmentcommunities, and the synergies between tradeliberalization and sustainable development. This was the first meeting of its kind, andrepresented to the United States a recognition bymany WTO Members of the role thatsustainable development must play in the globaltrading system. Details of the meeting,including submissions and presentations, can belocated on the WTO website.

High Level Symposium on Trade andDevelopment: The WTO sponsored the HighLevel Symposium on Trade and Developmenton March 17-18, 1999, immediately followingthe High Level Symposium on Trade and theEnvironment, to provide informal high-leveldialogue among senior officials of WTOMembers, senior officials of internationalorganizations, and representatives of non-governmental organizations from developed anddeveloping countries. The symposium offeredthe opportunity for an exchange of views onissues such as the development dimension ofinternational trade issues and trade-relatedconcerns of developing countries, includingleast developed countries, and the role of theWTO in promoting developmental objectivesset out in the preamble to the MarrakeshAgreement establishing the WTO.

NGO Symposium: Immediately prior to theformal opening of the Third Ministerialmeeting, the WTO sponsored a symposiumdesigned to encourage an informal dialogueamong WTO Members and NGOrepresentatives on issues likely to affect theinternational trading system in the next century. Participants included representatives of themore than 700 NGO organizations which hadbeen accredited to the Ministerial Conference.

Topics included: “Trade and DevelopmentProspects for the next Twenty Years: The Roleof International Trade in Poverty Elimination;Effects of Globalization on Developing CountryEconomies; Integration of Developing Countriesinto the Multilateral Trading System” and“Evolving Public Concerns and the MultilateralTrading System: Public Concerns Towards2020, Trade and Sustainable; DevelopmentTrade and Technological Developments.” Themeeting was simulcast and details are availableon the WTO website.

F. Dispute Settlement

1. The Dispute SettlementUnderstanding

The Understanding on Rules and ProceduresGoverning the Settlement of Disputes (DisputeSettlement Understanding or DSU), which isannexed to the WTO Agreement, provides amechanism to settle disputes under the UruguayRound Agreements. Thus, the DSU is key tothe enforcement of U.S. rights under theseAgreements. Assessment of the First Five Years ofOperation

The accomplishments of the WTO disputesettlement system in the last five yearsparticularly stand out when compared to therecord of the prior system under the GATT. Under the GATT, panel proceedings took years,the defending party could simply block anyunfavorable judgment, and the GATT panelprocess did not cover some of the agreements. Under the WTO, there are strict timetables forpanel proceedings, the defending party cannotblock findings unfavorable to it, and there is onecomprehensive dispute settlement processcovering all of the Uruguay Round Agreements. The first five years have demonstrated thatwhen a WTO Member violates its WTOobligations, there will be consequences. Moreover, if a WTO Member violates its


intellectual property or trade in servicesobligations, another Member can be authorizedto retaliate against the goods of the violatingMember.

In setting negotiating objectives for the UruguayRound, Congress placed dispute settlementreform high on the list, as it saw effectiveenforcement as an essential precondition foragreeing to be bound by new rules. Five yearslater, WTO dispute settlement has begun to paythe dividends that Congress sought. Theexistence of effective WTO dispute settlementmeans that U.S. trading partners are on noticethat they have to be serious about living up totheir obligations. Like any other form of lawenforcement, dispute settlement in the WTOcreates a stable and law-abiding climate thatU.S. businesses and workers can depend on,aiding the Administration’s unparalleled recordof economic growth. The WTO disputesettlement mechanism also provides the UnitedStates with a means to raise and to solveparticular bilateral trade problems.

While the DSU has been an effective tool so far,its procedures need to be strengthened –particularly with respect to the procedures formonitoring compliance with WTO rulings andfacilitating swift action in the event of non-compliance. The United States has beenworking over the past year to clarify the disputesettlement procedures to prevent protractedlitigation where there is a disagreement aboutthe WTO-consistency of measures taken tocomply with a panel ruling, and to preclude aparty that has lost a case from gaming thesystem and delaying the exercise of WTO rightsby the complaining parties. Even though thenumber of cases in which WTO Members havecomplied with adverse rulings far outweighs thecases where they have failed to comply, it isnevertheless critical to improve the DSU toensure better implementation. The UnitedStates will continue to seek these and otherimprovements to the DSU, including moreopenness of the dispute settlement proceedings.

(See below for a discussion of the DSU Reviewconducted in 1999.)

During its first five years in operation 185requests for consultations (25 in 1995, 40 in1996, 50 in 1997, 40 in 1998, and 30 in 1999)concerning 144 distinct matters were filed withthe WTO. During that period, the United Statesfiled 49 requests for consultations, and received35 requests for consultations on U.S. measures.

Disputes Brought by the United States

The United States has been the world’s mostactive user of the WTO dispute settlementprocess. The Administration has used WTOdispute settlement both as a means ofvindicating rights in particular cases, and as away to communicate to U.S. trading partnersthat the United States expects them to be asserious as it is about complying with WTOrules. The United States has been successful inlitigation both by prevailing in the cases it hasbrought, and by negotiating agreements thatsettled cases “out of court” in its favor. So far25 of the complaints that we have filed with theWTO have reached resolution, and we prevailedon 23 of them – winning 13 cases in panelproceedings and successfully settling 10 others. And in two cases the United States has beenauthorized to retaliate against a non-complyingWTO Member, without fear of counter-retaliation. Highlights of our litigationsuccesses include:3

� Elimination of discriminatory taxes onU.S. exports of distilled spirits to Japanand to Korea – U.S. exports to Japan in

3 Other cases where the United Statesprevailed in panel proceedings includechallenges to the EU banana import regime; theEU ban on U.S. meat; Argentina’s restrictionson textile imports; Australia’s export subsidieson leather; and Mexico’s antidumping duties onhigh-fructose corn syrup (which has not yetreached the implementation stage).


the year after Japan beganimplementing the WTO rulings were up23 percent over the previous year ($14million), and grew faster than exports toother markets, in spite of the Japaneserecession;

� Elimination of barriers to U.S.magazines in the Canadian market, andthe creation of new tax and investmentbenefits and opportunities for U.S.publishers to sell and distributemagazines in Canada;

� Compliance by India with its WTOintellectual property rights obligationsprior to providing patent protection forpharmaceutical and agriculturalchemical inventions;

� Elimination of Indonesia’s 1996National Car Program and its localcontent requirements whichdiscriminated against imports of U.S.automobiles;

� Elimination of Japanese restrictions onthe imports of certain varieties of fruit,including apples and cherries – Japan’scompliance with the WTO rulings willhelp our growers export more than $50million a year of apples and otherproducts to Japan;

� Elimination of India’s import bans andother quantitative restrictions on 2,700tariff lines of goods – as a result of theWTO ruling, India has alreadyliberalized trade in hundreds of theseitems for the first time, and when Indiacomplies with this ruling for theremaining tariff lines, it will open newmarkets for U.S. producers of consumergoods, textiles, agricultural products,petrochemicals, high technologyproducts and other industrial products;and

� Reduction of Canada’s subsidizedexports of dairy products – Canada willcomply immediately with its WTOexport subsidy commitments on butter,skimmed milk powder, and an array ofother dairy products; beginning in the2000-2001 marketing year, Canada willnot be able to export more than 9,076tons of subsidized cheese, which is lessthan half of the volume exported inrecent years.

Each of these cases provides concrete economicbenefits to the United States. And in each case,we have insisted that our partners act rapidly toaddress the problems. This will remain the casein all our disputes; and in most cases ourpartners have taken their responsibilitiesseriously.

In two longstanding cases involving theEuropean Union, however, the United States,after protracted litigation, had to exercise itsright under the DSU to suspend concessionswith respect to certain products from the EU asa result of the EU’s failure to lift its ban onimports of U.S. meat, as well as its adoption of anew banana import regime that perpetuatesWTO violations previously found by a WTOpanel and the Appellate Body. In both of thesedisputes, talks aimed at a positive resolution arecontinuing. (Both of these cases are more fullydescribed below.)

As important as favorable WTO rulings areearly settlements, achieved without having topursue litigation to completion. In the past 5years we have obtained favorable settlements incases involving:

� Korea’s unfair shelf-life standards foragricultural imports;

� Hungary’s agricultural export subsidies;


� Market access for pork and poultry inthe Philippines;

� Market access for U.S. rice in the EU;

� Full copyright protection for soundrecordings in Japan (which theRecording Industry Association ofAmerica estimated was worth half abillion dollars annually);

� Full enforcement of intellectualproperty rights in Sweden;

� Improved patent protection for U.S.inventions in Portugal;

� Pakistan’s provisions for exclusivemarketing rights for pharmaceutical andagricultural chemicals;

� Elimination of tax discriminationagainst imported movies in Turkey; and

� Trade-related investment measures onautos in Brazil.

In addition to the 13 disputes that the UnitedStates has successfully pursued through WTOlitigation, we also pursued two other complaintsinvolving measures that, in our view, deniedU.S. rights under the WTO agreements, but wedid not obtain rulings in our favor. One caseinvolved Europe’s reclassification of local-areacomputer network equipment from one tariffcategory to another. The WTO ruling in thatcase, however, had no effect because wesucceeded in negotiating the elimination oftariffs on such equipment in the multilateralInformation Technology Agreement (ITA). Theproducts at issue now enter the EU duty-free nomatter where classified, and the ITA hasensured against any repetition of the problem. In the other case, we challenged variousJapanese laws, regulations, and requirementsaffecting Japanese imports of photographic filmand paper, but the WTO panel did not find

sufficient evidence that Japanese Governmentmeasures were responsible for changes in theconditions of competition between imported anddomestic photographic materials. While theUnited States did not prevail in the film dispute, Japan made a number of representations duringthe course of the panel process regarding theopenness of its photographic film and papermarket, and we have been actively monitoringJapan’s actions to ensure that they are in linewith Japan’s representations. (See Japan sectionin Chapter V.)

Disputes Brought Against the United States

During the past five years, 35 complaints werefiled in the WTO against U.S. measures. Sevenof those cases have completed all phases of thelitigation process, including an appeal whereone was filed. In one case, a WTO panel upheldthe WTO-consistency of a U.S. law: Section301 of the Trade Act of 1974. Section 301 isthe principal U.S. statute for addressing foreigntrade barriers. In the other six cases, someaspect of U.S. practice was found inconsistentwith U.S. WTO obligations.

When we have defended a U.S. statute orregulation and have not prevailed, we haverespected our WTO obligations – just as weexpect the same of our trading partners – andresponded in a manner that did not diminishU.S. sovereignty. For example:

� In a dispute regarding an EnvironmentalProtection Agency (EPA) regulation onconventional and reformulated gasoline,a WTO panel found against one aspectof the regulation that treated domesticcompanies differently than their foreigncompetitors. In that case, the WTOAppellate Body took a broad view ofthe WTO’s exception for conservationmeasures and affirmed that clean air isan exhaustible natural resource coveredby that exception. The WTO rulingrecognized the U.S. right to impose


special enforcement requirements onforeign refiners that sought treatmentequivalent to U.S. refiners. The abilityof the United States to achieve theenvironmental objective of thatregulation was never in question, andEPA was able to issue a revisedregulation that fully met its commitmentto protect health and the environmentwhile meeting U.S. obligations underthe WTO.

� In a dispute involving U.S. restrictionson imports of shrimp harvested in amanner harmful to endangered speciesof sea turtles (the “Shrimp-Turtle” law),on appeal the Appellate Body agreedthat our law was within the scope of theWTO’s exception for conservationmeasures. Although the AppellateBody found problems in the U.S.implementation of the law, these issuescould be addressed in a manner that didnot weaken, and in fact promoted, oursea turtle conservation efforts. Inparticular, the Appellate Body foundthat the procedures for determiningwhether countries meet therequirements of the law did not provideadequate due process, because exportingnations were not given formalopportunities to be heard, and were notgiven formal written explanations ofadverse decisions. The Appellate Bodyalso found that the United States hadunfairly discriminated between thecomplaining countries and WesternHemisphere nations by not exerting asgreat an effort to negotiate a sea turtleconservation agreement with thecomplaining countries and by notproviding them the same opportunitiesto receive technical assistance. TheUnited States informed the WTO of itsintention to implement the ruling in amanner consistent not only with WTOobligations, but also with the firm

commitment of the United States toprotect endangered sea turtles. In July1999 the State Department revised itsprocedures to provide more due processto countries applying for certificationunder the Shrimp-Turtle law. TheUnited States is also engaged with thecomplaining countries in the process ofnegotiating a comprehensive sea turtleconservation agreement, and isproviding them with additionaltechnical assistance. Throughout thecase, U.S. import restrictions on shrimpharvested in a manner harmful to seaturtles have remained fully in effect.

� We also failed to prevail in two casesinvolving U.S. import measures ontextiles and apparel – on underwearfrom Costa Rica and on wool shirts andblouses from India. The measure onunderwear from Costa Rica wasimposed in March 1995 for a two-yearperiod. It ran to the full length of itsterm and expired in March 1997, onemonth after dispute settlementproceedings had concluded. Themeasure on wool shirts from India wasunilaterally terminated by the U.S.interagency Committee onImplementation of Textile Agreements(which oversees the U.S. textile importprogram) due to changed commercialconditions. U.S. production in thiscategory had increased and importsfrom India in this category hadplummeted. The WTO panel did notrecommend that the United States makeany changes, and no action by theUnited States was necessary.

� In a dispute involving a CommerceDepartment antidumping order onKorean dynamic random accessmemory chips (DRAMs), we prevailedon all but one of the claims raised byKorea. Specifically, Korea won on one


claim that the standard in Commerce’sregulation on review of antidumpingorders should have been whether it was“likely” that dumping would continue orrecur if an antidumping order wererevoked instead of “not not likely.” Commerce amended the regulation inquestion and has made aredetermination retaining the DRAMsantidumping order under the revisedregulation.

� Finally, in a case challenging theForeign Sales Corporation (FSC)provisions in U.S. tax law, the WTOAppellate Body ruled on February 24,2000 that the FSC tax exemptionconstitutes a prohibited export subsidyunder the WTO Subsidies Agreement,and also violates the WTO Agreementon Agriculture. The Appellate Bodyreport is due to be adopted in March.

The WTO dispute settlement system does notgive panels any power to order the United Statesor other countries to change their laws. If apanel finds that a country has not lived up to itscommitments, all a panel may do is recommendthat the country begin observing its obligations. It is then up to the disputing countries to decidehow they will settle their differences. Thedefending country may choose to make achange in its law. Or it may decide instead tooffer trade “compensation” – such as lowertariffs. The countries concerned could agree oncompensation or on some other mutuallysatisfactory solution. Alternatively, thedefending country may decide not to change itsmeasure and the country that lodged thecomplaint may retaliate by suspending tradeconcessions equivalent to the trade benefits ithas lost.

2. Dispute Activity in 1999

a. Disputes Brought by the UnitedStates

The United States continues to be the mostactive user of the WTO dispute settlementprocess. In 1999, eight new complaints werefiled by the United States. This section includesbrief summaries of dispute settlement activity in1999 with respect to those cases in which theUnited States was a complainant. These casesinvolve a variety of different WTO-inconsistenttrade barriers maintained by several differentgovernments. As demonstrated by thesesummaries, the WTO dispute settlement processhas proven to be an effective tool in combatingbarriers to U.S. exports. Indeed, in manyinstances, the United States has been able toachieve satisfactory outcomes invoking theconsultation provisions of the dispute settlementprocedures, without recourse to formal panelprocedures.

New complaints filed by the United States in1999:

The United States filed the following eight newcomplaints under WTO dispute settlementprocedures in 1999, covering a broad range ofsectors and various WTO Agreements:

Republic of Korea – Measures affectingimports of fresh, chilled, and frozen beef. TheRepublic of Korea has established a regulatoryscheme that discriminates against imported beefby confining sales of imported beef tospecialized stores, limiting the manner of itsdisplay, and otherwise constraining theopportunities for the sale of imported beef. Inaddition to challenging the regulatory scheme,the United States contends that the Republic ofKorea imposes a markup on sales of importedbeef, limits import authority to certain so-called“super-groups” and the Livestock ProducersMarketing Organization (LPMO), and providesdomestic support to the cattle industry in the


Republic of Korea in amounts that cause thecountry to exceed its aggregate measure ofsupport as reflected in its WTO schedule. Theserestrictions appear to be inconsistent with theGATT 1994, the Agreement on Agriculture, andthe Import Licensing Agreement. Consultationswere held March 11-12, 1999, and a panel wasestablished on May 26, 1999. Australia alsobrought a dispute against the Republic of Koreaon the same measures; the Australian and U.S.panels have been consolidated.

Republic of Korea – Measures affectinggovernment procurement. The United States ischallenging certain procurement practices ofKorean entities responsible for the procurementof airport construction in the Republic of Korea. The United States believes these practices,which include domestic partneringrequirements, the absence of access to challengeprocedures, and inadequate bid deadlines, areinconsistent with the Republic of Korea’sobligations under the Agreement onGovernment Procurement (GPA). While theRepublic of Korea contends that the entitiesresponsible for the procurement of airportconstruction are not covered under its GPAobligations, the United States maintains thatsuch entities are in fact within the scope of thecountry’s list of covered central entities asspecified in its GPA concessions. Consultationswith the Republic of Korea were held March 17,1999. On May 11, 1999, the United Statesrequested the establishment of a panel. A panelwas established on June 16, 1999.

Argentina – Certain measures affectingimports of footwear. In November 1998Argentina adopted Resolution 1506 modifyingan existing safeguard measure on imports offootwear from non-MERCOSUR countries. This resolution imposes a tariff-rate quota(TRQ) on such imports, in addition to safeguardduties previously imposed. Moreover, theresolution postponed any liberalization of theoriginal safeguard duty until November 30,1999, and liberalized the TRQ only once during

the life of the measure. On March 1, 1999, theUnited States requested consultations withArgentina on this measure, alleging violationsof the Agreement on Safeguards. A panel wasestablished on July 26, 1999, but work did notproceed pending the outcome of a disputebrought by the European Union involving thesame matter. On December 14, 1999, theAppellate Body in the EU challenge upheld thepanel’s determination that Argentina violatedthe Agreement on Safeguards. The UnitedStates is currently monitoring Argentina’simplementation of the panel and AppellateBody’s rulings and recommendations.

Canada – Patent protection. The TRIPSAgreement obligates WTO Members to grant aterm of protection for patents that runs at least20 years from the filing date of the underlyingapplication, and requires each Member to grantthis minimum term to all patents existing as ofthe date of application of the Agreement to thatMember. Under the Canadian Patent Act, theterm granted to patents issued on the basis ofapplications filed before October 1, 1989 is only17 years from the date on which the patent isissued. This provision is inconsistent withCanada’s obligations under the TRIPSAgreement. The United States filed a requestfor consultations on May 6, 1999. Consultations were held June 11, 1999. TheUnited States requested the establishment of apanel on July 15, 1999. The panel wasestablished on September 22, 1999.

Argentina – Patent and test data protection forpharmaceuticals and agricultural chemicals. The United States is challenging Argentina’sfailure to provide a system of exclusivemarketing rights for pharmaceutical products,pursuant to the TRIPS Agreement. In addition,the United States is challenging Argentina’sfailure to ensure that changes in its laws andregulations during its transition period do notresult in a lesser degree of consistency with theprovisions of the TRIPS Agreement. TheUnited States filed a request for consultations on


May 6, 1999. Consultations were held on June15, 1999 and again on July 27, 1999.

France and EU – Measures relating to thedevelopment of a flight management system. This dispute involved a French government loan– on preferential and non-commercial terms – inthe amount of 140 million French francs, to bedisbursed over three years, for a project inwhich a French company, Sextant Avionique,will develop a new flight management system(FMS) adapted to Airbus aircraft. The grant ofthe loan was approved by the EU. On May 21,1999, the United States filed a request forconsultations. Consultations were held on June30, 1999.

EU – Protection of trademarks andgeographical indications for agriculturalproducts and foodstuffs. EU Regulation2081/92, as amended, does not provide non-discriminatory treatment with respect togeographical indications for agriculturalproducts and foodstuffs; it also does not providesufficient protection to pre-existing trademarksthat are similar or identical to such geographicalindications. The United States considers thatthis measure is inconsistent with the EU’sobligations under the TRIPS Agreement andrequested consultations regarding this matter onJune 1, 1999. Consultations were held on July9, 1999.

India – Measures affecting trade andinvestment in the motor vehicle sector. Inorder to obtain import licenses for certain motorvehicle parts and components, India requiresmanufacturing firms in the motor vehicle sectorto achieve specified levels of local content, toneutralize foreign exchange by balancing thevalue of certain imports with the value ofexports of cars and components over a statedperiod, and to limit imports to a value based onthe previous year’s imports. Considering theserequirements inconsistent with India’sobligations under the GATT 1994 and theTRIMS Agreement, the United States requested

consultations on June 2, 1999. Consultationswere held on July 20, 1999.

Activity in 1999 on disputes that werecommenced in prior years:

Argentina – Specific duties and other measuresaffecting imports of footwear, textiles andapparel. The United States prevailed when itchallenged (with the EU, Hungary and Indiaparticipating as interested third parties) specificduties imposed by Argentina on various textile,apparel and footwear items in excess of its tariffcommitments; a statistical tax of 3 percent advalorem on almost all imports; and measuresrequiring that each import of textiles, appareland footwear be labeled with the number of acorresponding affidavit of product componentfiled with the Argentine government. OnNovember 25, 1997, the panel found that thespecific duties violated Argentina’s tariffbindings under GATT Article II, and that thestatistical tax violated GATT Article VIII. TheAppellate Body then determined on March 27,1998 that the structure and design ofArgentina’s specific duties resulted in thelevying of customs duties at rates aboveArgentina’s Article II tariff bindings. Argentinacapped its specific duties on textiles and apparelat 35 percent in October 1998, and compliedwith the ruling on the statistical tax in February1999.

Australia – Prohibited export subsidies onleather. The United States prevailed in thisdispute concerning subsidies available to leatherproducers under Australia’s Textile, Clothingand Footwear Import Credit Scheme (TCFscheme) and other subsidies granted ormaintained, which are prohibited underArticle 3 of the Agreement on Subsidies andCountervailing Measures (SubsidiesAgreement). Under the original TCF scheme,exporters of eligible products could earn importcredits. After consultations held October 31,1996, the two sides reached a settlementannounced on November 25, 1996, with an


agreement by Australia to excise automotiveleather from eligibility for these exportsubsidies by April 1, 1997. However, soon aftersettling this dispute, Australia announced a newpackage of subsidies, granted to the soleAustralian exporter of automotive leather. OnNovember 10, 1997, the United States requestedWTO consultations on the new measures; theconsultations took place December 16, 1997. On January 22, 1998, a panel was establishedunder the expedited procedures of the SubsidiesAgreement. Further consultations wererequested on May 4, 1998 and a replacementpanel was established June 22, 1998.

On May 25, 1999, the panel circulated its report,ruling that the grant constituted a WTO-inconsistent export subsidy and recommendingthat Australia withdraw the subsidy within 90days. Australia did not appeal to the WTOAppellate Body and the Dispute SettlementBody adopted the panel report on June 16, 1999. On September 14, 1999, Australia announcedthat it had taken actions to implement thefindings of the panel report. The United Statesdid not consider Australia’s action as full andcomplete compliance and therefore asked thepanel to review Australia’s implementation ofthe recommendations. The panel recently ruledthat Australia had not complied. If asatisfactory solution cannot be reached withAustralia, the Dispute Settlement Body willauthorize the United States to suspendconcessions (i.e., retaliate) with respect toproducts of Australia.

Canada – Export subsidies and tariff-ratequotas on dairy products. The United Statesprevailed on its claim that Canada wasproviding subsidies to exports of dairy productswithout regard to its Uruguay Roundcommitment to reduce the quantity ofsubsidized exports, and was maintaining a tariff-rate quota on fluid milk under which it onlypermitted the entry of milk in retail-sizedcontainers by Canadian residents for theirpersonal use. On March 19, 1999, the panel

issued its report upholding U.S. arguments byfinding that Canada’s export subsidies areinconsistent with the Agreement on Agriculture. Similarly, the panel determined that Canada’spractice of restricting the import of milk toretail-sized containers imported by Canadianresidents is inconsistent with its obligationsunder the GATT 1994. On October 13, 1999,the Appellate Body issued its report upholdingthe panel’s finding that Canada’s exportsubsidies are inconsistent with its GATTobligations. The panel and Appellate Bodyreports were adopted by the DSB on October 27,1999. On December 22, the parties reachedagreement on the time period forimplementation by Canada. Under thisagreement, Canada will implement the DSB’srulings and recommendations in stages; Canadahas already implemented on some measures,and will complete full implementation no laterthan December 31, 2000.

Canada – Measures affecting split-runmagazines. This dispute, in which weprevailed, concerned Canada’s measuresaffecting “split-run” and other importedmagazines, including a ban on imports ofmagazines with advertisements directed atCanadians, a special excise tax on split-runmagazines, and discriminatory postal rates onimported magazines. The panel found thatCanada’s import ban violated the provisions ofGATT 1994. Upon appeal, the Appellate Bodyrejected Canada’s argument that the excise taxwas a services measure and confirmed thepanel’s determination with regard to the GATT1994. Canada abolished the excise tax, thepostal rate discrimination, and the import ban inOctober 1998. However, the Canadiangovernment proposed legislation which, ifenacted, would have accomplished the sameprotectionist result. On May 26, 1999, theUnited States and Canada successfully reachedan agreement that not only addresses U.S.concerns, but also provides commitments fromCanada in the areas of investment, tax, andmarket access for U.S. periodicals carrying


advertisements directed primarily for theCanadian market. In return, the United Stateshas committed not to take further action underthe WTO.

Denmark – Measures affecting enforcement ofintellectual property rights. The United Statesused the dispute settlement procedures in thiscase to encourage action by Denmark toimplement its TRIPS obligations. The TRIPSAgreement requires that all WTO Membersprovide provisional relief in civil intellectualproperty rights enforcement proceedings. Afternumerous consultations with the United Statesin 1997 and 1998, the Government of Denmarkagreed to form a special committee to consideramending Danish law to provide this type ofremedy. The work of the committee appears tobe proceeding in the right direction, and theUnited States expects Denmark to move towardamendment of its law in the near future. Wecontinue to monitor Denmark’s progress on thisissue.

EU – Regime for the importation, sale anddistribution of bananas. The United States,along with Ecuador, Guatemala, Honduras, andMexico, successfully challenged the EU bananaregime. The regime was designed, among otherthings, to take away a major part of the bananadistribution business of U.S. companies. OnMay 22, 1997, the panel found that the EUbanana regime violated WTO rules; theAppellate Body upheld the panel’s decision onSeptember 9, 1997. At the request of thecomplaining parties, the compliance period wasset by arbitration and expired on January 1,1999. However, on January 1, 1999, the EUadopted a regime that perpetuates the WTOviolations identified by the panel and theAppellate Body. The United States soughtWTO authorization to suspend concessions (i.e.,retaliate) with respect to certain products fromthe EU, the value of which is equivalent to thenullification or impairment sustained by theUnited States. The EU exercised its right torequest arbitration concerning the amount of the

suspension and on April 6, 1999, the arbitratorsdetermined the level of suspension to be $191.4million. On April 19, 1999, the DSB authorizedthe United States to suspend such concessions,and the United States proceeded to impose 100percent ad valorem duties on a list of EUproducts with an annual trade value of $191.4million. Discussions with the EU to resolve thismatter are continuing.

EU – Hormone ban. The United States andCanada successfully challenged the EU ban onimports of meat from animals to which any ofsix hormones for growth promotional purposeshad been administered. The panel found thatthe EU ban is inconsistent with the EU’sobligations under the SPS Agreement and thatthe ban is not based on science, a riskassessment, or relevant international standards. Upon appeal, the Appellate Body affirmed thepanel’s findings that the EU ban fails to satisfythe requirements of the SPS Agreement. TheAppellate Body also found that while a countryhas broad discretion in electing what level ofprotection it wishes to implement, in doing so itmust fulfill the requirements of the SPSAgreement. In this case the ban imposed is notrationally related to the conclusions of the riskassessments the EU had performed. The EU’sban ignored a vast body of scientific evidence –including evidence produced by the EU’s ownreviews – that it is safe to consume meat fromanimals to which these drugs have beenadministered in accordance with good animalhusbandry practice. Because the EU did notcomply with the rulings and recommendationsof the DSB by May 13, 1999, the final date ofits compliance period as set by arbitration, theUnited States sought WTO authorization tosuspend concessions (i.e., retaliate) with respectto certain products of the EU, the value of whichrepresents an estimate of the annual harm toU.S. exports resulting from the EU’s failure tolift its ban on imports of U.S. meat. The EUexercised its right to request arbitrationconcerning the amount of the suspension. OnJuly 12, 1999, the arbitrators determined the


level of suspension to be $116.8 million. OnJuly 26, 1999, the DSB authorized the UnitedStates to suspend such concessions, and theUnited States proceeded to impose 100 percentad valorem duties on a list of EU products withan annual trade value of $116.8 million. Discussions with the EU to resolve this matterare continuing.

Greece – Enforcement of intellectual propertyrights. The United States has obtained positiveresults through the pursuit of this dispute underthe dispute settlement process. Prior to theUnited States initiating this case, a significantnumber of television stations in Greeceregularly broadcasted copyrighted motionpictures and television programs without theauthorization of the copyright owners; effectiveremedies against such copyright infringementswere not provided. Copyrights owned by U.S.nationals were violated in this manner, despiteefforts by the U.S. owners to enforce their rightsin Greece. The United States considered thesituation to be inconsistent with the TRIPSAgreement. Consultations were held on June 11and September 28, 1998. In September 1998,the Greek government enacted new legislationto crack down on pirate stations. The U.S.industry has filed several test cases under thisnew law, the majority of which have beenresolved. In addition, the rate of televisionpiracy in Greece fell significantly in 1999. Discussions were held again in April 1999 andthe United States continues to monitor thesituation.

India – Import quotas on agricultural, textileand industrial products. The United Statesprevailed in its challenge to India’s importrestrictions on more than 2,700 tariff items. These restrictions are no longer justified underthe balance-of-payments (BOP) exceptions ofthe GATT 1994. On April 6, 1999, the panelcirculated its report, finding that India’squantitative restrictions on imports violate theWTO Agreement and rejecting India’s claimthat its BOP situation justified them. The

Appellate Body confirmed the panel’sdetermination on August 23, 1999. The DSBadopted the panel and Appellate Body reports atits meeting on September 22, 1999. The UnitedStates and India have agreed that India willimplement the DSB’s rulings andrecommendations by April 1, 2000 forapproximately 73 percent of the tariff items atissue in this case, and by April 1, 2001 for theremaining items.

India – Patent protection for pharmaceuticaland agricultural chemical products. TheUnited States successfully challenged Indiaregarding its failure to provide a “mailbox”system for filing patents for pharmaceutical andagricultural chemical products, and for failing toprovide a system of exclusive marketing rightsfor such products. Both a panel and theAppellate Body ruled in favor of the UnitedStates. The compliance period of April 19,1999 was set by agreement with India. Indiaannounced at the April 28, 1999 DSB meetingthat it had completed its implementation byenacting, among other things, amendments to itspatent law and new regulations, to thesatisfaction of the United States.

Indonesia – Certain measures affecting theautomobile industry. The United Statesprevailed in this dispute affecting U.S. autoexports. Beginning in 1993, Indonesia grantedtax and tariff benefits to automobilemanufacturers based on the percentage of localcontent in a finished automobile. In 1996, theIndonesian Government established the“National Car Program,” which granted“pioneer” companies luxury tax and tariff-freetreatment if they met gradually-increasing localcontent requirements. On April 22, 1998, aWTO panel requested by the United Statesfound that Indonesia’s measures violated itsobligations under the Agreement on Trade-Related Investment Measures (TRIMSAgreement) and the GATT 1994. Indonesia hasalready eliminated the 1996 National CarProgram, and the 1993 program was to be


terminated by July 22, 1999, as determinedthrough WTO arbitration. On July 26, 1999,Indonesia announced that it had fullyimplemented the rulings and recommendationsof the DSB. The United States continues tomonitor Indonesia’s new automotive sectorpolicy.

Ireland and EU – Measures affecting the grantof copyright and neighboring rights. In thisdispute, the United States used WTO disputesettlement consultations to encourage Ireland totake further steps to implement its TRIPSobligations. Ireland has not comprehensivelyrevised its copyright law to implement theTRIPS Agreement. Examples of TRIPSinconsistencies include the absence of rentalrights for sound recordings and the lack of“anti-bootlegging” provisions. Afterconsultations with the United States, Irelandcommitted in February 1998 to accelerate itsimplementation of comprehensive copyrightreform legislation, and agreed to pass a separatebill, on an expedited basis, to address twoparticularly pressing enforcement issues. Consistent with this agreement, Ireland enactedlegislation in July 1998 raising criminalpenalties for copyright infringement andaddressing other enforcement issues. Theprocess of completing comprehensive copyrightlegislation is progressing, but is currentlybehind schedule. The United States continues tomonitor Ireland’s progress and to press for rapidimplementation of the new legislation.

Japan – Measures affecting imports ofagricultural products. The United Statesobtained a favorable ruling when it complainedto the WTO that, when requiring quarantinetreatment for agricultural products, Japanprohibited the importation of each variety of aproduct until the quarantine treatment had beentested for that particular variety (even thoughthe same treatment was proven effective forother varieties of the same product). OnOctober 6, 1998, a WTO panel found thatJapan’s testing requirement was not supported

by scientific evidence, was more traderestrictive than required, and was non-transparent. Japan appealed certain panelfindings and the United States cross-appealed. The Appellate Body decision, issued onFebruary 22, 1999, broadly upheld the paneldecision and accepted the U.S. cross-appeal(extending the scope of the findings to covermore products). The Appellate Body alsoreversed the panel finding that the requirementwas more trade restrictive than necessary. As aresult of this dispute, variety-by-variety testingmust be eliminated, not just simplified. TheDSB adopted these reports on March 19, 1999and Japan agreed to implement the rulings andrecommendations of the DSB by December 31,1999. On July 30, 1999, Japan’s AgricultureMinistry announced that it had lifted restrictionson the imports of certain varieties of fruit,including apples and cherries.

Republic of Korea – Taxes on alcoholicbeverages. The United States, joined by the EU,prevailed in this case against Korean excise taxrates that discriminate in favor of the Koreandistilled spirit soju and against whisky and otherWestern-type distilled spirits. On May 23,1997, the United States requested consultations. On October 16, the DSB established a singlepanel to consider both the EU and U.S.complaints against the Republic of Korea. Thefinal panel report, circulated on September 17,1998, found that the Republic of Korea’s liquortaxes violate Article III:2 of GATT 1994. TheAppellate Body confirmed this finding onJanuary 18, 1999. The reports were thenadopted on February 17, 1999. The Republic ofKorea confirmed to the DSB its commitment tomeet its obligations under the WTO with respectto this matter, and an arbitrator determined thatit had to comply by January 31, 2000. Tocomply with the rulings, the KoreanGovernment has harmonized tax rates onKorean and imported alcoholic beverages andhas reduced taxes on imports of whiskey by 28percentage points.


Mexico – Antidumping investigation of highfructose corn syrup from the United States. Atthe panel stage of this dispute the United Statesprevailed. In 1997, Mexico had commenced anantidumping investigation, on the basis of apetition by the Mexican sugar industry,concerning the import of high fructose cornsyrup (HFCS) from the United States. TheUnited States successfully challenged thefindings of this investigation under the WTOAntidumping Agreement. A WTO panelestablished on November 25, 1998, ruled thatMexico’s imposition of antidumping duties onHFCS was inconsistent with the requirements ofthe Antidumping Agreements in severalrespects. Mexico did not appeal, and the panelreport was adopted on February 24, 2000.

Sweden – Measures affecting enforcement ofintellectual property rights. A satisfactoryresolution of this dispute was reached throughthe use of WTO dispute settlement procedures,without having to resort to panel proceedings. The TRIPS Agreement requires that all WTOMembers provide provisional relief in civilenforcement proceedings (see discussion ofDenmark above). Sweden had not implementedthis obligation. On May 27, 1997, the UnitedStates requested consultations with Swedenconcerning Sweden’s failure to implement thisobligation. Consultations were held on June 27and in September 1997. Settlement was thenreached on November 25, 1998, when Swedenpassed legislation addressing U.S. concerns. The legislation took effect on January 1, 1999.

b. Disputes Brought Against the UnitedStates

Section 124 of the URAA requires inter aliathat the Annual Report on the WTO describe,for the preceding fiscal year of the WTO, thestatus and matter at issue in each proceedingbefore a panel or the Appellate Body that wasinitiated during that fiscal year regardingFederal or State law and for the status of theproceeding, and each report issued by a panel or

the Appellate Body in a dispute settlementproceeding regarding Federal or State law. Thissection includes summaries of disputesettlement activity in 1999 with respect to thosecases in which the United States was adefendant.

New complaints filed against the United Statesin 1999:

United States – Section 110(5) of the CopyrightAct. As amended in 1998 by the Fairness inMusic Licensing Act, section 110(5) of the U.S.Copyright Act provides that certain retailestablishments may play radio music withoutpaying royalties to songwriters and musicpublishers. The EU claims that, as a result ofthis exception, the United States is in violationof its TRIPS obligations. Consultations with theEU took place on March 2, 1999. A panel onthis matter was established on May 26, 1999.

United States – 1916 Revenue Act. Title VII ofthe Revenue Act of 1916 (15 U.S.C. §§ 71-74,entitled “Unfair Competition”), often referred toas the Antidumping Act of 1916, allows forprivate claims against, and criminalprosecutions of, parties that import or assist inimporting goods into the United States at a pricesubstantially less than the actual market value orwholesale price. The EU claims that the 1916Act is not in conformity with the GATT 1994and the Antidumping Agreement. A panel wasestablished on January 29, 1999 and will issueits final report in March 2000. Separately,Japan submitted a request for consultations onthe same matter on February 10, 1999. Consultations with Japan took place on March17, 1999. A panel pursuant to Japan’s requestwas established July 26, 1999.

United States – Import measures on certainproducts from the EU. On March 4, 1999, theEU requested consultations regarding increasedU.S. Customs bonding requirements on certainimports from the EU, alleging violations of theDSU and of the GATT 1994. The United States


had increased bonding requirements to preserveits ability to collect any increased duties whichmight ultimately be authorized by the DSB as aresult of the EU’s failure to comply with theDSB’s rulings and recommendations in thedispute involving Bananas (see descriptionabove). Consultations were held on April 21,1999, and a panel was established on June 16,1999.

United States – Safeguard measure on importsof wheat gluten from the EU. By PresidentialProclamation 7103 of May 30, 1998, the UnitedStates imposed a safeguard measure in the formof a quantitative limitation on imports of wheatgluten from the EU. On March 17, 1999, theEU requested consultations concerning thissafeguard measure, asserting that it is inviolation of the Agreement on Safeguards, theAgreement on Agriculture, and the GATT 1994. Consultations were held on May 3, 1999. Apanel was established July 26, 1999.

United States – Countervailing dutyinvestigation with respect to live cattle fromCanada. On March 19, 1999, Canada requestedconsultations regarding a countervailing dutyinvestigation, initiated by the United States onDecember 22, 1998 concerning Canadiansubsidies on live cattle. Canada contended thatthe initiation of this investigation wasinconsistent with U.S. obligations under theWTO, and alleged that the countervailing dutypetition was not “by or on behalf of” thedomestic industry and that the information inthe petition was insufficient as a basis forinitiating such an investigation. Canadaasserted that the initiation was inconsistent withthe WTO Agreement on Subsidies andCountervailing Measures and the Agreement onAgriculture. Consultations were held April 22,1999. On October 12, 1999, the Department ofCommerce issued a final negativedetermination, thereby terminating theinvestigation.

United States – Section 211 of the 1998Omnibus Appropriations Act. Section 211addresses the ability to register or enforce,without the consent of previous owners,trademarks or trade names associated withbusinesses confiscated without compensation bythe Cuban government. The EU questions theconsistency of Section 211 with the TRIPSAgreement and it requested consultations onJuly 7, 1999. Consultations were heldSeptember 13 and December 13, 1999.

United States – Safeguard measure on importsof fresh, chilled, or frozen lamb. On July 22,1999, the United States imposed a safeguardmeasure on imports of lamb meat from NewZealand and Australia, pursuant to section 203of the Trade Act of 1974. New Zealand andAustralia requested consultations on July 16 andJuly 23, 1999, respectively, claiming violationsof the GATT 1994 and the Agreement onSafeguards. Consultations were held August 26,1999. A panel was established on November18, 1999.

United States – Antidumping measures onstainless steel from Republic of Korea. TheGovernment of the Republic of Korea contendsthat several errors were made by the UnitedStates Department of Commerce in thePreliminary and Final determinations ofStainless Steel Plate in Coils from the Republicof Korea dated January 20, 1999 and June 8,1999, respectively. The Republic of Koreaclaims that these errors resulted in improperfindings and deficient consultations as well asthe imposition, calculation and collection ofantidumping margins which are incompatiblewith the obligations of the United States underthe Antidumping Agreement and the GATT1994. On October 14, 1999, the Republic ofKorea requested the establishment of a panel. Apanel was established on November 18, 1999.

United States – Tariff reclassification of sugarsyrups. The Government of Canada requestedconsultations with the United States to review


the U.S. reclassifications of certain sugar syrupsby the United States Customs Service. Canadabelieves that these measures are inconsistentwith the GATT 1994 and the Agreement onAgriculture. Consultations were held onOctober 20, 1999, and no further action hasbeen taken.

United States – Antidumping measures oncertain hot-rolled steel products from Japan. Japan contends that the preliminary and finaldeterminations of the United States Departmentof Commerce and International TradeCommission in their antidumping investigationsof certain hot-rolled steel products from Japan,issued on November 25 and 30, 1998, February12, 1999, April 28, 1999, and June 23, 1999,were erroneous and based on deficientprocedures under the U.S. Tariff Act of 1930and related regulations. Japan claims that theseprocedures and regulations violate the GATT1994, as well as the Antidumping Agreement. Consultations were held on January 13, 2000,and Japan thereafter requested the establishmentof a panel.

Activity in 1999 on disputes that werecommenced in prior years:

United States – Measures relating to theimportation of shrimp and shrimp products. The United States prevailed on the centralpoints of a challenge brought by India,Malaysia, Pakistan, and Thailand to U.S.restrictions on imports of shrimp and shrimpproducts harvested in a manner harmful toendangered species of sea turtles, under aspecial “shrimp-turtle” statute. (This case didnot concern and did not affect the EndangeredSpecies Act.) A dispute settlement panel foundthat these import restrictions were inconsistentwith WTO rules. However, the United Statesappealed, and on October 12, 1998, theAppellate Body largely reversed the panel’sruling. The Appellate Body confirmed thatWTO rules allow Members to condition accessto their markets on compliance with certain

policies such as environmental conservation andagreed that the U.S. “shrimp-turtle law” was apermissible measure adopted for the purpose ofsea turtle conservation. The Appellate Bodyalso found that WTO rules permit panels toaccept unsolicited amicus curiae briefs fromnon-governmental organizations. The AppellateBody, however, did find fault with certainaspects of the U.S. implementation of theshrimp-turtle law. In particular, it found that theState Department’s procedures for determiningwhether countries meet the requirements of thelaw did not provide adequate due process,because exporting nations were not affordedformal opportunities to be heard, and were notgiven formal written explanations of adversedecisions. The Appellate Body also found thatthe United States had unfairly discriminatedbetween the complaining countries and WesternHemisphere nations by not exerting as great aneffort to negotiate a sea turtle conservationagreement with the complaining countries andby not providing them the same opportunities toreceive technical assistance.

The United States informed the DSB of itsintention to implement the rulings andrecommendations of the DSB in a mannerconsistent not only with WTO obligations, butalso with the firm commitment of the UnitedStates to protect endangered species of seaturtles. In this connection, the United Statesagreed to an implementation period of 13months, which ended on December 6, 1999. After Congressional consultations andopportunities for input from all interestedparties, in July 1999 the State Departmentrevised its procedures to provide more dueprocess to countries applying for certificationunder the shrimp-turtle law. In addition, theState Department is making progress in effortsto negotiate a sea turtle conservation agreementwith the countries of the Indian Ocean region,including the complaining countries, and theUnited States is providing the complainingcountries with additional technical assistance inthe adoption of sea turtle conservation


measures. Throughout the case, U.S. importrestrictions on shrimp harvested in a mannerharmful to sea turtles have remained fully ineffect.

United States – Rule of origin for textiles andapparel. This dispute has been settled throughconsultations. On May 23, 1997, the UnitedStates received an EU request for consultationsconcerning U.S. rules of origin for textile andapparel products provided for in section 334 ofthe Uruguay Round Agreements Act. The EUrequest stated that these rules adversely affectexports of EU fabrics, scarves and other flatproducts to the United States; it cited possibleincompatibility with the ATC, the Agreementon Rules of Origin, GATT 1994, and the TBTAgreement. On July 15, 1997, the EU andUnited States reached agreement on asettlement, committing themselves inter alia toachieving a satisfactory resolution in the WTOnegotiations on harmonization of rules of originfor textiles. On November 19, 1998, the EUagain requested consultations concerning U.S.rules of origin for textiles. Consultations wereheld on January 15, 1999 and later the two sidesreached an agreement to settle this case. Alegislative proposal to implement thatsettlement was included in the Trade andDevelopment Act of 1999 as approved by theSenate, which is currently awaiting action by aconference committee.

United States – Antidumping measures onDRAMs from the Republic of Korea. TheRepublic of Korea challenged the Department ofCommerce’s antidumping review of dynamicrandom access memory (DRAM)semiconductors from the Republic of Korea,alleging that Commerce’s decision not to revokethe antidumping order was inconsistent with theAntidumping Agreement and the GATT 1994. The panel report was circulated on January 29,1999. While the panel rejected almost all of theRepublic of Korea’s claims, it found that,technically, the “not likely” standard inCommerce’s regulations (for determining

whether dumping would continue or recur if anantidumping order were revoked) did not meetthe requirements of Article 11.2 of theAntidumping Agreement. The panel report wasadopted on March 19, 1999 and neither sideappealed. On April 15, 1999, the United Statesindicated its intention to implement the ruling ofthe DSB. The parties eventually negotiated a“reasonable period” for implementation, inwhich the United States agreed to implement byNovember 19, 1999. The CommerceDepartment amended its regulations to complywith the panel report, and made aredetermination under the revised regulationsretaining the antidumping order on DRAMsfrom the Republic of Korea.

United States – Foreign Sales Corporation(FSC) tax provisions. The EU challenged theFSC provisions of the U.S. tax law, claimingthat the provisions constitute prohibited exportsubsidies and import substitution subsidiesunder the Subsidies Agreement, and that theyviolate the export subsidy provisions of theAgreement on Agriculture. A panel wasestablished on September 22, 1998. The panelfound that the FSC tax exemption constitutes aprohibited export subsidy under the SubsidiesAgreement, and also violates U.S. obligationsunder the Agriculture Agreement. The paneldid not make findings regarding the FSCadministrative pricing rules or the EU’s importsubstitution subsidy claims. The panel reportwas circulated on October 8, 1999 and theUnited States filed its notice of appeal onNovember 26, 1999. The Appellate Bodycirculated its report on February 24, 2000. TheAppellate Body upheld the panel’s finding thatthe FSC tax exemption constitutes a prohibitedexport subsidy under the Subsidies Agreement,but, like the panel, declined to address the FSCadministrative pricing rules or the EU’s importsubstitution subsidy claims. While theAppellate Body reversed the panel’s findingsregarding the Agriculture Agreement, it foundthat the FSC tax exemption violated provisions


of that Agreement other than the ones cited bythe panel.

United States – Imposition of countervailingduties on certain hot-rolled lead and bismuthcarbon steel products originating in the UnitedKingdom. This dispute is pending before theWTO Appellate Body. The EU is challengingseveral administrative reviews conducted by theDepartment of Commerce with respect to thecountervailing duty order placed on certain hot-rolled lead and bismuth carbon steel productsfrom the United Kingdom, alleging violations ofthe Subsidies Agreement. The EU claims thatthe Department of Commerce improperlyattributed the benefits of subsidies received byBritish Steel Corporation (BSC) to UES, a jointventure that acquired BSC’s leaded barfacilities, and that the Department of Commercealso improperly attributed to the production ofleaded bars the benefits of subsidies received byBSC prior to its privatization. Consultationswere held on July 29, 1998, and a panel wasestablished February 17, 1999. The panelreport, circulated on December 23, 1999, foundthat the Department of Commerce’s attributionof pre-privatization subsidies to the privatizedUES and BSC was inconsistent with theSubsidies Agreement. However, thecountervailing duty order in question wasrevoked by operation of law on January 1, 2000under the Department of Commerce’s “sunsetreview” procedures. The United States filed itsnotice of appeal on January 27, 2000.

United States – Sections 301 - 310 of the TradeAct of 1974. The panel in this case rejected theEU claims and upheld the U.S. law as consistentwith WTO rules. In late 1998 the EUcomplained about these provisions of the U.S.trade law, especially sections 304 to 306,alleging that the law does not allow the UnitedStates to comply with the DSU. Consultationswere held on December 17, 1998, and a panelwas established on March 2, 1999. OnDecember 22, 1999, the panel circulated itsreport rejecting the EU complaint. The panel

concluded that the U.S. law was not inconsistentwith U.S. WTO obligations and the panel foundnothing to contradict evidence that the UnitedStates has in fact acted in accordance with itsWTO obligations in every Section 301determination involving an alleged violation ofU.S. WTO rights. The panel concluded thatneither the EU nor the third parties to thedispute had demonstrated otherwise. The EUdecided not to appeal and the panel report wasadopted on January 27, 2000.

G. The Dispute Settlement Body

The DSU is administered by the DisputeSettlement Body (DSB), which includesrepresentatives of all WTO Members. The DSBis empowered to establish dispute settlementpanels, adopt panel and Appellate Body reports,oversee the implementation of panelrecommendations adopted by the DSB, andauthorize the suspension of concessions where adefending party fails to comply with DSBrecommendations and rulings. Furtherbackground on the WTO dispute settlementprocess can be found in Annex II of this Report.

Assessment of the First Five Years ofOperation

In its first five years of operation, the DSB hasaddressed the ambitious agenda set for it by thenegotiators in the Uruguay Round, and has putin place the rules and institutions required for afunctioning dispute settlement system. It hasestablished rules of conduct designed to keepthe system free from conflicts of interest. It haselected the members of an Appellate Body thathas become one of the most active andproductive tribunals in the field of internationallaw. Yet while the DSB has made someprocedural decisions when required, the agendaof dispute settlement in the WTO remainsmember-driven. Any procedural innovationshappen not because panels or the AppellateBody impose them on the parties, but becauseMember governments propose and agree to


them. The review of WTO dispute settlementrules and procedures conducted in the last twoyears was run as a member-driven process inwhich all proposals were generated by Membersand agreed by consensus.

In January 1999, the DSB for the first timeauthorized measures in response to non-compliance by a WTO Member with panel andAppellate Body rulings. The United Statesinvoked its WTO and DSU rights and proposedto suspend concessions in an amount equivalentto the trade damage caused to the United Statesby the EU’s illegal banana import regime. Resisting repeated attempts at blockage by theEU, the DSB authorized the United States toproceed. This action by the DSB was a signal toagricultural exporters everywhere thatcompliance with WTO rules cannot simply beignored. Later in 1999, the DSB againauthorized suspension of concessions(retaliation) by the United States against the EUin the hormones case, again reinforcing WTOrules.

Major Issues in 1999

The DSB met 42 times in 1999 to oversee thedispute settlement process, to conduct informalmeetings discussing the ongoing review of theDispute Settlement Understanding, and to takecare of tasks such as approving additions to theroster of governmental and non-governmentalpanelists.

DSU Review: A 1994 Decision taken byMinisters at Marrakesh provided for a generalreview of WTO dispute settlement rules andprocedures, to be completed within four yearsafter the WTO Agreement’s entry into force,i.e., by January 1, 1999. USTR solicited inputfor U.S. positions in the Review through aFederal Register notice in June 1998, and drewon the comments received in formulating U.S.proposals and reactions to the proposals of otherdelegations. The U.S. paper tabled in theReview on October 30, 1998, emphasized two

key goals: enhancement of compliance withWTO obligations, and enhancement oftransparency in WTO dispute settlement. InDecember 1998, the DSB agreed to extend thedeadline for completion of the DSU Review toJuly 31, 1999. However, after many informalnegotiating meetings of the DSB in the earlypart of 1999, consensus for an amendmentpackage did not emerge by the July deadline. Discussions have continued informally, and theDSU Review package of proposed amendmentsremains pending.

Roster of Governmental and Non-GovernmentalPanelists: Article 8 of the DSU makes it clearthat panelists may be drawn from either thepublic or private sector and must be “well-qualified,” such as persons who have served onor presented a case to a panel, represented agovernment in the WTO or the GATT, servedwith the Secretariat, taught or published in theinternational trade field, or served as a seniortrade policy official. The Secretariat maintaineda roster of non-governmental experts since 1985for GATT 1947 dispute settlement, which wasavailable for use by parties in selectingpanelists. In 1995, the DSB agreed onprocedures for renewing and maintaining theroster, and for expanding it to includegovernmental experts. In response to a U.S.proposal, the DSB also adopted standardsincreasing and systematizing the information tobe submitted by roster candidates, to aid inevaluation of candidates’ qualifications and toencourage appointment of well-qualifiedcandidates who would have expertise in thesubject matters of the Uruguay RoundAgreements. In 1999, the DSB approved byconsensus a number of additional names for theroster. The United States scrutinized thecredentials of these candidates to assure thequality of the roster. At the end of 1999, theDSB initiated a renewal of the roster, which wasnot completed as of December 31, 1999. TheWTO panel roster as of December 31, 1999,appears in the background information in AnnexII at the end of this Report. The roster notes the


areas of expertise of each roster member (goods,services and/or TRIPS).

Rules of Conduct for the DSU: The DSBcompleted work on a code of ethical conduct forWTO dispute settlement and on December 3,1996, adopted the Rules of Conduct for theUnderstanding on Rules and ProceduresGoverning the Settlement of Disputes. A copyof the Rules of Conduct was printed in theAnnual Report for 1996 and due to itsimportance is reproduced in Annex II of thisReport. (The Rules of Conduct are alsoavailable on the WTO and USTR websites.) There were no changes in these Rules in 1999.

The Rules of Conduct were designed toelaborate on the ethical standards built into theDSU, and to maintain the integrity, impartialityand confidentiality of proceedings conductedunder the DSU. The Rules of Conduct requireall individuals participating in disputesettlement proceedings to disclose direct orindirect conflicts of interest prior to theirinvolvement in the proceedings, and to conductthemselves during their involvement in theproceedings so as to avoid such conflicts. TheRules of Conduct also provide parties to adispute an opportunity to address potentialmaterial violations of these ethical standards. The coverage of the Rules of Conduct exceedsthe goals established by Congress in section123(c) of the Uruguay Round Agreements Act,which directed the USTR to seek conflicts ofinterest rules applicable to persons serving onpanels and members of the Appellate Body. The Rules of Conduct cover not only panelistsand Appellate Body members, but also (i)arbitrators; (ii) experts participating in thedispute settlement mechanism (e.g., thePermanent Group of Experts under theSubsidies Agreement); (iii) members of theWTO Secretariat assisting a panel or assisting ina formal arbitration proceeding; (iv) theChairman of the Textile Monitoring Body(TMB) and other members of the TMBSecretariat assisting the TMB in formulating

recommendations, findings or observationsunder the Agreement on Textiles and Clothing;and (v) support staff of the Appellate Body.

As noted above, the Rules of Conductestablished a disclosure-based system. Examples of the types of information thatcovered persons must disclose are set forth inAnnex 2 to the Rules, and include the following:(i) financial interests, business interests, andproperty interests relevant to the dispute inquestion; (ii) professional interests; (iii) otheractive interests; (iv) considered statements ofpersonal opinion on issues relevant to thedispute in question; and (v) employment orfamily interests.

Appellate Body: The DSU requires the DSB toappoint seven persons to serve on an AppellateBody, which is to be a standing body, withmembers serving four-year terms, except forthree initial appointees determined by lot whoseterms expire at the end of two years. At its firstmeeting on February 10, 1995, the DSBformally established the Appellate Body, andagreed to arrangements for selecting itsmembers and staff. They also agreed thatAppellate Body members would serve on a part-time basis, and sit periodically in Geneva. Theoriginal seven Appellate Body members, whotook their oath on December 11, 1995, are: Mr.James Bacchus of the United States, Mr.Christopher Beeby of New Zealand, ProfessorClaus-Dieter Ehlermann of Germany, Dr. SaidEl-Naggar of Egypt, Justice Florentino Felicianoof the Philippines, Mr. Julio Lacarte Muró ofUruguay, and Professor Mitsuo Matsushita ofJapan. The names and biographical data for theAppellate Body members are included in theannex to this report. On June 25, 1997, it wasdetermined by lot that the terms of Messrs. Ehlermann, Feliciano and Lacarte-Muró wouldexpire in December 1997. The DSB agreed onthe same date to reappoint them for a final termof four years commencing December 11, 1997.


In September 1999, Messrs. El-Naggar andMatsushita announced their intention to retire atthe end of their terms, on December 11, 1999. On November 3, the DSB agreed to reappointMessrs. Bacchus and Beeby for a final term offour years commencing December 11, 1999. The DSB also agreed to extend the terms ofMessrs. El-Naggar and Matsushita until the endof March 2000 and to initiate a process toensure their timely replacement. The DSBagreed to request nominations by December 17,1999 and to set up a Selection Committeecomposed of the WTO Director-General,together with the 1999 Chairs of the GeneralCouncil, the DSB, and the Councils for Trade inGoods, Trade in Services and TRIPS, with aview to a recommendation being made to theDSB for a decision at its meeting in March2000.

The Appellate Body has also adopted WorkingProcedures for Appellate Review. On February28, 1997, the Appellate Body issued a revisionof the Working Procedures, providing for a two-year term for the first Chairman, and one-yearterms for subsequent Chairmen. Mr. LacarteMuró, the first Chairman, served until February7, 1998; Mr. Beeby served from February 7,1998 to February 6, 1999; Mr. El-Naggar servedfrom February 7, 1999 to February 6, 2000; andMr. Feliciano’s term as Chairman runs fromFebruary 7, 2000 to February 6, 2001.

In 1999, the Appellate Body issued 10 reports,of which 4 involved the United States as a partyand are discussed in detail below. The 6 otherreports concerned Argentina’s safeguardmeasures on footwear imports, Brazil’s exportsubsidies for aircraft, Canada’s export subsidiesfor aircraft, Chile’s taxes on distilled spirits, theRepublic of Korea’s safeguard measures ondairy imports, and Turkey’s quantitativerestrictions on textiles. The United States wasan active third party in all but one of thoseappeals.

Work for 2000

In 2000, the United States expects the DSB tocontinue to focus on the administration of thedispute settlement process in the context ofindividual disputes. Experience gained with theDSU will be incorporated into theAdministration’s litigation and negotiationstrategy for enforcing U.S. WTO rights. Therevised DSU Review package remains apending item.

The United States has long sought aninternational trading system governed byenforceable rules. If WTO dispute settlementproceedings are to play the role of ultimateguarantor of the system, they must be open toobservation by the public, and open to receivinginput from the public. Openness of this sort isessential to assuring public support for thelegitimacy of WTO dispute settlement. As theWTO takes on more complex and controversialcases, there is an ever-increasing need fortransparency in dispute settlement.

The United States has taken many steps on itsown to improve the transparency of the WTOdispute settlement process. USTR seeks publiccomment, through a Federal Register notice, onevery dispute that goes to a panel where theUnited States is a party. USTR also makes itswritten submissions to panels and the AppellateBody available to the public as soon as they aresubmitted. The United States routinely requeststhe parties to any WTO case (even cases inwhich it is not a party) to provide it with a copyof their submissions or non-confidentialsummaries for release to the public.

USTR makes WTO panel reports available tothe public upon receipt, and the WTO makesWTO panel and Appellate Body reportsavailable on the Internet for downloading theday after they are circulated in Geneva, andsometimes the same day. This is also true ofother WTO documents regarding disputes. The


consultation requests and panel requests inevery dispute are circulated to all WTOMembers in all three official languages(English, French and Spanish) as publicdocuments, and immediately put on the WTOwebsite. Any member of the public can accessWTO documents through the Internet andfollow the progress of WTO disputes on thatwebsite. In this way, members of the public canfind out from these WTO documents that therewill be a panel proceeding and what issues thepanel will address, even before the panel isestablished.

The United States has proposed that the WTOinclude a mechanism to permit non-governmental stakeholders to present theirwritten views on disputes, and that the WTOallow the public to observe WTO panel andappellate proceedings. The United States willcontinue to urge other WTO Members to workwith the United States to enhance thetransparency of the WTO dispute settlementprocess, through changes in the workingprocedures applied in individual disputes, andthrough an ongoing assessment of the operationof the DSU.

Implementation of the WTOAgreements

A. General Council Activities

Status

The WTO General Council is the highestdecision-making body in the WTO that meets ona regular basis during the year. It exercises allof the authority of the Ministerial Conference,which is required to meet once every two years. The General Council and MinisterialConference consist of representatives of allWTO Members. Three major bodies reportdirectly to the General Council: the Council forTrade in Goods, the Council for Trade inServices, and the Council for Trade-Related

Aspects of Intellectual Property Rights. Allsubsidiary bodies report through this hierarchy;the Committee on Trade and Environment, theCommittee on Trade and Development, theCommittee on Balance of PaymentsRestrictions, the Committee on Budget, Financeand Administration, and the Committee onRegional Trading Arrangements report directlyto the General Council. The Working Groupsestablished at the First Ministerial Conferencein Singapore to examine investment, trade andcompetition policy, and transparency ingovernment procurement also report directly tothe General Council. Ambassador Ali SaidMchumo of Tanzania served as Chairman of theGeneral Council in 1999.


The General Council has successfully fulfilledthe role envisioned when the WTO was createdin 1995. It follows the pattern of the GATTCouncil – conducting the regular business of theWTO between meetings of the MinisterialConference. Only the Ministerial Conferenceand the General Council are permitted to adoptauthoritative interpretations of the WTOAgreements, submit amendments to theAgreements for consideration by Members, andto grant waivers of obligations. All accessionsto the WTO must be approved by the GeneralCouncil or the Ministerial Conference. Technically, meetings of both the DisputeSettlement Body and the Trade Policy ReviewBody (TPRB) are meetings of the GeneralCouncil convened for the purpose ofdischarging the responsibilities of the DSB andTPRB.

The General Council has a heavy responsibilityin following the work of the WTO, monitoringcompliance and in the management of theinstitution, including the Secretariat. Over thepast five years the General Council has servedas the focal point of activity in the WTO, fromdispensing with hundreds of regular businessitems to addressing the most difficult, complex


and contentious issues confronting the WTO. The Chairman of the General Council, whoserves an annual term and is selected from theWTO Membership, plays an important role inworking with the Director-General andSecretariat in managing the day-to-day work ofWTO and addressing issues of concern toMembers. The work of the General Council, inmany cases, is all the more important becausethe WTO is a new organization and many rulesand policies are new or must be developed.

The General Council is the body, beyond allothers, that is most representative of the viewsof the 135 Members of the WTO. It attracts thehighest level of attention and participation ofWTO Members, and meetings are attended byHeads of Delegation, generally senior tradepolicy officials at the level of Ambassador. Tothe extent that there is disagreement within themembership on a particular issue, it will bereflected in the work of the General Council andresolved by the Chairman in consultation withthe Membership. The General Council hasworked effectively in achieving consensus onmany issues ranging from making the WTOoperational in 1995 to facilitating the entranceof new Members to providing a forum for allMembers to be heard.


The General Council met 18 times during 1999in regular session and seven times in specialsession, focusing on preparations for the thirdMinisterial Conference discussed earlier in thischapter.

Accessions: The General Council approves theterms of accession of Members whennegotiations are complete. In 1999, the GeneralCouncil approved the accession of Estonia,Georgia and Jordan. Estonia became a Memberof the WTO on November 13, 1999, afterdepositing its instrument of ratification. Domestic ratification of the terms of accessionfor Jordan and Georgia are expected early in2000. Additional details are discussed below in

the section “Accession to the World TradeOrganization.”

Waivers of Obligations: As part of the annualreview required by Article IX of the WTOAgreement, the General Council consideredreports on the operation of a number ofpreviously agreed waivers and decided byconsensus to extend the waivers for specifiedperiods. The Council agreed to extend threesuch waivers applicable to the United Statesconcerning the Caribbean Basin EconomicRecovery Act, the Andean Trade PreferencesAct, and preferences for the Former TrustTerritories of the Pacific Islands. (Annex IIcontains the list of waivers currently in force.) The General Council also approved two newwaivers. One waiver allows developingcountries to extend tariff preferences to least-developed countries without providing thosepreferences to other WTO Members. Developed countries, including the UnitedStates, generally provide preferential marketaccess for least developed countries throughtheir respective GSP programs. A waiverallowing Peru an additional three months toimplement its obligations under the Agreementon Customs Valuation was also approved.

Review of Procedures for Circulation andDerestriction of WTO Documents: In 1996, theGeneral Council adopted a decision onprocedures for the circulation and derestrictionof WTO documents which was designed toreduce the number of documents withheld fromthe public and to speed the circulation ofWTO-origin information both to Members andto the public at large. The 1996 decision calledfor a review in 1998 and, beginning with theFebruary 1998 meeting of the General Council,the United States introduced proposals designedto further the dissemination of WTO documentsto the public. A proposal put forth by the U.S.delegation in the course of 1998 urged Membersto agree to make unrestricted information on theoutcome of dispute settlement panel proceedingsavailable on a more expedited basis after disputesettlement rulings are made. Although the


various proposals put forth by the United Statesand others enjoy a wide degree of supportamong WTO Members, the General Councilwas not able to reach a consensus onmodifications to the 1996 decision. Discussionsof these issues continued throughout 1999without resolution. Debate on the disputesettlement documents also took place in theDSU Review.

Selection of the Next Director-General andSenior Management Team: The GeneralCouncil, in the person of its chairman, oversawthe consultations for selection of a newDirector-General and senior management team. The previous Director-General, RenatoRuggiero, retired in April 1999. At the sametime, the terms of the four serving DeputiesDirector-General expired and these officials leftthe organization. After intensive consultationsamong Members, on July 22 a consensus wasreached to appoint Mr. Mike Moore of NewZealand as Director-General. Mr. Moore willserve a three year term, from September 1, 1999to August 31, 2002. He will be succeeded byDr. Supachai Panitchpakdi of Thailand, whowill serve from September 1, 2002 to August 31,2005.

At the October 6 meeting, following theappointment of the Director-General, theGeneral Council agreed that a review of theWTO Secretariat and senior managementstructure would be carried out in conjunctionwith the review of the current Rules andProcedures for appointment ofDirectors-General, to be concluded by the endof September 2000.

After consulting with WTO Members, onNovember 3, Director-General Mooreannounced the selection of four DeputiesDirector-General: Mr. Ablasse Ouedraogo ofBurkina Faso, Mr. Miguel Rodriquez Mendozaof Venezuela, Mr. Paul-Henri Ravier of France,and Mr. Andrew Stoler of the United States. The terms of service are until September 30,2002.

Work for 2000

In addition to its regular responsibility ofoverseeing the work of the WTO, a significantfocus of the Council will be devoted tofollow-up activities from the 3rd MinisterialConference, including the work on mandatednegotiations in agriculture and services;developing a consensus on a broader negotiatingagenda; implementation issues; transparencyrelated issues (the internal operation of theWTO as well as outreach to civil society); andthe program of action for least-developedcountries and technical cooperation issues. TheCouncil will be the venue for decisions to betaken on the expansion of negotiations or thepreparation of decisions on a launch of a newRound.

The Council will continue to oversee work onrevisions to the 1996 Decision on Circulationand Derestriction Procedures and oversight ofthe work program on electronic commerce willalso feature importantly in the work of theCouncil, as will the likely consideration ofpotential new Members’ accession protocols. Early in 2000, the Council will be expected toconsider the mandates of the working groups oninvestment, competition policy, andtransparency in government procurement thatwere established at the Singapore Ministerialmeeting, and how work in these areas shouldproceed.

B. Council for Trade in Goods

Status

The WTO Council for Trade in Goods (CTG)oversees the activities of twelve committees(Agriculture, Antidumping Practices, CustomsValuation, Import Licensing Procedures,Information Technology, Market Access, Rulesof Origin, Safeguards, Sanitary andPhytosanitary Measures, Subsidies andCountervailing Measures, Technical Barriers toTrade and Trade-related Investment Measures(TRIMS)) in addition to the Textiles Monitoring


Body (TMB), the Working Party on StateTrading, and the Working Party on PreshipmentInspection). In 1999, the CTG held five formalmeetings.


At the conclusion of the Uruguay Round, theCouncil for Trade in Goods was established. Ithas proven to be a useful forum for discussingissues and decisions which may ultimatelyrequire the attention of the General Council forresolution or a higher-level discussion, andputting the issue in the broader context of therules and disciplines that apply to trade ingoods. The CTG serves as a place to lay thegroundwork and to resolve issues on manymatters that will ultimately require GeneralCouncil approval. The use of the waiverprovisions, for example, often are initiated inthe Goods Council. One question that has beenraised is whether the Council on Goods isneeded given the fact that issues andrecommendations are sent forward to theMinisterial Conference via the General Council. The Services and TRIPS Councils report to theGeneral Council directly, so there may be valuein reflecting on this question further.


As the central oversight body in the WTO formonitoring agreements related to trade in goods,the CTG addressed a number of important issuesin 1999. Much of its attention was devoted toproviding formal approval of decisions andrecommendations proposed by its subsidiarybodies. The CTG also served as a forum forairing initial complaints regarding actions takenby individual Members with respect to theoperation of agreements under its purview. Many of these were resolved by interestedMembers through consultations, although somewere subsequently pursued through the DisputeSettlement Body.

The actions taken by the CTG in 1999 include:

� Approval of the Working Party Reporton Preshipment Inspection.

� Referral of a number of newly notifiedregional agreements to the Committeeon Regional Trading Agreements forconsideration of their consistency withWTO obligations.

� Approval of the extension of a numberof waivers, including those related toimplementation of the HarmonizedSystem and renegotiation of tariffschedules, tariff preferences bydeveloping countries to least developedcountries, and a short extension of thetransition period for implementation ofthe Agreement on Customs Valuationby one country and referral of these tothe General Council for final decision. (Annex II of this Report lists waiverscurrently in force.)

Work for 2000

The CTG will continue to discharge itsresponsibilities as the final approving body fordecisions and recommendations made by itsvarious subsidiary bodies. The Council willcontinue its work on waivers, as it did in 1999. The United States will continue to use the CTGas another means to draw attention to problemsrelated to monitoring and compliance. Giventhe renewed attention to implementation ofexisting Agreements, expiry of transitionperiods in a number of rules agreements (e.g.,Customs Valuation and TRIMS) and staging ofmarket access commitments from the UruguayRound, the CTG is poised to play an active rolein the enforcement efforts of WTO Members. In light of experience to date, and the work ofthe General Council on implementation issues,the United States will assess suggestions tostreamline the WTO Committee process andmerge the functions of the CTG, which wouldrequire modification of existing Agreements.


1. Committee on Agriculture

Status

The WTO Committee on Agriculture overseesimplementation of and adherence to theAgreement on Agriculture. It provides a vitalforum for consultation and, in many cases,resolution of issues resulting from thecommitments made in the Uruguay Round. TheCommittee is also charged with monitoring thefollow-up to the 1995 Marrakesh MinisterialDecision on Measures Concerning the PossibleNegative Effects of the Reform Program onLeast Developed and Net Food ImportingDeveloping Countries.

During 1999, the Committee concluded its workon the Analysis and Information Exchange(AIE) that had been mandated by the WTO’s 1st

Ministerial Conference in Singapore. The AIEwas charged with reviewing issues arising out ofthe implementation of the Uruguay RoundAgreement and identifying possible areas toaddress in the continuation of the agriculturereform process, mandated as part of the WTO’sbuilt-in agenda.


The Agreement on Agriculture represents amajor step forward in bringing agriculture morefully under WTO disciplines. The creation ofnew trade rules and specific market-openingcommitments has transformed the world tradingenvironment in agriculture from one wheretrade was heavily distorted and basically outsideeffective GATT disciplines to a rules-basedsystem that quantifies, caps and reduces trade-distorting protection and support. Prior to theestablishment of the Agreement, Members wereable to block imports of agricultural products,provide essentially unlimited productionsubsidies to farmers, and dump surplusproduction on world markets with the aid ofexport subsidies. As a consequence, U.S.farmers and ranchers were denied access to

other countries’ markets and were undercut bysubsidized competition in world markets.

The WTO Agreement on Agriculture set out aframework that imposed disciplines in threecritical areas affecting trade in agriculture.

� First, the Agreement places limits on theuse of export subsidies. Products thathad not benefitted from export subsidiesin the past are banned from receivingthem in the future. Where Members hadprovided export subsidies in the past,the future use of export subsidies wascapped and reduced.

� Second, the Agreement set agriculturaltrade on a more predictable basis byrequiring the conversion of non-tariffbarriers, such as quotas and importbans, into simple tariffs. Currently,trade in agricultural products can onlybe restricted by tariffs. Quotas,discriminatory licensing, and other non-tariff measures are now prohibited. Also, all agricultural tariffs were“bound” in the WTO and made subjectto reduction commitments; a decision bya Member to impose tariff rates above abinding would violate WTO obligations. Creating a “tariff-only” system foragricultural products is an importantadvance, yet too many high tariffs andadministrative difficulties with tariff-rate quota systems that replaced thenon-tariff barriers continue to impedeinternational trade of food and fiberproducts.

� Third, the Agreement calls for reductioncommitments on trade-distortingdomestic supports, while preservingcriteria-based “green box” policies thatcan provide support to agriculture in amanner that minimizes distortions totrade. Governments have the right tosupport farmers if they so choose. However, it is important that this


support be provided in a manner thatcauses minimal distortions toproduction and trade.

As a result, farmers all over the world benefitfrom access to new markets and improvedaccess to existing markets, face less subsidizedcompetition, and now have a solid frameworkfor addressing agricultural trade disputes. Yet itis clear that full agricultural reform is a long-term endeavor. Hence, the Agreement alsocalled for new negotiations on agriculturebeginning in 1999, as part of the “built-in”agenda of the WTO.

The Committee on Agriculture has proven sinceits inception to be a vital instrument for theUnited States in monitoring and enforcingagricultural trade commitments that wereundertaken by other countries in the UruguayRound. Members agreed to provide annualnotifications of progress in meeting theircommitments in agriculture, and the Committeehas met frequently to review the notificationsand monitor activities of Members to ensure thattrading partners honor their commitments.

Under the watchful eye of the Committee,Members have, for the most part, been incompliance with the agricultural commitmentsthat they undertook in the WTO. However,there have been important exceptions whereclear violations of Uruguay Round commitmentshave adversely affected U.S. agricultural tradeinterests. In these situations, the AgricultureCommittee has frequently served as anindispensable tool for resolving conflicts beforethey become formal WTO disputes. Thefollowing are some examples:

� Resolution of issues related to the use ofexport subsidies in Hungary, benefittingU.S. exports of grains, fruits andvegetables by nearly $10 million.

� Elimination of restrictions on beefimports by Switzerland that affected

approximately $15 million in U.S.exports.

� Resolution of issues related to accessfor pork and poultry in the Philippines. In the case of pork, resolution of thisissue meant additional U.S. exports ofup to $70 million, and in the case ofpoultry, of up to $20 million.

� Resolving issues associated withTurkey’s imposition of a tax onimported cotton, important to U.S.exports of more than $150 million.

� Resolution of issues related to theimplementation of a tariff-rate quota onpoultry in Costa Rica helped to tripleU.S. exports to that country in 1998.

� Questioning Canada concerning a milkpricing scheme that appeared to be inviolation of Canada’s export subsidycommitments. Building on a processthat began with the Committee’sdiscussion, the United States eventuallywon a WTO dispute settlement case onthis issue, benefitting U.S. exporters byreining in unfairly subsidized dairyexports from Canada.


In 1999, the Committee on Agriculture remainedan effective forum for raising agricultural tradeissues of concern to participating Members. The United States played a leading role in theCommittee’s activities, working with othercountries to ensure broad-based compliancewith WTO commitments on agriculture.

The Committee held four formal meetings, inMarch, June, September and November of 1999. Over the course of these meetings, WTOMembers provided detailed notifications to theCommittee on their adherence to thecommitments they undertook in the UruguayRound related to export subsidies, market access


and domestic supports. As a result of theCommittee’s strong history of vigilance onrequired notifications since the conclusion ofthe Uruguay Round, most Membersconscientiously supply the required information. The United States and other Members alsoexamined ways to streamline the notificationrequirements on market access commitments,export subsidies, and domestic support.

In November, the Committee conducted itsannual monitoring exercise on the possiblenegative effects of agricultural reform on leastdeveloped and net food importing countries. Inthis review, the Food and AgricultureOrganization (FAO) reported that the combinedcereal import bill of least-developed and net-food importing countries in marketing year1998/99 was down 15 percent from the previousyear. This decline reflects a small reduction inthe volume of imports but, more substantially,much lower average prices paid for imports.

The following are some of the more importantspecific issues that were raised in theCommittee:

Notifications: The Committee reviewed morethan 250 notifications detailing theimplementation of market access commitments,particularly with regard to tariff-rate quotacommitments and the special agriculturalsafeguard, and compliance with export subsidyand domestic support commitments. Generally,the rate of compliance with notificationobligations and the scope of countryparticipation has been good. Most major U.S.trading partners are in compliance with thenotification obligations.

Member-specific issues: The Committee alsoprovides the opportunity to clarify or resolvespecific policies and issues of interest toMembers. During 1999, issues raised includeduse of unused export subsidies from previousyears in the current year, or the so-called“rollover” provisions (European Union, Turkey,United States); noncompliance with export

subsidy commitments leading to modificationsin the use of those measures (Poland, Thailand);domestic support programs (EU, the Republic ofKorea, Thailand, Norway, United States, CzechRepublic) inadequate implementation of tariff-rate quota commitments (Venezuela, SouthAfrica, Czech Republic, the Republic of Korea,Japan); compliance with tariff bindings(Panama, Chile); and, inappropriate applicationof agricultural safeguards (Republic of Korea). The United States also questioned the Republicof Korea about market access restrictions onU.S. beef; this issue is now in formal disputesettlement.

Analysis and Information Exchange. In additionto its work on the specific trade issuesmentioned above, the Committee continued itswork in the informal AIE forum, prompting awide-ranging exchange on topics of relevance tothe built-in agenda negotiations on agriculture. More than 80 papers on issues affectingagricultural trade reform were presented duringthe AIE process. The United States submittedpapers on a number of trade issues, includingthe administration of tariff-rate quotas and tradein products involving new technologies. Issuesraised by other Members included non-tradeconcerns, special and differential treatment fordeveloping countries, export credits, anddomestic support. Although the forum wascurtailed in September 1999, as mandated by theSingapore Ministerial, the AIE process provedvital in preparing and identifying areas ofinterest for the new negotiations on agriculture.

Work for 2000

The United States and other like-mindedMembers will focus considerable attention in2000 on developing the procedures andframework for the mandated negotiations onagriculture. Work on agriculture negotiationswill proceed in the Committee on Agriculture inSpecial Session, beginning on March 23-24,2000. This situation does not mean, however,that the work and scrutiny of the Committee onAgriculture will be lessened, and its activities


during the year 2000 will complement theongoing negotiations on agriculture. The mainfocus of the Committee, however, will continueto be ensuring timely notification andenforcement of Uruguay Round commitments. Members will give particular attention toproblems revealed in the notifications coveringmarket access, export competition, and domesticsupport. In addition to monitoring compliancewith commitments, the Committee will continuereviewing the mechanisms and the processesMembers use to implement their UruguayRound commitments, monitoring the effects ofimplementation on net-food importingdeveloping countries and will continueidentifying emerging agricultural issues.

2. Committee on AntidumpingPractices

Status

The Agreement on Implementation of Article VIof the General Agreement on Tariffs and Trade1994 (Antidumping Agreement) providesdetailed rules and disciplines which allowMembers to impose antidumping duties incarefully circumscribed situations to offsetinjurious dumping of products exported fromone Member country to another.

The Ad Hoc Group on Implementation is animportant subsidiary body of the AntidumpingCommittee. The Group focuses onimplementation of the Antidumping Agreement. Members meet to discuss specific topics, inorder to understand similarities and differencesin their policies and practices in implementingthe terms of the Agreement. Members providepapers in advance of each meeting on the topicsthat will be discussed. This enhances the depthof the discussions, and gives all Members anopportunity to describe their own laws, policiesand practices in writing and to put forwardquestions about operational and other practicalaspects of conducting antidumpinginvestigations. Since the inception of the AdHoc Group, the United States has submitted

papers on most topics, and has been an activeparticipant at all meetings. Where possible, theAd Hoc Group endeavors to prepare draftrecommendations on the topics it discusseswhich it forwards to the AntidumpingCommittee for consideration. To date, theCommittee has adopted on Ad Hoc Grouprecommendation on pre-initiation notificationsunder Article 5.5 of the Agreement.

At Marrakesh in 1994, Ministers adopted aDecision on Anticircumvention directing theAntidumping Committee to develop rules toaddress the problem of circumvention ofantidumping measures. In 1997, theAntidumping Committee agreed upon aframework for discussing this important topicand established the Informal Group onAnticircumvention. Per the framework, theInformal Group held meetings in April andOctober 1999 to discuss the topic of “whatconstitutes circumvention.”


Antidumping rules provide a remedialmechanism which WTO Members have agreedis necessary to the maintenance and health ofthe multilateral trading system. Without thisand other trade remedies, there could have beenno agreement on broader GATT and later WTOpackages of market-opening agreements,especially given the imperfections which remainin the multilateral trading system. While WTOrules ensure that antidumping actions aregoverned by objective and transparent standardsand procedures, these rules continue to befounded on the principle set out in Article VI ofthe GATT 1994 that injurious dumping is to becondemned. The WTO, therefore, sets out rulesand procedures that ensure the legitimate actionstaken against injurious dumping are grounded inthe rule of law and due process, building uponthe standards that have been ingrained in U.S.antidumping statutes for decades.


Antidumping rules are necessarily complex. Yet they have come to be used by a growingcircle of countries, especially in the developingworld. Unlike the situation prior to entry intoforce of the WTO, when only a handful ofcountries were held to the relatively morerigorous requirements of the Tokyo RoundAntidumping Code, the AntidumpingAgreement resulting from the Uruguay Roundsets the standard by which all WTO Membersmust act if they choose to take measures tocombat injurious dumping. This means thatdeveloping countries and countries in transitionfrom centrally-planned to market economies are,in essence, learning the rules as they implementthem. This can understandably lead tofrustrations with compliance, and concerns thatthe existing rules are too difficult or onerous forsome to apply. The United States understandsthese concerns, which explains why we havechosen to place so much emphasis on improvingthe implementation of existing antidumpingrules – including through technical cooperationand assistance – versus a reopening of thoserules that would lead to ever greatercomplexities and difficulties of implementation.

In light of these needs, the work of theAntidumping Committee and its subsidiarybodies takes on even greater importance than itwould otherwise have. Their work over the pastfive years has been essential in anchoring theimportance and usefulness of multilateralantidumping rules for the world trade system. The Committee’s work has helped ensure thatMembers understand their commitments underthe Antidumping Agreement and can developthe tools to implement them properly. Byproviding opportunities to discuss Members’legislation, policies and practices, and views oncontroversial topics such as the need for rules onanticircumvention, the Committee’s work assistsall Members in conducting antidumpinginvestigations and adopting antidumpingmeasures in conformity with the detailedprovisions of the Agreement. To date, Membershave requested the establishment of disputesettlement panels to review the consistency of

antidumping measures with the Agreement inrelatively few instances. The work of theCommittee has played a role in ensuring thatMembers take their commitments seriously.

The United States is a key actor in the work ofthe Antidumping Committee and its subsidiarybodies. This has had several importantramifications. First, U.S. participation hasdemonstrated the importance of the antidumpingrules in the multilateral trading system. Second,U.S. participation has provided an opportunityto showcase the U.S. antidumping laws both fortheir detail and intrinsic consistency with theprovisions of the Antidumping Agreement, andas a model for other Members to consider whenadopting and amending their own antidumpingrules. Finally, U.S. participation in theCommittee and bilaterally with other Membershas been successfully used to serve the interestsof U.S. exporters whose products are subject toantidumping investigations by other Members. The Office of the United States TradeRepresentative, assisted by the Department ofCommerce, regularly follows antidumpinginvestigations ongoing in other countries thataffect U.S. exporters. Where warranted, theUnited States engages other Members inbilateral discussions to resolve issues arisingunder the Antidumping Agreement that affectU.S. exporters. The United States has alsoraised other Members’ antidumpinginvestigations affecting U.S. exports fordiscussion in the Antidumping Committee. Finally, in one instance, the United States hassuccessfully challenged the antidumpingmeasure of another Member in disputesettlement proceedings, and remains prepared to take such action in the future ifappropriate.


The Antidumping Committee’s work remains animportant avenue for ensuring Members’understanding of the detailed provisions in theAntidumping Agreement, and for providingopportunities for discussing Members’ views on


the interpretation and application of theAgreement’s provisions.

In 1999, the Antidumping Committee held tworegular meetings, in April and October, as didthe Ad Hoc Group on Implementation and theInformal Group on Anticircumvention. At itsmeetings, the Antidumping Committee focusedon implementation of the AntidumpingAgreement, in particular, by continuing itsreview of Members’ antidumping legislation. The Committee also reviewed the reports thatthe Agreement requires Members to provide oftheir preliminary and final antidumpingmeasures and actions taken in each case over thepreceding six months.

Among the more significant activitiesundertaken in 1999 by the AntidumpingCommittee, the Ad Hoc Group onImplementation and the Informal Group onAnticircumvention are the following:

Notification and Review of AntidumpingLegislation: The Antidumping Committeereviewed 14 notifications of new or amendedantidumping legislation, and also reviewed onenotification of legislation which had beenpreviously reviewed. Members, including theUnited States, were active in formulatingwritten questions and in making follow-upinquiries at Committee meetings. Theregulations of the U.S. Department ofCommerce on procedures for sunset reviewswere reviewed as a part of this process at theCommittee’s October meeting. Eight Membersput forward written questions regarding theseregulations which the United States answered indetail, both orally and in writing.

Notification and Review of AntidumpingActions: Twenty-five Members notifiedantidumping actions taken during the first halfof 1999. These actions, in addition tooutstanding antidumping measures currentlymaintained by WTO Members, were identifiedin semi-annual reports submitted for the

Antidumping Committee’s review anddiscussion.

Ad Hoc Group on Implementation: At its Aprilmeeting, the Ad Hoc Group discussed seven ofthe topics which the Antidumping Committeereferred to it for discussion: (i) treatment ofconfidential information under Article 6.5, (ii)sampling methods, (iii) “special circumstances”in Article 5.6, (iv) the provision for hearings inArticle 6.2, (v) public notices under Article 12,(vi) content of affirmative preliminarydeterminations, and (vii) duty assessmentsunder Article 9. Members submitted papers onthese topics, and the WTO Secretariat compiledinformation that Members had provided forprevious meetings on their practices concerninghearings and the disclosure of essential facts. The Group also gave consideration to draftrecommendations on two topics: the period ofdata collection for a dumping investigation andthe provision of essential facts and disclosure offindings under Article 6.9. Members offeredviews on these draft recommendations andagreed that further work on them was required. Finally, the Ad Hoc Group discussedsuggestions for new topics and forwarded a listof these topics to the Antidumping Committee. The Committee agreed that the Ad Hoc Groupshould begin discussing six new topics: (i)practical issues and experience in applyingArticle 2.4.2, (ii) termination of investigationsunder Article 5.8 in cases of de minimis importvolume, (iii) practical issues and experience incases involving cumulation under Article 3.3,(iv) practical issues and experience with respectto questionnaires and requests for informationunder Articles 6.1 and 6.1.1, (v) practical issuesand experience in providing opportunities forindustrial users and consumer organizations toprovide information under Article 6.1.2, and (vi)practical issues and experience in conducting “new shipper” reviews under Article9.5.

At its October meeting, the Ad Hoc Groupbegan discussing the six new topics that the


Committee referred to it. The United Statessubmitted papers on all of these topics andparticipated actively in the discussion. Manyother Members also submitted papers. TheGroup also discussed new drafts of therecommendations on the period of datacollection for a dumping investigation and theprovision of essential facts and disclosure offindings under Article 6.9.

The Ad Hoc Group has opened importantopportunities for Members to examine issuesrelating to the implementation of theAntidumping Agreement, and the United Stateshas been a key participant in the work of thisGroup. The annual report of the AntidumpingCommittee notes the satisfaction expressed bythe Committee’s chairman on the high level ofparticipation by Members and the presence andparticipation in Geneva of experts fromMembers’ capitals.

Informal Group on Anticircumvention: TheAntidumping Committee’s establishment of theInformal Group on Anticircumvention in 1997marked an important step in taking up theDecision of Ministers at Marrakesh to refer thismatter to the Committee. At its 1999 meetings,the Informal Group on Anticircumvention hadproductive discussions on the subject of “whatconstitutes circumvention.” For the Aprilmeeting, the United States submitted a paperproviding examples from U.S. practice of whattypes of facts have resulted in findings thatcircumvention of an antidumping order was orwas not taking place. The United States alsoreplied to questions from Hong Kong and Japanreceived at the October 1998 meeting. TheRepublic of Korea submitted a paper regardingthe circumvention inquiry the United Statesconducted on color television receivers, whichwas ended with a withdrawal by the U.S.industry of its request for this inquiry. At theend of the October meeting, Members agreedthat it was appropriate to consider the seconditem in the agreed framework: “what is beingdone by Members confronted with what they

consider to be circumvention.” The first topic,“what constitutes circumvention”, will remainopen for further discussion.

Work for 2000

Work in 2000 will continue in all of the areasthat the Antidumping Committee, the Ad HocGroup on Implementation and the InformalGroup on Anticircumvention addressed this pastyear. The Antidumping Committee willcontinue to review Members’ notifications ofantidumping legislation, and Members willcontinue to have the opportunity to submitadditional questions concerning previouslyreviewed notifications. This on-going reviewprocess in the Committee is important toensuring that antidumping laws around theworld are properly drafted and implemented,thereby contributing to a well-functioning,liberal trading system. As notifications ofantidumping legislation are unrestricteddocuments, it will remain possible for U.S.exporters to have access to the antidumpinglaws of other countries in order to betterunderstand their operation and to take them intoaccount in commercial planning.

The preparation by Members and review in theCommittee of semi-annual reports and reports ofpreliminary and final antidumping actions willcontinue in 2000. The 1996 decision of theWTO General Council to liberalize the rules onthe restriction of WTO documents has resultedin these reports also becoming accessible to thegeneral public, in keeping with the objectives ofthe Uruguay Round Agreements Act. (Information on accessing WTO notifications isincluded in Annex II.) This has been animportant development in ensuring the meriteddegree of public awareness regarding Members’antidumping actions.

The discussions in the Ad Hoc Group onImplementation will continue to provideopportunities for the United States to learn inmore detail about the administration by othercountries of their antidumping laws, particularly


by those Members that have newly enactedlegislation. This process is important because itsheds light on the operational practices ofMembers in implementing their obligationsunder the Antidumping Agreement. Theprocess has led to the Committee’s adoption ofone Ad Hoc Group recommendation regardingnotifications under Article 5.5 of theAgreement, and two more draftrecommendations are in the final stages ofconsideration by the Group. As Memberscontinue to submit papers on the topics beingconsidered and participate actively in thediscussions, it is anticipated that the Group’sutility will continue to be confirmed.

The work of the Informal Group onAnticircumvention will continue to be pursuedin 2000, according to the framework fordiscussion which Members agreed. ManyMembers, including the United States, recognizethe importance of using the Informal Group topursue the 1994 decision of Ministers atMarrakesh, who expressed the desirability ofachieving uniform rules in this area as soon aspossible.

3. Committee on Customs Valuation

Status

The purpose of the WTO Agreement onCustoms Valuation is to ensure that thevaluation of goods for customs purposes, suchas for the application of duty rates, is conductedin a neutral and uniform manner, precluding theuse of arbitrary or fictitious customs values. Adherence to the Agreement has become anincreasingly important issue for U.S. exportersand a priority in the negotiations for allcountries in the process of acceding to theWTO.


Achieving universal adherence to theAgreement on Customs Valuation in the

Uruguay Round was an important objective ofthe United States dating back more than twentyyears. The Agreement was initially negotiatedin the Tokyo Round, but its acceptance wasvoluntary until mandated as part of membershipin the WTO.

At one time, difficulties associated with customsvaluation regimes in export markets were oftengenerally characterized as mere technicalirritants. However, since the completion of theUruguay Round and the resulting dramaticgrowth in trade combined with the continuingshift to a faster-moving manufacturing anddistribution environment, issues pertaining tohow trade transactions are conducted areincreasingly viewed as important systemicmatters. U.S. exporters across all sectors –including agriculture, automotive, textile, steel,and information technology products – haveexperienced difficulties related to the conduct ofcustoms valuation regimes outside of thedisciplines set forth under the WTO Agreementon Customs Valuation. These difficulties –which can affect every single shipment of goodsto a particular export market – generally arerelated to arbitrary and inappropriate “uplifts” inthe transfer prices that are ultimately used by theimporting country for the application of tariffs. If unchecked, such practices can sometimesresult in a doubling or tripling of duties,undermining market access opportunities gainedthrough tariff reductions. Other difficulties toexporters presented by customs valuationmethodologies can pertain to an absence oftransparency, delays in shipments, and improperhandling of confidential business information. Finally, in a significant number of key U.S.emerging export markets, an arbitrary customsvaluation methodology is often the genesis ofcorruption by customs officials entering thetrade transaction process.

The means for squarely addressing many ofthese problems are provided by the Agreement’sdisciplines, which underscores theAdministration’s stance toward meeting the 20-year objective of bringing about implementation


of the Customs Valuation Agreement by the fullWTO membership. A proper valuationmethodology under the WTO Agreement onCustoms Valuation, avoiding arbitrarydeterminations or officially-establishedminimum import prices, can be the foundationto the realization of market accesscommitments. Just as important, theimplementation of the Customs ValuationAgreement also often represents the firstconcrete and meaningful steps taken bydeveloping countries toward reforming theircustoms administrations and diminishingcorruption, and ultimately moving to a rules-based trade facilitation environment.


The Agreement is administered by the WTOCommittee on Customs Valuation, which metformally three times in 1999. The Agreementalso established a Technical Committee onCustoms Valuation under the auspices of theWorld Customs Organization (WCO). TheWTO Committee continued to follow throughon an initiative generated by the United States in1998, holding several informal sessions onimplementation and technical assistance issuesrelated to those developing country Memberswho will be implementing the provisions of theAgreement in the year 2000. The United Stateshas led efforts within the Committee to impressupon Members the importance of timelyimplementation of the Agreement, both in termsof enhancing the trade facilitation environmentand ensuring that market access gains are nototherwise diminished through customs valuationpractices.

This Agreement only became applicable to allWTO Members in 1995. The Agreementprovided special transitional measures fordeveloping country Members, providing time tobring their respective regimes into compliancewith the provisions of the Agreement. At theend of the Uruguay Round, more than 50developing country Members opted for recourseto delayed application for up to five years from

January 1, 1995, or the date of entry into forceof the WTO Agreement. For approximately halfthese Members, the deadline for implementationwas January 1, 2000, while for others the fiveyear deadline expires at various datesthroughout 2000 and into 2001.

While many developing country Members witha January 1, 2000 deadline undertook timelyimplementation of the Agreement, throughout1999 the, Committee began to addressindividual requests either for transitionalreservations as to how the Agreement would beimplemented, or for further extensions of timefor overall implementation. Working with keytrading partners, the United States ledconsultations which resulted in the developmentof a detailed decision on each request, includingindividualized benchmarked work programstoward full implementation, along withreporting requirements and specificcommitments on other implementation issuesimportant to U.S. export interests.

Work for 2000

A high priority for the Committee will continueto be the adequate preparation for the remainingdeveloping country Members which havedeadlines to apply the Agreement’s provisions. The Committee’s work in 2000 will also includea review of the relevant implementinglegislation and regulations submitted by thosenewly-implementing Members, along withmonitoring progress of the benchmarked workprograms that were the result of requests fortransitional reservations or extensions of time. The Committee also will continue to provide aforum for sustained focus on issues arising frompractices of all Members that have implementedthe Agreement to ensure that such Members’customs valuation regimes do not utilizearbitrary or fictitious values, such as “minimumreference prices.”

Finally, reflecting the recommendation of theWorking Party on Preshipment Inspection whichwas adopted by the General Council, the


Committee on Customs Valuation will provide aforum for reviewing the operation of variousMembers’ preshipment inspection regimes andthe implementation of the Agreement onPreshipment Inspection.

4. Committee on the Expansion ofTrade in Information TechnologyProducts

Status

The landmark agreement to eliminate tariffs byJanuary 1, 2000 on a wide range of informationtechnology products, generally known as theInformation Technology Agreement, or ITA,was concluded at the WTO’s first MinisterialConference at Singapore in December 1996. Asof this writing, the ITA has 524 participantsrepresenting over 95 percent of trade in the $600billion global market for information technologyproducts.

Assessment of the First Three Years ofOperation

The ITA entered into force on July 1, 1997. TheITA was one of three post-Uruguay Roundagreements essential to the new economy of the21st century (the others were financial servicesand basic telecommunications services). The

ITA confirms the potential for the WTO as avehicle for ongoing trade liberalization. Themultilateral benefits of the ITA aredemonstrated by growth in participation. Twenty-eight participants launched the ITA in1996 at the WTO Ministerial in Singapore. ByMarch 1997, 39 participants agreed toimplement the ITA and to establish theCommittee to carry out the work programenvisioned in the Ministerial Declaration. As ofDecember 17, 1999, the number of participantshas grown to 52, with several more countries inthe process of WTO accession having agreed tojoin the ITA upon joining the Organization.

ITA product coverage includes computers andcomputer equipment, semiconductors andintegrated circuits, computer software products,telecommunications equipment, semiconductormanufacturing equipment and computer-basedanalytical instruments. The ITA participantswill eliminate tariffs on these products by theyear 2000. Some limited staging up to 2005 wasgranted on a country-by-country basis forindividual products. The ITA, thus far, is theonly global, sectoral agreement in whichparticipating governments have agreed on auniform list of products on which all duties willbe eliminated.

In launching the ITA, Ministers agreed that theproduct coverage would be subject to periodicreview and expansion to take account of therapidly changing technology and differences intariff nomenclature in the sector. Ministersfurther agreed consultations on non-tariffmeasures would be undertaken during the courseof WTO work in this sector. Participants alsoestablished a Committee on the Expansion ofTrade in Information Technology Products tocarry out the work program identified atSingapore. The ITA is a special Agreement inmany ways. Many countries in the process ofaccession have already negotiated andimplemented commitments and joined the ITA,pending completion of their negotiations.

4 ITA participants are: Albania,Australia, Canada, Costa Rica, Croatia, CzechRepublic, El Salvador, Estonia, EuropeanCommunities (on behalf of 15 Member States),Georgia, Hong Kong China, Iceland, India,Indonesia, Israel, Japan, Jordan, Republic ofKorea, Krygyz Republic, Latvia, Lithuania,Macau, Malaysia, Mauritius, New Zealand,Norway, Panama, Philippines, Poland, Romania,Singapore, Slovak Republic, Switzerland andLiechtenstein, Taiwan, Thailand, Turkey, andthe United States. Additional countries,including China, Armenia, Georgia andMoldova, have indicated their intention to jointhe ITA.


The ITA, thus far, is the only global, sectoralagreement in which participating governmentshave agreed on a uniform list of products onwhich all duties will be eliminated. The ITAcovers much of the hardware side of theinnovations in electronic commerce andtelecommunications services and the interactivesoftware that underlies these innovations –products that represent over $600 billion inglobal trade.

United States producers and exporters receivesignificant benefits from the expansion of globalmarkets through the ITA. Industry sourcesestimate that the Information TechnologyAgreement will save U.S. exporters of ITAproducts about $5 billion in tariffs, benefittingthe 1.6 million workers in the informationtechnology industry, including the 200,000workers in the 1,000 U.S. computer hardwarecompanies that produced equipment worth over$70 billion last year; the 200,000 workers in theover 7,000 firms that comprise the U.S. softwareindustry, which is the largest in the world andone of the fastest growing high technologysectors in the U.S. economy; the 170,000workers in the more than 5,000 firms that makethe United States the largest single-countryproducer of telecommunications equipment inthe world; the 400 or so U.S. manufacturers ofsemiconductor manufacturing equipment thataccount for 50 percent of world shipments; the3,200 U.S. firms producing high technologymeasuring, testing and analyzing instrumentsthat account for over 40 percent of globalproduction; and the 190,000 workers in the U.S.semiconductor industry that alone producedabout $40 billion in state-of-the-artsemiconductors in recent years.

The WTO, through the activities of theCommittee, is well-placed to respond to thedynamic nature of the information technologysector. The Committee, through its ongoingwork on product expansion and non-tariffmeasures (including product standards, andproduct classification issues) offers the venueand interested participants to address these and

other forthcoming issues, such as those relatedto the convergence of consumer and informationtechnology product technologies.


The Committee examined all areas of itsmandated work program during the six formalmeetings of the Committee held during 1999. The Committee consistently reviewed the statusof implementation of the ITA. All participantscontinued to lower tariffs on ITA products in1999, and for the majority of participants, 1999marked the final year where tariffs would becharged on these products. Consultations alsocontinued throughout the year on the so-calledITA II product expansion list proposed in 1998,with certain participants noting the need forfurther time to continue domestic review of thepackage.

Pursuant to the provisions of the SingaporeMinisterial Declaration, the Committee alsocontinued its work to address divergences inclassifying information technology products thathad begun in 1998. The Committee agreed thatan informal meeting of experts would be auseful way to move forward on this issues. As aresult, experts from many Member countriesmet for a week of technical discussions inOctober to review a wide range of classificationdivergences for ITA products, particularlysemiconductor manufacturing and testequipment. As a result of these discussions,certain participants revised their classificationof some products to achieve more uniform andtransparent classification. Participants agreed tocontinue this constructive discussion ofclassification issues in 2000. Participants alsoreviewed the product description for monitors inaccordance with a provision contained inAttachment B of the Ministerial Declaration. There were no resulting decisions or changes tothe product description.

The Committee continued its consultations onnontariff measures with many participantsexpressing a strong interest in work on


standards-related measures in the sector. Following a proposal initiated by the UnitedStates, the Committee had conducted a surveyamong participants of current regulations andconformity assessment requirements forinformation technology products as an initialproject in this area. More specifically, thesurvey asked about current practices in the areasof safety (i.e., use of IEC 950), other standards(i.e., CISPR 22 which addresses electromagneticinterference) and reliance on suppliers’declaration of conformity for IT products. Further work in this areas is anticipated,utilizing a summary of replies to the surveyrequested by the Committee for this purpose aswell as “national experience” papers by certainparticipants.

The importance of further work on standardsand other non-tariff measures was one of theissues highlighted by private sector participantsin an Information Technology Symposium heldby the Committee on July 16, 1999 in order toensure that the WTO and the trading systemoverall adequately address the challenges of the21st century. The symposium consisted ofissue-oriented panels that addressed thedynamism of the information technology sectorand its future, to explain the role of informationtechnology in promoting economic growth anddevelopment, and to highlight the value of theapplication of information technology. Eachpanel was followed by an interactive discussionand question and answer session. Speakersfrom 18 countries, with wide geographicrepresentation, participated in the symposium.

One theme stressed by the speakers was theimportance of information technology, its“enabling” quality, and the importance of trade. The convergence of computers, communication,consumers, and electronic commerce was amajor theme of the presentations. Private sectorrepresentatives from Israel, Malaysia, CostaRica, and Estonia highlighted the benefit ofinformation technology trade for small anddeveloping countries. Other speakers addressedthe private sector’s concerns that cumbersome

regulatory procedures substantially slow theintroduction of new products in this sector. Private sector speakers addressing this issueexpressed their support for a regulatory regimethat would leave it up to the product’s producerto determine if the product conforms to requiredstandards rather than requiring that testing bedone by independent laboratories or governmentagencies. The presentations of all speakers canbe found on the WTO website at www.wto.org.

Work for 2000

Bolstered by the enthusiasm expressed by theprivate sector at the July symposium for theCommittee’s work program, the Committee isexpected to intensify its efforts to ensure thatthe WTO remains an important vehicle toaddress the dynamic nature of the informationtechnology sector. The Committee willcontinue its mandated work program, includingreviewing possibilities for product expansion(“ITA II”), classification issues, standards andother non-tariff measures that present barriers totrade in information technology products. Inaddition, the Committee will continue tomonitor implementation of the Agreement,including undertaking any necessaryclarifications.

5. Committee on Import Licensing

Status

The Agreement on Import Licensing Proceduresestablishes rules for WTO Members that useimport licensing systems to regulate their trade. The Agreement covers both “automatic”licensing systems, which are intended only tomonitor imports, not restrict them, and“non-automatic” licensing systems wherecertain conditions must be met before a licenseis issued. Governments often use non-automaticlicensing to administer import restrictions, forquotas and tariff-rate quotas or to administersafety or other requirements (e.g., for hazardousgoods, armaments, antiquities, etc.). Requirements for permission to import that act


like import licenses, such as certification ofstandards and sanitary and technical regulations,are also subject to the rules of the Agreement. A Committee was established to administer theAgreement and monitor compliance.


As tariff barriers have decreased, the rulesgoverning non-tariff measures has grown inimportance. The aim of the Agreement is toensure that the procedures used by Members inoperating their import licensing systems do notin themselves form barriers to trade. It setsguidelines for the administrative proceduresimporters must observe to obtain importlicenses, and is designed principally to increasethe transparency and predictability of suchregimes while creating disciplines that protectthe importer against unreasonable requirementsor delays that block trade. The Uruguay Roundcodified changes to the Tokyo RoundAgreement by setting firm deadlines for thepublication of information on new or revisedlicensing requirements and places limits on thetime for processing licensing applications. TheAgreement also establishes a limit on thenumber of government agencies an importermust approach to obtain a license, and requiresall information on the operation of the licensingsystem be available for importers and exporters. The results of the Uruguay Round expanded theapplication of rules on import licensingmeasures to the entirety of the WTO’sMembership. This has been an importantdevelopment in the evolution of trade regimes oftrading partners because it has ensured a singleset of procedures will be followed in theadministration of licensing procedures. Thisexpanded membership moves the benefits of theAgreement beyond the trade regimes of themostly industrialized core of countries thatnegotiated the original Agreement to a moreuniversal coverage. As a result, there is nowbroad acceptance of the requirement fortransparency, certainty and predictability in theoperation of licensing regimes, and of the need

for the discipline of mutually agreed rules forthe application of these widely used measures.

As tariffs have declined in relative importanceas a means of trade regulation, and as licensingto monitor trade and to apply safety, quality, andother requirements to imports has increased, theAgreement’s provisions have taken on addedsignificance. The effect of licensingrequirements also has increasingly impactedagricultural trade as most Members uselicensing to implement tariff-rate quotaprovisions established during the UruguayRound. It is expected that the Agreement willbe invoked more frequently to minimize tradedisruptions that could result from suchrequirements.

In the first five years of operation of theAgreement under the WTO, the Committee hasreceived initial or follow-on information onimport licensing requirements from about halfthe WTO Members, including the countries thataccount for the bulk of international trade. Inaddition, the provisions of this Agreement havebeen very important in review of the traderegimes of acceding countries. Many of the newMembers are either transforming economieswith broad mandatory licensing requirements ordeveloping economies that have long relied ondiscretionary licensing to regulate trade flows. These countries’ regimes have been closelyscrutinized during the accession process. Theyare required to adopt the Agreement’sprovisions in law and immediately provide theirinitial notifications to the Committee for furtherreview and discussion. Committee reviews ofthe notifications have allowed Members toidentify specific procedures and measures thathave the potential of blocking trade, and tofocus multilateral attention on problems at anearly stage. In addition, while the Agreement’sprovisions do not directly address the WTOconsistency of the underlying measures thatlicensing systems regulate, they establish thebase line of what constitutes a fair and non-discriminatory application of the procedures andin minimizing the procedures themselves as a


barrier to trade. This issue has been critical inat least one recent trade dispute involving injuryto trading interests through the application oflicensing procedures to administer tariff-ratequotas.


The main work of the WTO Committee onImport Licensing, which oversees the WTOLicensing Agreement, is to receive the officialnotifications on the licensing regimes of theMembers, which includes responses to aquestionnaire that lays out how the systemworks. Initial or new notifications or completedquestionnaires were received from 23 WTOMembers in 1999. The Committee alsoaddressed specific issues raised by Members,such as Brazil’s import licensing procedures andMalaysia’s approval permit requirement onimports of heavy machinery and constructionequipment. While not a substitute for disputesettlement procedures, consultations on specificissues allow Members to clarify problems andresolve possible potential problems before theybecome disputes.

Work for 2000

The Committee has issued an ambitious agendato review of Members’ regimes during 2000,and continues to be the point of first contact inthe WTO for Members with complaints orquestions on the licensing regimes of otherMembers. The Committee has also undertakento increase the rate at which countries supplytheir initial and revised information for review. Additional attention will be given to thedisciplines in this area as negotiations proceedin agriculture. Administration of tariff ratequotas, for example, is generally accomplishedvia licensing regimes. Where necessary, theUnited States will rely on the expertise of theCommittee and consider notifications indevising appropriate options for the newdisciplines in agriculture.

6. Committee on Market Access

Status

WTO Members established the Committee onMarket Access in January 1995, consolidatingthe work of the Committee on TariffConcessions and the Technical Group onQuantitative Restrictions and other Non-TariffMeasures from the GATT 1947. TheCommittee on Market Access supervises theimplementation of concessions on tariffs andnon-tariff measures (where not explicitlycovered by another WTO body, e.g., theTextiles Monitoring Body) agreed innegotiations under WTO auspices. TheCommittee also is the working-level bodyresponsible for future negotiations andverification of new concessions on marketaccess in the goods area.


Since 1995, WTO Members have negotiated andimplemented new tariff initiatives onpharmaceuticals (1997 and 1999), distilledspirits (1997) and information technologyproducts (1997) under the Committeesauspices5. In addition, in 1998 and 1999, theCommittee has been the venue for introducingthe Accelerated Tariff Liberalization initiativeson environmental goods and services, medicalequipment and instruments, fish and fishproducts, toys, gems and jewelry, chemicals,energy sector goods and services, and forestproducts.

The Committee also has focused on developingthe tools needed to monitor goods market accesscommitments and establish the technicalfoundation for any new market access

5A new WTO Committee on Trade inInformation Technology Products wasestablished to monitor implementation of theInformation Technology Agreement.


negotiations, including the ongoing negotiationson agriculture. Specific achievements include:

� Revitalizing the Integrated Data Base(IDB) by restructuring the frameworkfrom a mainframe environment to apersonal computer-based system anddeveloping technical assistance projectsto facilitate participation by developingcountries. Once the new IDBframework had been developed, theCommittee recommended that all WTOMembers be mandated to supply tariffand trade information on an annualbasis. After review by the Council onTrade in Goods, the General Counciladopted the Decision in July 1997. Asof September 1999, 65 Members andthree acceding countries had providedIDB submissions; in contrast, only threeMembers (including the United States)supplied IDB information in 1994 underthe old mainframe system.

� Ensuring implementation of the 1996updates to the harmonized systemnomenclature (HS96) did not adverselyaffect existing tariff bindings of WTOMembers. This activity has requiredmore time than initially anticipated dueto the scope of changes required underHS96 and the lack of foresight in 1991(when the HS96 implementationprocedures were developed) as to thepotential value of detailed,electronically-based data requirementsand verification methods. Despite thesedifficulties, most WTO Members arenow using HS96 nomenclature. Thelessons learned from the HS96experience should yield procedures forthe HS2002 updates that maximize thenew innovations in computer software.

� Establishing procedures and technicalassistance projects to ensure thedevelopment in 2000 of an up-to-dateschedule in current tariff nomenclature

of the tariff bindings for each WTOMember that reflects Uruguay Roundtariff concessions, HS96 updates totariff nomenclature and bindings, andany other modifications to the WTOschedule. These consolidated scheduleswill be the vehicles for conductingfuture tariff negotiations in the WTO.


During 1999, WTO Members continuedimplementing the ambitious package of tariffcuts agreed in the Uruguay Round with theCommittee having responsibility for verifyingthat implementation is proceeding on track. TheCommittee held four meetings in 1999 todiscuss the ongoing review of WTO tariffschedules to accommodate updates to theHarmonized System (HS) tariff nomenclature;the WTO Integrated Data Base; and proceduresfor preparing a consolidated schedule of WTOtariff concessions in current HS nomenclature,including technical assistance that could beprovided to developing country Members. TheCommittee also was the venue for reporting ontariff initiatives, such as the Accelerated TariffLiberalization initiative.

Expansion of the Product Coverage for theZero-Duty Initiative on Pharmaceuticals. TheUnited States and most of the other 22participants to the second expansion ofpharmaceutical products initiative begun underthe Uruguay Round zero duty initiativeimplemented the additional tariff concessions onJuly 1, 1999. The new initiative covered 642finished pharmaceutical products and relatedchemical intermediates, including products forthe treatment of breast cancer, AIDS, diabetes,asthma, and Parkinson’s disease. As a result ofWTO actions on pharmaceutical tariffs in theUruguay Round and thereafter, nearly 7,000pharmaceutical items in participating countriesare duty-free.

The industries affected by this initiative employover 400,000 American workers. The


elimination of tariffs on these products willfurther expand U.S. producers’ overseas marketaccess opportunities in Europe and Asia, andwill help to reduce costs and improveproductivity in this leading high technologysector. Moreover, U.S. and other consumerswill benefit from lower costs and, potentially, awider choice of product.

Accelerated Tariff Liberalization initiative(ATL) and other market access proposals. InMarch, New Zealand in its role as APEC Chairprovided additional information to theCommittee on the sectoral liberalizationinitiatives that Malaysia, on behalf of APECmembers, had introduced into the Committeefollowing the November 1998 APEC Leaders’meeting. APEC Leaders agreed to seekmultilateral participation in sectoralliberalization initiatives on environmentalequipment, medical equipment and instruments,fish and fish products, toys, gems and jewelry,chemicals, energy sector goods and services,and forest products. The eight ATL sectors areof major importance to U.S. exporters,accounting for 29 percent of total U.S.merchandise exports in 1998. Approximately2.2 million jobs were supported by the $198billion in exports in the eight product sectors,counting both direct employment in the ATLsectors and employment in other sectors of theeconomy that indirectly depend on exports ofATL products.

Throughout the year, New Zealand and otherAPEC coordinators for the various proposals,including the United States, held numerousinformal discussions on the ATL sectors inGeneva and in capitals with over 40 WTOMembers. The proposals for new negotiationson the broad area of non-agricultural tariff andnon-tariff measures also were discussed as partof the preparatory process for the 1999Ministerial under the auspices of the GeneralCouncil.

Updates to the Harmonized Systemnomenclature. In 1993, the Customs

Cooperation Council (now known as the WorldCustoms Organization, or WCO) agreed toapproximately 400 sets of amendments to theHS, which were to enter into effect on January1, 1996. These amendments result in changes tothe WTO schedules of tariff bindings. Inkeeping with their WCO obligations, most WTOMembers have implemented the HS96 changesin their national customs nomenclature. TheCommittee previously had developedprocedures for identifying possible effects onthe scope of WTO tariff bindings due to theHS96 updates. Members have the right toobject to any proposed nomenclature affectingbound tariff items on grounds that the newnomenclature (as well as any increase in tarifflevels for an item above existing bindings)represents a modification of the tariffconcession. Unresolved objections can trigger aGATT 1994 Article XXVIII process.

Most WTO Members were unable to carry outthe procedural requirements related to theintroduction of HS96 changes in WTOschedules prior to implementation of thosechanges. Waivers have been granted until theprocedures can be finalized. These waivers,which currently affect 32 Members, wereextended by successive decisions of the GeneralCouncil until April 30, 2000, at which timeissues related to the adoption of HS96 areexpected to be completed for all WTOMembers. The Committee also examined issuesrelated to the transposition and renegotiation ofthe schedules of certain Members which hadadopted the HS in the years following itsintroduction on January 1, 1988. Technicalassistance is being provided to some Membersto assist in the transposition of theirpre-Uruguay Round schedules into the HS andin the preparation of documents required for theHS96 updates.

Integrated Data Base (IDB). The Committeeaddressed issues concerning the IDB, which isto be updated annually with information on thetariffs, trade data and non-tariff measuresmaintained by WTO Members. The U.S.


objectives are to achieve full participation in theIDB by all WTO Members and, ultimately, todevelop a method to make the trade and tariffinformation publicly available. In recent years,the United States has taken an active role inpushing for a more relevant database structurewith the aim of improving the trade and tariffdata supplied by WTO Members.

In 1997, the Committee agreed to a completerestructuring of the IDB from a mainframeenvironment to a personal computer-basedsystem (PC IDB). The Committee alsorecommended that all WTO Members bemandated to supply tariff and trade informationon an annual basis. After review by the Councilon Trade in Goods, the General Council adoptedthe Decision in July 1997, with initialimplementation to occur beginning in December1997. As of September 1999, 65 Members and3 acceding countries had provided IDBsubmissions. To facilitate the development andupdating of the data, the Committee adoptedguidelines on the operation and modalities forthe IDB, in particular the submission anddissemination of the data. The Committee alsocontinued its discussion of the technicalassistance that might be provided to facilitatesubmission of the data.

Consolidated schedule of tariff concessions. The establishment of a PC-compatible structurefor tariff and trade data also will facilitate theCommittee’s ongoing work to establishelectronically each Member’s consolidated“loose-leaf” schedule of tariff concessions. Thishighly technical task is essential in order togenerate an up-to-date schedule in current tariffnomenclature of the tariff bindings for eachWTO Member that reflects Uruguay Roundtariff concessions, HS96 updates to tariffnomenclature and bindings, and any othermodifications to the WTO schedule (e.g.,participation in the Information TechnologyAgreement). The Committee also reviewed atechnical assistance project undertaken by theSecretariat designed to facilitate the preparationof loose-leaf schedules by developing countries.

The objective of the project is to develop draftconsolidated loose-leaf schedules for alldeveloping countries by spring of 2000. Developed countries will prepare their ownschedules, within the same time frame. Theconsolidated schedule will be the vehicle forconducting future tariff negotiations in theWTO, such as the mandated negotiations onagriculture that are underway and any newnegotiations on non-agricultural tariffs.

Work for 2000

The ongoing work program of the Committee,while highly technical, is the first step neededfor any new negotiations on goods marketaccess. The work program will provide thetariff schedules and data needed for newnegotiations on agriculture or non-agriculturalmarket access. The Committee will continuework on the consolidated tariff schedules soelectronic schedules of tariff bindings for eachMember will be forthcoming in current tariffnomenclature, including assistance todeveloping countries in preparing theirschedules through the WTO’s technicalcooperation programs. Committee efforts tosecure updated data on applied tariffs and tradealso will continue. The United States also seeksanalyses by the Secretariat on the structure ofWTO bindings and applied tariff rates of WTOMembers to assist in monitoring compliancewith existing WTO commitments, assessing thecurrent situation with regard to market access ingoods and preparing for new negotiations ontariffs, such as negotiations underway inagriculture and possible new negotiations onnon-agricultural market access. In addition tofinalizing the HS96 updates, the Committee alsoneeds to develop procedures to facilitate theadoption of updates to the harmonized tariffnomenclature in 2002, as agreed in the WorldCustoms Organization. The United States willseek to ensure that the new HS2002 procedureswill be electronically-based, transparent andeasy to implement, in order to minimizedisruptions to any ongoing negotiations ontariffs (e.g., in agriculture).


7. Committee on Rules of Origin

Status

The objective of the WTO Agreement on Rulesof Origin is to increase transparency,predictability, and consistency in both thepreparation and application of rules of origin. In addition to setting forth disciplines related tothe administration of rules of origin, theAgreement provides for a work program leadingto the multilateral harmonization of rules oforigin used for non-preferential trade regimes.

The Agreement establishes a WTO Committeeon Rules of Origin to oversee the work programon harmonization. The Committee also servedas a forum to exchange views on notificationsby Members concerning their national rules oforigin, along with those relevant judicialdecisions and administrative rulings of generalapplication. The Agreement also established aTechnical Committee on Rules of Origin in theWorld Customs Organization to assist in theharmonization work program.


Virtually all issues and problems cited by U.S.exporters as arising under the origin regimes ofU.S. trading partners arise from administrativepractices such as non-transparency,discrimination, and a lack of certainty. TheAgreement on Rules of Origin providesimportant disciplines for conducting preferentialand non-preferential origin regimes-- such asthe obligation to provide binding origin rulingsupon request to traders within 150 days ofrequest. For the past five years the Agreementhas provided a means for addressing andresolving many problems facing U.S. exporterspertaining to origin regimes, and the Committeehas been active in its review of the Agreement’simplementation.

The ongoing work program leading to themultilateral harmonization of nonpreferential

product-specific rules of origin has attracted agreat deal of attention and resources. Significant progress has been made towardcompletion of this effort, despite the sheervolume and magnitude of complex issues whichmust be addressed for literally hundreds ofunique specific products.


The WTO Committee on Rules of Origin metformally six times in 1999, and also conductednumerous informal consultations and workingparty sessions related to the harmonization workprogram negotiations. As of the end of 1999, 72WTO Members had made notificationsconcerning non-preferential rules of origin, and75 had made notifications concerningpreferential rules of origin.

Much of the focus of the WTO Committee onRules of Origin continued to be on conductingthe harmonization work program. Workproceeded throughout 1999 in accordance with aJuly 1998 Committee decision, endorsed by theGeneral Council, to continue the harmonizationeffort. The Committee has been assisted in thiswork by the Technical Committee on Rules ofOrigin that was established at the WorldCustoms Organization. The TechnicalCommittee has been responsible for developingtechnical interpretations and opinions onharmonization proposals for consideration bythe WTO Committee on Rules of Origin. InJune 1999, the Technical Committee finishedthis phase of its work, forwarding to the WTOCommittee several hundred product-specificissues that could not be resolved on a technicalbasis. In 1999, the WTO Committee on Rulesof Origin also began addressing several complexissues of broad application to the harmonizationwork program, including undertaking importantwork toward a common understanding as to theimplications of applying harmonized rulesconsistent with the rights and obligations underother WTO agreements.


Work for 2000

U.S. proposals for the WTO originharmonization negotiations are developed underthe auspices of a Section 332 study beingconducted by the U.S. International TradeCommission pursuant to a request by the U.S.Trade Representative. The proposals areformulated utilizing the input received from theprivate sector, with ongoing consultations withthe private sector as the negotiations haveprogressed from the technical stage todeliberations at the WTO Committee on Rulesof Origin.

The harmonization program will continue to beconducted by the Committee through asector-by-sector approach, in accordance withthe Agreement, as defined in various HS chaptergroupings in the Harmonized Tariff Schedule. The work will continue on the development ofproduct-specific rules by focusing primarily onmethodologies involving change in tariffclassification, although, where appropriate, thework program has also been givingconsideration to other possible requirements,beyond a change of tariff classificationmethodology. The Committee will maintainmomentum toward completing the workprogram while also ensuring results that aresound from both a technical and policystandpoint. Progress in the harmonization workprogram will be contingent on obtainingappropriate resolution of several complex issuesconcerning the overall structure and operationof the harmonized rules, as well as their futureapplication consistent with the rights andobligations under other WTO agreements.

Increased attention will continue to be given tothe implementation of the Agreement’simportant disciplines related to transparency,which are recognized elements of what areconsidered to be “best customs practices.”

8. Committee on Safeguards

Status

The Committee on Safeguards was establishedto administer the WTO Agreement onSafeguards. The Agreement establishes rulesfor the application of safeguard measures asprovided in Article XIX of GATT 1994.

The Agreement on Safeguards incorporates intoWTO rules many concepts embodied in U.S.safeguards law (i.e., section 201 of the TradeAct of 1974, as amended). The Agreementrequires all WTO Members to use transparentand objective procedures when takingemergency actions to prevent or remedy seriousinjury to domestic industry caused by increasedimports.

Among its key provisions, the Agreement:

� requires a transparent, public processfor making injury determinations;

� sets out clearer definitions of the criteriafor injury determinations;

� requires safeguard measures to besteadily liberalized over their duration;

� establishes an eight year maximumduration for safeguard actions, andrequires a review and determination nolater than the mid-term of the measure;

� allows safeguard actions to be taken forthree years, without the requirement ofcompensation or the possibility ofretaliation; and,

� prohibits so-called “grey area”measures, such as voluntary restraintagreements and orderly marketingagreements, which had been utilized bycountries to avoid GATT disciplinesand which adversely affect third-countrymarkets. Measures of this type inexistence when the Agreement enteredinto force were required to be phasedout over four years.



Effective safeguards rules are important to theviability and integrity of the multilateral tradingsystem. Armed with the assurance that they canact quickly to help industries adjust totemporary import surges, the availability of asafeguards mechanism provides WTO Membersa flexibility they otherwise would not have toopen their markets to international competition. At the same time, WTO safeguards rules ensurethat such actions are of limited duration and aregradually less restrictive over time. With theUruguay Round Safeguards Agreement, theUnited States succeeded in raising multilateralprocedural and substantive requirements forsafeguard actions up to a level commensuratewith U.S. standards, as embodied in section 201of the Trade Act of 1974. Other importantaccomplishments of the Uruguay Roundnegotiations include clarifying that it ispermissible to impose a safeguards measure inresponse to a relative increase in imports;permitting the imposition of a measure for aninitial three years, in response to an absoluteincrease in imports, without having to worryabout payment of compensation or facingretaliation; and the elimination of voluntaryexport restraint agreements and orderlymarketing arrangements which had previouslyundermined the integrity of safeguards rules anddisciplines.

Over the past five years, WTO Members havemade increasing use of the safeguardsprovisions. Thirty-four safeguardsinvestigations have been instituted since theAgreement came into effect, of which sevenwere initiated by the United States. The UnitedStates has actively used the provisions forbilateral consultation and Committee review toraise concerns about certain safeguard measuresimposed and procedures followed by U.S.trading partners. By the same token, in certaincases where increasing imports into the UnitedStates have substantially caused or threatenedserious injury to a U.S. industry, the injured

U.S. industry has benefitted significantly fromthe provision of WTO-sanctioned relief thataffords the time and opportunity needed toadjust to the emergency situation. Often, thecauses and circumstances of an import surge aresuch that safeguard measures are the only orbest-suited remedy available to address thesituation. Thus, to date, the Agreement hasgenerally operated so as to provide thecombination of structure, balance and flexibilitythat a full defense of U.S. commercial interestsrequires. In the future, the United States intendsto continue to make vigorous use of theSafeguards Committee both to defend U.S.actions and to ensure that the actions of U.S.trading partners conform to the applicablemultilateral requirements.


During its two meetings in 1999, the Committeecontinued its review of Members’ laws,regulations and administrative procedures, basedon notifications required by Article 12.6 of theAgreement. As of early October 1999, 84Members had notified the Committee of theirdomestic safeguards legislation. Thirty-fiveMembers had not yet made Article 12.6notifications. As in prior years, the Committeediscussed the extent of non-compliance with thenotification obligation and the implications ofthe situation during both meetings in 1999. Attention is also being paid to safeguard actionsthat are being initiated by Members who havenot complied with their Article 12.6 obligationto notify their safeguards legislation.

The Committee was updated on the status ofprogress in phasing out previously notified pre-existing Article XIX measures, and measuressubject to prohibition and elimination underArticle 11.1 of the Agreement. As of lateOctober 1999, the only such measures still inforce were the use of minimum import prices fordried grapes and preserved cherries, and avoluntary export restraint on Japaneseautomobiles, by the European Communities,which were scheduled to be eliminated as of


December 31, 1999. Nigeria had notified, in1998, that its import prohibitions on wheatflour, sorghum, millet, gypsum and kaolin were“pre-existing Article XIX measures,” and askedthe Committee for a waiver of its notificationobligations under Article 12.7 of the SafeguardsAgreement. The Committee did not act on thatrequest in 1998 or 1999, and Nigeria had notprovided any information, as of late October1999, on the elimination date for these importprohibitions.

The Committee reviewed Article 12.1(a)notifications of the initiation of and reasons foran investigatory process relating to seriousinjury or threat thereof from: Colombia (taxis),the Czech Republic (sugar), Ecuador (sandals), India (phenol and acetone), Latvia (swine meat),the Slovak Republic (swine meat), and theUnited States (lamb meat, steel wire rod and linepipe). Some additional Article 12.1(a)notifications, to be reviewed in 2000, werereceived from: Chile (tires), Egypt (fluorescentlamps) and India (white/yellow phosphorous).

The Committee received Article 12.1(b)notifications of a finding of serious injury orthreat thereof caused by increased imports from: Australia (frozen boneless pork), the CzechRepublic (sugar), Egypt (safety matches), India(high density board, propylene glycol, slabstockfoam and phenol), and the United States (lambmeat and steel wire rod). All but the CzechRepublic (sugar) notifications were reviewedduring the year.

The Committee received Article 12.1(c)notifications of a decision to apply (or, in thecase of the U.S. measure on wheat gluten,modify) a safeguard measure from: the CzechRepublic (sugar), Egypt (safety matches), India(acetylene black, carbon black, propyleneglycol, and slabstock foam) and the UnitedStates (lamb meat and wheat gluten). All butthe Czech Republic (sugar) notifications werereviewed during the year. The Committeereceived two notifications, from India (hardboard) and Australia (swine meat), of the

termination of a safeguard investigation with nosafeguard measure imposed.

The Committee reviewed Article 12.4notifications of the application of a provisionalsafeguard measure from: the Czech Republic(sugar), Latvia (swine meat), the SlovakRepublic (swine meat) and Slovenia (swinemeat).

Among other business taken up by theSafeguards Committee in 1999 were two itemsraised for discussion by Japan concerningpossible amendments to U.S. safeguardslegislation and the relationship of undertakingsinstituted pursuant to the Agreement onSubsidies and Countervailing Measures (e.g.,U.S. suspension agreements in countervailingduty proceedings) and the provisions of Article11 of the Safeguards Agreement concerningprohibited measures.

Work for 2000

The Committee has substantially completed itsreviews of the laws and regulations of the 84Members who have notified their safeguardsregimes. With the December 31, 1999,expiration of pre-existing Article XIX and GreyArea Measures, the Committee’s work in 2000will focus on the reviews of safeguard actionsthat have been notified to the Committee and onthe notification of new or amended safeguardslaws.

9. Committee on Sanitary andPhytosanitary Measures

Status

The WTO Agreement on the Application ofSanitary and Phytosanitary (SPS) Measuresestablishes rules and procedures to ensuremeasures are based in science and developedthrough systematic risk assessment procedures. At the same time, the SPS Agreement preservesevery WTO Member’s right to choose the levelof protection it considers to be appropriate.


Sanitary and phytosanitary measures protectagainst risks associated with plant- oranimal-borne pests or diseases, or withadditives, contaminants, toxins ordisease-causing organisms in foods, beverages,or feedstuffs. The Committee on SPS Measures6 serves as aforum for consultation on issues associated withthe implementation and administration of theAgreement. This consultation includesdiscussion of specific SPS measures that areperceived to violate the Agreement and theexchange of information on implementation ofthe obligations in the Agreement. TheCommittee’s work also encompasses an ongoingreview of the Agreement’s operationalprovisions related to transparency in thedevelopment and application of SPS measures.


The SPS Agreement was an important evolutionin international rules and disciplines foragricultural products. The SPS Agreementserves as a compliment to the WTO Agreementon Agriculture by seeking to ensure that astariffs, export subsidies and other moretraditional measures affecting international tradein agricultural products are liberalized,

governments do not replace the traditional toolsof agricultural protection with capricioussanitary and phytosanitary barriers.

The SPS Agreement, for the first time,established multilaterally recognized rules anddisciplines for the development and applicationof measures taken to protect human, animal orplant life or heath. The Agreementaccomplishes this by requiring that SPSmeasures be transparent, based in science anddeveloped through systematic risk assessmentprocedures.

At the same time, the Agreement preserves eachWTO Member’s right to choose the level ofprotection it considers to be appropriate withrespect to food safety, animal and plant health,and other SPS risks, even if a Member’s chosenlevel of protection is higher than the level ofprotection that would be provided by acomparable international standard. Since theAgreement was adopted, for example, theAdministration has launched a number ofimportant initiatives to ensure, in a manner thatis fully consistent with the Agreement, thatdomestic and international food products sold toU.S. consumers continue to meet the higheststandards in the world.

The Agreement’s notification procedures are animportant tool, allowing the Administration toidentify and seek to resolve potential problemswith new SPS measures before they areimplemented. Members are required to provideinformation on proposed SPS actions forcomment before they are finalized. Concernsregarding proposed or ongoing SPS actions maybe addressed through bilateral consultationsand/or raised for more general discussion andscrutiny in the SPS Committee. The mostimportant benefits have been the result of stepsthat governments have taken, bothindependently and on the basis of consultations,to implement the Agreement and addressparticular concerns before potentialinternational differences rise to the level of

6Participation in the Committee is opento all WTO Members. Certain non-WTOMembers also participate as observers, inaccordance with guidance agreed to by theGeneral Council. Representatives of a numberof international organizations are invited toattend meetings of the Committee as observers: the Food and Agriculture Organization (FAO);the World Health Organization (WHO); theFAO/WHO Codex Alimentarius Commission;the FAO International Plant ProtectionConvention Secretariat (IPPC); the InternationalOffice of Epizootics (OIE); the InternationalOrganization for Standardization (ISO) and theInternational Trade Center (ITC).


formal WTO consultations and disputesettlement procedures.

In the cases brought to the WTO DisputeSettlement Body by the United States and otherMembers, the DSB’s decisions haveconsistently upheld the Agreement’s emphasison science and risk assessment, furtherreinforcing the need for all WTO Members toensure that their SPS measures are based onthose principles and procedures. At the sametime, these decisions have affirmed the right ofWTO Members to determine what levels ofprotection are appropriate, even when theydiffer from the levels that would be afforded byinternational standards.

The Administration has pushed aggressively, inthe SPS Committee, the WTO DisputeSettlement Body, and a wide range of bilateraland multilateral fora, for full implementation ofthe Agreement by all current Members and bycountries that are in the process of acceding tothe WTO. The combination of the SPSAgreement’s framework of rules – with itsstrong emphasis on transparency, science andsystematic risk assessment – and the efforts bythe United States and other Members to ensureeffective implementation of those rules hashelped the Administration open up and preservemajor export markets for U.S. agriculturalproducts throughout the world.

Throughout the past five years, the WTOSecretariat has organized numerous seminars onthe operation of the SPS Agreement in manyregions of the world in order to assist WTOMembers in complying with the provisions ofthe Agreement. The Administration alsoprovides technical assistance to individual WTOMembers and countries acceding to the WTO onthe SPS Agreement. U.S. government agenciessuch as the Food Safety Inspection Service(FSIS) also provide information and training atpermanent centers such as the FSIS facility inCollege Station, Texas.


The Committee held three meetings in 1999 tocontinue monitoring the implementation of theSPS Agreement.

Review of Implementation of the Agreement: Article 12.7 of the SPS Agreement provides that“[t]he Committee shall review the operation andimplementation of this Agreement three yearsafter the date of entry into force of the WTOAgreement, and thereafter as the need arises. Where appropriate, the Committee may submitto the Council for Trade in Goods proposals toamend the text of this Agreement having regard,inter alia, to the experience gained in itsimplementation.” The report of the firsttriennial review contains a section-by-sectionanalysis of the SPS Agreement, reflectingdiscussion that took place in the Committeeduring the review. The report identifies severalareas for improvement in implementing theAgreement, as well as follow-up activities bythe Committee. At no time during the triennialreview did any Member suggest the reopeningof the text of any Article or negotiation of anynew text. The SPS Committee adopted byconsensus the final report of the triennial reviewof implementation of the SPS Agreement onMarch 11, 1999.

Transparency: A key opportunity resultingfrom the SPS Agreement is the ability to obtaininformation on WTO Members’ proposed SPSregulations, controls, and inspection andapproval procedures, and to provide commentson those proposals before they are finalized. These opportunities have proved to beextremely useful in preventing problemsassociated with SPS measures before trade isaffected. The United States continued toencourage all WTO Members to establish anofficial notification authority, as required by theAgreement, and to ensure that the Agreement’snotification requirements are fully andeffectively implemented.


U.S. INQUIRY POINT

Office of Food Safety and Technical ServicesAttention: Carolyn F. WilsonForeign Agricultural ServiceU.S. Department of AgricultureAG Box 1027Room 5545 South Agriculture Building14th and Independence Avenue, S.W.Washington, DC 20250-1027

Telephone: (202) 720-2239Fax: (202) 690-0677email: [email protected]

The SPS Agreement requires each Member toestablish a central contact point, known as aninquiry point. This inquiry point serves twoprimary functions. First, it provides notice tothe SPS staff of the WTO Secretariat of aMember’s proposed SPS measures and serves asa contact point for questions from other WTOMembers. Second, the inquiry point receivesnotifications from the Secretariat of otherMembers’ proposed SPS measures andcirculates them to interested parties forcomment.

Prior to the November meeting, the WTOSecretariat conducted a workshop on SPSinquiry points to provide technical assistanceand information exchange on the operation ofinquiry points. Approximately one-fourth ofWTO Members have not yet designated aninquiry point and notified the Committee.

Guidelines for the Practical Implementation ofArticle 5.5: The Committee also was chargedwith developing guidelines to further thepractical implementation of each Member’sobligation to avoid arbitrary or unjustifiabledistinctions in the levels of SPS protection thatthe Member considers to be appropriate indifferent situations (Article 5.5). TheCommittee has held extensive consultations andMembers have generally been satisfied with theconsiderable progress that has been made ondraft guidelines.

In 1999, the Committee continued to discusspractical issues associated with implementationof Article 5.5 regarding consistency in theapplication of appropriate levels of protection. The Committee informally reviewedsuggestions by Members and various drafts ofthe Secretariat. While progress has been made,discussions continue on three important issues:the role of international standards in theimplementation of measures versus in decisionsrelated to the appropriate level of protection; thedifferentiation between disciplines related todecisions on the appropriate level of protectionand the disciplines related to its applicationthrough measures; and the differentiationbetween approaches for food safety and humanhealth, and approaches for animal and plant lifeand health. Discussions will continue on theseissues.

Monitoring Procedures for the Use ofInternational Standards. The Committee alsowas given responsibility for developingprocedures to monitor internationalharmonization and the use of internationalstandards, guidelines or recommendations(Articles 3.5 and 12.4). Accordingly, there wasan exchange of information on nationalregulatory procedures and the use of riskassessment in the development of SPSmeasures. The Committee also established aprovisional procedure, which was extended in1999 for two years, to monitor the use ofinternational standards. The procedureadditionally seeks to identify internationalstandards that may have a major impact on tradeand that may warrant review because they areout of date, or otherwise technicallyinappropriate, or because they have not, forother reasons, been adopted by WTO Members. The Secretariat’s report (documentG/SPS/W/94/Rev.2 at www.wto.org) detailsspecific international standards consideredunder this review.

Specific Trade Concerns. The Committeereviewed a number of specific trade concerns,


including several related to individualnotifications. These included measures relatedto dioxin; measures related to maximum levelsof afaltoxins in food; measures related toantibiotics in feed; and measures affecting rawmilk cheeses, other dairy products, beef, poultryproducts, bovine semen, horses, gelatine,potatoes and milled rice. A number of thesematters were resolved following discussions inthe Committee or bilaterally.

Work for 2000

In 2000, the Committee is expected to continuediscussions on the guidelines called for inArticle 5.5 of the Agreement. The Committeealso will continue to monitor implementation ofthe SPS Agreement by WTO Members. Theincrease in disputes in this area is evidence ofthe importance which Members place on theeffective operation of the Agreement.

10. Committee on Subsidies andCountervailing Measures7

Status

The Agreement on Subsidies andCountervailing Measures (SubsidiesAgreement) provides rules and disciplines forthe use of government subsidies and theapplication of remedies – through either WTOdispute settlement or countervailing duty (CVD)action – to address subsidized trade that causesharmful commercial effects.8 The Agreement

divides subsidy practices among three classes: prohibited (red light) subsidies; permitted yetactionable (yellow light) subsidies; andpermitted, non-actionable (green light)subsidies. Export subsidies and importsubstitution subsidies are prohibited. Greenlight subsidies consist of certain circumscribedgovernment assistance granted for industrialresearch and development (R&D), regionaldevelopment, or environmental compliancepurposes. All other subsidies are permitted, yetare actionable (through CVD or disputesettlement action) if they are (i) limited to afirm, industry or group thereof within theterritory of a WTO Member (i.e., “specific”subsidies) and (ii) found to cause adverse tradeeffects, such as material injury to a domesticindustry or serious prejudice to the tradeinterests of another WTO Member. However,certain subsidies, referred to as dark ambersubsidies, are presumed to cause seriousprejudice: subsidies to cover an industry’soperating losses; repeated subsidies to cover afirm’s operating losses; the direct forgiveness ofdebt (including grants for debt repayment); andwhen the ad valorem subsidization of a productexceeds five percent. In such cases, ifchallenged in a WTO dispute settlementproceeding, the subsidizing government has the

7For further information, see also theJoint Report of the United States TradeRepresentative and the U.S. Department ofCommerce, Subsidies Enforcement AnnualReport to the Congress, February 2000.

8Another WTO body which carried outwork of relevance to subsidies disciplines in1999 is the Committee on Trade andEnvironment (CTE). The United States played

a leading role in the CTE, and elsewhere, inidentifying areas where reduction or eliminationof subsidies can yield both trade andenvironmental benefits. A clear example is inthe fisheries sector, where subsidies have playeda major role in exacerbating the problems ofovercapacity and over-fishing. The UnitedStates has worked closely with like-mindedcountries to build a consensus for thedevelopment of stronger WTO disciplines toaddress this problem. The United States willcontinue to pursue this initiative, as well as toexplore other opportunities where strengthenedsubsidies disciplines can yield trade andenvironmental benefits.


burden of showing that serious prejudice has notresulted from the subsidy.9

In 1999, a review was conducted under Article31 of the Agreement with respect to whether toextend beyond 1999 the application of Article6.1 (the dark amber subsidies) and Articles 8and 9 (the green light subsidies). Because aconsensus could not be reached on whether orhow these provisions might be extended beyondtheir five-year period of provisional application,they expired at the turn of the year.


Rules and disciplines covering industrialsubsidies have evolved over time in themultilateral trading system to ensure that theartificial competitive advantages which they canconfer do not disrupt the market signals whichguarantee the most efficient allocation ofresources, both within and among countries –forces at the heart of the generation of wealthfor producers, consumers and workers. TheWTO disciplines subsidies in order to preventthe erosion of comparative advantage and theundermining of market access expectationsconferred through reciprocal concessions toreduce tariffs and other barriers at the border. In short, subsidy rules help to make the field ofcompetition more even, so private actors neednot worry about having to compete withgovernment treasuries. At the same time,however, WTO subsidy rules recognize that allgovernments do – indeed, must – intervene intheir economies in some fashion to pursuelegitimate objectives for the society at large. The WTO rules, accordingly, are intended toprohibit or discourage the most distortive kindsof subsidies, and to encourage governments touse less distortive subsidies in order to achieve

the broader social or economic objectives ofinterest to them.

This historical balance has served U.S. interestswell. The orientation of multilateral subsidyrules has tended to reflect the balances struckwithin the United States on these same issues: alow toleration for the more distortive types ofgovernment intervention, yet with a flexibilitywhich permits a variety of approaches toaddress the different social, economic,technological, developmental andenvironmental needs of a Member. It is also abalance that has served the multilateral systemwell, e.g., during the financial crisis, it provideda model which discouraged the kind of targetedindustrial policies and non-commercialgovernment support that exacerbated the crisis,but saved room for the broadly availableindustry and worker assistance that could beimportant in overcoming the crisis. Finally, it isa framework which holds promise for creatinggreater complementarities between the goals oftrade policy and environmental policy, as theUnited States identifies sectors in which thereduction or elimination of subsidy practicescan alleviate both adverse trade andenvironmental effects.

The Uruguay Round Subsidies Agreementbrought important new disciplines to address themore egregious subsidy practices, and for thefirst time extended the coverage of disciplinesfrom the 25 to 30 signatories of the TokyoRound Subsidies Code to all 135 Members ofthe WTO. Its remedies and methodologicalconcepts reflect, in most instances, the veryconcepts and standards which the United Statesdeveloped over the course of decades inadministering its own anti-subsidy tradestatutes. With some exceptions, the outcome ofsubsidy-based disputes brought since entry intoforce of the WTO has tended to reinforce thestrict standards which the United States believedat the conclusion of the Uruguay Round wereembodied in the Agreement. Even with theexpiration last year of certain important

9As explained below, the green light anddark amber provisions mentioned here are nolonger in effect.


elements of the Agreement, it continues to offera strong yet balanced solution to the impact ofsubsidies on international trade.


The Committee held two regular and twospecial meetings in 1999. In addition to itsroutine activities concerned with clarifying theconsistency of WTO Members’ domestic laws,regulations and actions with Agreementrequirements, the Committee gave specialattention to reviewing general subsidynotifications and to the process by which suchnotifications are made to and considered by theSubsidies Committee. Particular attention wasdevoted to the review of 1998's new and fullsubsidy notifications, including that of theUnited States,10 which is the second series ofsuch notifications made since entry into force ofthe WTO. Pursuant to its own “built-inagenda,” as set forth in Article 31, theCommittee also conducted its review of theoperation of the green light and dark amberrules. Further information on these variousactivities is provided below.

Review and Discussion of Notifications:Throughout the year, Members submittednotifications of (i) new or amended CVDlegislation and regulations; (ii) CVDinvestigations initiated and decisions taken; and(iii) measures which meet the definition of asubsidy and which are specific to certainrecipients within the territory of the notifyingMember. Notifications of CVD legislation andactions, as well as updating subsidy

notifications, were reviewed and discussed bythe Committee at both of its regular meetings. New and full subsidy notifications for the 1998reporting period were, in turn, considered at thetwo special meetings. In reviewing notifiedCVD legislation and subsidies, the Committeeprocedures provide for the exchange of writtenquestions and answers to clarify the operation ofthe notified measures and their relationship tothe obligations of the Agreement. For the firsttime, the Committee agreed to specialprocedures for conducting its review of fullsubsidy notifications in order to allow adequatetime for a written exchange of questions andanswers prior to the meeting, thereby permittinga more probing and free-flowing discussion ofissues at the meeting itself.

Among the notifications of CVD laws andregulations reviewed in 1999 were those ofArgentina, Australia, Dominica, Egypt, theEuropean Union (EU), Fiji, Ghana, Indonesia,Jamaica, Latvia, Maldives, Trinidad and Tobagoand the United States (including the most recentsubstantive CVD regulations of the Departmentof Commerce). As for CVD measures, reportswere submitted by 68 Members last year, andthe Committee reviewed actions taken byArgentina, Barbados, Canada, the EU, Egypt,Mexico, Peru, South Africa, Sri Lanka, theUnited States, and Venezuela. With respect tosubsidy notifications, the Committee examinedthe notifications of 36 Members (counting the15 member states of the EU as one). Most werenew and full notifications submitted for 1998,the beginning of the second triennialnotification cycle under the Agreement, butupdate notifications for 1997 and 1999 werealso reviewed. The table contained in Annex IIshows the WTO Members whose subsidynotifications were reviewed by the Committeein 1999.

The United States has long pressed not only forbetter compliance with subsidy notificationobligations, but also for improvements aimed atstreamlining the notification process. In 1999,

10As noted in last year’s report, the 1998notification of the United States included for thefirst time information on over 200 measures atthe sub-federal level. This innovation waswelcomed by many other Members, and haspermitted the United States to probe for orprovide information about similar measuresmaintained at the sub-central government levelin other WTO Members’ territories.


the Subsidies Committee considered an EUproposal drawn from earlier suggestions of theUnited States and other Members that new andfull notifications be made biennially rather thantriennially, and that updating notifications beeliminated. Such a change, the United Stateshas argued, would not only lessenadministrative burdens, but would rationalizethe review process by permitting a Member toshift resources from preparing its notification inone year to reviewing notifications in the next. This would, in fact, heighten transparencythrough better organization and fewer delays. Whereas many delegations expressed interest inor support for this proposal, a number ofdeveloping countries requested additional timeto study the idea. The Committee will continueto consider this and other proposals forstreamlining the notification process in 2000.

Sunsetting of Green Light & Dark Amber Rules:When the Subsidies Agreement was negotiated,the green light and dark amber rules wereconsidered to be the most novel, and thereforeunpredictable, aspects of the Agreement. As aresult, the Agreement provided that these rulesshould apply only for the first five years. UnderArticle 31 of the Agreement, the SubsidiesCommittee was charged with reviewing theiroperation with a view toward extending themfor a further period, with or withoutmodifications, but the Agreement made clearthat the provisions would expire at the end of1999 unless an explicit decision was made tokeep them in force.

Pursuant to the URAA, the Administrationconducted extensive consultations on this issuewith a broad spectrum of interested U.S. partiesthroughout 1998 and 1999. On the basis ofthose consultations, the United States took theposition that it could join a consensus to extendthe application of Articles 6.1, 8 and 9, aswritten, for another reasonable period of time(e.g., up to another five years). This wasconsistent with the vast majority of the advicethat the United States had received from its

statutorily-mandated advisory committees, otherprivate sector and state/local governmentrepresentatives and interested members of theCongress. It reflected the mixed views whichthe United States has always held about thevalue and danger of these provisions, and therelative lack of experience with their use sinceestablishment of the WTO.

Although many WTO Members supported anextension, a number of developing countryMembers asserted that the provisions workedexclusively to the advantage of developedcountries, and opposed an extension unlesscertain modifications were made to theseprovisions, other parts of the SubsidiesAgreement and even other WTO agreements. The United States argued that the Article 31issue had to be judged on its own merits, and theUnited States could not accept changes whichwould substantively dilute subsidy or otherWTO disciplines as a price for extension. OtherMembers expressed similar views, while ahandful of developing countries voiced doubtsthat there could be any basis acceptable to themfor extending the application of Articles 6.1, 8and 9. Accordingly, the Committee was unableto take a decision on this matter by the end of1999, and the provisions automatically lapsed asof January 1, 2000.

Pursuant to the requirements of the URAA,USTR plans to submit by no later than June 30,2000, a separate report to the Congressidentifying the provisions of U.S. law that areaffected by these developments. As set forth insection 251 of the URAA, the green lightprovisions of U.S. CVD law will no longer haveeffect as of July 1, 2000, unless new legislationis enacted before that date which alters thatstatus.

Work for 2000

Implementation will continue to be the hallmarkof Subsidies Committee work this year. First,as noted above, the United States will continue


to work towards agreement on ways tostreamline the burdens of subsidy notificationfor all WTO Members without taking awayfrom the substantive benefits of that obligation. Second, certain developing country Membersraised concerns in both the Committee and theThird Ministerial preparatory process last yearabout the problems of Subsidies Agreementimplementation. The United States agrees thatthe Committee should assume a more active rolein addressing the variety of pending, andimpending, implementation issues. Amongthese, from a U.S. perspective, are certainleading examples:

� IMPLEMENTATION OF ARTICLE27.3: On January 1, 2000, the phase-outperiod ended for all developingcountries except the least-developedwith respect to “subsidies contingent . . .upon the use of domestic over importedgoods,” measures which are prohibitedunder Article 3.1(b) of the Agreement. Without prejudice to any Member’sdispute settlement rights, the UnitedStates believes that the Committeeshould monitor Members’implementation efforts in order toensure compliance with this obligation.

� IMPLEMENTATION OF ARTICLE27.2/27.4: In the course of the pastyear, many developing countries haveraised concerns about their ability tomeet the transitional obligations invarious WTO Agreements by theprescribed deadlines. Under theSubsidies Agreement, the transitionperiod for most developing countries tophase out their export subsidies expireson January 1, 2003. Although theUnited States and other Members haveasked certain developing countries toreport on the status of their phase-outplans during the review of generalsubsidy notifications under Article 26,little information has typically been

supplied in response. Notwithstandingthat the deadline is roughly three yearsaway, and individual requests forextension need not be made untilJanuary 1, 2002, the Agreement doesprescribe that these subsidies are to bephased out “in a progressive manner”and within a shorter period where “theuse of such . . . subsidies is inconsistentwith [a country’s] development needs.” Given this, there are reasonable groundsfor the Committee to consider this yearcreating a special reporting andmonitoring process to facilitate thesephase-outs.

� ARTICLE 27.6 REVIEW: The SubsidiesAgreement provides that a developingcountry which has reached 3.25 percentof world trade in a given product overtwo consecutive years must acceleratethe phase-out of its export subsidies onthat product. The product scope isdefined as a section heading of theHarmonized System nomenclature, andapplication of this provision can betriggered either by a notification madeby the developing country or acomputation done by the WTOSecretariat at the request of anotherMember. Pursuant to Article 27.6 of theAgreement, the Subsidies Committeebegan reviewing the operation of thisprovision at the end of last year. Although the provisions have yet to beinvoked, the United States believes thata number of issues relating to the scope,structure and likely operation of theseprovisions are topics worthy of morerigorous consideration.

� OPERATION OF ANNEX VII: AnnexVII to the Agreement identifies twospecific groups of developing countrieswhich receive treatment more generousthan that given to other developingcountries with respect to both export


subsidy obligations and the applicationof CVD rules.11 Over the past year, anumber of developing countries haveraised concerns about the scope andoperation of Annex VII. While there isno justification for arbitrarily expandingthe scope of this Annex, in terms ofeither countries covered or theexceptions provided from normalAgreement rules and disciplines, somelegitimate questions have been raisedabout the manner in which Annex VII(as it is currently written) may haveoperated or been interpreted. TheUnited States agrees that the Committee

could profitably review the status andoperation of this Annex, with thepossibility of drawing uprecommendations for improvements andclarifications should any be identified.

11. Committee on Technical Barriersto Trade

Status

The Agreement on Technical Barriers to Trade(TBT Agreement) establishes rules andprocedures regarding the development,adoption, and application of voluntary productstandards, mandatory technical regulations, andthe procedures (such as testing or certification)used to determine whether a particular productmeets such standards or regulations. Its aim isto prevent the use of technical requirements asunnecessary barriers to trade. The Agreementapplies to a broad range of industrial andagricultural products, though sanitary andphytosanitary (SPS) measures and specificationsfor government procurement are covered underseparate agreements. Its establishes rules thathelp to distinguish legitimate standards andtechnical regulations from protectionistmeasures. Standards, technical regulations andconformity assessment procedures are to bedeveloped and applied on a non-discriminatorybasis, developed and applied transparently, andshould be based on international standards andguidelines, when appropriate.

11If a developing country WTO Memberis identified in Annex VII, Article 27 of theAgreement provides it with more generoustreatment than is provided for other developingcountries, i.e., they are not immediately subjectto export subsidy phase-out requirements and,for a limited remaining period, their exportsbenefit from higher de minimis subsidy rates incountervailing duty investigations. Annex VIIidentifies two groups of the poorest developingcountries: (i) the least developed countries asdesignated by the United Nations and (ii) certainother specifically named countries whose annualGNP per capita was below $1000 at theconclusion of the Uruguay Round negotiations. The specifically named countries are: Bolivia,Cameroon, Congo, Côte d’Ivoire, theDominican Republic, Egypt, Ghana, Guatemala,Guyana, India, Indonesia, Kenya, Morocco,Nicaragua, Nigeria, Pakistan, the Philippines,Senegal, Sri Lanka and Zimbabwe. Annex VIIindicates that this latter group of countries shallcontinue to benefit from the more generoustreatment described here until such time as theirannual per capita GNP reaches $1000. Over thepast five years, World Bank data has indicatedthat the annual per capita GNP of theDominican Republic, Egypt, Guatemala,Indonesia, Morocco and the Philippines roseabove $1000 (although, for some, it has sincedropped below $1000).


The TBT Committee12 serves as a forum forconsultation on issues associated with theimplementation and administration of theAgreement. This includes discussions and/orpresentations concerning specific standards,technical regulations and conformity assessmentprocedures maintained by a Member that arecreating adverse trade consequences and/or areperceived to be violations of the Agreement. Italso includes an exchange of information onMember government practices related toimplementation of the Agreement and relevantinternational developments.


The TBT Agreement seeks to ensure that astariffs are liberalized, governments do notreplace tariff protection with capricioustechnical barriers. The TBT Agreement, for thefirst time, established multilaterally recognizedrules and disciplines for the development andapplication of standards, technical regulationsand conformity assessment procedures appliedto all WTO Members. Although a form of theAgreement had existed since 1979 as a result ofthe Tokyo Round of trade negotiations, theexpansion of its applicability to all Memberswas significant. Under the WTO, all Membersassumed obligations for non-discrimination andtransparency in the development and applicationof measures covered by the TBT Agreement.

The Agreement’s notification procedures securethe right for interested parties in the UnitedStates to obtain early information on standards,technical regulations, and conformityassessment procedures in all WTO Members. Itprovides interested parties the ability toinfluence the development of such measures byproviding written comments on proposedmeasures. Among other things, this helps toprevent the establishment of technical barriers totrade. The Agreement has functioned well inthis regard, though discussions on how toimprove the operation of the provisions ontransparency are ongoing.

Other disciplines and obligations, such as theprohibition of discrimination and the call formeasures to be no more trade restrictive thannecessary to fulfill legitimate regulatoryobjectives, have been useful in evaluatingpotential trade barriers and in seeking ways toaddress them. The monitoring and oversight bythe Committee has been critical. It has served asa constructive forum for discussing andresolving issues, and this oversight has perhapsreduced the need for more formal disputesettlement proceedings. To date, there has beenno dispute settlement panel finding concerning

12Participation in the Committee is opento all WTO Members. Certain non-WTOMember governments also participate, inaccordance with guidance agreed by the GeneralCouncil. Representatives of a number ofinternational intergovernmental organizationswere invited to attend meetings of theCommittee as observers: the InternationalMonetary Fund (IMF), the United NationsConference on Trade and Development(UNCTAD); the International Trade Center(ITC); the International Organization forStandardization (ISO); the InternationalElectrotechnical Commission (IEC); the Foodand Agriculture Organization (FAO); the WorldHealth Organization (WHO); the FAO/WHOCodex Alimentarius Commission; theInternational Office of Epizootics (OIE); theOrganization for Economic Cooperation andDevelopment (OECD); the UN EconomicCommission for Europe (UN/ECE); and theWorld Bank. The International Organization ofLegal Metrology (OIML), the United NationsIndustrial Development Organization (UNIDO),the Latin American Integration Association(ALADI), the European Free Trade Association(EFTA) and the African, Caribbean and PacificGroup of States (ACP) have been grantedobserver status on an ad hoc basis, pending finalagreement by the General Council on theapplication of the guidelines for observer statusfor international intergovernmentalorganizations in the WTO.


U.S. Inquiry Point

National Center for Standards and CertificationInformationNational Institute of Standards and Technology(NIST)100 Bureau Drive, Stop 2150Gaithersburg, MD 20899-2150

Telephone: (301) 975-4040Fax: (301) 926-1559email: [email protected]

the rights and obligations of the TBTAgreement.

Transparency and Availability of WTO/TBTDocuments: A key opportunity for the publicresulting from the TBT Agreement is the abilityto obtain information on proposed standards,technical regulations and conformity assessmentprocedures, and to provide comments forconsideration on those proposals before they arefinalized. The Members are also required toestablish a central contact point, known as aninquiry point, which is responsible forresponding to requests for information ontechnical requirements or making theappropriate referral.

The NIST maintains a reference collection ofstandards, specifications, test methods, codesand recommended practices. This referencematerial includes U.S. government agencies’regulations, and standards of U.S. privatestandards-developing organizations and foreignnational and international standardizing bodies. The inquiry point responds to all requests forinformation concerning federal, state and privateregulations, standards and conformityassessment procedures. This office circulates tointerested parties in the United Statesnotifications of proposed regulations fromforeign governments received under the TBTAgreement. The NIST also will provideinformation on central contact points forinformation maintained by other WTO

Members. On questions concerning standardsand technical regulations for agriculturalproducts, including SPS measures, the NISTrefers requests for information to the U.S.Department of Agriculture, which maintains theU.S. inquiry point under the Sanitary andPhytosanitary Agreement.

A number of documents relating to the work ofthe TBT Committee are available to the publicfrom the WTO website: www.wto.org. TBTCommittee documents are indicated by thesymbols, “G/TBT/....” Notifications byMembers of proposed technical regulations andconformity assessment procedures which areavailable for comment are issued as“G/TBT/Notif./...” (followed by a number). Parties in the United States who submitcomments to foreign governments on theirproposals are encouraged to provide a copy ofthose comments to the U.S. inquiry point at theaddress above. Minutes of the Committeemeetings are issued as “G/TBT/M/...” (followedby a number). Submissions by Members (e.g.,statements; informational documents; proposals;etc.) and other working documents of theCommittee are issued as “G/TBT/W/...”(followed by a number). As a general rule,written information provided by the UnitedStates to the Committee is provided on an“unrestricted” basis and available to the public.


The TBT Committee met three times in 1999. At the meetings, the Committee addressedimplementation of the Agreement, including anexchange of information on actions taken byMembers domestically to ensure implementationand ongoing compliance. A number ofMembers used the Committee meetings to raiseconcerns about specific technical regulationswhich affected, or had the potential to affect,trade adversely and were perceived to createunnecessary barriers to trade. For example, in1999, the United States expressed concerns withearly drafts of European Commission Directiveson Batteries and on Waste from Electrical and


Electronic Equipment (WEEE). The UnitedStates also raised concerns with the EU’sproposal to restrict the use of hushkitted andre-engined aircrafts (G/TBT/Notif.99.75;G/TBT/W/101); its Regulation 881/98 on“Traditional Terms” which would restrict theuse of commonly-used wine labeling terms(G/TBT/W/119); and EC Regulation 1139/98regarding the labeling of foods and foodingredients produced from genetically modifiedsoy or maize (G/TBT/W/94; see alsoG/TBT/W/115 for a summary of relatednotifications). During the year, no Memberraised a question about U.S. compliance withthe TBT Agreement.

The Committee conducted its fourth AnnualReview of the Implementation and Operation ofthe Agreement based on backgrounddocumentation contained in G/TBT/7, and itsFourth Annual Review of the Code of GoodPractice for the Preparation, Adoption andApplication of Standards (Annex 3 of theAgreement) based on backgrounddocumentation contained in WTO TBTStandards Code Directory, G/TBT/CS/1/Add.3and G/TBT/CS/2/Rev.5. Decisions andrecommendations adopted by the Committee arecontained in G/TBT/1/Rev.6.

A primary focus of the Committee in 1999 wasthe work program arising from its First TriennialReview of the Operation and Implementation ofthe Agreement (G/TBT/5). The reviewprovided the opportunity for WTO Members toreview and discuss all of the provisions of theAgreement, which facilitated a commonunderstanding of the rights and obligations. Thereview, which was concluded in November,1997, highlighted a number of areas for furtherconsideration by the Committee. The followingsummarizes the issues identified in the firsttriennial review and work in the Committee in1999:

� Implementation and Administration ofthe Agreement by Members (Article15.2): Committee members agreed to

make detailed presentations on thearrangements they have in placedomestically to assure effective andcontinued compliance with theAgreement. This exchange is intendedto assist all Members seeking ways toimprove compliance, and should help toidentify specific needs for technicalassistance. To date, 57 notifications asrequired by Article 15.2 have been madeby 72 Members containing informationon the implementation andadministration of the Agreement(G/TBT/2/Add.1-57). Ninety-sixMembers have notified the existence oftheir inquiry points in documentG/TBT/ENQ/15.

� Preparation, Adoption and Applicationof Technical Regulations: TheCommittee emphasized that goodregulatory practice is essential to ensuretechnical regulations do notunnecessarily impede trade. Forexample, it is important to avoidpromulgating technical regulationswhere they are not necessary. Wherethey are necessary, their preparation,adoption and application should be inaccordance with the provisions of theAgreement. This requires coordinationamong trade and regulatory officials. In1999, the Committee continued itsexchange of information on Members’approaches to regulation.

� Operation and Implementation ofNotification Procedures (Articles 2, 3, 5and 7): The Committee highlighted theimportance for product suppliers andother interested parties of obtainingearly information on proposals for newtechnical regulations and conformityassessment procedures, providingcomments on them while still in draft,and having those comments consideredbefore a final rule is adopted. It


therefore agreed that the proceduralaspects of notification should be thesubject of ongoing review.

In 1999, the Committee accepted a U.S.proposal to conduct a survey ofMembers to ascertain the extent towhich they had access to electronicmeans for information exchange. Thesurvey confirmed that a broad range ofMembers’ inquiry points did have thefacilities for electronic exchange ofinformation and the Committee agreedon recommendations to encouragegreater use of this medium (e.g.,electronic publication of work programson voluntary standards foreseen inAnnex 3 of the Code of Good Practice).

� Code of Good Practice byStandardizing Bodies (Article 4; Annex3): The Committee noted thatcompliance with the Code of GoodPractice was necessary to ensure thatvoluntary standards, whether developedby governments or private or regionalbodies, do not create unnecessarybarriers to trade. It also noted that theprovisions of the Code were notapplicable to the activities ofinternational bodies. The Committeeinvited Members to share experienceson difficulties associated with voluntarystandards and the nature of and reasonsfor deviations from relevantinternational standards. It agreed thatthe obligation to publish notices of draftstandards containing voluntary labelingrequirements was not dependent uponthe kind of information provided on thelabel.

In 1999, the Committee continued itsdiscussion of whether there should bean obligation to encourage privatestandardizing bodies to recognizeequivalent standards of bodies in other

Members’ territories (along the lines ofthe obligation on Members in Article2.7). Several Members have offeredspecific proposals that are underconsideration. A proposal to change therecommended 60 days to be allowed forpublic comment on draft standards wasalso discussed.

� International Standards, Guides andRecommendations: The Committeeacknowledged that the Agreementaccords significant emphasis to thedevelopment and use of internationalstandards for preventing unnecessarytrade barriers. It recognized, however,that trade problems could arise through,inter alia, the absence of internationalstandards or their non-use due topossible outdated content. Furtherexamination of such issues waswarranted and Members wereencouraged to bring specific examplesto the Committee. The Committee alsoagreed to intensify its exchange ofinformation with international bodies,with a view to ensuring that suchstandards emanate from processesconsistent with the objectives of theAgreement (e.g., that standards bedeveloped in an open and transparentprocess).

In November 1998 the WTO held an“Information Session of BodiesInvolved in the Preparation ofInternational Standards” to improveCommittee Members’ understanding ofthe procedures by which internationalstandards are developed and theongoing activities of these bodies, andto enhance these bodies’ awareness ofthe ongoing discussions on internationalstandards in the TBT Committee. TheU.S. paper (G/TBT/W/64) outlined ourinterest in clarifying the Committee’sunderstanding that, for purposes of the


Agreement, international standards mustresult from a fair process of openness,transparency and consensus. A specificproposal is contained inG/TBT/W/75/Rev.1. Other Membersalso introduced proposals on this topicand on other issues relating to thedevelopment and use of internationalstandards, all of which remain underconsideration. In addition, Memberscontinue to provide statements andwritten information on their experiencein developing and using internationalstandards, guides and recommendations.

� Conformity Assessment Procedures: The Committee noted the growingconcern with the restrictive effect ontrade of multiple testing, certificationand other conformity assessmentprocedures, and the call by industry for“one standard, one test.” TheCommittee noted that the supplier’sdeclaration of conformity wasrecognized as saving costs, and that therecognition of the results of conformityassessment could be achieved throughdifferent approaches which might havedifferent effects on trade. There was anemerging interest in concluding mutualrecognition agreements (MRAs) as ameans of facilitating trade, yet it wasalso noted that such agreements raisedconcerns for non-participants andoverall questions about their utility insolving the problems of multiple testingand conformity assessment procedures. The Committee urged the use ofcommon procedures for conformityassessment, such as internationalguides, as an essential basis for buildingconfidence among parties.

The Committee continued to examinevarious approaches for solving theproblems and costs of multiplerequirements for conformity

assessment. In June 1999, the WTOheld a “Symposium on ConformityAssessment Procedures” to develop animproved understanding of the issues. The Symposium enabled CommitteeMembers to learn from the perspectivesand experience of a broad range ofexperts on the use of conformityassessment procedures for businesstransactions in the marketplace and as atool to promote regulatory compliance. Information was obtained onagreements and arrangements which areevolving to facilitate trade and reducecompliance costs. In addition to theinformation received at the Symposium,Members have continued to provideinformation on their national experienceand practice (e.g., the United Statesprovided a paper on its use of Supplier’sDeclaration of Conformity inG/TBT/W/75). Members have alsointroduced proposals relating to theobligations concerning conformityassessment procedures which are underconsideration.

� Technical Assistance (Article 11) andSpecial and Differential Treatment(Article 12): The Committee agreed tocontinue to exchange information onassistance provided by Members, aswell as to examine the specific needs ofMembers for assistance. Discussion ofdeveloping country needs and interestswere also considered in the topicsabove.

At the Committee’s request, the WTOSecretariat prepared a paper (G/TBT/W/103) torecord the state of knowledge concerning thetechnical barriers to the market access ofdeveloping country suppliers, especially smalland medium sized enterprises, as a result ofstandards, technical regulations and conformityassessment procedures.


The Agreement (Article 10.6) requires the WTOSecretariat to draw to the attention ofdeveloping country Members any notificationrelating to products of particular interest tothem. In light of the information obtained in theSurvey on the Electronic Facilities Available inNational TBT Inquiry Points, the Committeeagreed on an approach to facilitateimplementation of this provision through the useof electronic mail.

Work for 2000

Second Triennial Review: In 2000, the TBTCommittee is required to complete its secondtriennial review of the Agreement. Article 15.2obliges the Committee to “...review theoperation and implementation of thisAgreement, including the provisions relating totransparency, with a view to recommending anadjustment of the rights andobligations...Having regard, inter alia, to theexperience gained in the implementation of theAgreement, the Committee shall, whereappropriate, submit proposals for amendmentsto the text of this Agreement to the Council forTrade in Goods.” The mandate for this reviewprovides an additional incentive for theCommittee to draw conclusions on the range ofissues under discussion and to determine whataction, if any, needs to be taken to improve orenhance compliance with the Agreement.

The United States will work in the secondtriennial review to resolve the issues oftransparency and openness in the developmentand application of international standards;improve the understanding of variousapproaches to conformity assessment and theconsideration of cost-saving approaches toestablishing conformity with technicalregulations; assess the special needs ofdeveloping country Members (in concert withthe Integrated Framework); and establishpractical approaches to ensure effectiveimplementation by all Members. USTR intendsto solicit from the U.S. public additional views

on U.S. objectives for the second triennialreview in 2000.

The first triennial review in the TBTCommittee, General Council discussions held inpreparation for the 1999 Ministerial, anddiscussions at the Ministerial itself revealedsignificant interest (by developing countries inparticular) in addressing the issues associatedwith participation in the development ofinternational standards, and their use, whenappropriate, as a basis for technicalrequirements applied domestically. Theseconcerns will need to be addressed on a prioritybasis to secure ongoing compliance with theTBT Agreement and its continued relevance inaddressing potential technical trade barriers.

12. Committee on Trade-RelatedInvestment Measures

Status

The Agreement on Trade-Related InvestmentMeasures (TRIMS) prohibits investmentmeasures that violate the GATT Article IIIobligations to treat imports no less favorablythan domestically produced products, or theGATT Article XI obligation to removequantitative restrictions on imports. TheAgreement thus expressly eliminates measuressuch as those that require the incorporation oflocal inputs or “local content requirements” inthe manufacturing process, or measures thatrestrict a firm’s imports to an amount related toits exports or related to the amount of foreignexchange a firm earns (“trade balancingrequirements”). It also includes an illustrativelist of measures that violate its requirements. The Agreement requires that any such measuresexisting as of the date of entry into force of theWTO (January 1, 1995) be notified andeventually eliminated. Developed countrieswere required to bring notified measures intoconformity by January 1, 1997. Developingcountries had until January 1, 2000, and theleast developed countries have until January 1,2002.



The TRIMS Agreement successfully providedfor the first time an unambiguous method foraddressing investment measures such as localcontent and trade balancing requirements. Previously, a Member interested in pushing forthe removal of such practices would haverecourse only through GATT Articles III andXI; the interpretation of which had been underdispute. Additionally, the notification processprovided a listing of measures that are not incompliance with the Agreement, which willprove useful as transition periods expire at theend of 1999.

The TRIMS Agreement has been supported byU.S. labor groups, who consider that themeasures that the Agreement prohibits lead toincreased overseas production at the expense ofU.S. employment and to increased competitionfrom imports as firms strive to meet tradebalancing requirements. U.S. industry has alsoadvocated for the Agreement as a general rulebecause it allows exporters and investors toovercome certain measures that would otherwiseinhibit their ability to operate. The eventualremoval and prohibition of such practices canhelp a company increase export sales, reducetransactions costs, enhance productivity andefficiency and increase profitability.

Since its establishment in 1995, the Committeeon TRIMS has been a forum for the UnitedStates and other Members to address concerns,gather information, and to raise questions aboutthe maintenance, introduction or modification ofTRIMS by certain WTO Members, particularlyin the automotive sector. Twenty-four WTOMembers submitted notifications of inconsistentmeasures to the TRIMS Committee, as requiredby the terms of the Agreement, to enjoy thebenefit of the grace periods described above. Three developing countries eliminatedinconsistent measures ahead of the January 2000deadline to remove notified TRIMS.

In 1997, the United States, along with the EUand Japan, brought a WTO dispute against twoIndonesian automotive programs that includedlocal content requirements. In 1998, the DSBadopted the panel’s finding that the localcontent aspects of the automotive programswere inconsistent with the TRIMS Agreement. By July of 1999, Indonesia eliminated theinconsistent measures in compliance with theDSB’s recommendation.

The United States also challenged Brazilianautomotive measures, which the United Statesasserted were inconsistent with the Agreementsince certain measures entered into force afterthe Agreement came into effect and withoutproper notification. In March of 1998, afterconsultations with the United States, Brazilreached a bilateral agreement to accelerateremoval of the measures.


The Committee met twice during 1999. TheUnited States, supported by a number of otherMembers, used the forum to raise questionsregarding developing country Members’ plansto comply with the developing country deadlineto remove inconsistent measures by January 1,2000.

The United States also challenged a number ofMembers’ existing TRIMS, which appearedinconsistent with the terms of the Agreement. In particular, the United States questioned a newIndian law that appeared to expand a previouslynotified measure in the automotive industry. The United States subsequently requestedconsultations with regard to this measure underthe WTO Dispute Settlement Understanding. (See section on the Dispute Settlement Body.)

The Committee also discussed the timing andcontent of the coming review regarding theoperation of the Agreement mandated by Article9. The Article states that the Council for Tradein Goods (CTG), no later than five years afterentry into force of the WTO Agreement, must


begin a review of the operation of the TRIMSAgreement and, as appropriate, proposeamendments to the Agreement’s text. In thecourse of this review, the CTG also mustconsider whether provisions on investmentpolicy and competition policy should be added. While the CTG has begun discussing the natureof the review, no decisions on these mattershave been taken.

Work for 2000

The Committee will have two major areas ofwork in 2000. First, regarding implementation,Article 5.3 of the Agreement provides authorityfor the Council on Trade in Goods (CTG) toextend the transition period for the eliminationof notified TRIMS of developing and leastdeveloped country Members which demonstrateparticular difficulties in implementing theprovisions of the Agreement. Eight Membershave requested the CTG to extend theirtransition periods in accordance with thisprovision. These Members are Romania, Chile,Argentina, Malaysia, Pakistan, Colombia, thePhilippines, and Mexico. The CTG’sconsideration of these requests has alreadybegun. Consultations among interestedMembers have taken place, and writtenquestions and answers have been exchangedwith respect to some of the requests and therespective measures. The second area of work will involve the Article9 review. The educative work alreadyundertaken on investment and competitionpolicy by the working groups established at theSingapore Ministerial (discussed in more detailseparately in this report) will provide a strongbackground to draw upon as the review getsunderway. Accordingly, the Committee can beexpected to support the work of the CTG asneeded in the consideration of the requests forextension and in the review of the operation ofthe Agreement.

The general subject of implementation andcompliance with the Agreement will be an issue

at the core of both of these areas of work. Thematter of specific requests for extension must beaddressed, in addition to the issue of Members’noncompliance with the terms of theAgreement. Some developing countries haveexpressed the need for the Article 9 review toconsider the question of relief from theobligations of the Agreement for developmentreasons. On the other hand, Article 9 is also anopportunity for Members to consider provisionsthat might strengthen the Agreement’sobjectives to reduce the trade-restrictive anddistorting effects of investment measures and tofacilitate international investment.

13. Textiles Monitoring Body

Status

The Textiles Monitoring Body (TMB),established in the Agreement on Textiles andClothing (ATC), supervises the implementationof all aspects of the Agreement. In 1999, TMBmembership was composed of appointees andalternates from the United States, the EU, Japan,Canada/Norway, Slovenia/Turkey, Costa Rica,Thailand, Pakistan/Macau, India/Egypt, andHong Kong/Republic of Korea. Each TMBmember serves in a personal capacity.

The ATC succeeded the Multifiber Arrangement(MFA) as an interim arrangement establishingspecial rules for trade in textile and apparelproducts on January 1, 1995. All Members ofthe WTO are subject to the disciplines of theATC, whether or not they were signatories tothe MFA, and only Members of the WTO areentitled to the benefits of the ATC. The ATC isa ten-year, time-limited arrangement whichprovides for the gradual integration of the textileand clothing sector into the WTO and providesfor improved market access and the gradual andorderly phase-out of the special quantitativearrangements that have regulated trade in thesector among the major exporting and importingnations.



The United States has implemented theAgreement on Textiles and Clothing in such away as to ensure that the affected U.S. industriesand workers as well as U.S. importers andretailers have a gradual, stable and predictableregime to operate under during the quota phase-out period. At the same time, the United Stateshas aggressively sought to ensure fullcompliance by U.S. trading partners with marketopening commitments, so that U.S. exporterscan enjoy growing opportunities in foreignmarkets.

Under the ATC, the United States is required to“integrate” products which accounted forspecified percentages of 1990 imports in volumeover three stages during the course of thetransition period, that is, to designate thosetextile and apparel products for which it willhenceforth observe full GATT disciplines. Once it has “integrated” a product into theGATT, a WTO Member may not impose ormaintain import quotas on that product otherthan under normal GATT procedures, such asArticle XIX. As required by Section 331 of theUruguay Round Agreements Act, the UnitedStates selected the products for early integrationafter seeking public comment, and published thelist of items at the outset of the transition period,for purposes of certainty and transparency forU.S. industry and trading partners. Theintegration commitments for stages 1 and 2 werecompleted in 1995 and 1998, and the list may befound in the Federal Register, volume 60,number 83, pages 21075-21130, May 1, 1995. Also keyed to the ATC “stages” is a requirementthat the United States and other importingMembers increase the annual growth ratesapplicable to each quota maintained under theAgreement by designated factors. Under theATC, the weighted average annual growth ratefor WTO Members’ quotas increased from4.9179 percent in 1994 to 5.7048 percent in1995 and 9.1231 percent in 1998.

Article 5 of the ATC requires that Memberscooperate to prevent circumvention of quotas byillegal transshipment or other means. TheUnited States has actively worked with tradingpartners to improve cooperation and informationsharing, and concluded a new agreement withHong Kong to this end. The United States hasalso established a Textile Transshipment TaskForce at Customs, to improve enforcement oftextile quotas at U.S. borders, and has tightenedenforcement actions vis-a-vis other tradingpartners where an improved bilateral agreementwas not possible.

The ATC requires that all Members take actionsto abide by WTO obligations so as to achieveimproved access to markets for textiles andclothing. The United States initiated WTOdispute resolution cases against Argentina’s useof alternative specific duties and a statistical taxon imports; these measures primarily affectedthe textile, apparel and footwear sector. TheUnited States prevailed in that instance throughthe WTO Appellate Body. In another instance,the United States initiated a WTO dispute overIndia’s lack of justification for use of trademeasures (largely affecting the textile andapparel sector) under balance of paymentsgrounds, and again prevailed in the DisputeSettlement Body and at the Appellate Body. (For further details on these cases, please see thedescription of the activities of the WTO DisputeSettlement Body in this Chapter.)

Most of the significant exporters of textile andapparel products to the United States are WTOMembers. For these Members, bilateral quotaarrangements are governed by the provisions ofthe ATC. Approximately 84 percent of U.S.imports of textiles and apparel are from WTOMember countries, and approximately 98percent (in value) of U.S. exports of textiles andapparel are destined for WTO Membercountries. Members with whom the UnitedStates maintains bilateral quota arrangementsunder the provisions of the ATC are: Bahrain,Bangladesh, Brazil, Bulgaria, Burma/Myanmar,Colombia, Costa Rica, Czech Republic,


Dominican Republic, Egypt, El Salvador, Fiji,Guatemala, Hong Kong/China, Hungary, India,Indonesia, Jamaica, Kenya, the Republic ofKorea, Kuwait, Macau, Malaysia, Mauritius,Pakistan, Philippines, Poland, Qatar, Romania,Singapore, Slovak Republic, Sri Lanka,Thailand, Turkey, United Arab Emirates andUruguay.


Safeguard Restraints: A special three-yearsafeguard is provided in the ATC to controlsurges in uncontrolled imports that cause orthreaten to cause serious damage to domesticindustry. Actions taken under the safeguard areautomatically reviewed by the TMB. In 1998,the United States determined that domesticproducers of category 301 (combed cotton yarn)had been seriously damaged or threatened withserious damage as a result of imports fromPakistan and issued a request for consultationsunder the safeguard provisions of Article 6 ofthe ATC. As the United States and Pakistanwere unable to reach an agreement on thematter, the TMB reviewed the measure in 1999and found the restriction was not justified inaccordance with the provisions of Article 6 ofthe ATC. As provided for under Article 8 of theATC, the United States provided the TMB withthe reasons why it was unable to comply withthe TMB’s findings. The TMB reviewed thereasons put forward by the United States andreiterated its original conclusion. Consistentwith its rights under the WTO, the United Stateshas decided to keep the measure in place despitethe position taken by the TMB.

The TMB also reviewed an Article 6 actiontaken by Argentina on imports of man-madefiber fabric from Brazil. In this case, the TMBfound that Argentina had not demonstratedserious damage or actual threat thereof, andrecommended that Argentina rescind therestraint. Argentina disagreed with the TMB’sfinding and the measure remains in place. As inthe U.S.-Pakistan case cited above, Argentinadisagreed with the TMB’s finding and informed

the TMB of its reasoning. The TMB reiteratedits original conclusion and Argentina chose tokeep the measure in place.

In 1998, the TMB reviewed an Article 6 actiontaken by Colombia on man-made fiber yarnfrom the Republic of Korea and Thailand. TheTMB concluded, in 1999, that Colombia had notdemonstrated serious damage or actual threatthereof, and recommended that Colombiarescind the restraint. Subsequently, Thailandrequested a panel under the WTO DisputeSettlement Understanding to review Colombia’srestraint. Because Colombia had alreadyremoved the restraint at the time of the requestand after further consultations between theparties, Thailand agreed to drop the requestfrom the agenda before the Dispute SettlementBody.

In another matter, Turkey had imposed newtextile quotas on imports from India in order toalign its regime with the EU in accordance withtheir customs association. As these restraintswere notified to the TMB for its information,the TMB did not review the action. Indiachallenged the new restraints before a WTOpanel and the Appellate Body, prevailing in bothcases. Turkey had tried to justify its new textilerestraints under the GATT 1994. Turkey’srestraints were found to be inconsistent withGATT 1994 and the ATC.

Notifications and Other Issues: A considerableportion of the TMB’s time was spent reviewingnotifications made under Article 2 of the ATCdealing with textile products integrated intonormal GATT rules and no longer subject to theprovisions of the ATC. WTO Members wishingto retain the right to use the Article 6 safeguardmechanism were required in 1998 to submit alist of products comprising at least 17 percent bytrade volume of the products included in theannex to the ATC. A number of thesenotifications were defective for various reasonsand the TMB’s review carried into 1999 in anumber of cases. The TMB expressed concernthat a number of countries that have announced


their intention to retain the right to use Article 6safeguards failed to make the requiredintegration notification. On its own initiative,the TMB raised the issue of a new restraint oncategory 352/652 (underwear), as reported in theU.S. Federal Register, with the United Statesand Turkey. The United States and Turkeyprovided the TMB with a joint communicationcontaining information concerning this restraint. The TMB’s consideration of this matter had notbeen completed by the end of 1999. TMB documents are available on the WTO’sweb site, “www.wto.org.” Documents are filedin the Document Distribution Facility under thedocument symbol “G/TMB.” The TMB’sannual report to the General Council for 1999appears as document G/L/318.

Work for 2000

The United States will continue to monitorcompliance of market opening commitments bytrading partners and will raise concernsregarding these commitments in the TMB orother WTO fora, as appropriate. The UnitedStates will also pursue further market openings,including in the negotiation of new Members’accessions to the WTO. In addition, the UnitedStates will continue to respond to surges inimports of textile products which cause orthreaten serious damage to U.S. domesticproducers. The United States will continueefforts as well to enhance cooperation with U.S.trading partners and improve the effectivenessof customs measures to ensure that restraints ontextile products are not circumvented throughillegal transshipment or other means. Finally,the United States maintains textile restraintagreements that are scheduled to expire onDecember 31, 2000, including China, Taiwan,Nepal, Laos, Macedonia, Oman, Ukraine, andRussia. To the extent that these countries donot, by that time, become Members of the WTOto whom the United States applies theAgreement Establishing the WTO, the UnitedStates will seek to renegotiate these bilateralagreements.

14. Working Party on State Trading

Status

Article XVII of the GATT 1994 requiresgovernments to place certain restrictions on thebehavior of their trading firms and on privatefirms to which they accord special or exclusiveprivileges to engage in importation andexportation. Among other things, Article XVIIrequires governments to ensure that these “statetrading enterprises” act in a manner consistentwith the general principle of non-discriminatorytreatment, e.g., to make purchases or sales solelyin accordance with commercial considerations,and to abide by other GATT disciplines. Toaddress the ambiguity regarding which types offirms fall within the scope of “state tradingenterprises,” agreement was reached in theUruguay Round on “The Understanding on theInterpretation of Article XVII.” It provides aworking definition and instructs Members tonotify all firms in its territory that fall within theagreed definition, whether or not suchenterprises have imported or exported goods.

A WTO Working Party was established toreview the notifications and their adequacy andto develop an illustrative list of relationshipsbetween governments and state tradingenterprises, and the kinds of activities engagedin by these enterprises. All Members arerequired under Article XVII of GATT 1994 andparagraph 1 of the Understanding to submit annually notifications of their state tradingactivities.


The Uruguay Round ensured, for the first time,that the operation of agricultural state tradingentities would be subject to internationalscrutiny and disciplines. Agricultural productswere effectively outside the disciplines ofGATT 1947, thereby limiting the scrutiny ofstate trading entities since many state tradingentities direct trade in agricultural products. For


example, the lack of tariff bindings on mostagricultural products in most countries alsolimited the scope of GATT 1947 disciplines thatcould be brought to bear on state trading entities(e.g., importing state trading entities couldcapriciously adjust the import duty and/ordomestic mark-up on imported products.)

The WTO Agreement on Agriculture marked animportant step in bringing the activities ofagricultural state trading entities under the samedisciplines that apply to industrial products. Allagricultural tariffs (including tariff-rate quotas)are now bound. While further work is neededon the administration of tariff-rate quotas,bindings do act to limit the scope of state tradersto manipulate the tariff import system. Likewise, the disciplines on export competition,including value and quantity ceilings on exportsubsidies, apply fully to state trading entities. U.S. agricultural producers and exporters haveexpressed concerns about the operation ofcertain state trading entities, particularly single-desk importers or exporters of agriculturalproducts.

The “working definition” of state tradingentities in the Uruguay Round along with theestablishment of a Working Party on StateTrading also significantly increased the scrutinyof these entities in the WTO compared to GATT1947. New and full notifications were firstrequired in 1995 and subsequently every thirdyear thereafter, while in the intervening years anupdating notification is to be made indicatingany changes since the full notification. Whilenotification requirements for state tradingentities existed after 1960 in GATT 1947, nobody was established specifically to review thenotifications, in part due to the situation onagriculture. Little, if any, attention was given inthe Council to compliance with the notificationrequirement or the content of the notifications,and differences existed among countries as towhat type of entities actually fell under ArticleXVII obligations.

Under the WTO, 58 Members provided new andfull notifications of state trading enterprises for1995 and 32 Members for 1998 (the EuropeanCommunities submits a single notificationcovering all 15 Member States). More than 30Members submitted updating notifications for1996 and 1997, and 13 Members for 1999. TheWorking Party on average met four times a yearsince 1995 to review these notifications,including the formal submission of questionsand answers on the operation of specific entitiesreported in the notifications. This improvedscrutiny and transparency also set the stage forin-depth examination of certain activities ofagricultural state trading entities in theAgricultural Information and Exchange exerciseunder the auspices of the WTO Committee onAgriculture that laid the groundwork for issuesto be addressed in the mandated negotiations onagriculture.

The Working Party also completed two othertasks mandated in the Uruguay Round“Understanding on the Interpretation of ArticleXVII”: review of the 1960 notificationquestionnaire and development of theillustrative list. Prior to September 1998,submissions followed a notification formatdeveloped in 1960. A review of thenotifications tabled since 1995 revealed a needfor more extensive work on updating the 1960questionnaire. The United States worked tobroaden the notification requirements. In April1998, the Working Party approved an improvednotification format that requires more extensivequalitative and quantitative information than the1960 version. The new format provides more transparent information about the operation ofstate trading entities than the 1960 version.

The Working Party also agreed to continue itswork, consistent with its mandate, including theexamination of what further information mightbe appropriate to notify to enhance transparencyof state trading entities. In July 1998, theCouncil for Trade in Goods adopted the revisednotification format which is now the basis for all


new and full notifications submitted in thefuture. As noted previously, in 1999, theWorking Party completed its work on anillustrative list of relationships betweengovernments and state trading enterprises andthe kinds of activities engaged in by theseenterprises. The illustrative list will assistMembers in preparing notifications by providingexamples of the types of activities and entitiesthat were notified in the past. As a result of theWorking Party, agriculture negotiators willbenefit from the improved transparency andunderstanding of activities and measures utilizedby agricultural state trading entities.


The Working Party held three formal meetingsin 1999 to review the notifications and tocontinue work on the illustrative list. As ofDecember 31, 1999, 32 Members provided newand full notifications for 1998, and 13 Memberssubmitted updating notifications for 1999. During the year, the Working Party reviewed 26of these notifications.

During 1999, the Working Party finished itswork on the illustrative list. The illustrative listis not intended to refine or redefine thedefinition of state trading enterprise. Rather, itreflects many of the relationships and entitieswhich had previously been included innotifications and, as such, may be useful inhelping Members prepare their notifications. The illustrative list was approved by theWorking Party in July and by the Council forTrade in Goods in October.

Work for 2000

The three areas of discipline in the WTOAgreement on Agriculture – market access,export competition and domestic support –provide the basis on which to pursue furtherreform in the mandated negotiations onagriculture. In the Agricultural and InformationExchange exercise, several countries identifiedissues to be addressed in the negotiations related

directly to measures used by state tradingentities, such as in tariff-rate quotaadministration or export competition. TheWorking Party will contribute to the ongoingdiscussion of these and other state tradingissues, including through its review of newnotifications and its examination of what furtherinformation might be appropriate to notify toenhance transparency of state trading entities.

15. Working Party on PreshipmentInspection

Status

More than 30 developing country Membersrequire, as a condition of importation, that aninspection of each shipment of goods beperformed in the country of exportation by aprivate entity. The private preshipmentinspection (PSI) entity generally provides to theimporting country an opinion on customsclassification and customs valuation. Thissituation often reflects inadequacies in thecustoms administrations of those countries thatresort to the use of a PSI regime. The purposeof the WTO Agreement on PreshipmentInspection, which was achieved during theUruguay Round, is to ensure that PSI operationsare carried out in a transparent manner withoutgiving rise to unequal treatment or unnecessaryand costly delays.


The Agreement on Preshipment Inspectionstands in a somewhat unique position amongWTO agreements. While the Agreement’sobligations pertain to WTO Members, thecompliance with those obligations is largelycontingent on the conduct of private entities(i.e., PSI entities under contract with WTOMembers), rather than strictly the behavior ofgovernmental entities. This situation presentscertain challenges to ensuring proper operationof the Agreement. In this regard, it is notablethat the Working Party’s final report stated a


consensus view of WTO Members that“recourse to PSI is a transitional measure to beused only until national customs authorities arein a position to carry out these tasks on theirown.” The Working Party also recommendedvarious types of reforms for improving andmodernizing the border transaction environmentsuch as the use of risk management andselective inspection. These recommendationsreflect an important shift brought about amongWTO Members in the past five years, givingfocus not only on the operation of PSI regimes,but also on the broader question of the role ofsuch regimes in view of ongoing efforts bymany countries to improve the overall tradefacilitation environment, particularly withregard to enhancing administrative transparencyand efficiency. An important issue for allMembers was the need for a continuing forumfor regular oversight and to address anyday-to-day implementation issues. One of thekey recommendations, endorsed by the WTOGeneral Council as part of its adoption of theWorking Party’s report, established PSI as astanding agenda item for the WTO Committeeon Customs Valuation.


The Agreement did not provide for a standingWTO Committee on Preshipment Inspection. The WTO Working Party on PreshipmentInspection was established in 1997 as a meansto conduct a review of the Agreement’simplementation and operation. The GeneralCouncil extended the operation of the WorkingParty through March 1999, after adopting theWorking Party’s initial report which had beenissued in December 1997. The Working Party’sfinal report, issued March 18, 1999, reflectedthe efforts by the Working Party to address awide range of issues in order to bringimprovements in transparency and to diminishirregularities resulting from the operation of PSIregimes.

C. Council for Trade in Services

Status

The General Agreement on Trade in Services(GATS) consists of a framework agreement thatlays out the general obligations for trade inservices in much the same way that the GeneralAgreement on Tariffs and Trade does for tradein goods. Most-favored-nation treatment(MFN), market access and national treatmentare three of the important principles included inthe general framework of the GATS. Thus, theGATS provides a legal framework foraddressing barriers to trade and investment inservices, and it includes specific commitmentsby WTO Members to restrict their use of thosebarriers. These commitments are contained innational schedules, similar to the nationalschedules for tariffs. The Council for Trade inServices oversees implementation of the GATSand reports to the General Council.

All Members of the WTO are signatories to theGATS framework agreement and have madesector-specific commitments pertaining tonational treatment, market access, and MFNtreatment. Ministerial Decisions at theconclusion of the Uruguay Round had called fornegotiations on further liberalization in, interalia, the financial services and basictelecommunications sectors, the results of whichentered into force in 1999 and 1998,respectively, as well as a work program inprofessional services, which completed its workwith respect to accountancy in 1999.

The GATS also provides a forum for furthernegotiations to open services markets aroundthe world. The GATS Article XIX calls foradditional rounds of market-openingnegotiations. The first such round began onJanuary 1, 2000, and, consistent with GATSprovisions, was preceded by a program ofpreparatory work in the Council.



The GATS is the first multilateral, legallyenforceable agreement covering trade andinvestment in the services sector. Its objectiveis to reduce or eliminate governmental measuresthat prevent services from being freely providedacross national borders or that discriminateagainst locally-established service firms withforeign ownership, while at the same timemaintaining regulators’ ability to meetlegitimate objectives. Trade in services includesall economic activities whose outputs are otherthan tangible goods, including, but not limitedto, banking, insurance, telecommunications,distribution services (retail and wholesaletrade), computer and related services,advertising, professional services, privateeducation and training, private health care,audiovisual and tourism services.

The past five years have focused on improvingthe ground-breaking framework agreementcreated in the Uruguay Round. This work hastaken place in three arenas: sectoralnegotiations, elaboration of importantprovisions of the framework agreement, andspecific commitments of new WTO Members.

As discussed in previous Annual Reports, since1995 there have been GATS negotiations in foursectors (financial services, basictelecommunications, professional services, andmaritime transport services) and one “mode” –temporary entry of natural persons. Whileoutcomes have varied in these negotiations,each has served to establish importantprecedents that reinforce the objective of theGATS: removal of restrictions and establishingdisciplines to ensure effective market access fortrade in services.

In the cases of financial services and basictelecommunications, negotiations that had beentwice extended since the Uruguay Round finallywere concluded only when a “critical mass” of

important trading partners demonstrated theirwillingness to include new commercialopportunities in their scheduled commitments. By contrast, in the case of maritime transportservices, negotiations failed to conclude whenalmost without exception no WTO Memberproposed to remove restrictions in that sector; tothe contrary, many wanted to use their GATSschedules to legitimize existing, restrictiveregimes.

The negotiations on professional servicesproduced “Guidelines for Negotiation of MutualRecognition in Accountancy” to facilitatemutual recognition of licensed accountants and“Disciplines for Regulation in the AccountancySector” to address unnecessarily trade-restrictive regulation of the profession. Moreover, this work serves as a starting pointfor examination of other professions with theultimate goal of improving portability ofprofessional credentials worldwide.

The post-Uruguay Round period also has seenprogress in expanding the scope of certainGATS provisions, in particular to help ensurethat regulation of trade in services supportstrade liberalization. Resulting from theAgreement on Basic TelecommunicationsServices, 67 countries have effectivelyexpanded the scope of existing GATSprovisions addressing transparency, monopolies,and restrictive business practices and agreed toapply these strengthened, sector-specificdisciplines to their liberalizedtelecommunications markets. Separately, asnoted below, the Working Party on DomesticRegulation is building on the achievements inaccountancy to develop new disciplines aimedat promoting transparency and fairness inregulation in all service sectors. Finally, thenomenclature work, described below, in theCommittee on Specific Commitments, is aimedat improving the framework of the GATSthrough sectoral commitments that encompassreal-world commercial activities and interests.



As it had the previous year, in 1999 the Councildevoted the bulk of its time to preparing for thecoming round of services negotiations. First,the Council continued the “informationexchange,” the first required step in thepreparations, ultimately covering over 15services sectors and the four GATS “modes ofdelivery.” During the information exchange, theWTO Secretariat produced over 20 backgroundpapers, with information on and analysis of theeconomic importance of each of the sectors,regulatory and other restrictions, and existingcommitments by WTO Members. The Councilquickly agreed to derestrict the papers, whichare publicly available atwww.wto.org/wto/services/w65.htm.

The information exchange helped to develop acommon understanding among Members of theimportant role that services can play in theirown economic growth, the importance of furtherliberalization in services, the need forappropriate regulation to safeguard legitimatedomestic social and other concerns, theevolution in the nature of trade in services sincethe Uruguay Round, and, in many cases, thevery limited nature of country commitments inthese sectors.

In a more immediate sense, the informationexchange helped Members identify additionaltechnical work needed to lay the basis forimproved commitments in the next negotiation. As in 1998, nomenclature, regulatory, and otherissues that emerged in the course of theinformation exchange fed into work in two ofthe Council’s subsidiary bodies, the Committeeon Specific Commitments, and the WorkingParty on Domestic Regulation.

In 1999, the Council also took up other requiredpreparatory steps for the new GATS round,including an “assessment of trade in services.” Drawing on background documentation by theSecretariat, other international organizations and

individual Members, the Council took note ofdevelopmental aspects of trade in services, aswell as major statistical deficiencies inmeasuring such trade and its impact. In view ofthe preliminary nature of these conclusions,Members agreed to continue the “assessment”into the negotiations themselves in 2000.

The Council also discussed “negotiatingguidelines and procedures,” as provided for inthe GATS. Some 25 Members submitted viewsto the Council for Trade in Services or theGeneral Council or both and, in the end,achieved a very high degree of unanimity onthese provisions, which ultimately was reflectedin the draft text at Third Ministerial. Inaddition, the Council began two reviewsrequired by the GATS, regarding the currentexclusion of most air transport services from thescope of the GATS and Members’ exemptionsfrom most-favored-nation treatment. Bothreviews will continue in 2000.

Work for 2000

In pursuing the mandated negotiations onservices, the Council, and its subsidiary bodies,will continue the technical work alreadyunderway: improvements in nomenclature,development of appropriate regulatorydisciplines – applicable to all sectors and, wheredesirable, applicable to individual sectors – andreview of scheduling guidelines. Discussionwill continue on timing and modalities for thenegotiations.

1. Agreement on BasicTelecommunications Services

Status

The Agreement on Basic TelecommunicationServices, which came into force in February1998, opened up over 95 percent of the worldtelecommunications market (by revenue) tocompetition. The range of services andtechnologies covered by the agreement is


vast–from submarine cables to satellite systems,from broadband data to cellular services, frombusiness networks based on the Internet totechnologies designed to bring low-cost accessfor under-served rural communities. Themajority of WTO Members have maderegulatory as well as market accesscommitments, ensuring adherence to amultilateral framework for promotingcompetition in this sector.


Prior to this Agreement, only 17 percent of thetop 20 telecommunications markets were opento U.S. firms. Today, over 95 percent of theworld telecommunications market is open. Themarket access opportunities cover the entirespectrum of innovative services andtechnologies pioneered in the United States thatcontinue to drive the growth of this sector. Through the Agreement on BasicTelecommunications Services, the United Stateshas largely succeeded in shaping aninternational consensus, unthinkable five yearsago, that telecommunications monopolies mustbe replaced with competitive markets for anyeconomy to enjoy the benefits of the digital era.

Through this agreement, the United Statessuccessfully exported a model based on the U.S.experience of telecommunicationsliberalization, focused on unimpeded marketaccess, fair rules, and effective enforcement ofkey regulatory principles. Based on theseprinciples, WTO Members around the world arerewriting rules to permit effective competitionand promote the growth of new markets. Theresults, as predicted from the experience of theUnited States, have exceeded our trade partners’expectations: usage of telecommunicationsnetworks has boomed as prices have dropped,fueling new services and introducing newefficiencies throughout economies. Withdemand for advanced services including the

Internet not being met by traditional suppliers,new entrants willing to innovate with differenttechnologies are creating markets that simplywould not have developed had control of othernations’ networks remained in the hands ofmonopolists.

As a result of this Agreement, U.S. firms haveinvested billions of dollars abroad, extendingtheir networks, bringing down the cost ofcommunications for U.S. consumers andbusinesses, and laying the infrastructure forglobal electronic commerce. The experienceU.S. firms have gained in developingcompetitive markets in the United States hasprovided an enormous advantage in these newlyopened markets, allowing them to bring to thesemarkets the same innovation and efficiency U.S.consumers have long enjoyed.

Opening foreign markets has had immediatebenefits on U.S. consumers and businesses aswell. Prices for international phone calls fell 25percent between 1996 and 1998, and in 1999,prices for calls to several competitive marketsdiffered little from domestic long-distanceprices.

Growth in demand for international voice anddata services, especially for the Internet, has ledto massive investments in submarine cable andthe development of new radio-based mobilesystems. These new infrastructures will providequantum increases in transmission capacity. The lower prices made possible by thisincreased capacity are in turn fueling furtherdemand for telecommunications services,setting the stage for global growth in this sectorover the next five years of several hundreds ofbillions of dollars.

Often overlooked is the fact that the growth innew services stimulated by open markets hasstimulated a boom in equipment sales. U.S.manufacturers have been major beneficiaries inthe growth of a global equipment marketexpected to reach $345 billion in the next three


years–spending largely dedicated to investmentin new networks, or upgrades to existingnetworks, driven by competitive pressures.

Major issues in 1999

The Agreement’s pro-competitive policies led todeep reductions in end-user prices forinternational and other services around theworld, and to the explosion in global capacitymade available for Internet and other services in1999. Investment opportunities increaseddramatically in developed countries thanks tothe Agreement’s open-market requirements. Inthe developing world, newly-acceding WTOMembers made broad-basedtelecommunications commitments in 1999. Inaddition, a number of current Membersunilaterally liberalized further (e.g., Hong Kong,Korea, Singapore, India) to keep pace in theglobal competition for investment in this sector. Implementation problems encountered in Japan,Germany and Mexico were addressed inongoing bilateral consultations, using WTOdisciplines as the framework for resolvingmarket access issues. The United States playeda key role in instituting a dialogue in the WTObetween trade and regulatory officials and inincreasing coordination between the WTO andother multilateral institutions, such as the WorldBank and the International TelecommunicationUnion, enlisting the help of these institutions inbuilding global support for more vigorouscompetition in the global telecommunicationsmarketplace.

Work for 2000

The global appetite for investment in this sectorand U.S. firms’ interest in meeting this demandshow no sign of abating. Demand for high-capacity (broadband) services on wirelinenetworks and the development of advancedwireless services (e.g. so-called ThirdGeneration services) ensure that competitiveopportunities, and the importance of the

Agreement as framework for ensuring marketaccess, will increase.

Given the recent trend in unilateralliberalization, prospects are good that the WTOservices negotiations now under way willexpand existing commitments to cover abroader range of telecommunications sub-sectors with fewer market access limitations. Inregions that were previously not a major marketfocus (e.g., in less developed countries) there issubstantial room for improved commitments.

2. Agreement and Committee onTrade in Financial Services

Status

Negotiations in the financial services sector(banking, securities, insurance, and otherfinancial services), extending beyond the end ofthe Uruguay Round, were successfullyconcluded in December 1997 under U.S.leadership. Of the 70 WTO Members that madeimproved commitments in financial servicesduring these negotiations, 53 countries met theoriginal deadline of January 29, 1999 forcompleting domestic ratification procedures andnotifying their acceptance of the 1997Agreement – the Fifth Protocol to the GATS. Another 7 Members have completed theseprocedures since then, meaning that the numberof countries whose 1997 commitments haveentered into force stands at 60.


The WTO Financial Services Agreement, whichentered into force in March 1999, represents animpressive package of commitments that standson its own merits as a major success for theUnited States and the world trading system. The final agreement includes commitments thatcover an overwhelming share of global tradefrom 102 countries, with new and improvedfrom 70 countries from both the developed and


developing world. Already 60 of those 70countries have ratified their commitments. Financial services is one of the fastest growingareas of the world economy, and itsliberalization has tremendous significance for anumber of other related sectors, includingelectronic commerce. Financial services also isone of the United States’ most competitiveindustries and is a major contributor to growthin U.S. domestic employment.

The 1997 Financial Services Agreement hasserved as a key first step in opening worldfinancial services markets to U.S. suppliers ofinsurance, banking, securities and financial dataservices. The Agreement extends to the mostimportant international financial servicesmarkets, encompassing $38 trillion in globaldomestic bank lending, $19.5 trillion in globalsecurities trading, and $2.1 trillion in worldwideinsurance premiums. This Agreement hasopened world financial services markets to anunprecedented degree. Fifty-two countriesguaranteed broad market access terms across allinsurance sectors – encompassing life, non-life,reinsurance, brokerage and auxiliary services. Another fourteen countries committed to opencritical sub-sectors of their insurance markets ofparticular interest to U.S. industry. Fifty-ninecountries committed to permit 100 percentforeign ownership of subsidiaries or branches inbanking. And forty-four countries guaranteed toallow 100 percent foreign ownership ofsubsidiaries or branches in the securities sector.

The Agreement also is fostering thedevelopment of financial markets, especially inemerging markets and developing countries, byhelping to lay the foundation for sustainedgrowth. Many countries had begun to processof financial services liberalization but hadhesitated to lock in those measures. The 1997Agreement “binds” these improvements underthe GATS system which contributes to theoverall stability of economic and trade regimesand results in further economic growth. TheAgreement will provide an extremely effective

launching pad for further negotiation on a widerange of financial services issues in “GATS2000.

The Committee on Financial Services has beeninstrumental in overseeing post-Uruguay Roundnegotiations on financial services thatculminated in the December 1997 Agreement. The Committee also has been a useful venue todiscuss and reach agreement on issues related toratification and acceptance of Members’commitments under the Fifth Protocol. Finally,the Committee also has held initial discussionson various technical issues as they affectfinancial services which could prove useful inthe GATS 2000 negotiations.


The United States worked intensively throughbilateral channels and in the WTO to ensure thatthe 10 remaining countries that have notaccepted the Fifth Protocol ratify theircommitments and accept the Protocol as quicklyas possible. The Committee on Trade inFinancial Services (CTFS) held three formalmeetings in 1999 that to a large extent focusedon this issue. At the request of severalMembers, the Chairperson sent letters to thosecountries that had not yet accepted the FifthProtocol requesting information on the status oftheir ratification efforts. In a relateddevelopment, the GATS Council agreed onFebruary 15, 1999 to renew the standstillcommitment made by participants in the 1997negotiations not to take any measuresinconsistent with their services schedulesannexed to the Fifth Protocol.

Work for 2000

The United States will continue to work throughbilateral means and in the WTO to ensure thatthe 10 countries that have not accepted the FifthProtocol do so as quickly as possible. The 10countries generally have reported that theyintend to ratify their commitments under the


Protocol and are working to ensure passage ofnecessary legislation. The WTO Members willhave to decide on a case-by-case basis how toopen the window for Fifth Protocol acceptance. The United States also will be an activeparticipant in other work of the Committee,including recommendations concerning thefinancial services component of issues exploredas part of the new services negotiations.

3. Working Party on DomesticRegulation

Status

The GATS Article VI (Domestic Regulation)directs the Council to develop any necessarydisciplines “with a view to ensuring thatmeasures relating to qualification requirementsand procedures, technical standards, andlicensing requirements do not constituteunnecessary barriers to trade in services.” A1994 Ministerial Decision had assigned priorityto the professional services sector, for which theWorking Party on Professional Services(WPPS) was established. The WPPS developedGuidelines for the Negotiation of MutualRecognition Agreements in the AccountancySector, adopted by the WTO in May 1997, andcompleted Disciplines on Domestic Regulationin the Accountancy Sector, adopted inDecember 1998. (The text of both are publiclyavailable on the WTO website atwww.wto.org/wto/new/press73.htm andwww.wto.org/wto/new/press118.htm,respectively).

With the adoption of the Disciplines, in May1999 the Council established a new WorkingParty on Domestic Regulation which also tookon the work of the predecessor WPPS. The newWorking Party’s mandate is as cited above. These disciplines may be generally applicableand may also apply to individual sectors. TheWorking Party is to report its recommendationsto the Council not later than the conclusion ofthe coming round.


The work program on accounting was animportant step in the multilateral liberalizationof this important sector. While the UnitedStates was disappointed that Membersultimately were not able to agree to earlyapplication of the accountancy disciplines, thedisciplines remain open for improvement beforetheir adoption at the conclusion of the currentGATS round. They further provide a referencepoint for the cross-sectoral work begun in 1999.


With respect to development of generallyapplicable regulatory disciplines, on the basis ofa background paper prepared by the Secretariat,Members have discussed needed improvementsin GATS transparency obligations. Membersalso have begun discussion of possibledisciplines aimed at ensuring that regulationsare not more trade restrictive than necessary tofulfill legitimate objectives.

To continue work on professional services,Members agreed to solicit views on theaccountancy disciplines from their relevantdomestic professional bodies, addressingwhether those other professions would favor useof the accountancy disciplines with appropriatemodifications. Members agreed to shareinformation on the results of these consultationsby March 2000. In addition, Members asked theSecretariat to consult with appropriatecounterpart international organizations, to beidentified by Members.

Work for 2000

The Working Party will continue developmentof possible regulatory disciplines, bothhorizontally and sector-specific, to promote theGATS objective of effective market access. TheWorking Party also will discuss extending theaccountancy disciplines to other professions.


4. Working Party on GATS Rules

Status

The Working Party on GATS Rules wasestablished to determine whether the GATSshould include new disciplines on safeguards,government procurement and subsidies. TheWorking Party met six times in 1999. As theseare complex issues, their discussion remains at arelatively conceptual stage.


The Working Party has provided a useful forumfor discussions on whether the GATS shouldinclude new disciplines on safeguards,government procurement and subsidies. This isthe first time that WTO Members have exploredwhether concepts, originally formulated fortrade in goods, are needed for the GATS. Workon these concepts remains in a preliminary stagewith most Members, including the UnitedStates, needing further domestic consultations todevelop more specific positions and examine therelationship with work in other WTO bodies. For example, during 1999 the WTO WorkingGroup on Transparency in GovernmentProcurement also examined similar concepts.


Regarding safeguards, Members continue toexpress differing views on the desirability,feasibility, and possible form of an emergencysafeguard mechanism for services. Withoutprejudice to such differences of view, in recentmeetings, Members continued discussion ofbasic issues that would have to be considered inthe application of any future safeguard actions,including MFN treatment, advance notice,temporary and degressive application, andprotection of acquired rights of establishedsuppliers.

The safeguards negotiations were set toconclude in July 1999. However, some

developing countries and other WTO Memberswere interested in continuing this mandate. TheCouncil approved a recommendation of theWorking Party to extend negotiations on thequestion of whether emergency safeguardsmeasures are needed until December 15, 2000. The WTO Members also agreed that the resultsof the negotiations will enter into effect no laterthan the date of entry into force of the nextround of services negotiations.

Regarding government procurement, discussionsfocused on the range of activities and entitieswhich may be covered by GATS Article XIII. Recently, Members started giving thought to thescope and depth of any procurement disciplineswhich might be agreed upon at the end of thenegotiating process.

With respect to subsidies negotiations, threeMembers have now tabled submissionsdescribing their subsidies regimes as part of aninformation exchange program. Discussionshave continued on the potential for subsidiesextended under one mode to distort trade underother modes, and the effects of export subsidieson services trade. In addition, Members arereviewing a proposal that Members provideinformation on subsidy-related problemsexperienced in foreign markets.

Work for 2000

Information-gathering and discussion of allthree issues will continue. The Working Partyfaces a December 15, 2000 deadline withrespect to the question of emergency safeguardsmeasures.

5. Committee on SpecificCommitments

Status

The Committee on Specific Commitmentsexamines ways to improve the technicalaccuracy of scheduling commitments, primarilyin preparation for the coming round of GATS


negotiations, and oversees application of theprocedures for the modification of schedulesunder Article XXI of the GATS. TheCommittee also oversees implementation ofcommitments in country schedules in sectors forwhich there is no sectoral body, currently allsectors except financial services.


The Committee has taken on four technical,complicated, resource-intensive tasks and hasproduced results that improve prospects forclear, commercially-valuable commitments inthe coming negotiations (in the case of work onnomenclature and on scheduling guidelines),usefully elaborate on GATS provisions (in thecase of Article XXI procedures), and promoteaccessibility and clarity in GATS schedules inthe case of the electronic schedules.


Much of the Committee’s work in 1999 was insupport of the new negotiations. First, theCommittee continued its work on developing anagreed classification system for use inscheduling sectoral commitments, using as aresource technical issues raised in the Council’ssectoral “information exchange.” Led byMember submissions, the Committee has beenexamining proposed changes in nomenclaturefor environmental services, energy services,express delivery services, legal services, andconstruction services.

Second, the Committee began to examineproposed revisions to scheduling guidelines thatwere developed by the GATT Secretariat for usein scheduling country commitments during theUruguay Round. Members agreed that revisionof these guidelines can help improvetransparency and consistency of newcommitments.

Also in 1999, the Committee reached agreementon procedures for modification of schedules

under GATS Article XXI. The Councilsubsequently adopted the agreed procedures,pursuant to GATS Article XXI:5.

Finally, the Committee directed the Secretariatto continue work on an electronic “looseleaf”version of each Member’s GATS schedule,incorporating, for example, the results of thefinancial services and basic telecommunicationsnegotiations in single, consolidated countryschedules. This version would primarily be forease of reference and would not have legalstatus in the WTO; it would be made availableto the public in CD-ROM format. Membersreceived drafts of their respective schedules inDecember and will provide comments by March2000.

Work for 2000

The Committee’s work will continue to play animportant role in the first phase of the GATSround. The United States and other countrieswill propose nomenclature changes in additionalsectors, and Members will work to concludediscussions on the five sectors now underdiscussion. These new sectoral definitions thenwould be available for use in the GATS round. Members also recognize the importance ofcompleting any revisions to the schedulingguidelines early in the round.

Depending on comments on the draft version ofMembers’ schedules, the Committee may beable to direct the Secretariat to prepare a finalversion of the electronic “looseleaf” schedulesin the first half of 2000.

D. Council on Trade-RelatedAspects of IntellectualProperty Rights

Status

The Agreement on Trade-Related Aspects ofIntellectual Property Rights (the TRIPSAgreement) is a multilateral agreement that setsminimum standards of protection for copyrights


and neighboring rights, trademarks,geographical indications, industrial designs,patents, integrated- circuit layout designs, andundisclosed information. Minimum standardsare established by the TRIPS Agreement for theenforcement of intellectual property rights incivil actions for infringement and, at least inregard to copyright piracy and trademarkcounterfeiting, in criminal actions and actions atthe border. The TRIPS Agreement requires aswell that, with very limited exceptions, WTOMembers must also provide national and most-favored-nation treatment to the nationals ofother WTO Members in regard to the protectionof intellectual property. In addition, the TRIPSAgreement is the first multilateral intellectualproperty agreement that is enforceable betweengovernments through WTO dispute settlementprovisions.

Although the TRIPS Agreement entered intoforce on January 1, 1995, most obligations arephased in based on a country’s level ofdevelopment (developed country Members wererequired to implement by January 1, 1996;developing country Members generally were toimplement by January 1, 2000; andleast-developed country Members mustimplement by January 1, 2006). The TRIPSAgreement also provides a general “standstill”obligation, and mandates that those Membersthat avail themselves of the transition period forproviding patent protection for pharmaceuticalsand agricultural chemicals must provide a“mailbox”. This mailbox is for filing patentapplications claiming pharmaceutical andagricultural chemical inventions and providingexclusive marketing rights for such products incertain circumstances. All Members wereobligated to provide “most-favored-nation” andnational treatment beginning January 1, 1996.


The TRIPS Agreement has yielded enormousbenefits for a broad range of U.S. industries,including producers of motion pictures, sound

recordings, software, books, magazines,pharmaceuticals, agricultural chemicals, andconsumer goods; and individuals, includingauthors, artists, composers, performers, andinventors and other innovators. As mentionedabove, the Agreement establishes minimumstandards for protection and enforcement ofintellectual property rights of all kinds andprovides for dispute settlement in the event thata WTO Member fails to fulfill its obligationsfully and in a timely fashion. Much of the creditfor ensuring that the benefits of the TRIPSAgreement are realized by U.S. industriesshould be given to the operation of the TRIPSCouncil.

During 1997 and 1998, the TRIPS Councilconducted reviews of the implementation ofobligations by developed country Members. Implementation by newly acceding Memberswas reviewed during 1999. The reviews in theTRIPS Council provide an opportunity for WTOMembers to ask detailed questions about theway in which other WTO Members haveimplemented their obligations. All questions areasked and answered in writing, creating a usefulrecord that can be used to educate domesticindustries about acquiring and exercising rightsin other countries and that also can alertMembers in instances in which obligations havenot been adequately implemented. Perhapsmost important, the reviews have helped toestablish certain expectations about theinterpretation of the TRIPS Agreement bydemonstrating that there is considerablesimilarity in implementation by those WTOMembers that have met their obligations. Theexamples of implementation regimes and therationales given for such implementationprovided useful guidance for developing countryMembers as they worked to implement theirobligations by January 1, 2000.

Of particular importance to U.S. intellectualproperty right holders was the review of theenforcement obligations of the Agreement. During this review, the United States drewspecial attention to obligations such as that


contained in Article 41.1 which requiresMembers to ensure that enforcement proceduressufficient to permit effective action against actsof infringement were available. Suchprocedures must include expeditious remedieswhich constitute a deterrent to furtherinfringement. The United States stressed it wasimpossible to get a complete picture of thesituation in a Member country withoutunderstanding how its enforcement remedieswere applied in practice. If the proceduresprovided in legislative texts were not availablein practice, they could not be effective or havethe deterrent effect required by the Agreement.

The review of the provisions of Article 27.3(b)of the TRIPS Agreement during 1999 providedan opportunity for the developed countryMembers to compile information on the ways inwhich they have implemented any exceptions topatentability authorized by that section. Thesynoptic table compiled by the WTO Secretariatfrom the information provided by Membersdemonstrated that there is considerableuniformity in the protection afforded plants andanimals among those Members that haveimplemented their obligations, even though themanner in which that protection is providedvaries. The description of various regimes forprotecting plants and animals also could assistdeveloping country Members that wereconsidering the best method to implement theirobligations. In addition, the review provided anopportunity for the United States, along withother WTO Members, to submit papers thatform the basis of discussion during Councilmeetings, helping to clarify issues related to theprotection of plants and animals.

During 1998 and 1999, the TRIPS Councilconsidered the articles of the Agreement, inparticular those related to copyright andneighboring rights, for which emergingelectronic commerce would likely have thegreatest implications. The Council submitted areport to the General Council, identifying thosearticles and noting that the subject might bepursued further. The United States submitted a

paper, as part of the review, giving its views onthe implications of electronic commerce for theTRIPS Agreement.

Over the last five years, the TRIPS Council hasserved as a valuable forum for discussion ofissues related to intellectual property. TheUnited States has used the opportunitiesprovided by the built-in agenda and otheragenda items, including electronic commerce, toexplain its interpretation of the Agreement’sprovisions and to support its interpretation withappropriate examples of the benefits that flowfrom strong protection of intellectual propertyrights. It has worked to provide support forthese views and will continue to do so in thefuture.


In the TRIPS Council meetings in 1999, theUnited States continued to press for full andtimely implementation of the TRIPS Agreementby all WTO Members. In a number of instanceswhere WTO Members have not implementedtheir obligations fully, the United States hasemployed the WTO dispute settlement system tosecure compliance. Since the WTO wascreated, the United States has filed 13complaints under WTO dispute settlementprocedures to challenge foreign governmentpractices affecting U.S. creative works andprotection of U.S. intellectual property rights. In 7 of those cases, we have already obtainedfavorable results, either by obtaining asatisfactory settlement or by prevailing in WTOdispute settlement proceedings. We reachedprompt settlements with Japan on protection ofsound recordings, with Portugal and Pakistan onpatent protection, with Sweden on enforcementof its intellectual property laws, and withTurkey on taxation of foreign films. We alsogot favorable results from WTO disputesettlement rulings against Canada on magazinesand against India on exclusive marketing rightson pharmaceutical and agricultural chemicalproducts. The remaining 6 cases are stillpending, although progress has been made over


the last year. These achievements demonstratethat the WTO dispute settlement mechanism hasalready had a significant impact on our ability toprotect the creative works of U.S. citizens.

A commitment to full and timelyimplementation of TRIPS obligations by allWTO Members was evident in a TRIPS Councilrecommendation to Ministers at Singapore“reaffirming the importance of fullimplementation of the TRIPS Agreement withinthe applicable transition periods” and statingthat “each WTO Member will take appropriatesteps to apply the provisions of the Agreement.” However, a series of recommendations forextending the transition period for developingcountry Members’ implementation were madeprior to the 1999 Ministerial. In spite of suchefforts, however, more than 26 developingcountry Members have already volunteered toundergo an implementation review in the TRIPSCouncil during the year 2000 and the CouncilChairman is consulting with other developingcountry Members to establish the schedule for2001.

Geographical Indications: In addition toreviewing the implementation of obligations ofthe Agreement by new Members including theKyrgyz Republic and Latvia, the TRIPS Councilreviewed the responses to a questionnairereviewing, in depth, developed and newlyacceding Members’ implementation of theirobligations under section 3 of Part II of theTRIPS Agreement, i.e., obligations dealing withgeographical indications. To facilitate thisreview, the WTO Secretariat prepared asynoptic table of the information contained inthe responses. This information greatlyenhanced Members’ negotiations in the Council,as provided for in Article 23.4, on theestablishment of a multilateral system fornotification and registration of geographicalindications for wines and spirits, aimed atfacilitating the protection of such geographicalindications. The European Union submitted aproposal for such a system under whichMembers would notify the WTO of their

geographical indications and other Memberswould have one year in which to oppose anysuch notified geographical indications. If notopposed, the notified geographical indicationswould be registered and all Members would berequired to provide protection as required underArticle 23. The United States, Canada, Chileand Japan introduced an alternative proposalunder which Members would notify theirgeographical indications for wines and spiritsfor incorporation in a register available to allMembers on the WTO website. Under thisproposal, Members choosing to participate inthe system would agree to consult thenotifications made on the website when makingdecisions regarding registration of relatedtrademarks or otherwise providing protection forgeographical indications for wines and spirits. Implementation of this proposal would not placeobligations on Members beyond those alreadyprovided under the TRIPS Agreement or placeundue burdens on the WTO Secretariat. TheCouncil discussed the two proposals during itsmeetings in 1999. This negotiation willcontinue in 2000.

Review of Current Exceptions to Patentabilityfor Plants and Animals: The TRIPS Councilalso reviewed the provisions of Article 27.3(b)of the Agreement that permits Members toexclude from patentability plants and animalsand essentially biological processes forproducing plants and animals. Any Memberincluding such exclusions in its patent law mustensure that micro-organisms and non-biologicaland microbiological processes are patentable. The Council reviewed the practices of thoseMembers that were already obligated toimplement the provisions and the Secretariat, tofacilitate the review, prepared a synoptic tableso that the descriptions of Members’ practicescould be compared easily. This portion of thereview revealed that there was considerableuniformity in the practices of the Members thathave implemented their obligations. During thediscussion, the United States noted that theability to patent micro-organisms andnon-biological and microbiological processes, as


well as plants and animals per se, has given riseto a whole new industry that has broughtinestimable benefits in health care, agriculture,and protection of the environment. The UnitedStates submitted a paper giving its views of theimportance of providing patent protection forplants and animals and responding to some ofthe concerns raised by other WTO Members. Itis expected that the review will remain on theagenda of the TRIPS Council in 2000.

Electronic Commerce: The TRIPS Councilconsidered the Articles of the Agreement forwhich emerging electronic commerce mighthave the greatest implications. The Councilsubmitted a report to the General Council,identifying those Articles and noting that thesubject might be pursued further. To facilitatethe Council’s work, the Secretariat prepared apaper identifying provisions which electroniccommerce might affect. The United Statessubmitted a paper giving its views on theimplications of electronic commerce for theTRIPS Agreement.

Non-violation: The TRIPS Council consideredthe scope and modalities of possiblenon-violation nullification and impairmentdisputes that might arise in connection with theTRIPS Agreement after expiration of the five-year proscription against such cases that expiredon January 1, 2000. Both Canada and theUnited States submitted papers explaining theirviews on the issue. A number of proposals weresubmitted for the Third Ministerial seeking toextend the moratorium. No consensus wasreached on extending the moratorium. The U.S.view was that an extension was unnecessary.

Implementation: The United States continued topursue implementation questions with a numberof developed countries, including Denmark,regarding its failure to provide provisional reliefin civil enforcement proceedings, and Ireland,for its failure to amend its copyright law tocomply with TRIPS. Ireland passed a number ofamendments to its existing copyright law toresolve major problems and was working to

enact a comprehensive revision of its copyrightlaw by the end of 1999. The United Statescontinued to pursue a dispute settlement casewith Greece regarding its failure to takeappropriate action to stop television broadcastpiracy in that country and considerable progresshas been made in eliminating such piracy on theairwaves. The United States initiated disputesettlement procedures with the EuropeanCommunities regarding its failure to provideprotection for certain geographical indicationsof other WTO Members. Another was filedagainst Canada regarding its failure to ensurethat all inventions protected by patent in Canadaon January 1, 1996 had a term of protection thatdid not end before a period of twenty yearsmeasured from the date on which the patentapplication was filed. (The details of thesecases are discussed in the Dispute SettlementBody section.)

Work for 2000

In 2000, the TRIPS Council will continue tofocus on its built-in agenda and on theimplementation of the obligations of theAgreement by developing country Members. The reviews of implementation by 26developing country Members will takeconsiderable time at the June and Novembermeetings. As part of those reviews, Membersgive written questions to the country underreview on the manner in which it hasimplemented its obligations and writtenresponses to those questions must be provided. Each Member being reviewed is afforded anopportunity during the TRIPS Council meetingsto give an oral presentation highlightingresponses to questions or particular pointsregarding its implementation of the Agreementthat it wishes to draw to the attention of otherMembers. The Council will continue thenegotiations under Article 23.4 aimed atestablishing a multilateral system of notificationand registration for geographical indications forwines and spirits. The United States will workto ensure that any such system establishedaccommodates the varied regimes of Members


for the protection of geographical indications. Finally, as noted above, the review of theprovisions of Article 27.3(b) will continue as anitem on the agenda of the TRIPS Council.

The Council and developed country Members,including a review of the United States, willcontinue to provide technical assistance todeveloping country Members as they implementtheir obligations under the Agreement.

U.S. objectives for 2000 include:

� Evaluation of the implementation of theTRIPS Agreement, particularly bydeveloping countries;

� Pursuit of dispute settlementconsultations and panels whereappropriate;

� Review of formal notifications ofintellectual property laws andregulations to ensure their consistencywith TRIPS obligations by other countryMembers; and

� Consideration of the relationshipbetween the TRIPS Agreement ande-commerce.

E. Other General CouncilBodies/Activities

1. Trade Policy Review Body

Status

The Trade Policy Review Body (TPRB), asubsidiary body of the General Council, wascreated by the Marrakesh Agreementestablishing the WTO to administer the TradePolicy Review Mechanism (TPRM). TheTPRM examines national trade policies of WTOMembers on a schedule designed to cover allWTO Members on a frequency determined bytrade volume. The process starts with anindependent report on a Member’s trade policies

and practices that is written by the WTOSecretariat on the basis of information providedby the subject Member. This report isaccompanied by the report of the country underreview. Together the reports are subsequentlydiscussed by WTO Members in the TPRB at asession at which representatives of the countryunder review appear to discuss the reports on itstrade policies and practices and to answerquestions. The purpose of the process is tostrengthen Member observance of WTOprovisions and contribute to the smootherfunctioning of the multilateral trading system.

The current process reflects changes in theinstrument, which was created in 1989, tostreamline it and to give it more coverage andflexibility. Reports now cover services,intellectual property and other issues addressedby WTO Agreements.

During 1999, the TPRB conducted twelve tradepolicy reviews, including the United States. Reviews also were held for Argentina, Togo,Guinea, Egypt, Bolivia, Israel, Philippines,Romania, Nicaragua, Papua New Guinea, andThailand. Four countries were reviewed for thefirst time, including two least developedcountries, Togo and Guinea. By the end of1999, 120 reviews (113 if grouped reviews werecounted as single reviews) have been conductedsince the formation of the TPR covering 71Members, counting the European Union as one. The Members reviewed represent 84 percent ofworld merchandise trade and 63 percent of thetotal Membership of the WTO. Of the Membersreviewed since 1995, 10 are least developedcountries.


The TPRM has served as a valuable resource forimproving transparency in WTO Members’trade and investment regimes and ensuringcommitment to WTO rules. The reports arepublished after the review is conducted andmade available to the public through the WTO.


For many lesser developed countries, the reportsrepresent the first comprehensive analysis oftheir commercial policies, laws, and regulationsand have implications and uses beyond themeeting of the TPRB. Some Members haveused the Secretariat’s Report as a national tradeand investment promotion document, whileothers have indicated that the report has servedas basis for internal analysis of inefficienciesand overlaps in domestic laws and governmentagencies. For other trading partners and U.S.businesses, the reports are a dependableresource for assessing the commercialenvironment of the majority of WTO Members.

The United States has participated in everyTrade Policy Review and developed for eachMember under review a detailed list ofquestions and comments designed to urge,where necessary, compliance with certainWTO/GATT obligations or to obtain betterinformation on issues that are of particularconcern to interested parties in the UnitedStates. The biennial Reviews of the EuropeanUnion, Canada, and Japan have provided aregular forum for updates and analysis ofpolicies and measures undertaken by the UnitedStates’ largest trading partners. During the twoReviews of the United States since 1995, theadministration has emphasized the openness ofthe U.S. market and the important role the U.S.economy plays in the global trading system. The U.S. Trade Policy Reviews also haveafforded the opportunity to defend WTOconsistent trade practices and reducemisunderstandings about certain U.S. tradepolicies and laws. Thus, the TPRM has met theexpectations of the United States to providegreater transparency, understanding andconsistency in the trade policies of WTOMembers, and to better ensure compliance withthe rules-based system.


Reviews have emphasized the macroeconomicand structural context for trade policies,including the effects of economic and trade

reforms, transparency with respect to theformulation and implementation of policy, andthe current economic performance of Membersunder review. Another important issue has beenthe balance between multilateral, bilateral,regional and unilateral trade policy initiatives;in particular, the priorities given to multilateraland regional arrangements have been importantsystemic concerns. Closer attention has beengiven to the link between Members’ tradepolicies and the implementation of WTOAgreements, focusing on Members’participation in particular Agreements, thefulfilment of notification requirements, theimplementation of TRIPS, the use ofantidumping measures, governmentprocurement, state-trading, the introduction bydeveloping countries of customs valuationmethods, and the adaptation of nationallegislation to WTO requirements.

Trade Policy Review of the United States: InJuly 1999, the United States underwent itssecond Trade Policy Review under the WTO. The meeting offered the opportunity for theUnited States to point to its traditionally opentrade and investment regime and to theimportant role the strong U.S. economy hasplayed in the stabilization of the global economyduring the Asian economic crisis and incontributing through imports to the growth ofdeveloping economies. The United States alsoemphasized the importance it places oncompliance by all Members with their WTOcommitments and discussed U.S.implementation of commitments in the areas ofAgriculture and Sanitary/PhytosanitaryStandards, Services, Intellectual PropertyRights, and the Agreement on Clothing andTextiles. The importance of improving andopening up the Dispute SettlementUnderstanding was emphasized, while theUnited States also explained the important linksbetween trade, labor and the environment.

Five-Year Appraisal: As required under theMarrakesh Agreement, the TPRB undertook anappraisal of the operation of the TPRM, which


was issued as a report to the Ministers at the1999 Ministerial. The appraisal confirmed thatthe TPRM continues to function effectively andremains relevant to its mandate, particularly inits contribution to transparency. The appraisalalso noted that the Mechanism has operated as acatalyst for Members to reconsider theirpolicies, has served as an input into policyformulation and has helped to identify technicalassistance needs. The TPRB examinedresource-savings initiatives, highlighting effortsto utilize, where possible, information fromother divisions of the WTO Secretariat andtrade-related macroeconomic information fromother intergovernmental organizations, such asthe World Bank and the International MonetaryFund. The appraisal also examineddissemination, reporting and meeting proceduresand offered recommendations towardsimprovements in each area, including improvedaccess through the WTO website. A secondappraisal was recommended not more than fiveyears after the Third Ministerial or as requestedby a Ministerial Conference.

Trade and Core Labor Standards: An importantU.S. achievement at the Singapore MinisterialConference was the inclusion of language in theMinisterial Declaration whereby TradeMinisters from all WTO Members recognized acommitment to the observance of internationallyrecognized core labor standards. Consideringthat Trade Ministers’ reaffirmation of thiscommitment in Singapore made observance oflabor standards a legitimate topic for discussionin the WTO, the United States delegationroutinely made observations and raisedquestions relative to labor standards with nearlyall those WTO Members which underwentreviews in 1999.

Work for 2000

The TPRM is an important tool for monitoringand surveillance, in addition to encouragingWTO Members to meet their GATT/WTOobligations and to maintain or expand tradeliberalization measures. The program for 2000

contains provision for reviews of 15 Members,including Kenya, Iceland, Tanzania, Singapore,Bangladesh, Peru, Norway, Poland, EuropeanUnion, the Republic of Korea, Bahrain, Brazil,Japan, Switzerland and Canada. Although theTPRM continues to meet its goals, limitedresources and a growing list of countries to bereviewed annually – in addition to a number ofnew accessions – makes it important to keep theMechanism functioning as efficiently aspossible. In particular, the continued activecooperation between Members and theSecretariat plays an essential role in the successof the Mechanism and must be maintained toensure that the review process continues to runsmoothly; that deadlines are met; and that thequality of the report is maintained. Implementation of the recommendationsproposed in the five year appraisal also will helpto address these issues.

2. Committee on Trade andEnvironment

Status

The Committee on Trade and Environment(CTE) was created by the WTO GeneralCouncil on January 31, 1995 pursuant to theMarrakesh Ministerial Decision on Trade andEnvironment. The mandate of the CTE is tomake appropriate recommendations to theMinisterial Conference as to whether, and if sowhat, changes are needed in the rules of themultilateral trading system to foster positiveinteraction between trade and environmentmeasures and to avoid protectionist measures.


The CTE has played an important role inbringing together government officials fromtrade and environment ministries to build abetter understanding of the complex linksbetween trade and environment. Among otherthings, this has helped to address the seriousproblem of lack of coordination between trade


and environment officials in many governments. In addition, the CTE has produced usefulrecommendations calling for transparency inecolabeling and launching the creation of a database of all environmental measures that havebeen notified under WTO transparency rules.

The CTE has also engaged in importantanalytical work, helping to identify areas wheretrade liberalization holds particular potential foryielding environmental benefits. Win-winopportunities that have been identified thus farinclude the elimination or reduction ofagriculture subsides that promote unsustainablefarming practices and fisheries subsidies thatcontribute to over fishing, and the elimination ofbarriers to environmental goods and services.


The WTO Committee on Trade andEnvironment met three times during 1999,pursuant to its mandate. The United Statescontributed to this process by, inter alia,working to build a consensus that bothimportant trade and environmental benefits canbe achieved by addressing agriculturalsubsidies, fisheries subsidies that contribute tooverfishing and the liberalization of trade inenvironmental goods and services.

Multilateral Environmental Agreements(MEAs): Inclusion of trade measures in MEAshas been and will continue to be essential tomeeting the objectives of certain agreements butmay raise questions with respect to WTOobligations. Over the course of the year, theCTE helped strengthen WTO Members’understanding of MEAs and trade by holdingthe third in a series of meetings withrepresentatives from a number of MEASecretariats at which those representativesbriefed the committee members on recentdevelopments in their respective agreements. There continue to be sharp differences of viewwithin the CTE on whether there is a need toclarify WTO rules in this area. The United

States holds the view that the WTO broadlyaccommodates trade measures in MEAs.

Market Access: Work in this area continued tofocus on the environmental implications ofreducing or eliminating trade-distortingmeasures. There is a broad degree of consensusin the Committee that trade liberalization, inconjunction with appropriate environmentalpolicies, can yield environmental benefits. Discussion continued over the course of the yearon the potential for such a “double dividend” inthe agriculture sector. The Committee alsodiscussed in depth the potential environmentalbenefits of reducing or eliminating fisheriessubsidies, drawing on a previously tabled paperon this subject by the United States. Furtherwork in the area was taken up at the ThirdMinisterial. Discussion also took place on thebenefits of improving market access forenvironmental services and goods. TheCommittee also discussed the environmentalimplications of trade liberalization in othersectors, including forestry and energy.

TRIPS: The Committee had a brief discussionof the relationship between the TRIPSAgreement and the environment. As in the past,a few countries advanced arguments forconsideration of changes to the TRIPSAgreement to address “contradictions” betweenthe WTO and the Convention on BiologicalDiversity. The United States once again madeclear its view that there are no contradictionsbetween the WTO and the Convention onBiological Diversity.

Relations with NGOs: The United States, joinedby several other Members, emphasized the needfor further work to develop adequatemechanisms for involving NGOs in the work ofthe WTO and adequate public access todocuments. Following through on this work, inthe Third Ministerial process the United Statesproposed that the WTO General Council’s 1996agreement on Guidelines for Relations withNGOs be reviewed and substantially improved,and the United States continues to lead efforts at


enhancing the WTO’s transparency, includingderestriction of documents.

3. Committee on Trade andDevelopment

Status

The Committee on Trade and Development wasestablished in 1965 to strengthen the GATT’srole in the economic development ofless-developed GATT Contracting Parties. Inthe WTO, the Committee on Trade andDevelopment is a subsidiary body of theGeneral Council. The Committee addressestrade issues of interest to Members withparticular emphasis on the results in theUruguay Round and on the operation of the“Enabling Clause” (the 1979 Decision onDifferential and More Favorable Treatment,Reciprocity and Fuller Participation ofDeveloping Countries). This included areassuch as the Generalized System of Preferences(GSP) programs, the Global System of TradePreferences among developing countries andregional integration efforts among countries. The Committee also has a role in advising theWTO Secretariat on technical assistanceprograms.


The Committee has historically functioned as aforum for developing countries to discuss thebroad range of issues of special interest todevelopment, in contrast to the other committeesin the WTO structure which are responsible forthe operation and implementation of particularagreements. Thus, the Committee offers aunique venue for Members to discuss tradeissues in the broader context of development. The Committee’s discussion of development-related issues has generated considerableinterest, debate, and a variety of viewpoints. But, one thing that is abundantly clear from theCommittee’s work is that, while all developingcountries are interested in development, the

precise meanings of and methods to achievedevelopment are unique to each country.

The Committee’s work has contributedpositively to the WTO’s discussions onelectronic commerce. For example, Committeediscussions on the development dimensions ofelectronic commerce in 1999 were generallyviewed as useful in educating developingcountry Members on the potentially largebenefits of opening their markets to the hightechnology sector. The initiative to equip leastdeveloped and developing countries withcomputers and internet access was very positive,and complemented the Leland Initiative of theUnited States. Under the auspices of the U.S.Agency for International Development, theLeland Initiative facilitated the improvement oftelecommunications infrastructures, includinginternet infrastructure, in a number of Sub-Saharan African countries. The LelandInitiative enabled the Trade Reference Centersto connect to the Internet.

The Committee’s involvement in two successfulHigh Level Meetings – the 1997 High LevelMeeting on the Least Developed Countries andthe 1999 Symposium on Trade andDevelopment – are two additional examples ofthe CTD’s positive contribution to the overallWTO work program. These meetings broughtattention to the concerns of many countrieswhile, at the same time, provided an opportunityfor non-governmental organizations, observersand other entities to participate in thediscussion. The Committee has beeninstrumental in helping to shape the debateabout the benefits of trade liberalization todevelopment prospects and the role of technicalassistance and capacity building in this effort. The work on the Integrated Framework ofTechnical Assistance (discussed in detail below)was the result of initiative undertaken by theCommittee to ensure better coordination amongdonor agencies and countries.



The Committee held five formal meetings in1999. Its work focused on the following areas:preparations for the March 1999 High LevelSymposium on Trade and Development; reviewof the special provisions in the MultilateralTrading Agreements and related MinisterialDecisions in favor of developing countryMembers, in particular least-developedcountries; the development dimension of tradefacilitation; the development dimension ofelectronic commerce; and technical assistanceand training.

High Level Symposium on Trade andDevelopment: Following requests from severalMembers, the WTO held the High LevelSymposium on Trade and Development March17-18, 1999. The purpose of the symposiumwas to hold an informal, high-level dialogue ontrade and development issues in order to addressthe development dimension of internationaltrade issues and trade-related concerns ofdeveloping countries, including least developedcountries, and to highlight the role of the WTOin promoting developmental objectives set outin the Preamble to the Marrakesh Agreement.

Development Dimensions of Trade Facilitationand Electronic Commerce: Throughout theyear, the CTD held useful discussions and didvaluable work on these two important areas thatoffer substantial potential benefits to developingcountries. On trade facilitation, the Committeeheld several discussions of the relevance of thisissue to development. With respect to electroniccommerce, Members discussed a wide range ofissues relating to electronic commerce anddevelopment including potential benefits fromelectronic commerce for developing countriesand potential problems developing countriesmight face with respect to electronic commerce. The Committee also held a one-day seminar onElectronic Commerce and Development onFebruary 19, 1999 which was widely attendedby government officials and private sectorrepresentatives from several countries to allow

for informal exchanges of views on thisimportant topic.

Technical Assistance: One element of the Planof Action for Least Developed countries agreedby Ministers at the 1996 Singapore MinisterialMeeting was the desire to foster an integratedapproach to trade-related technical assistanceactivities for the least-developed countries witha view to improving their overall capacity torespond to the challenges and opportunitiesoffered by the trading system. The result wasthe Integrated Framework for Trade-relatedTechnical Assistance (“Integrated Framework”)that seeks to coordinate the trade assistanceprograms of six core international organizations(the International Monetary Fund, theInternational Trade Center, the United NationsConference on Trade and Development, theUnited Nations Development Program, theWorld Bank and the WTO). In addition, leastdeveloped countries can invite other multilateraland bilateral development partners to participatein the Integrated Framework process. TheCommittee devoted considerable time toreviewing the experiences to date with theimplementation of the Integrated Frameworkand discussing possible ways to improve itsability to serve the needs of developingcountries. Building upon the experiences withthe Integrated Framework, the United States andsix developing countries tabled proposals in theThird Ministerial process concerning ways toimprove capacity building and technicalassistance efforts in the WTO.

A particularly important and successful elementof the WTO technical assistance program in1999 was its initiative to establish “TradeReference Centers” in each least developedcountry and a variety of developing countries. Established in a government ministry, usuallythe trade ministry, the “center” is designed toallow officials better access to WTO resources,the resources of the Integrated Framework andother trade resources. This is accomplishedthrough placement of a personal computer,appropriate software, printer, internet


connection, and support in the center. To date,Trade Reference Centers have been installed in56 countries. The United States contributedfinancially to this project.

Work for 2000

The Committee will continue its function as theforum for discussion of development issueswithin the WTO. Particular emphasis is likelyto be placed on two topics: the application ofspecial and differential treatment in existingagreements and potential scope for differentapproaches in new negotiations; and improvedtechnical assistance and capacity building. Anyfurther debate on special and differentialtreatment will need to address the growingdivergences among developing countries and theleast-developed in their ability to participateeffectively in further trade negotiations andbenefit from new agreements.

On technical assistance, the Director-Generalhas already pledged greater efforts to work withspecialized agencies to address the growingneeds of WTO Members. The Committee willbe expected to look carefully at proposals andconsult with Members on new approaches. Inthis connection, the Committee will workclosely with the WTO Secretariat to devise amethod to regularly evaluate the Secretariat’stechnical assistance activities. Members havecommitted to improve and enhance theIntegrated Framework, and are likely to extendsome concepts of that program to otherdeveloping countries.

4. Committee on Balance ofPayments Restrictions

Status

Pursuant to the GATT 1947 and the GATT1994, any Member imposing restrictions forbalance of payments purposes is required toconsult regularly with the BOP Committee todetermine whether the use of restrictivemeasures is necessary or desirable to address its

balance of payments difficulties. Fullconsultations involve a complete examination ofa country’s trade restrictions and balance ofpayments situation, while simplifiedconsultations provide more general reviews. Full consultations are held when restrictivemeasures are introduced or modified, or at therequest of a Member in view of improvementsin the balance of payments. The UruguayRound results strengthened substantially theprovisions on balance of payments.


The Committee on Balance of Payments has hadextraordinary success during the past five years. In contrast to the pre-WTO period, theCommittee and its Members, particularly theUnited States, have ensured that the BOPprovisions of the GATT 1994 are used asoriginally intended: to enable countriesundergoing a balance of payments crisis toimpose temporary measures until their situationimproves. In the past, Members resorted toBOP measures to provide protection to domesticindustries when such action was not warranted. The BOP Committee works closely with theInternational Monetary Fund (IMF) inconducting its BOP consultations; BOPprovisions provide for close coordination withthe IMF on BOP matters.

This situation has changed, due to both theimproved rules that were established in theUruguay Round and better enforcement,including use of the dispute settlementprovisions. The Uruguay Round Understandingon Balance of Payments Provisions made anumber of clarifications to the two primaryarticles dealing with balance of payments in theGATT 1947 and now GATT 1994: Article XII(Restrictions to Safeguard the Balance ofPayments) and Article XVIII:B (GovernmentalAssistance to Economic Development). TheUnderstanding confirmed that price-basedmeasures, i.e., import surcharges, are preferred,that the use of quantitative restrictions is


allowed only under exceptional circumstancesand that measures taken for BOP reasons mayonly be allowed to protect the general level ofimports, i.e., applied across-the-board, not toprotect specific sectors from competition. Additionally, the Understanding establishedstrict notification deadlines and explicitdocumentation requirements, and permitted“reverse notification” by Members concernedwith measures instituted, but not notified, byother Members.

Over the course of the last five years, theWTO’s BOP provisions have become moreimportant, in large part due to the increasedlevel of tariff bindings that resulted from theUruguay Round market access negotiations. The bound tariff rates ensure that Memberscannot breach the bound rates withoutconsequences. WTO rules ensure that whenbound rates are breached, the Member takingthe action must comply with the rules governingtrade in goods. Accordingly, more stringentBOP rules, particularly the new limitation on theuse of quantitative restrictions, the strongpreference for price-based measures and theinability of countries to protect only specificsectors, have dissuaded most countries fromresorting to BOP measures. In spite of theAsian financial crisis, no country resorted toBOP measures.

The improved Uruguay Round rules have beenenhanced by stronger and more successfulenforcement of the provisions. Two particularexamples are illustrative. In 1995, the first caseseeking approval of new measures that camebefore the WTO BOP Committee concernedBrazil’s desire to impose quantitativerestrictions on autos. The Committee rejectedthe request as unnecessary and inconsistent withthe WTO rules. In the intervening five years, norequests for new quantitative restrictions orsector-specific measures have been presented.

A lingering problem from the GATT period wascountries which maintained quantitativerestrictions or prohibitions, generally applying

only to specific sectors and of long-standingduration. The situation with respect to India’suse of BOP measures is the best example ofsuch a case. India’s trade policy since the 1950shad featured quantitative restrictions for BOPreasons. Beginning in 1995 in the BOPCommittee and continuing into disputesettlement in 1997, the United States and otherschallenged India’s need to maintain measuresfor balance of payments reasons. A panel andthe WTO Appellate Body agreed that India wasnot justified in its use of BOP measures. Indiawill eliminate one-half of its remainingmeasures by April 1, 2000 and the remainder byApril 1, 2001.

But beyond these two major cases, WTOMembers acting through the BOP Committee,have a strong record of enforcing the new rules. In 1995, South Africa, Egypt and Israeldisinvoked Article XVIII:B and agreed tocomplete the elimination of all BOP-justifiedmeasures. Egypt and Israel had maintainedBOP-justified measures for many years. In thatsame year, Hungary imposed an importsurcharge, and was asked to present a concretetimetable for the reduction and elimination ofthe surcharge; this surcharge was subsequentlyeliminated in 1997. In 1996, Poland, SlovakRepublic, Philippines, Turkey, and South Africaeliminated all BOP-justified restrictions. In1997, Tunisia and Bulgaria committed to theelimination of BOP-justified measures. Due tosevere economic problems, the Slovak Republictemporarily re-introduced an import surcharge. In 1998, the Slovak Republic, Sri Lanka, andBulgaria and, in 1999, Nigeria eliminated allBOP-justified restrictions.


Since entry-into-force of the WTO on January 1,1995, the WTO BOP Committee hasdemonstrated that the hard-won new WTO rulesprovide Members additional, effective tools toenforce obligations under the BOP provisions. During 1999, the Committee held consultationswith the Slovak Republic, Bangladesh and


Romania, and saw Nigeria eliminate all BOP-justified restrictions. While India maintainsimport restrictions that were once justified onbalance of payments grounds, these measuresare no longer under the jurisdiction of the BOPCommittee, but have moved to the disputesettlement arena.

In a dispute brought by the United States, apanel and the Appellate Body ruled during 1999that India’s restrictions were not justified onbalance of payments grounds and were thusillegal. Under the terms of an agreementreached by the United States and India, Indiawill phase out one half of its restrictions byApril 1, 2000 and all remaining restrictions byApril 1, 2001.

Work for 2000

In 2000, the Committee will consult with thefollowing countries maintaining BOP-relatedrestrictions: Pakistan, the Slovak Republic, andRomania. Additionally, should Members resortto BOP measures, the WTO provides for aprogram of rigorous consultation with theCommittee. The United States expects theCommittee will make further progress inensuring that the WTO BOP provisions are usedas intended to address legitimate, serious BOPproblems through the imposition of temporary,price-based measures. The Committee willcontinue to rely upon the close cooperation withthe IMF.

5. Committee on Budget, Financeand Administration

Status

WTO Members are responsible for workingwith the WTO Secretariat on the budget for theorganization, and the Budget Committee hastraditionally taken a “hands on” approach to thefinancial matters confronting the institution. Compared to other international institutions, theWTO has a relatively small budget that itmanages despite the dramatic increase in

activity since establishment of the WTO in1995. The U.S. budget assessment for 2000 is15.7 percent or about $13 million dollars. Details on the WTO’s budget required bySection 124 of the URAA are provided inAnnex II.


Despite the increase in the WTO’s activitiesover the past five years, the U.S. assessment tothe WTO has remained relatively unchanged. As the world’s largest exporter – accounting formore than $200 billion in trade last year – thecost of WTO Membership for the United Statesis very small. WTO Members are assessedbudget contributions according to a Member’sshare in world trade. In the GATT,contributions were based on a contractingparty’s share of world trade in goods. With theexpansion of the WTO to include services andintellectual property rights beginning in 1996,the assessment was revised to take into accountstatistics as reported in balance of paymentsstatistics from the International Monetary Fund. In the case of goods, gold held as a store ofvalue is excluded from the statistics and in thecase of services, statistics relate to the definitionof commercial services as applied in the WTO. The addition of services and intellectualproperty rights statistics to the calculationmethodology marginally increased the relativeshare of the budget paid by the United States,which in 1996 was 15.87 percent.

The Committee has had a difficult task duringthe past five years, from ensuring that theadministrative and financial aspects of the movefrom the GATT 1947 to the WTO wereaccomplished in good order to transfer smoothlythe Secretariat staff from the UN CommonSystem to an independent WTO salary andpension system. The Committee’s work overthe years in managing the financial andpersonnel growth the organization has required,all the while ensuring that the organization uses


its resources wisely and efficiently, is perhapsits greatest achievement.


Continuing the discussions begun in 1998, theCommittee continued to examine the previousyear’s policy of holding the WTO to a zeronominal growth budget. A constantly expandingworkload, resulting from new initiatives and adramatic increase in dispute settlement activity,combined with the need to fund “on-budget”certain spending categories which hadheretofore been funded out of extraordinarysurplus accounts, created a situation in which agood deal of the Committee’s work in 1999 wasdevoted to discussion of how to handle proposedincreases in 2000 spending. Other significantissues discussed in the Committee in 1998included: (i) implementation of the newconditions of service system for the WTOSecretariat; (ii) a review of the methodologyemployed in determining Members’ share of thebudget; (iii) various efforts to streamlineoperations and reduce costs in the WTO; and(iv) distribution of the extraordinary surplusfrom 1998, which resulted from the UnitedStates paying its 1997 assessment in 1998.

Agreed Budget for 2000: After considerabledebate and delays in reaching a consensus, theCommittee proposed and the General Councilapproved a 2000 budget for the WTOSecretariat and Appellate Body of Swiss Francs127,697,010. While this amount represents anominal increase over the approved 1999 budgetof 4.3 percent, the real increase is far lower dueto the inclusion in the regular budget of certainspending categories previously funded “off-budget.” The 2000 budget reflects theCommittee’s continuing efforts to ensure thatthe real base of WTO activity is more apparent. In addition, a certain amount of the increase isdue to the need to fund fully the new staffapproved in 1999 in certain categories (such aslawyers and translators) where existingresources were inadequate to keep pace with thelevel of activity, especially in dispute

settlement-related work. For 2000, the UnitedStates owes Swiss Francs 19,890,887 (about $13million). Members’ assessments are based ontheir share of WTO Members’ trade in goods,services and intellectual property. The currentU.S. contribution accounts for 15.727 percent ofthe total assessments on WTO Members, a sharefar lower than the U.S. assessment in otherinternational organizations. As the WTO addsnew Members, the U.S. assessment willautomatically be reduced. At the end of 1999,the accumulated arrears of the United States tothe WTO amounted to Swiss Francs 3,205,232($2,257,200).

Establishment of WTO Secretariat: At theOctober 1998 meeting of the General Council, itwas agreed to proceed with the establishment ofthe WTO Secretariat on an independent basisseparate from the United Nations CommonSystem. As a result, from January 1, 1999, theWTO Secretariat withdrew from the UN JointStaff Pension Fund and established the WTOPension Plan. The funds transferred from theUN fund to the new WTO fund wereconsiderably more than the minimum requiredto set up the plan on a viable basis. The newsystem operates exclusively in Swiss Francs, afactor which will dramatically reduce theexchange rate risk in future WTO budgets. Thischange and the resulting savings are alreadyreflected in the 2000 Secretariat budget.

Determination of Members’ Share of theBudget: With the creation of the WTO in 1995,Members’ share of the budget was recalculatedto capture their relative share of world trade inservices as well as trade in goods (goods tradealone had been the basis for GATT assessmentcalculations). It was agreed that the operationof the methodology should be reviewed in 1998and a working group was formed for thispurpose. The working group concluded that themethodology was essentially sound and shouldbe retained. However, at least one Memberquestioned the inclusion in the calculation ofservices trade of receipts for traffic in a majorcanal. The discussion also revealed least


developed countries’ collective opposition tobeing assessed at a minimum rate (0.03 percent)– an amount which is often higher than theirshare of world trade. As part of the approval ofthe 2000 Secretariat budget, WTO Membersagreed to reduce the minimum contribution forleast-developed countries to 0.015 percent.

Efforts to Reduce Costs and ImproveEfficiencies: The Committee and Secretariatcontinued efforts designed to keep costs down,eliminate duplicative activities and do awaywith inefficient operations. For example, theSecretariat has enhanced its coordination withUNCTAD, the International Trade Center and avariety of other international organizations withregard to elements of technical assistance toavoid duplication of activities. As noted above,a certain number of efficiencies and cost savingsover time will also be the result of theintroduction of a WTO-specific salary andpension system.

Work for 2000

Development and Agreement on a Budget for2001: Given new multilateral trade negotiationswill be launched in 2000 and the continuedgrowth in dispute settlement activities, it isexpected that there will again be pressure put onthe WTO’s resources and budget. TheCommittee will likely devote considerable timeto the development of a budget for 2001 thatconsiders these factors.

6. Committee on Regional TradeAgreements

Status

All regional trade agreements in the WTOsystem are reviewed for compliance with WTOobligations and for transparency reasons. Priorto 1996, these reviews were typically conductedin a “Working Party.” The Committee onRegional Trade Agreements (CRTA), asubsidiary body of the General Council, wasformed in early 1996 as a central body to

oversee all regional agreements in the WTOsystem. The Committee is charged withconducting the reviews of all agreements,seeking ways to facilitate and improve thereview process, particularly the conclusion ofeach review, to implement the biennial reviewrequirement established by the Uruguay Roundagreements, and to consider the systemicimplications of such agreements and regionalinitiatives for the multilateral trading system.

Free trade areas (FTAs) and customs unions(CUs), both exceptions to the principle of MFNtreatment, are allowed in the WTO system ifcertain requirements are met. In the GATT1947, Article XXIV (Customs Unions and FreeTrade Areas) was the principal provisiongoverning FTAs and CUs. Additionally, the1979 Decision on Differential and MoreFavorable Treatment, Reciprocity and FullerParticipation of Developing Countries,commonly known as the “Enabling Clause,”provides a basis for less-than-comprehensiveagreements between or among developingcountries. The Uruguay Round added two moreprovisions: Article V of the General Agreementon Trade in Services (GATS), which governsthe services-related aspects of FTAs and CUs;and the Understanding on the Interpretation ofArticle XXIV, which clarifies and enhances therequirements of Article XXIV.


The Committee’s work has improved theprocess reviewing and understanding regionaltrade agreements in the context of themultilateral trading system. For the first time,most agreements are reviewed in a single forum. All FTAs and CUs must fulfill severalrequirements in the WTO. First, substantiallyall of the trade between the parties to theagreement must be covered by the agreement,i.e., tariffs and other regulations of trade mustbe eliminated on substantially all trade. Second,the incidence of duties and other regulations ofcommerce applied to third countries after the


formation of the FTA or CU must not, on thewhole, be higher or more restrictive than wasthe case in the individual countries before theagreement. Finally, while interim agreementsleading to FTAs or CUs are permissible,transition periods to full FTAs or CUs canexceed ten years only in exceptional cases. With respect to a CU, in which by definitioncommon regulations of trade, including MFNduty rates, are adopted toward third countries,the parties to an agreement must notify WTOMembers and begin compensation negotiationsprior to the time when any tariff bindings,services commitments or other obligations areviolated.

Before the Committee was established,agreements were reviewed in isolation. Oneresult of this new, single forum review processis a focus on the varying quality and consistencyof individual agreements or groups ofagreements with WTO rules. Now WTOMembers have the opportunity to compare andcontrast the agreements. While providing animportant oversight and transparency function,the Committee does not have the power tonullify agreements or find that the agreement isout of compliance with WTO rules. Membersstill have the option to address complianceproblems via dispute settlement. The debate inthe Committee more recently has been theextent to which the Committee should havemore power to find agreements “consistent”with WTO rules. Thus far there has been noconsensus on moving in this direction. Nonetheless, identification of problematicaspects of individual agreements have mademany WTO Members more attentive to theirWTO obligations.

Another area for further consideration is thereview of developing country agreements. TheUnited States, along with other trading partnershas sought to bring such agreements under thepurview of the new Committee. Currently, anumber of developing countries argue that theCommittee on Trade and Development, which isresponsible for the “enabling clause” under

which some agreements may be justified, is themore appropriate venue.


The Committee met four times during 1999. Bythe end of 1999, the Committee started orcontinued examination of 72 regional tradeagreements (A list of all regional integrationagreements notified to the GATT/WTO andcurrently in force is included in Annex II.) TheNorth American Free Trade Agreement wasamong the accords reviewed. Detaileddiscussions were conducted on procedures andobjectives for the biennial review of eachagreement. The Committee held extendeddiscussions on ways to improve the notificationand review process. Finally, the Committee hadsubstantial, but inconclusive, discussions onsystemic effects of regional agreements on themultilateral trading system.

Work for 2000

During 2000, the Committee will continue toaddress all aspects of its mandate. Particularemphasis will be placed on completing thereviews of regional trade agreements that havealready been notified, including the NAFTA,improving compliance with notificationrequirements, and establishing andimplementing procedures for the biennial reviewprocess. Further discussions on improving thereview process and the systemic effects ofregional agreements will also be part of thework program for the coming year.

7. Accessions to the World TradeOrganization

Status

Countries seeking to join the WTO mustnegotiate the terms of their accession, asmandated by Article XII of the WTOAgreement. The WTO Members areconsidering thirty-three applications for WTOMembership. This is a record high level. The


Kyrgyz Republic and Latvia became Memberson January 20, 1999 and February 11, 1999,respectively, after their parliaments ratified thenegotiations completed in October 1998. Estonia followed as the 135th WTO Member onMay 21. Georgia and Jordan completednegotiations and submitted to their parliamentsthe accession package which had been approvedby the General Council in October andDecember 1999, respectively. Both countriesintend to become Members by the end of March2000. Croatia and Albania substantiallycompleted negotiations on accession terms in1999, but were not able to see the processthrough to completion that year. Armenia,China, Lithuania, Moldova, Oman, ChineseTaipei (Taiwan), and Vanuatu are relativelyadvanced in the accession process, and maycomplete negotiations in 2000, along withCroatia and Albania.

The General Council accepted new accessionapplications from Lebanon, Bhutan, and Bosnia-Herzegovina during 1999. Cape Verde alsorequested initiation of accession negotiations,but the application had not been acted uponbefore the end of the year. Azerbaijan,Cambodia, and Sudan activated their accessionnegotiations by submitting initial information ontheir trade regimes, reducing to six the numberof accession applicants that had not yetactivated negotiations. Working Party meetingswere convened for Andorra, Armenia, China,Croatia, Estonia, Georgia, Jordan, Lithuania,Moldova, Oman, Russia, Saudi Arabia, ChineseTaipei (Taiwan), Vanuatu, and Vietnam. Thechart included in the Annex to this sectionreports the status of each accession negotiation.

Accession Process

Article XII of the WTO Agreement states, thatto become a WTO Member, applicants mustnegotiate terms of accession to the organizationwith current WTO Members. After acceptingthe application, the WTO General Councilestablishes a Working Party to reviewinformation on the applicant’s trade regime and

to conduct the negotiations. Accessionnegotiations are time consuming and technicallycomplex. They involve a detailed review of anapplicant’s entire trade regime by the WorkingParty. Applicants must be prepared to makelegislative changes to implement WTOinstitutional and regulatory requirements, toeliminate existing WTO-inconsistent measures,and to make specific commitments on marketaccess for goods and services.

The terms of accession developed with WorkingParty members in these bilateral and multilateralnegotiations are recorded in an accession“protocol package” consisting of a WorkingParty report and Protocol of Accession,consolidated schedules of specific commitmentson market access for imported goods andforeign service suppliers, and agricultureschedules that contain commitments on exportsubsidies and domestic supports. The WorkingParty adopts the completed protocol packagecontaining the negotiated terms of accession andtransmits it with its recommendation to theGeneral Council or Ministerial Conference forapproval. The United States conducts domesticconsultations during the course of negotiations. Prior to General Council approval of theprotocol package, the USTR transmits thepackage to Congress for consideration, asprovided for in section 122 of the UruguayRound Agreements Act. Any WTO Memberintending to invoke the non-applicationprovisions of the WTO Agreement must notifythe WTO prior to General Council approval ofthe protocol package. After General Councilapproval, accession applicants normally submitthe package to their domestic authorities forratification. Thirty days after the instrument ofratification is received in Geneva, accession tothe WTO occurs. Ultimately, the pace of theaccession process is up to the applicant, anddepends on the ability to comply with WTOprovisions and agree on market access terms.



While the broad outlines of the WTO accessionprocess are the same as they were under GATT1947, the scope of the negotiations hasbroadened and the requirements strengthened toreflect the expansion of obligations thatoccurred when the WTO was created. TheWTO accession negotiations give currentMembers, including the United States, anopportunity to seek from the applicantelimination of barriers to trade and to ensurethat WTO provisions are observed. In addition,tariff and other requirements on trade in goodsand services in the applicant’s trade regime canbe liberalized and bound as part of the terms ofaccession. The United State’s participation inWTO accession negotiations has supported U.S.export interests, helped improve bilateral traderelations with applicants, and strengthened theWTO as an institution through enhanced tradeliberalization and observance of WTOprovisions. Since the establishment of the WTOin 1995, 26 countries have either becomeMembers, completed negotiations formembership, or have made substantial progresson the terms of WTO membership. This figureaccounts for over one-sixth of the totalmembership.

During 1995, some WTO Members accededunder simplified negotiations reserved forformer contracting parties to the GATT, but allsubsequent applicants have been subject to fullArticle XII accession procedures for the termsof their accession. Negotiations completedunder these procedures have resulted in fullybound tariff schedules and broad servicescommitments. WTO Members have placedgreat emphasis on securing comprehensive tariffbindings, low bound tariff rates on priorityitems, and participation in the InformationTechnology Agreement, the Chemical TariffHarmonization initiative, and other sectoraltariff-cutting initiatives initially negotiatedduring and after the Uruguay Round. Elimination of agricultural export subsidies and

progressive reduction of other agriculturalsupports have been major U.S. priorities, as hasthe establishment of broad sectoral coverage forcommitments in services for cross-border andcommercial presence, with emphasis onfinancial services, telecommunications services,professional and other business services,environmental services, tourism, construction,audiovisual services, and other services sectors.


During 1999, in response to concerns expressedby some WTO Members that the accessionprocess was too difficult for developing countryapplicants, the General Council reviewed theresults of WTO accessions since 1995. Discussions focused on how the process couldbe streamlined and made more transparent, lessexpensive for small countries, and overall lesscomplex. While no definitive answer to theseconcerns emerged from the discussions, WTOMembers agreed that more technical assistanceshould be provided to assist developingcountries in the accession process and that waysshould be found to minimize the number ofmeetings needed to complete the negotiations. This is particularly relevant with regard to eightcountries currently seeking accession, i.e.,Bhutan, Cambodia, Cape Verde, Laos, Nepal,Samoa, Sudan, and Vanuatu and to a number ofprospective applicants that are least developedcountries with extremely low levels of incomeand economic development.

Of the 33 current accession applicants, 12 arecountries that enjoy “normal trade relations(NTR) (called “most-favored-nation” treatmentin the WTO) with the United States subject tothe provisions of the “Jackson-Vanik” clauseand the other requirements of Title IV of theTrade Act of 1974. Under GATT 1947 and theWTO, the United States has invoked the non-application provisions of these agreements.13

13Prior to 1999, the United Statesinvoked nonapplication when Romania became


During 1999, the United States invokednonapplication with respect to Georgia for thisreason. Pursuant to legislative authorization, thePresident granted Mongolia permanent NTR in1999, and the United States established WTOrelations with that country. Legislation wasproposed during 1999 to grant permanent NTRstatus to Albania, Armenia, Georgia, KyrgyzRepublic, and Moldova.

Work for 2000

Demands on WTO delegations and WTOSecretariat resources for accession negotiationscan be expected to remain strong during 2000. A number of the WTO applicants that madesubstantial progress in their negotiations butwere unable to complete all aspects of theiraccession negotiations in 1999 will resumenegotiations with a view to finishing theprocess. A number of the applicantgovernments have declared WTO accession apriority issue and will press to completenegotiations expeditiously. The United Statesalso expects that countries currently outside theWTO system will seek to initiate accessionnegotiations. (A more detailed discussion ofChina’s accession negotiations may be found inChapter V.)

8. Working Group on Trade andCompetition Policy

Status

At the December 1996 Singapore MinisterialConference, Ministers established a workinggroup “to study issues raised by Membersrelating to the interaction between trade andcompetition policy, including anti-competitivepractices, in order to identify any areas that maymerit further consideration in the WTOframework.” Whereas the Ministers took noteof the fact that certain existing WTO provisionsare relevant or relate to competition policy, theywere careful to specify that the aim of thisWorking Group was educative and not intendedto prejudge whether, at some point in the future,negotiations would be initiated to establishmultilateral disciplines in this area. TheWorking Group on the Interaction betweenTrade and Competition Policy (WGTCP) wasdirected to draw upon the work of a companionworking group, also established at Singapore,that was mandated to examine the relationshipbetween trade and investment. The WGTCPwas also encouraged to cooperate withUNCTAD and other intergovernmentalorganizations examining similar trade andcompetition policy issues in order to make thebest use of available resources and to ensure thatthe development dimension is fully considered. The WTO General Council oversees the work ofthe WGTCP. While, in December of 1998, theGeneral Council approved an extension of theGroup’s work into 1999, it remains to be seenwhether further work on competition policy willbe done in a continuation of the WGTCP in2000 and beyond.

Assessment of the First Three Years

The Working Group only started its work in1997. The United States has long beeninterested in addressing the extent to which anti-competitive conduct and restrictions oncompetition in foreign markets – as well as theinappropriate or inadequate application of

an original Member in 1995, and when theaccession packages of Mongolia and the KyrgyzRepublic were approved by the WTO GeneralCouncil in 1996 and 1998, respectively. Congress subsequently authorized the Presidentto grant Romania and Mongolia permanentNTR, and the United States withdrew itsinvocation of non-application in the WTO forthese countries. The remaining WTO accessionapplicants covered by Title IV are: Albania,Armenia, Azerbaijan, Belarus, China,Kazakhstan, Moldova, Russia, Ukraine,Uzbekistan, and Vietnam.


foreign antitrust laws – act as barriers to theexport of U.S. goods and services. The disputewith Japan over trade in photographic film isonly one example where these kinds of issueshave been relevant to the pursuit of U.S. tradepolicy goals. In reflection of these interests andconcerns, the United States joined other WTOMembers in authorizing establishment of theWGTCP. Although the educative work hasbeen distracted at times by the efforts of some todwell on issues such as antidumping, which areproperly the responsibility of other WTObodies, the Group by and large performed itswork well. It did a good job of improving theWTO membership’s understanding ofcompetition policy and of its supportive,complementary relationship to tradeliberalization and economic growth. The UnitedStates has encouraged this aspect of the workprogram, as we know that the institution ofcompetitive market structures not only helps theeconomies and consumers of other countries, itcan also help assure better market accessopportunities for firms exporting to thosecountries.

The proposal of some, such as the EU andJapan, to move on to the negotiation ofmultilateral competition rules has been opposedby many developing countries. The UnitedStates has expressed its own concerns aboutmoving on to the negotiation of comprehensivecompetition rules, but the key consideration isnot whether to consider and to addresscompetition issues in the trade context, but howto do so most effectively and sensibly. TheUnited States is prepared to work with itspartners to determine the best way to moveforward in this area. In any event, much canstill be done in the WTO and elsewhere toaddress selective competition-related issueswhich arise in the course of negotiating market-opening agreements. The adoption of pro-competitive regulatory principles was animportant feature of the WTO Agreement onTrade in Basic Telecommunications. Wheresimilar approaches make sense in other sectors

and industries, they should continue to bepursued.


The WGTCP held three meetings in 1999, thelast of which was devoted to the preparation ofan annual report to the General Council. TheGroup continued to organize its work on thebasis of written contributions from Members,supplemented by discussion and commentaryoffered by delegations at the meetings and,where requested, factual information from theWTO Secretariat and observer organizationssuch as the OECD, the World Bank andUNCTAD. In light of the new mandate given itby the General Council in December 1998, theGroup’s agenda was more focused than inprevious years. Specifically, the GeneralCouncil directed the WGTCP to explore newissue areas not addressed in its first two years ofwork. These were: (i) the relevance offundamental WTO principles of nationaltreatment, transparency and most-favored-nationtreatment to competition policy; (ii) approachesto promoting cooperation and communicationamong Members, including in the field oftechnical cooperation; and (iii) the contributionof competition policy to achieving theobjectives of the WTO, including the promotionof international trade. All three areas of focuswere addressed at the Group’s two substantivemeetings, and WTO Members shared a widevariety of views and experience – particularly asto whether trends recorded and observations tobe made in these areas were or were notindicative of a need to negotiate a multilateralframework for competition rules.

Work for 2000

WTO Members have actively debated thequestion of whether the issue of trade andcompetition policy is ripe for negotiations in theWTO and, if so, what the nature of thosenegotiations might be. Differing views prevail,and Members will undoubtedly need to continuetheir consultations to determine what should be


the next steps on competition issues. TheUnited States remains prepared to consider thismatter with other WTO Members as other workmoves forward and the broader WTO agenda isfashioned.

9. Working Group on Transparencyin Government Procurement

Status

Drawing largely on proposals made by theUnited States, Ministers agreed at the 1996Singapore Ministerial Conference to establish aWorking Group on Transparency in GovernmentProcurement. The Working Group’s mandatecalled for: (1) conducting a study ontransparency in government procurement; and(2) developing elements for an appropriateWTO agreement on transparency in governmentprocurement.


Since its first meeting 1997, the Working Grouphas made an important contribution to theUnited States’ longstanding efforts to bring allWTO Members’ procurement markets withinthe scope of the international rules-based tradingsystem. During its first two years, the WorkingGroup identified and analyzed a set of coreprinciples of transparency and due process inprocurement which are generally accepted andapplied throughout the WTO membership. These principles tracked very closely with thenon-binding principles on transparency ingovernment procurement that the United Statesand its Pacific Rim trading partners developedsimultaneously within the Asia PacificEconomic Cooperation (APEC) forum. Thestrong similarities between these two sets ofprinciples confirmed that there is broadinternational agreement on essential principlesof transparency in procurement and widespreadrecognition of the benefits that all governmentsderive from implementing those principles.

In 1999, the Working Group moved forwardrapidly with the development of concreteprovisions for potential internationalcommitments in this area. On this basis, WTOMembers are now poised to conclude amultilateral agreement on transparency ingovernment procurement. This work provides astrong foundation for continuing to pursue U.S.procurement objectives in bilateral and regionalnegotiations, as well as in the WTO.

An eventual WTO agreement in this area wouldbe an important contribution towardsdevelopment of predictable and competitiveprocurement environments throughout theworld. Although government procurement is ofgreat commercial significance – the globalprocurement market is estimated to be worthover $3.1 trillion annually – only 26 WTOMembers presently belong to the plurilateralWTO Government Procurement Agreement dueto its more stringent requirements. Transparency provisions would address asubstantial number of concerns and buildsupport for broader cooperation on procurementover the long term.

The United States also views this initiative as animportant part of broader international efforts topromote the rule of law and combatinternational bribery and corruption. WTOcommitments to ensure a transparentprocurement environment could significantlyreduce opportunities for the solicitation ofbribes, and could therefore complement otherinternational efforts – such as the OECDConvention on Combating Bribery – tocriminalize the offering of bribes. Work in thisarea would also build on the good governancepractices that many WTO Members haveadopted as part of their overall structural reformprograms. This would help to prevent the mis-allocation of resources, which inhibits theability to address other social needs, and wouldpromote fiscal and financial stability incountries affected by the Asian financial crisis.



In order to facilitate continued progress on thedevelopment of concrete elements for apotential WTO agreement on transparency ingovernment procurement, the United States,Hungary and Korea jointly submitted a draft textfor an agreement in July 1999. Australia, theEuropean Union and Japan subsequentlysubmitted separate draft texts. Thosesubmissions contained many similar provisions,including in relation to:

� Publication of information regarding theregulatory framework for procurement,including relevant laws, regulations andadministrative guidelines;

� Publication of information regardingopportunities for participation ingovernment procurement, includingnotices of future procurements;

� Clear specification in tender documentsof evaluation criteria for award ofcontracts;

� Availability to suppliers of informationon contracts that have been awarded;and

� Availability of mechanisms to challengecontract awards and other procurementdecisions.

Between September-November 1999, the UnitedStates organized a series of intensivenegotiations aimed at narrowing differences onconcrete commitments in these and other keyissues. Those negotiations resulted inconverging views on most procedural elementsof transparency in government procurement. Atthe end of the year, however, significantdifferences remained on several key elements, inparticular:

� the appropriate scope and coverage of aTransparency Agreement; and

� the appropriate application of WTOdispute settlement procedures to such anAgreement.

Work for 2000

In 2000, the United States will continue to workwith other WTO Members, in bilateral andregional fora as well as in the WTO, to resolvethe remaining issues and build a consensus forconclusion of an Agreement in this area.

10. Working Group on Trade andInvestment

Status

At the December 1996 Singapore MinisterialConference, Ministers decided to establish aworking group “to examine the relationshipbetween trade and investment.” The Ministersadditionally specified that the aim of thisWorking Group was educative and not intendedto prejudge whether, at some point in the future,negotiations would be initiated to establishmultilateral disciplines in this area.

The Working Group on Trade and Investment(WGTI) was directed to draw upon the work ofa companion working group, also established atSingapore, that was mandated to examine therelationship between trade and competitionpolicy. The WGTI was also encouraged tocooperate with UNCTAD and otherintergovernmental organizations examiningsimilar trade and investment policy issues inorder to make the best use of available resourcesand to ensure that the development dimension isfully considered. The WTO General Counciloversees the work of the WGTI and, inDecember of 1998, approved an extension of theits work beyond the initial two-year mandate. Itremains to be seen whether further work oninvestment will be done in a continuation of theWGTI.



The WGTI provided a multilateral forum for theconsideration of investment liberalization andinternational investment agreements and theirrelationship to trade and to economicdevelopment. The forum provided anopportunity for the United States to present thebenefits it has derived from open investmentpolicies and programs and to advanceinternational understanding of these benefits.

The three years available to the group permittedit to analyze the full range of investmentagreement models currently in use, and toconsider the implications of the differences. The group assessed the advantages anddisadvantages of the variety of approaches,including as they affected development.

The United States believes that while the lastthree years of the WGTI’s work significantlyraised the group’s understanding of investmentrules, the work also raised a number ofimportant questions to which the group has notdeveloped sufficient answers. The UnitedStates also believes that a number of pertinentsubjects have not been adequately addressed,such as the relationship between high standardinvestment rules and national regulation forpublic purposes such as health, safety and theenvironment. Accordingly, the United States isprepared to give further consideration to arenewal of the mandate of a Working Group oninvestment as other work in the WTO movesforward.


The WGTI met three times in 1999. Drawingfrom the checklist of issues developed duringthe initial two years of the its work, and relyingprimarily on written submissions fromMembers, the WGTI reviewed: the economicrelationship between trade and investment;advantages and disadvantages of entering intoinvestment agreements, including from a

development perspective; the rights andobligations of home and host countries and ofinvestors and host countries; and therelationship between investment andcompetition policy. At each meeting, theWGTI also continued its stocktaking andanalysis of existing instruments, standards andactivities regarding international investmentrules, including WTO provisions, and bilateral,regional, plurilateral and multilateralagreements and initiatives.

Work for 2000

There remains widespread interest in the WTOto continue work in the area of trade andinvestment, but differences of view also remainas to what the next steps should be.

11. Electronic Commerce

Status

Based on the mandate from the May 1998Ministerial Declaration on ElectronicCommerce, the WTO in 1999 completed aninitial examination of the trade-related aspectsof electronic commerce. Building on this report,WTO Members began developing consensusprinciples to promote integrating electroniccommerce into the WTO’s trade-liberalizingagenda. Work on expanding market access forelectronic commerce will continue throughservices negotiations in 2000.


Based on work from September 1998 throughJuly 1999, WTO working bodies identified areasof general consensus on how WTO rules applyto electronic commerce and ensure a tradingenvironment supportive of its growth. As partof this process, the WTO also began a dialoguewith private sector representatives (in the formof two symposiums) to educate trade officials onhow electronic commerce is transforming tradeand commerce and how it can contribute toeconomic development. Building on these


activities, WTO Members began developingconsensus principles for integrating thepromotion of the global growth of electroniccommerce into the WTO’s trade-liberalizingagenda. Principles on which broad-basedagreement was reached included:

� Maintenance of a moratorium oncustoms duties on electronictransmissions;

� Applicability of WTO rules toelectronic commerce;

� Avoidance of unnecessary restrictionson electronic commerce that wouldhamper its growth; and

� Continued work to ensure that traderules and commitments adapt toelectronic commerce and that thetrading system promote electroniccommerce as a means of development.

While not yet formally adopted by the WTO, thebroad support among WTO Members for theseprinciples underscored the degree to whichWTO Members see a liberalized tradeenvironment for electronic commerce as the bestmeans of promoting its growth and attracting thenecessary infrastructure investment.

Work for 2000

The year 1999 was a watershed year forelectronic commerce, dispelling any doubts thatit represents a fundamental change in howbusiness is conducted across all sectors of theeconomy. At the same time, the rapid expansionof the Internet’s global reach brought into focusthe vast trade opportunities – and challenges –created by the greater use of electronicnetworks. Ensuring that the global tradeenvironment supports the unimpeded growth ofelectronic commerce is broadly recognized as akey goal shared by all WTO Members.

There appears to be solid support among WTOMembers for completing the work programidentifying how WTO disciplines apply toelectronic commerce and where furtherclarification is necessary. Areas such as how toclassify electronic commerce, i.e. as a good or aservice, deserve particular attention, given themarket access implications involved. There isalso ongoing demand among WTO Members forfurther education on the trade and developmentbenefits of electronic commerce. Integratingthese activities into work of WTO bodies islikely to be a priority for many WTO Membersand is an opportunity to ensure that the WTOplays a positive, trade-liberalizing role in theglobal development of electronic commerce.

As the current round of services negotiationsbegin in the WTO, a special focus will be onensuring that new commitments expand tradeopportunities for all services that can besupplied electronically, and ensuring that theinfrastructure for electronic commerce –information networks and related services – areadequately covered by trade rules andcommitments. Work will also continue onensuring development of competitivetelecommunications markets through adherenceto the basic telecommunications agreement; onensuring a regulatory environment conducive toalternative electronic commerce platforms suchas cable and satellite; on ensuring globalcoverage of intellectual property protection fordigital products; promoting adherence tomarket-based standards and expanding a mutualrecognition agreement on testing andcertification of telecommunications equipment.

12. Trade Facilitation

Status

The 1996 Singapore Ministerial Declarationrequested the Council for Trade in Goods “toundertake exploratory and analytical work,drawing on the work of other relevantinternational organizations, on the simplificationof trade procedures in order to assess the scope


for WTO rules in this area.” In 1999, theCouncil continued its work under this mandate,following up on the 1998 WTO TradeFacilitation Symposium by conducting severalinformal sessions that largely focused on issuesrelated to customs and other administrativerequirements pertaining to the movement ofgoods across borders. As part of this process,other WTO bodies also examined relevantaspects of various WTO Agreements and GATTArticles and provided reports to the Council.


In July 1999 the United States submitted to theGeneral Council a proposal for launching WTOnegotiations in the area of trade facilitation,with an objective of achieving an Agreement onthe publication and administration of tradetransactions, and on the formalities connectedwith importation and exportation. The U.S.proposal envisions strengthening anddeveloping new WTO disciplines that focus ontwo key elements: (i) ensuring greatertransparency in procedures for conducting tradetransactions; and (ii) providing for increasedefficiencies in how goods cross borders, such asthrough the rapid release of goods from thecustody of customs administrations. At the coreof future rule-making would be building uponrelevant provisions of GATT Article VIII (“feesand formalities connected with importation andexportation”) and GATT Article X(“Publication and Administration of TradeRegulations”).

An important element of the U.S. proposal setsforth a new path for integrating work oncapacity building into the negotiating process,through a concurrent process of developing thenecessary technical assistance programs toensure implementation of the results of thenegotiations. This type of approach wouldinclude important preparatory work that wouldsurvey the trade facilitation environment indeveloping countries – particularly with regardto the important core elements related totransparency and efficiency – and also assess

technical assistance needs. Moving forward insuch a manner will provide an importantopportunity for the WTO to workcollaboratively with other InternationalOrganizations such as the World Bank, theInternational Monetary Fund, and UNCTAD,ensuring greater coherency and efficient use ofresources.

Work for 2000

While a definite momentum developed in 1999toward launching WTO negotiations in tradefacilitation, a certain resistance also continuedto be exhibited on the part of some developingcountry Members. In most cases this was basedupon an unfortunate continuing perception thatassociated further WTO rule-making in this areaas involving a traditional-type trade concession,rather than a “win-win” undertaking that woulddevelop an overall rules-based framework forstimulating investment, production, and trade –particularly for developing country Members. The continuing WTO work in this area hasmade clear that, in an era of just-in-timemanufacturing and distribution, a rules-basedenvironment for conducting trade transactions isa necessity for securing continued growth in theeconomic output of all WTO Members. Smalland medium size enterprises are particularlypoised to take advantage of opportunitiesprovided by today’s instant communications andever-improving efficiencies in the movement ofphysical goods. These enterprises have therebybecome important stakeholders in further WTOcontributions to improving the TradeFacilitation environment. In addition, systemicrules-based reforms related to increasedtransparency and efficiency diminishescorruption, while also providing the benefit ofenhancing administrative capabilities that ensureeffective compliance with customs-relatedrequirements or laws concerning health, safety,and the environment.

The United States views further work in thisarea as ultimately leading to one of the mostimportant systemic negotiations to be


undertaken by the WTO. The United States willremain active to ensure the continuation ofeffective preparatory work, which includesongoing complementary initiatives involvingexisting Agreements, such as with regard toimplementation of the WTO Agreement onCustoms Valuation. Important educative effortswill continue within the WTO, increasing theunderstanding of the important linkages betweena rules-based trade transaction environment anda stable economic infrastructure. The UnitedStates will also be prepared to join with otherMembers in advancing an agenda that will beginto address capacity building issues in this area,particularly by undertaking an examination ofadministrative systems and measures related toproviding transparency and the rapid release ofgoods, in order to identify potential technicalassistance programs that would be developed inconjunction with planning for implementation aspart of overall negotiations.

F. Plurilateral Agreements

1. Committee on GovernmentProcurement

Status

The WTO Government Procurement Agreement(GPA), which entered into force on January 1,1996, is a plurilateral” agreement included inAnnex 4 to the WTO Agreement. As such, it isnot part of the WTO’s single undertaking and itsmembership is limited to WTO Members thatspecifically signed it in Marrakesh or thatsubsequently acceded to it. The GPA’s currentmembership includes the United States, themember states of the European Union (Austria,Belgium, Denmark, Finland, France, Germany,Greece, Ireland, Italy, Luxembourg,Netherlands, Portugal, Spain, Sweden, UnitedKingdom), Aruba, Canada, Hong Kong, Israel,Japan, Liechtenstein, Norway, the Republic ofKorea, Singapore and Switzerland. Iceland,Kyrgyz Republic, Latvia, and Panama are in theprocess of negotiating accession to the GPA;Chinese Taipei, as a part of its broader WTO

accession package, has initiated negotiations formembership.


The conclusion of the expanded GovernmentProcurement Agreement (GPA) opened uptremendous new opportunities for U.S. exportersto compete on a level playing field for foreigngovernments’ procurement contracts. Consistent with the United States’ broaderUruguay Round objective to bring serviceswithin the rules based international tradingsystem, the Parties agreed that the GPA wouldcover procurement of a wide range of servicesand construction contracts – where U.S.suppliers often enjoy a significant competitiveadvantage in international markets. They alsoagreed, for the first time, to include procurementby designated sub-central authorities within thescope of the Agreement. As a result of thesenew commitments, the WTO estimates that thevalue of trade opportunities created by the GPAincreased by ten times, to over $300 billion peryear.

So that the expansion of trade in this sector willbe balanced and fair, the United States hasensured that GPA coverage commitments arefirmly based on the principle of reciprocity. Forexample, U.S. GPA commitments relating to theprocurement of any particular category ofservices only apply to foreign suppliers whosegovernments have agreed to provide non-discriminatory treatment to U.S. supplierscompeting for the same category of services inthat country’s own procurement markets. Similarly, the agreement by 37 U.S. states toparticipate in the GPA does not apply tocountries that have not opened up their own sub-central government procurement markets to U.S.suppliers.

This emphasis on reciprocity provides anongoing incentive for other countries to open upadditional procurement markets to internationalcompetition. After the conclusion of the


Uruguay Round negotiations, theAdministration reached bilateral agreement withsix other GPA Parties (Austria, Switzerland,Norway, Sweden, Finland and Japan) to open upmajor sub-central procurement markets in thosecountries (i.e., procurement by Swiss cantonaland Japanese prefectural governments) to U.S.exporters. In 1995, Singapore’s interest in beingable to continue participating in U.S.procurement markets was a key factor in itsdecision to re-join the GPA.

In October 1998, the European Union and Japanused the WTO dispute settlement procedures tochallenge a Massachusetts statute whichregulated participation in Massachusettsprocurements by firms that do business in orwith Myanmar (Burma). The Administrationstrongly opposed this action by the EU andJapan, and pledged to vigorously defend theMassachusetts statute in the WTO, if necessary.

In response to an unrelated domestic suit,however, the U.S. District Court ofMassachusetts found the Massachusetts statuteto be unconstitutional and, in December 1998,issued an injunction against its implementation. In June 1999, this decision was upheld by theU.S. First Circuit Court of Appeals. InNovember 1999, the Supreme Court agreed toreview the Circuit Court’s decision, andscheduled oral argument for March 22, 2000. However, because the EU and Japan did notreinitiate proceedings within 12 months, theauthority of the panel lapsed in February 2000.

It is important to note that, like other WTO andNAFTA agreements, the GPA cannot preemptor invalidate state or local laws – even if adispute settlement panel were to find a state orlocal measure inconsistent with such anagreement. The United States is free todetermine how it will conform with thoseagreements at the national or sub-national level.


In its Report to the 1996 Singapore MinisterialConference, the Committee on GovernmentProcurement, which monitors the GPA, statedits intention to undertake an “early review” ofthe GPA starting in 1997. The review would beaimed at the implementation of ArticleXXIV:7(b) and (c) of the GPA, which call forfurther negotiations to achieve the followingobjectives:

� simplification and improvement of theGPA, including, where appropriate,adaptation of the rules to advances inthe area of information technology andstreamlined procurement methods;

� expansion of coverage of the GPA; and

� elimination of discriminatory measuresand practices which distort openprocurement.

The Parties to the Agreement have also agreedthat an additional objective of the review is topromote expanded membership of the GPA bymaking it more accessible to non-members.

In 1998, the Committee approved a provisionaltime-table for this review process, including “atarget of the third WTO Ministerial for thecompletion of the negotiations, at least on thesimplification and improvement of theAgreement.” However, as the review proceededin 1999, the Committee became aware that moretime would be required in order to adequatelyaddress a number of complex issues that havebeen raised, such as the growing use of certaintypes of procurement procedures that were notin widespread use at the time the GPA wasoriginally negotiated. The Committee alsocontinued to consider the potentialsimplification of GPA statistical reportingrequirements, an issue that is of particularinterest to members’ sub-central procurementauthorities and to other countries that maypotentially be interested in acceding to the GPA.


In 1999, some delegations continued to press forprogress on the simplification of the GPAannexes, particularly through the removal ofreciprocity reservations and product- orprogram- specific exceptions. The United Statesand other delegations noted that these issueswere inextricably linked to the overall balanceof negotiated coverage commitments, and wouldhave to be addressed in that context.

As provided for in the GPA, the Committeecontinued the process of monitoring members’implementing legislation. This included follow-up discussions on issues raised during thereview of the EU’s and Korea’s implementinglegislation in 1998, and the initiation ofdiscussions relating to the implementinglegislation of the United States, Canada andSwitzerland.

Work for 2000

In 2000, the Committee will continue its reviewof the text of the GPA, focusing on the Parties’efforts to “streamline” the Agreement, whereappropriate, and ensure that it addresses thetypes of procurement procedures, includingthose that make use of moderntelecommunications and informationtechnologies, that are commonly used by theParties’ procuring entities today. In addition,the Parties are likely to step up their efforts toresolve issues that have led them to includereciprocity-based reservations to their coveragecommitments in the Annexes to the Agreement,and to explore other opportunities for expandingthe Agreement’s coverage.

2. Committee on Trade in CivilAircraft

Status

The Agreement on Trade in Civil Aircraft(Aircraft Agreement), was concluded in 1979 aspart of the Tokyo Round of multilateral tradenegotiations and last amended in 1986. Whilethe Aircraft Agreement was not renegotiated

during the Uruguay Round, it remains fully inforce and is included in Annex 4 to the WTOAgreement as a Plurilateral Trade Agreement.

The Aircraft Agreement requires signatories toeliminate duties on civil aircraft, their engines,subassemblies and parts, ground flightsimulators and their components, and to providethese benefits on an NTR basis to all WTOMembers. On non-tariff issues, the AircraftAgreement establishes international obligationsconcerning government intervention in aircraftand aircraft component development,manufacture and marketing, including:

Government-directed procurement actions andmandatory subcontracts: The Agreementprovides that purchasers of civil aircraft(including parts, subassemblies, and engines)will be free to select suppliers on the basis ofcommercial considerations and governmentswill not require purchases from a particularsource.

Sales-related inducements: The Agreementstates that governments are to avoid attachingpolitical or economic inducements (positive ornegative linkages to government actions) as anincentive to the sale of civil aircraft.

Certification requirements: The Agreementprovides that civil aircraft certificationrequirements and specifications on operatingand maintenance procedures will be governed,as between Signatories, by the provisions of theAgreement on Technical Barriers to Trade.

Under Article II.3 of the Marrakesh Agreement,the Aircraft Agreement is part of the WTOAgreement, but only for those Members whohave accepted it and not for all WTO Members. As of December 1, 1999, there were 24Signatories to the Agreement: Bulgaria, Canada,the European Communities, Austria, Belgium,Denmark, France, Germany, Greece, Ireland,Italy, Luxembourg, the Netherlands, Portugal,Spain, Sweden, the United Kingdom, Egypt,Japan, Macau, Norway, Romania, Switzerland


and the United States. Albania, Croatia,Chinese Taipei and Latvia, Lithuania, Estonia,and Georgia have indicated that they willbecome parties upon accession to the WTO andOman within three years of accession. ThoseWTO Members with observer status in theCommittee are Argentina, Australia,Bangladesh, Brazil, Cameroon, Mauritius,Nigeria, Poland, Singapore, the SlovakRepublic, Sri Lanka, Trinidad and Tobago,Tunisia and Turkey. In addition, China, theRussian Federation and Chinese Taipei haveobserver status in the Committee. The IMF andUNCTAD are also observers.


While the 1979 GATT Agreement on Trade inCivil Aircraft was not strengthened throughrenegotiation during the Uruguay Round, civilaircraft were brought under the strongerdisciplines of the WTO Agreement on Subsidiesand Countervailing Measures. This was themajor objective of the U.S. aerospace industry,whose competitors have in the past benefittedfrom huge government subsidies.

Since the conclusion of the Uruguay Round,there have been some additional negotiatingefforts in Geneva to substantively revise theAircraft Agreement. The United Statesproposed revisions along the lines of the 1992U.S.-EU bilateral Large Aircraft Agreement,which sets limits on government support andclarifies provisions of the GATT AircraftAgreement that apply to governmentintervention in aircraft marketing. There hasbeen little progress in those negotiations.

The Aircraft Agreement has been incorporatedwithout revision into the WTO. Therefore therehave been efforts by the Signatories to update orrectify the Agreement to correctly referenceWTO instruments. The United States supportsthose efforts, so long as the current balance ofrights and obligations are preserved, and the

relationship between the Aircraft Agreementand other WTO agreements is maintained.

The Aircraft Agreement is plurilateral tradeagreement under the auspices of the WTO. Thus, not all WTO Members are signatories ofthe Aircraft Agreement.


The Aircraft Committee, permanentlyestablished under the Aircraft Agreement,affords the Signatories an opportunity to consulton the operation of the Agreement, to proposeamendments to the Agreement and to resolveany disputes. During 1999, the Committee mettwice. At those meetings the Committeediscussed an array of aircraft-related tradematters including technically updating theAnnex of aircraft items to be accorded duty-freetreatment, conforming the language in theAgreement to the WTO, end-use customsadministration and a proposal to define “civil”aircraft by initial certification rather than byregistration. The United States also raisedcertain activities by other Signatories that mightresult in trade barriers or market distortions,such as the failure to promptly certify large civilaircraft at full seating capacity, governmentexchange rate guarantees for some aircraftcomponent manufacturers and regulationsrestricting the operation of aircraft, otherwisecompliant with International Civil AviationOrganization Stage III noise standards, basedsolely on a design standard that targets U.S.-origin engines and environmental equipment.

Work for 2000

The United States will continue to seek toconform the Aircraft Agreement with the newWTO framework while maintaining the existingbalance of rights and obligations. The UnitedStates will also continue to make it a highpriority for countries with aircraft industries thatare seeking membership in the WTO to becomea Signatory to the existing Aircraft Agreement. In addition, other countries that might procure


civil aircraft products, but are not currentlysignificant aircraft product manufacturers, arebeing encouraged to become members of theAgreement in order to foster non-discriminatoryand efficient selection processes for aircraftproducts solely based upon product quality,price, and delivery.

Economic Assessment

Economic Benefits of the Uruguay Roundand the WTO for the United States in the

Last Five Years

A. Quantification of Benefits

The statistics for the last 5 years show that theUnited States was well positioned to takeadvantage of the gains secured in the UruguayRound, which in turn help lay a good foundationfor strong growth into the 21st century. In yearswhen sharp deterioration of foreign economicconditions were not creating strong headwindsfor U.S. exports, they expanded rapidly: up13.0 percent in 1995, 7.1 percent in 1996 and10.4 percent in 1997. When foreign economicconditions deteriorated after late 1997 forreasons unrelated to the Uruguay Round or theWTO, the countries most negatively affectedcontinued to abide by their Uruguay Roundconcessions to phase in their market openingcommitments, thus buffering U.S. trade from amore serious impact than that which actuallyoccurred. In 1998, U.S. exports fell by 0.5percent, but grew in 1999 by 2.6 percent. WithUruguay Round obligations and the WTOpromoting U.S. trade interests, even as U.S.trade was buffeted by economic crisis abroad,the United States was able to record two back-to-back years of strong economic growth: a 4.3percent increase in real GDP in 1998 (year-over-year) and 4.0 percent in 1999.

In addition to the Uruguay Round, of course,many other factors have influenced U.S. tradeand economic performance over the past fiveyears. Prominent among such factors are: (i) the

overall strength of the U.S. economy over thisperiod; (ii) the specific strength of technologyand business investment, attracting foreignlending and investment to the U.S. market; (iii)the Asian financial crisis of 1998-99 and itsconsequences for U.S. trade and investmentflows; (iv) growth substantially slower for manyU.S. trading partners than for the United Statesduring the period, most notably Japan; (v) theNorth American Free Trade Agreement and itsstimulation of trade among the United States,Canada and Mexico; and (vi) the ongoing shiftof relatively simple consumer and electronicproduct imports into the United States fromhigher skilled Asian producers to exporters inthe People’s Republic of China, currently not aMember of the WTO. Although it would beideal to do so, attempting to differentiate theeffects of the Uruguay Round and WTO fromthese and other important developmentsaffecting U.S. trade and the economy would be avirtually impossible task.

Another type of approach, however, is widelyused in estimating the impact of the tradeagreements like the Uruguay Round whileholding other factors constant. Both before andat the time of the WTO’s creation, a number ofstudies estimated its expected future effects onthe U.S. and world economy. These studiesconsidered how trade and the economy wouldhave been different in a recent historical year, ifthe Uruguay Round had been in place, fullyimplemented, with all long term economicadjustments made instantaneously. In such ananalysis, all other factors that mightindependently affect trade or the economy areautomatically held constant, since only a singleyear is used both as the baseline for measuringthe performance of trade and the economyabsent the impact of the Uruguay Round, as wellas for analyzing full implementation of theRound’s results. The effect of the Round istherefore measured as the difference betweenthe year as it was, in fact, and the year as itwould have developed with full implementationand no other independent factor being altered. A number of the original such comparative


static studies done at the time of the UruguayRound’s conclusion have since been updated.

The Council of Economic Advisers has recentlyreported on these academic studies that evaluategains from the Uruguay Round. Thesecomparative static studies capture only some ofthe effects of certain conceptually quantifiablefeatures of the Uruguay Round (reducing tariffsglobally by one-third, reducing export subsidiesin agriculture, and reducing or eliminatingquotas in the textile, apparel and agriculturalsectors). They do not capture gains fromprovisions for services liberalization, disputesettlement, intellectual property rightsprotection or other rules changes improving thepredictability and reliability of internationaltrade commitments. They do not capture theenhanced commercial predictability of bindingpreviously unbound tariffs in the agriculturaland industrial sectors – an extremely importantgain from the Uruguay Round with respect tothe trade policy regimes of low and middleincome countries. These studies, at best,capture only some of the possible dynamic orgrowth effects of Uruguay Round tradeliberalization. Finally, because the studiesgenerally deal with highly aggregated productcategories and cannot measure economic gainsfrom the reduction of barriers among productswithin categories, a so called “productaggregation bias” is likely to result in yetanother source of benefit underestimation insuch modeling efforts.

Nevertheless, these recent studies of some of thepotential Uruguay Round benefits estimate thatannual global income could rise between $171billion and $214 billion (1992 dollars) upon fullimplementation. For the United States alone,the increase could amount to $27 billion to $37billion each year with good prospects for evenfurther gains. Post Uruguay Round negotiationsyielded additional market access commitmentsin financial services, basic telecommunicationsservices and information technology, areas ofundoubted and substantial benefit. Similarly,the WTO provides the United States the

assurance of still more opportunities for U.S.export expansion through resumption this yearof negotiations aimed at additional liberalizationin services and agriculture.

B. Other ConsiderationsConcerning Benefits Fromthe Uruguay Round

Other aspects of the Uruguay Round and theWTO, not readily quantifiable, have also provenbeneficial to the United States. These aspectsinclude providing a framework within which theworld reversed the Asian financial crisis;facilitating the rapid growth of technology andU.S. competitiveness; and providing a robustsystem for managing and resolving internationaltrade disputes.

The Asian Financial Crisis: In 1998, with Japanin recession, real GDP dropped nearly 6.0percent in the Republic of Korea, 7.5 percent inMalaysia, 10 percent in Thailand and 13.2percent in Indonesia. Declines in nationalconsumption levels were substantially greaterand much human suffering occurred. Againstsuch a background, it is remarkable that not onlydid these middle income countries avoid thereimposition of import barriers, but they alsocontinued to honor their Uruguay Round marketopening commitments made in 1994 and thosemade later for financial services. A similar,though less severe, situation was playing out in1999 in Latin America. In both sets ofcircumstances, the WTO system aided U.S.interests doubly. First, it helped to avoid anadditional market access loss from new traderestrictions in the affected markets that wouldhave magnified the already considerable effectsof the Asian financial crisis on U.S. exports in1998 and 1999. Second, the existence of realinternational obligations as a result of the WTOhelped affected governments resist calls forimport protection; as a result, these countriestended to recover more quickly than wouldotherwise have been the case and the globaleconomy was aided in avoiding the 1930's cycle


of protectionism and depression. With theexception of Indonesia, all the Asian countriesinvolved returned to significant positive growthin 1999. Indonesia stabilized its economy in1999 and is likely to return to positive growththis year. In part, as a result of this rapidstabilization U.S. exports to the Asian PacificRim, excluding Japan and China, increased by8.2 percent in 1999, compared to a decline insuch exports of over 17 percent in 1998.

Technology and U.S. Competitiveness: Much ofthe fastest growth in the U.S. economy isoccurring in technology driven sectors such ascomputing and telecommunications, and insectors, like financial services, whereproductivity and output can be greatly enhancedby advanced computer and telecommunicationsequipment and services. Favoring the rapidadvance of these technologies and industries,and the jobs that they support, is the ability tofinance research and development on a salesbase that is global, rather than national, in size. The United States leads the world ininternational sales of many high technologygoods and services. Unquestionably,developments in the WTO – from the UruguayRound and more recent agreements – help theUnited States to finance research and investmentand to achieve or maintain preeminence in manyhigh technology sectors. The InformationTechnology Agreement (ITA), for example,includes 52 countries representing over 95percent of trade in the $600 billion globalmarket for information technology products. Under the ITA, participants will eliminatetariffs, largely by the year 2000, on products ofinterest to the United States such as computers,computer equipment, semiconductors,telecommunications equipment, semiconductormanufacturing equipment and computer based-analytical instruments. The Agreement on BasicTelecommunications Services opened up 95percent of the world telecommunications market(by revenues) to competition. Prior to thisagreement only 17 percent of the top 20telecommunications markets were open to U.S.firms. The market access opportunities opened

up by this Agreement cover the full range ofinnovative services and technologies pioneeredin the United States that continue to propelgrowth in this sector. The WTO FinancialServices Agreement includes commitments thatcover an overwhelming share of the global tradefrom 102 countries. The Agreementencompasses $38 trillion in global domesticbank lending, $19.5 trillion in global securitiestrading and $2.1 trillion in worldwide insurancepremiums. Financial services is one of theUnited States’ most competitive industries,contributing importantly to the growth of U.S.employment opportunities. Also, more recentwork on electronic commerce has included anagreement to a moratorium on the imposition ofcustoms duties on electronic transmissions.

Good trade agreements strengthen U.S.technological preeminence. First, increased andbound market access commitments under theWTO are essential not only in opening foreignmarkets for such U.S. export sales, but also forassuring certainty that, once open, such marketsare not likely to be arbitrarily closed. Second,commitments to protect intellectual propertymade with respect to traded goods greatlyreduce the likelihood of theft of benefits thatwould otherwise accrue on U.S. export sales ofproducts whose research and development entailoften large financial outlays. Commitments onintellectual property rights protection in theWTO help support the financial basis withoutwhich the healthy reinvestment in newtechnologies and products would become movedifficult to achieve.

Dispute Settlement: While the U.S. record inWTO dispute settlement is impressive – havingobtained favorable results on 23 of the 25 U.S.complaints that have been acted upon so far –the system for managing and resolving disputeshas been more successful than is suggested bythe mere number of cases brought and resolved. With the new assurance that cases brought canbe pursued to their ultimate end – a panel ruling,compliance measures if appropriate, and legalsuspension of proportional benefits in the case


of non-compliance – the dispute settlementmechanism of the WTO acts as a strongerdeterrent against trade restrictive governmentactions than the prior, less effective GATTmechanism. While it is virtually impossible toestimate the economic benefits of suchdeterrence, such economic benefits are real andprotect the interests of U.S. exporters, producersand workers every day.

C. Performance of the U.S.Economy Enhanced Over theLast Five Years

Since implementation of Uruguay Roundcommitments began and the WTO came intoforce, the U.S. economy has shown remarkablestrength. The U.S. real gross domestic product(GDP) grew at a strong average annual rate of3.9 percent during this period (fourth quarter1994 to fourth quarter 1999). This average rate,in fact, represents some acceleration in GDPgrowth when compared to the 3.2 percentaverage for the early part of the recovery fromthe 1991-1992 recession (first quarter 1991 tofourth quarter 1994). Industrial production inthe United States rose rapidly from 1994 to theend of 1999, more rapidly, in fact, than in any ofthe other major economies of the G-7 group ofcountries. Over this period, real industrialproduction in the United States increased bynearly 29 percent, compared to an 11 percentincrease for Germany and a 6 percent increasefor Japan.

Another notable feature of U.S. economicperformance since 1994 has been theimportance of business investment. Grossdomestic investment (including investment inhousing) in real terms has risen at an annual rateof 7.9 percent since the fourth quarter of 1994,double the rate of GDP growth. Suchinvestment accounted for over 30 percent oftotal U.S. GDP growth in the five-year period. Looking more narrowly at non-residential fixed,or business investment, standing at over $1.2trillion in 1999's fourth quarter, its average

annual rate of increase over the period has beena strong 10.8 percent. Its share of current dollarGDP has risen from 10.6 percent in the fourthquarter of 1994 to 12.5 percent in 1999's fourthquarter. Such high levels and strong expansionof investment in plant and equipment are widelyviewed as contributing importantly to the greatadvancement in a wide variety of growth-enhancing technologies in recent years, thestrengthening of productivity and wage growthin the United States.

Turning to employment, net job expansion inthe United States totaled nearly 14 millionbetween 1994 and 1999 (December toDecember), and the unemployment rate droppedfrom 6.1 percent for 1994 to 4.1 percent inDecember 1999, the lowest rate since 1969. Manufacturing employment, however, declinedby 151,000 from December 1994 to December1999. The weakness in manufacturingemployment was largely attributable to strongproductivity growth in U.S. manufacturingproduction rather than any overall weakness inoutput growth. At the end of 1999, U.S.industrial output stood 27.9 percent higher inreal terms than it was in 1994 – this being by farthe strongest growth among the G-7 economies.

Under the impact of stronger businessinvestment, new technologies and more openmarkets, U.S. labor productivity accelerated. The productivity of U.S. workers rose from anaverage annual rate of 1.8 percent in the 1990-1994 period, to 2.2 percent in 1994-1998, thefirst four years of the WTO’s existence, andmost recently to a 3.3 percent annual gainbetween the fourth quarter of 1998 and thefourth quarter of 1999. Productivity growth iswidely regarded as the key to the enhancementof real labor compensation, and the experienceof the last few years is broadly consistent withthat view. After stagnating for the early part ofthe 1990s, including 1995, real compensationper hour entered a period of significant growth,rising at a 2.4 percent real average annual ratebetween the first quarter of 1996 and the fourthquarter of 1999. Even real average hourly


wages for non-supervisory workers in December1999 stood 6 percent higher than they had beenin 1996.

A recent study by the Council of EconomicAdvisers and the Department of Labor(December 1999), while looking at a somewhatmore extended period than the five-year reviewof the WTO (January 1993 to November 1999),argues that strong U.S. job growth in this periodhas been dominated by jobs likely to be higherpaying and that the benefits of enhancedcompensation for U.S. workers have beenwidely shared. Among other things, the studyshows that 81 percent of job growth has been inindustry and occupation categories payingabove-median wages, that the gains have notbeen concentrated among higher wage workers,as in some recent past experience, that jobdisplacement rates have declined and that thepoverty rate in the United States has fallen to itslowest level since 1979. The study alsosuggests that job gains have been strong for allmajor subgroups of the population, with theproportion of the population with jobs at recordhighs and unemployment rates at record lowsfor African Americans and Hispanics.

The growth and success of the U.S. economyover the last five years has been such that WorldBank data show the United States sustaining andeven expanding its per capita income lead. According to World Bank data, U.S. per capitareal GDP (using purchasing-power-parityexchange rates) in 1998 exceeded the averagefor the handful of the world’s other high incomecountries by more than 40 percent. U.S. percapita real GDP exceeds the average for the restof the world combined – high, middle and lowincome countries – by nearly five fold.

The Uruguay Round, and nearly 300 other U.S.trade Agreements during the twoAdministrations of President Clinton, havecontributed to this outstanding performance ofthe U.S. economy in recent years. Thereduction of foreign trade barriers has helpedthe United States to increase production and

exports of the products in which it excels. Export-related jobs are concentrated in higherwage, higher skill fields that raise the livingstandards for U.S. families; U.S. workers andfamilies benefit as a result of this exportexpansion. The purchasing power of workers’pay checks is further enhanced by theavailability of a wider variety of high quality,competitively priced goods and services in theU.S. market. The estimated number of jobssupported by U.S. exports from 1994 to 1998(latest year available) has increased by 1.4million to a level of 11.7 million. These jobstend to be good jobs. Jobs supported by goodsexports in the United States are estimated to pay13 percent to 16 percent more than the U.S.national average wage.

The export slowdown in 1998 and 1999associated with the Asian financial crisis and theslow to negative economic growth experiencedby a number of U.S. trading partners over thisperiod temporarily halted export expansion andthe growth of export supported jobs. Recoveryin Asia and the strengthening growth prospectselsewhere have recently been reflected in thereturn of U.S. exports to growth in the latter halfof 1999. Recovery and expansion abroad,particularly if complemented with additionalefforts through the WTO to remove foreigntrade barriers, will help strengthen theexpansion of U.S. trade and the contributiontrade makes to U.S. economic performance.

D. Changes in Trade FlowsDuring the First Five Yearsof the WTO

Goods exports from the United States rose bymore than a third in nominal value from 1994through 1999, despite the Asian financial crisisand other economic problems abroad, in partdue to U.S. foreign trading partners honoringtheir Uruguay Round and WTO commitments. U.S. goods exports flattened in 1998 and muchof 1999 due to the Asian financial crisis,recessions in Latin America and weak growth in


many of U.S. trading partners. Nevertheless, thevalue of U.S. exports rose in nominal dollarterms by 36 percent between 1994 and 1999. (See Annex I, Table 1). Non-automotive capitalgoods, the largest U.S. export category,accounting for 45 percent of the $695 billion inU.S. goods exports in 1999 (under Censusdefinitions), grew by 51.5 percent between 1994and 1999. High technology products, many ofwhich are capital goods, recorded the fastestgrowth between 1994 and 1999, at 65.7 percent. At just over $200 billion in 1999, hightechnology products accounted for just under 29percent of U.S. goods exports. Under theimpact of price weakness, anemic foreigndemand associated with economic conditionsabroad, and still highly restricted globalmarkets, agricultural exports stagnated between1994 and 1999, growing by only 4.1 percent. At$48.2 billion, U.S. agricultural exportsaccounted for just under 7 percent of U.S. goodsexports in 1999.

Exports expanded to a range of countries. Regionally, the growth of U.S. exports between1994 and 1999 was about evenly split betweenhigh income countries (up 35.5 percent) and,despite the Asian financial crisis, middle andlow income countries (up 35.9 percent; seeAnnex I, Table 2). Among major countries andregions, exports to Mexico experienced thefastest growth, at 70.8 percent, while exports toCanada, China, and the EU followed, at 43.5percent, 41.4 percent and 40.7 percent,respectively. Strongly affected by weakeconomic conditions and an outright recessionin that country, exports to Japan rose a mere 7.5percent between 1994 and 1999.

Goods imports, reflecting the strong growth ofthe U.S. economy, increased by 54.7 percentfrom 1994 (under Census definitions; SeeAnnex I, Table 3). With the exception ofindustrial supplies and materials (a categorydominated by the price weakness of crudepetroleum in much of this period), all categoriesof imports rose substantially. The largestcategory, capital goods (except automotive),

accounting for just under 29.0 percent of goodsimports, rose by 61.0 percent. The overlappingcategory of high technology, accounting for justover 17.6 percent of imports, recorded thestrongest growth (except for a small “other”category) of 84.1 percent. Consumer goods, at23.4 percent of goods imports, rose by 63.8percent; autos and parts with a 17.5 percentshare of imports, rose 51.7 percent; andagricultural products, with a 3.6 percent share ofimports, rose by 41.4 percent.

Regionally, import growth in 1994-1999 wasstronger from low and middle income countries(up 69.6 percent) than from other high incomecountries (up 43.7 percent; see Annex I, Table4). As with exports, the strongest growth inU.S. goods imports was recorded with Mexico(121.7 percent) and China (110.9 percent). Following were the EU at 63.5 percent andCanada at 54.5 percent.

In 1999, services exports, at $275.5 billion, werejust over 40 percent of the value of goodsexports, while services imports, at $199.7billion were just 19.4 percent of the value ofgoods imports (See Annex I, Table 5, Table 6). The growth in services exports between 1994and 1999 (37.9 percent) slightly exceeded thatof goods (36.0 per cent), while growth ofservices imports (51.4 percent) slightly laggedthe growth of goods imports (54.1 percent).

Despite U.S. trade surpluses in the areas ofagriculture, high technology products, capitalgoods and services – all areas of particular U.S.competitive strength in international commerce– the U.S. trade deficit for goods and servicesrose from $98.4 billion in 1994 to $271.3 billionin 1999 (see Annex I, Table 7). In the period1995-1997, the goods and services trade deficithad been fairly stable at 1.3 percent to 1.4percent of the U.S. GDP, rates less than half ofthose of the late 1980s. However, the U.S. tradedeficit moved sharply higher in 1998 and 1999under the impact sharp increases in incomes,household wealth and consumer demand in theUnited States; the increased desire of foreign


lenders and investors to participate in buoyantU.S. financial markets (or to invest directly); theAsian financial crisis; recessions in LatinAmerica and Japan; and weaker growth in manyother countries than in the United States. Thegoods and services deficit rose to 2.0 percent ofGDP in 1998 and 2.9 percent in 1999. Thislatter rate was still below the record level of 3.3percent in 1987.

At the end of the period, U.S. goods andservices exports showed signs of recovery as theeffects of the Asian financial crisis abated andeconomic growth picked up in some regions. On a year over year comparison, U.S. exportsshowed a decline in 10 out of the 11 monthsbetween May 1998 and March 1999, a periodnear the height of the Asian financial crisis. Average monthly exports during this periodwere 2.1 percent lower than in the same monthof the preceding year. In the succeeding ninemonth period of April 1999 to December 1999,however, U.S. exports were higher in everymonth than a year earlier for every month butone. In the average month for this latter period,U.S. exports were 4.1 percent higher than in thepreceding year.