Emergency Committee For American Trade - Publications

Major Trade Policy Issues

Chance for Progress on the Trade Agenda

Despite the challenges of an election-year environment, a major trade deficit, and the need to rebuild a consensus on a WTO agenda both domestically and internationally, major progress on the trade agenda may well be achieved this year. Both the Administration and key congressional leaders have indicated that the extension of PNTR treatment for China and the Africa-CBI trade measure should be acted on in this session of Congress. Much progress has been made in resolving areas of disagreement on the Africa-CBI legislation. There is optimism that members can work creatively to bridge major areas of remaining differences on textile and apparel rules of origin and beneficiary country eligibility rules to reach a final agreement. Action on this legislation early this year would facilitate action on other items on the trade agenda.

On China, considerable progress is being made in completing the final elements of China’s WTO accession package. Finance Committee Chairman Bill Roth, other members of Congress, and the Administration have indicated their support for moving forward with PNTR treatment for China as soon as the fundamentals of China’s WTO agreement are in place. Enactment of PNTR treatment for China guarantees that America would enjoy the full benefits of China’s WTO membership and provides tremendous growth opportunities for all sectors of the U.S. economy for decades to come.

With regard to the WTO, despite the lack of consensus at the Seattle WTO ministerial, WTO members have agreed to proceed with the negotiations on agriculture and services under the built-in agenda and to resume the ongoing liberalization process established under the WTO agreement. It is critical that the United States and other WTO members build on this vote of confidence in the institution of the WTO and redouble their efforts to move forward on a trade-expanding agenda. It is also vitally important that Congress reaffirm its strong support for the multilateral trading system and the tremendous benefits and enforcement capability it has given the United States by soundly rejecting any efforts to disapprove U.S. participation in the WTO.

Finally, the continued strength of the U.S. economy and low unemployment rate here at home should continue to provide an effective response to calls for market-closing measures in face of a record trade deficit. As reflected in the congressional defeat of the protectionist steel legislation last year, more and more members recognize that closing U.S. markets and subjecting U.S. agricultural and manufactured exports to the risk of retaliation will only compound a rising trade deficit. Instead, we must continue to seek to eliminate remaining trade barriers and create greater growth and stability in global markets. In addition, the trade deficit commission established last year has begun its hearings in anticipation of submitting its report and recommendations to Congress in August of this year.

The most prominent issues on the trade agenda this year are likely to be PNTR treatment for China, a conference on the Africa-CBI trade legislation, and the vote on whether to continue U.S. participation in the WTO. The trade agenda is also likely to include efforts to deal with labor, environment, and food policy issues, proposals to amend Section 201 and the antidumping laws, legislation extending the "green light" subsidies provision, a review of the Trade Adjustment Assistance and GSP programs, legislation relating to Vietnam’s trade status, a miscellaneous tariff bill, and Customs issues. Unilateral sanctions and export control policy will also be on the trade agenda and are discussed in Sections 6 and 8 respectively of this report.

Permanent Normal Trade Relations (PNTR) Treatment for China
Importance of PNTR Treatment for China

China’s WTO membership presents the opportunity to unleash further economic reform in China, lock in historic market openings for U.S. agriculture, manufacturers, and services industries, and encourage greater individual freedom for Chinese citizens. That is why the Administration, leading Republicans and Democrats in Congress, American farmers, and the U.S. business community, are united in making the passage of PNTR treatment for China the top priority on the trade agenda this year.

China is in the final stages of completing its bilateral and multilateral negotiations on the terms of its WTO membership. China is nearing completion of its negotiations with the European Union, the only major bilateral negotiation that remains unfinished. Most of the key elements in the multilateral negotiation on the terms of China’s protocol of accession, setting out the general rules China must follow in joining the WTO and observing its market access commitments, have been agreed to. Through its bilateral and multilateral WTO commitments, China will be required to implement sweeping economic reforms, implement greater transparency, and remove all major trade barriers, and its commitments will be enforceable under the WTO dispute settlement process and trade policy review mechanism.

The historic bilateral WTO accession agreement reached between the United States and China last November commits China to remove all major trade barriers--from prohibitive tariffs and restrictions on trading rights to investment restrictions--in all sectors of its economy. U.S. farmers and businesses from auto manufacturers, electronics, banking, and insurance firms to food processors and motion picture companies--in union and non-union companies alike--have hailed the U.S. bilateral WTO agreement with China as opening the door to the world’s sixth largest and most rapidly growing major market. For example, companies like employee-owned United Parcel service stand to benefit from the far-reaching market access potential provided under the bilateral agreement. U.S. small and medium-size enterprises also have much to gain from the bilateral agreement and China’s WTO accession, as they accounted for 82 percent of total U.S. exports to China in 1997.

Leading religious leaders such as Pat Robertson also have endorsed the extension of PNTR treatment to China because they believe it gives the best chance to promote individual and religious freedoms in China. Similarly, Martin Lee, a leading political leader in Hong Kong, has stated that PNTR for China is critical to helping to ensure that Hong Kong remains a vibrant, market-driven economy under Chinese rule.

As has been noted by eminent WTO legal scholars, such as Professor John Jackson, and the Congressional Research Service, the United States cannot reap the full benefits of China’s WTO accession and the U.S.-China bilateral WTO market access agreement unless the United States extends PNTR treatment to China. Article I of the General Agreement on Tariffs and Trade and the WTO requires WTO members to accord each other unconditional most-favored nation (MFN) treatment--now referred to as NTR treatment under U.S. law. Under the Jackson-Vanik provisions of Title IV of the Trade Act of 1974, the United States provides China with MFN on a conditional and discriminatory basis because it is extended subject to statutory freedom of emigration criteria and must be renewed annually. Once China becomes a WTO member, the Jackson-Vanik provisions, with or without the freedom of emigration criteria, would prohibit the United States from providing China with unconditional MFN treatment and complying with Article I. If the United States extended WTO benefits to China without exempting China from the Jackson-Vanik provisions, China could challenge the Jackson-Vanik provisions under WTO dispute settlement procedures as a violation of the MFN requirements of Article I. To avoid the risk of such a challenge, the United States would invoke the non-application provisions of Article 13 of the WTO and not extend WTO benefits to China.

If the United States does not apply WTO benefits to China once China accedes to the WTO, any MFN rights between the United States and China would be governed by our existing 1979 bilateral commercial agreement. The 1979 agreement is far less comprehensive than the 1999 bilateral WTO agreement and would not entitle the United States to the full benefits of the 1999 agreement. For example, the 1979 agreement does not appear to create clear MFN obligations in the services sector or coverage of investment issues, nor does it provide for WTO dispute settlement.

More importantly, China has stated that it would not reduce its barriers to U.S. imports unless it received unconditional MFN treatment from the United States. The United States in turn has represented through the course of the WTO negotiations that it would proceed with extending PNTR treatment to China once an agreement on the terms of China’s accession had been reached. The failure of the United States to abide by this political commitment to extend PNTR treatment to China could seriously undermine our bilateral commercial and political relations with China. It would also put the United States at a significant disadvantage in competing with Japan and European nations in the Chinese market as these countries have indicated support for China’s WTO entry and would enjoy the full benefits of China’s WTO market-access commitments. The failure of the United States to extend PNTR treatment could also strengthen the case of "hard-liners" within China who are opposing greater economic freedom and reform.

Outlook for China PNTR Legislation

Although it will no doubt provoke a rancorous debate, the prospects for enactment of PNTR treatment for China are very good. President Clinton has made China’s WTO membership and enactment of PNTR treatment for China a national top priority, and has appointed Secretary of Commerce Bill Daley and White House Deputy Chief of Staff Steve Richetti to lead the Administration effort on China. PNTR Cabinet officials from Agriculture, USTR, Treasury, State, Defense, Commerce, and Labor are actively involved in the effort and are reaching out to members of Congress, the business and agricultural community, and the American public to build a national consensus for extending PNTR treatment to China. The President also met with Leaders in the House and the Senate in early February to urge them to begin an all out push for early passage of China PNTR legislation. In March, the Administration submitted legislation to the congress granting PNTR treatment to China.

The extension of PNTR treatment to China has strong bipartisan support. All major Presidential candidates support China’s WTO membership and recognize the importance of PNTR treatment for China. Key Republican and Democratic leaders in the House and Senate have expressed their strong support for PNTR treatment for China. Speaker of the House Dennis Hastert (R-14IL), House Majority Leader Dick Armey (R-26 TX), Rules Committee Chairman David Dreier (R-28CA) and other leading Republicans in the House have all indicated support for PNTR treatment for China and recognize the importance of early action this year. House Democrats Bob Matsui (D-5 CA) and Cal Dooley (D-20 CA) are leading the effort in the House to gain broad support for China PNTR legislation among Democrats. Ways and Means Committee Chairman Archer (R-7 TX) has begun Committee hearings on the benefits of China’s WTO accession and the importance of PNTR treatment for China. In addition, the general weariness of the debate during the NTR annual renewal process and the sound defeat of the resolution to disapprove the renewal of China’s NTR status last year by a vote of 170-to-260 should provide a good base of bipartisan support for China PNTR legislation.

There is likely to be strong bipartisan support for PNTR legislation in the Senate as well. Senate Majority Leader Trent Lott (R-MS) has indicated that he believes that Congress will pass China PNTR legislation this year. Finance Committee Chairman Roth (R-DE) has made enactment of PNTR treatment for China a priority for the Finance Committee and has launched a series of hearings on the benefits of China’s WTO accession. Two votes in the Senate last year indicate the likelihood of support for China PNTR legislation this year. Last March, the Senate voted to table an amendment offered by Senator Hutchinson (R-AR) that would have conditioned U.S. extension of WTO benefits to China on the passage of a joint approval resolution. The Hutchinson amendment was similar to a proposal introduced by Congressman Gephardt (D-3 MO) and Senators Hollings (R-SC), Helms (R-NC), and Grassley (R-IA) requiring congressional approval of China’s WTO accession. Last July, the Senate also rejected a motion , offered by Senator Smith (R-NH) to discharge a resolution from the Finance Committee disapproving the renewal of China’s NTR treatment.

While the support for PNTR legislation in both the House and the Senate is likely to be strong, the debate over the legislation will be contentious. U.S. labor groups and Ralph Nader’s Public Citizen group are urging members to oppose PNTR treatment for China and maintain the NTR annual review process, citing concerns over human rights, labor, and enforcement issues. Other major issues in this debate are likely to be the impact of strengthened ties with China on U.S. relations with Taiwan, religious freedom issues, national security concerns, and the U.S. trade deficit with China. Congressman Sander Levin (D-12 MI) has proposed a number of steps including the creation of a Presidential Commission to conduct annual reviews, an annual WTO Trade Policy Review Mechanism (TPRM) review of China’s compliance with WTO commitments, and enactment into law of the special safeguard provisions included in the U.S.-China bilateral WTO agreement.

While the serious human rights and other problems that exist in China must be addressed, linking the resolution of these issues to the extension of PNTR treatment to China is not the answer. Continuing the annual debate over China’s trade status will only perpetuate instability in U.S.-China bilateral relations. Moreover, to the extent that PNTR treatment is in any way contingent upon an annual review or approval process, it would not be consistent with U.S. WTO obligations to provide China with unconditional MFN treatment. An annual review requirement could therefore prevent the United States from enjoying the full benefits of China’s WTO accession.

In light of the shortness of the congressional calendar and the impending November elections, it is imperative that Congress act early this year to extend PNTR treatment to China without conditions. The Administration has submitted a PNTR bill and key congressional leaders have indicated that they are ready to proceed with consideration of PNTR legislation. It is also important that the consideration of PNTR legislation be underway before early June, by which time the President is required to send a notice to Congress of his intention to renew China’s NTR status under the Jackson-Vanik provisions. A debate over of annual of NTR would detract from the major effort that is necessary to secure enactment of PNTR legislation.

Congressional Review of USTR Five Year Report on the WTO

Section 125 of the Uruguay Round Agreements Act requires the President to submit to Congress a report on U.S. participation in the WTO every five years. The first report is due on March 1, 2000. The report must provide an analysis of the costs and benefits of U.S. WTO membership and the value of continuing U.S. membership. Once the Section 125 report is submitted, any member of Congress can introduce a joint resolution requiring the United States to withdraw from the WTO. The resolution must be acted upon within 90 legislative days from the date the report is submitted to Congress. The resolution is privileged and unamendable.

It is anticipated that a disapproval resolution will be introduced soon after the five-year report is submitted to Congress. It is likely that the resolution would be considered first in the House. Although some have suggested that the vote on the disapproval resolution should be early in the year, since Congress has 90 legislative days to act, the vote could be delayed until early fall.

Although the disapproval resolution is expected to fail, it will create a forum for members to express their dissatisfaction with the WTO and the outcome of the Seattle ministerial, particularly on issues such as lack of transparency, failure to incorporate labor and environment standards, efforts to reopen WTO antidumping rules, and the dispute settlement process.

The Importance of the WTO and Moving Forward on Trade Liberalization

The five-year report on U.S. participation in the WTO should provide the basis for a reaffirmation of the central role of WTO-fostered trade liberalization in ensuring the future prosperity of the United States and the global economy. Since the founding of the multilateral trading system, world trade has expanded twice as fast as production. The liberalization agreed under the Uruguay Round Agreements is expected to produce a $230 billion increase in world GDP and a $745 billion increase in world trade by 2005. Since the Uruguay Round, the WTO has kept pace with changes in global commerce and technology by producing agreements on information technology, financial services, and telecommunications, providing market opportunities in new areas of commerce that will promote greater global economic growth.

The WTO also has continued to encompass more of the global economy by steadily increasing its size and diversity of membership. The WTO has grown to 135 members from 90 member countries in 1986. Developing countries now account for approximately 80 percent of total WTO membership, and virtually all of the countries now applying for WTO membership are developing nations.

While the outcome of the Seattle ministerial was disappointing, putting it in proper context, too little groundwork had been laid to produce consensus on a comprehensive agenda for a new trade round. In the months before the ministerial, WTO members engaged in a rancorous debate over the selection of a new WTO director general. Mike Moore’s last minute selection as the new head of the WTO left little time to try to gather consensus around a draft declaration. As a result, trade ministers in Seattle were presented with a heavily-bracketed text with few areas of compromise, rather than a more manageable text with only a few key areas of disagreement. While the protests during the meetings received considerable media attention and complicated the logistics of the ministerial meeting process, they did not raise any new issues, nor did they reflect a weakness in the WTO itself.

In the aftermath of the Seattle WTO Ministerial, the WTO has continued to function and move forward in trying to reach a consensus on a future agenda. The ongoing liberalization process established under the WTO remains intact and on track with the recent agreement to go ahead with negotiations on agriculture and services under the WTO built-in agenda. At the same time, the United States will continue to press for greater transparency in the WTO system and dispute settlement process. In addition, Director General Moore is urging members to adopt a program to respond to the needs of developing countries to help rebuild their support for further trade liberalization.

WTO Dispute Settlement Issues

A number of WTO dispute settlement issues are likely to loom large in the debate over continuing U.S. participation in the WTO. These include 1) the EU’s unwillingness to comply with the WTO panel decisions in the cases brought by the United States against the EU’s discriminatory banana import regime providing preferential treatment to bananas from African and Caribbean nations and restrictions on imports of beef from cattle treated with hormones, 2) the EU challenge to the U.S. Foreign Sales Corporation (FSC) legislation, and 3) the shrimp-turtle case in which a WTO dispute panel ruled that a U.S. ban on shrimp imports from countries that fail to require the use of turtle-extruder devices in shrimp fishing violates WTO rules. It is hoped that significant progress can be made in resolving these cases prior to a vote on the disapproval resolution.

The United States is currently discussing a compromise proposal with the EU in the bananas case that has been received favorably by the Caribbean nations covered under the EU banana import regime. In the hormone-treated beef case, the United States indicated recently that it might be willing to accept compensation from the EU in lieu of a modification of the EU beef import regulations. The United States is also engaged in intensive negotiations with India and Malaysia to resolve the shrimp-turtle dispute.

The outcome of the FSC dispute is very significant, as it could affect as much as $2 billion in U.S. trade annually. Last fall, a WTO panel found that the U.S. FSC legislation, allowing for exemption of certain foreign-source income from U.S. taxation, was an export subsidy prohibited under WTO rules. The United States appealed the decision, and the WTO appellate body affirmed the panel decision in February of this year. The United States, is currently trying to resolve the matter with the EU to avoid further dispute settlement.

ECAT Position: Trade liberalization negotiated under the WTO remains a powerful engine of global economic growth, and it is vitally important that U. S. participation in the WTO be maintained. ECAT urges members to reject any legislation withdrawing U.S. participation in the WTO.

Africa - CBI Trade Bill

It is hoped that by this year’s April congressional recess, the Congress will pass a House-Senate conference report on an Africa-CBI trade bill. Last year, the House passed H.R. 434, the Africa Growth and Opportunity Act by a vote of 234-to-163. The Senate amended H.R. 434 by replacing its provisions with a Finance Committee-approved trade bill, which included the Senate version of the Africa trade bill, a CBI trade bill, and the renewal of the Generalized System of Preferences (GSP) and Trade Adjustment Assistance (TAA) programs. Senator Hollings (D-SC) led a lengthy filibuster against consideration of the bill in the Senate, arguing that the treatment of textile and apparel imports from African and CBI countries provided under the bill would harm the U.S. textile industry. The filibuster was ended based on an agreement to allow a number of amendments to be offered to the legislation. The Senate adopted the final bill by a vote of 76-to-19.

Summary of Key Provisions of Senate-Approved Trade Bill

The Senate-approved version of H.R. 434 includes provisions on Africa and CBI trade, as well as extensions of the GSP and TAA programs. The major elements of these measures are summarized below.

Trade Benefits for Sub-Saharan Africa

Title I of the Senate bill provides for duty-free treatment of products, other than textile and apparel products, from sub-Saharan African nations which meet certain eligibility criteria, including whether the country is making progress toward establishing a market-based economy, an open trading system, and a democratic society, and is not engaged in gross violations of human rights. The bill provides duty-free and quota-free treatment for U.S. imports of 1) apparel products assembled in sub-Saharan nations from U.S. fabric made with U.S. yarn, 2) apparel products cut and assembled in sub-Saharan African nations from U.S. fabric made with U.S. yarn and sewn with U.S. thread, and 3) handloomed and handmade folklore items from sub-Saharan nations. The preferential tariff treatment under the bill would expire in 2006. The Senate bill also establishes a U.S-sub-Saharan African Trade and Economic Cooperation Forum and directs the President to examine the feasibility of negotiating a free trade agreement with interested sub-Saharan African countries.

The Senate bill also contains a provision prohibiting the use of U.S. government funds to seek any revision or revocation of any intellectual property or competition law or policy that regulates HIV/AIDs drugs or technologies in sub-Saharan nations that are designed to promote access to such drugs, as long as the laws or policies are consistent with the WTO Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPs). This provision is intended to prevent the U.S. government from seeking the elimination of compulsory licensing of HIV/AIDs drugs in sub-Saharan nations under Special 301 or revisions in the WTO TRIPs agreement that would restrict such licensing.

The Senate version of the Africa trade provisions are generally more restrictive than the House-passed Africa Growth and Opportunity Act, H.R. 434, in terms of duration of benefits, scope of assistance provided, and eligibility criteria. The key difference between the House and Senate bills, however, is in the benefits provided to textile and apparel imports from sub-Saharan nations. The House bill provides more liberal benefits to textile and apparel products providing duty-free and quota-free treatment to U.S. imports of such articles from sub-Saharan nations even if the yarn and fabric used is not made in the United States. The House bill also does not contain the provision regarding HIV/AIDs drugs.

Trade Benefits for Caribbean Basin Nations

Title II of the Senate bill provides Caribbean Basin beneficiary countries temporary trade benefits equivalent to that provided to NAFTA countries for certain products that are not currently eligible for CBI duty-free treatment, such as petroleum and petroleum products, canned tuna, flat goods, footwear, leather apparel, and certain watches. The expanded duty-free treatment is intended to encourage CBI countries to join a Free Trade area of the Americas (FTAA) agreement or a comparable trade agreement by 2005. The Senate bill would provide enhanced duty-free and quota- free treatment to U.S. imports of 1) apparel articles assembled in CBI countries from U.S. fabric made from U.S. yarn, 2) apparel articles cut and assembled in CBI countries from U.S. fabric made from U.S. yarn and sewn with U.S. thread, and 3) handloomed, and handmade folklore items from CBI countries.

Although the House has not passed a CBI bill, H.R. 984, the "Caribbean and Central American Relief Economic Stabilization Act," sponsored by Ways and Means Trade Subcommittee Chairman Phil Crane (R-8 IL) and a bipartisan group of House members, has broad support in the House and has been reported favorably by the House Ways and Means Committee. The major difference between H.R. 984 and the Senate bill is in the treatment of U.S. imports of textile and apparel articles from CBI countries. H.R. 984 provides more liberal treatment for textile and apparel imports than the Senate bill and would provide trade preferences to U.S. imports of apparel from CBI countries made from U.S. fabric using U.S. yarn; regional fabric; and some fabric imported from third countries.

Extension of GSP and TAA Programs

Title II of the Senate bill extends the GSP program for a period of five years. The current GSP program was extended until September 30, 2001, pursuant to an amendment added to tax legislation passed last year just before Congress adjourned.

Title IV of the Senate bill extends the Trade Adjustment Assistance programs for firms and workers to September 30, 2001.

Key Senate Floor Amendments

A number of amendments were added to the Senate bill during floor consideration. These amendments include the so-called carousel retaliation provision; a measure requiring that beneficiary countries under the Africa, CBI, and GSP trade preferences programs enforce the new International Labor Organization (ILO) convention on child labor; and the provision of trade adjustment assistance to farmers.

The carousel retaliation provision was sponsored by Senator Mike DeWine (R-Ohio) and is supported by the National Cattlemen’s Beef Association and the American Farm Bureau Federation. The amendment would require the U.S. Trade Representative to revise every 180 days the list of goods targeted for retaliation in a WTO dispute settlement case. The amendment was prompted by the growing frustration in the U.S. beef industry and agricultural sector with the EU’s failure to comply with the WTO dispute settlement panel decisions on hormone-treated beef and bananas. USTR opposes the amendment on the grounds that it would create great uncertainty for U.S. businesses, and that it already has administrative authority to implement carousel retaliation. The provision also could provoke the EU to implement a mirror carousel retaliation provision against the United States.

Outlook for House-Senate Conference

The House passage of the Africa bill and the Senate passage of the broader trade bill were major achievements last year. A House-Senate conference compromise on these bills early this year would represent progress on the U.S. trade agenda and provide an improved climate for consideration of other major trade issues, such as China PNTR legislation and the vote on continued U.S. participation in the WTO. Passage of a House-Senate conference compromise would also promote U.S. foreign policy objectives in encouraging greater, economic reform and stability in sub-Saharan Africa and the Caribbean. The preferential treatment provided to apparel imports is particularly important to the rebuilding of the economic infrastructure in the Caribbean nations that are still in the process of recovering from the massive hurricane damage that occurred in 1998.

The Administration and congressional leadership in both Houses have indicated an interest in early action on the trade bill. The Senate conferees are Lott (R-MS), Roth (R-DE), Grassley (R-IA), Helms (R-SC), Moynihan (D-NY), Baucus (D-MT), and Biden (D-DE). House conferees have not been appointed as yet. House and Senate staffs have held extensive discussions to try to lay the groundwork for reaching an agreement on issues such as carousel retaliation, trade adjustment assistance for farmers, and access of sub-Saharan nations to HIV/AIDs drugs.

The major issue in the conference will be whether the House and Senate can reach an agreement on the treatment of U.S. textile and apparel imports from sub-Saharan African and CBI countries. Majority Leader Lott has said that the Senate wants to stick with the restrictive rule of origin requirements for textile and apparel imports in the Senate version of the Africa and CBI provisions. Lott’s position reflects the continued textile industry opposition to the Africa and CBI bills, based on the allegation that both measures will be used by the Chinese to illegally transship textile and apparel articles to the United States. Congressman Phil Crane (R-8 IL) and other House supporters of the Africa and CBI bills are continuing to argue for the more liberal treatment for textile and apparel articles as proposed in the House bills. In support of his position, Crane notes that the House and Senate bills already contain stringent measures to deal with illegal transshipment. Crane also has said that he is willing to discuss adding new provisions to the bill that would deal with import surges.

A potential compromise has been proposed by the cotton, yarn, and apparel producers and retailers with regard to the treatment of textile and apparel articles under the CBI provisions of the bill. The proposal would expand the benefits provided under the Senate version of the CBI bill to allow for preferential treatment of regional fabric made from U.S. yarn. The proposal meets the objections raised to the more liberal House provisions and still would make the program commercially viable. It is a constructive approach that is worthy of support.

ECAT POSITION: ECAT urges the House and Senate to make every effort to reach a conference agreement on H.R. 434 early this year that includes the Africa and CBI trade bills, as well as the extension of the GSP and TAA programs. ECAT supports the African Growth and Opportunity Act as passed by the House, as an effective platform for expanding commercial ties with sub-Saharan African nations. ECAT supports the proposed compromise to broaden the Senate version of the CBI bill to include preferential treatment of regional fabric made from U.S. yarn. ECAT also believes that providing trade benefits to Caribbean nations equivalent to those provided under NAFTA is critical to help CBI countries rebuild their economies and strengthen hemispheric ties. ECAT encourages House and Senate conferees to eliminate the carousel retaliation provision requiring the United States Trade Representative to modify periodically the retaliation targets imposed in a WTO dispute settlement case. ECAT also encourages conferees to eliminate the restrictions on the use of U.S. funds to seek elimination of compulsory licensing of HIV/AIDs drugs in sub-Saharan nations.

Addressing the Human Side of Trade While Moving Forward with Trade Liberalization

Addressing the human side of trade in areas such as labor, environment, and food policy will remain in the forefront of the U.S. trade policy debate. This year labor and environmental groups have announced that they will work to defeat the extension of PNTR treatment to China based on China’s record on human rights, labor issues, the environment, and the enforcement of trade agreements, as well as on the alleged threat to U.S. jobs. These groups also are opposed to continuing U.S. WTO membership unless the WTO reforms the dispute settlement process, provides greater transparency, and provides for treatment of labor and environment issues. Concerns about food safety standards and food containing genetically modified organisms (GMOs) will also remain prominent issues.

There is no question that labor concerns regarding dislocation of workers, environmental, and food safety issues must be fully addressed if we are to make further progress on the trade agenda. We cannot make real progress on these issues, however, until there is broad public understanding that continued global trade expansion is essential to achieving higher labor and environmental standards, as well as an improved quality of life around the globe. Since World War II, the liberalization of trade has produced a six-fold growth in the world economy and a tripling of per capita income and enabled hundreds of millions of families to escape from poverty and enjoy higher living standards.

Progress on the human side of trade issues also requires that the United States continue its leadership in the multilateral trading system, promoting a strong set of WTO rules based on the right of member countries to set and enforce high environmental, labor, and other domestic standards. For the United States to continue to enjoy the full benefits of global trade expansion that encompasses China, we must extend PNTR treatment to China and support its WTO membership. Making China a full participant in the global trading system will also raise Chinese living standards, expand individual freedom in China, and strengthen the platform in China for improved environmental, labor, and human rights standards.

Moving forward on the trade agenda requires an effort to provide an improved program of retraining and adjustment assistance for displaced workers.

Labor Issues

Important progress is being made to develop a greater consensus on labor standards in the International Labor Organization (ILO). The Administration is to be commended for its commitment to strengthening the ILO by supporting the "Declaration on Fundamental Rights and Principles at Work," intended to promote the observance of basic labor rights, and the ILO convention banning the worst forms of child labor. The United States is the largest donor to the ILO’s child labor program, which seeks to take children out of unhealthy work environments and place them in schools. Under the ILO program, thousands of children are being given educational opportunities and phased out of garment factories in Bangladesh, the soccer ball industry in Pakistan, and fireworks production in Guatemala. The Administration’s 2000 Budget requests an additional $45 million to support the ILO child labor program. The 2000 Budget calls for $55 million to finance a joint Department of Labor and Agency for International Development project to help developing countries improve educational alternatives for child labor. The United States has devoted significant resources to support the ILO’s work with developing countries to put in place basic labor protections.

The United States has stepped up U.S. Customs Service enforcement of U.S. laws banning the importation of goods made from forced or indentured child labor. USTR continues to enforce the worker rights provision of the GSP statute and has partially removed GSP duty-free preferences from Pakistan, based on child labor concerns. In addition, last year President Clinton issued an Executive Order banning any federal procurement of products made with forced child labor.

Senator Tom Harkin (D-IA) is a sponsor of legislation proposing additional measures to deter child labor. One of Senator Harkin’s bills, the Child Labor Deterrence Act of 1999, would ban U.S. imports from foreign industries that have been identified by the Secretary of Labor as using abusive and exploitative child labor in manufacturing their products. Senator Harkin also has proposed legislation creating standards for the use of voluntary labels on apparel and sporting goods indicating they were produced without child labor.

The United States continues to propose the creation of a WTO working group on trade and labor. The proposal remains widely opposed within the WTO, particularly by developing countries, on the grounds that linking labor issues to trade agreements could lead to disguised restrictions on trade and that the ILO is the appropriate forum to deal with labor issues. The Administration has recognized that more work needs to be done to acknowledge developing country concerns and find common ground for reaching consensus on treatment of labor issues.

In addition, the United States must make a real commitment to addressing the needs of dislocated workers. This year’s anticipated review of the Trade Adjustment Assistance program should provide an important vehicle for a discussion of needed reforms and new initiatives.

Environment

Trade expansion and improved environmental protection are mutually supportive goals. The prosperity and development produced by global economic growth provide nations with the infrastructure and resources necessary to implement and enforce environmental standards. In turn, the multilateral trading system that promotes that prosperity recognizes the importance of environmental protection as reflected in the WTO Preamble which makes the promotion of sustainable development a key objective and in the numerous exceptions provided to WTO obligations allowing for the enforcement of environmental, health, and safety measures. In addition, the WTO announced in November of last year that it had entered into a cooperative agreement with the United Nations Environment Program (UNEP) to help build awareness of the important link between trade, environment, and sustainable development in developing countries.

The WTO dispute settlement process also has maintained a core respect for environmental protection and conservation. WTO challenges to U.S. environmental policies have been rare, arising to date in only two out of a total of 82 dispute settlement cases involving the United States. In both cases, WTO dispute settlement panels did not question the soundness of the U.S. laws being challenged or the right of the United States to enforce those laws.

In the first WTO case involving a U.S. environmental law, a WTO panel found that a part of the regulations implementing the Clean Air Act pertaining to foreign refineries was applied in a discriminatory manner. In response, the Environmental Protection Agency eliminated the discriminatory aspect of its regulations without undermining the enforcement of the Clean Air Act. Similarly, in the second case involving a U.S. environmental law, a WTO panel found that the application of U.S. law requiring turtle-extruder devices on nets used by shrimping boats to Asian countries was discriminatory, but the panel did not question the validity of the law itself. The United States responded to this decision by expanding technical assistance to other countries to encourage compliance with the law and increased efforts to resolve the issue through a multilateral agreement.

The United States is also promoting trade and environmental protection in mutually supportive ways by promoting trade liberalization objectives that will contribute to a cleaner environment. For example, in the Accelerated Tariff Liberalization (ATL) negotiations, the United States is seeking an agreement to eliminate barriers to trade in environmental goods, end tariffs on energy equipment and scientific instruments, and eliminate fishery subsidies. These measures would both facilitate environmental protection abroad and create new U.S. export opportunities.

The Administration issued an Executive Order in 1999 directing USTR to conduct environmental reviews of comprehensive multilateral trade rounds, bilateral or plurilateral trade agreements, and major new liberalization agreements in the natural resources sector. The Administration conducted an environmental review of the ATL initiative on forest product tariffs last fall.

The Administration is currently in the process of appointing additional environmental representatives to the Industry Sector Advisory Committees (ISACs) for lumber and wood products and for paper and paper products in response to a federal district court lawsuit filed by environmental groups. Currently, environmentalists are included on USTRs advisory committee for trade policy and the trade and environment advisory committee.

Food Trade Issues

Concerns about the safety of Genetically Modified Organisms (GMOs) and the EU’s refusal to lift its ban on imports of U.S. hormone-fed beef will remain major issues this year.

Genetically Modified Organisms (GMOs)

Fueled by food safety scares over "mad cow" disease and other cases involving contamination of animal feed, public opposition to GMOs is widespread in Europe and has extended to Asian countries and the United States. The use of GMO crops is spreading worldwide. Genetically engineered crops have higher yields and do not require farmers to use dangerous pesticides for protection from insects. Despite these benefits, environmental groups have argued that GMOs present potential ecological hazards, citing studies that suggest that genetically-engineered crops may harm monarch butterflies and other beneficial insects.

In response to growing public opposition to GMOs, the EU imposed a moratorium on further approvals of GMOs and enacted a mandatory GMO labeling law. Australia, New Zealand, Japan, and Korea have passed similar GMO labeling laws. The United States has urged countries not to enact labeling laws on the grounds that they could be applied inconsistently and create major new trade barriers. The United States has argued that GMO labeling issues should be dealt with under the WTO Agreement on Sanitary and Phytosanitary (SPS) Measures which requires that SPS restrictions be placed on imports only when enough scientific evidence exists to justify the restrictions. The EU and certain developing countries argue in response that the SPS Agreement allows the use of the so-called "precautionary principle," permitting restriction of genetically-modified foods in certain circumstances, based on environmental or health concerns, even if the science behind the concerns remained uncertain. In an effort to prevent the EU from pressing for the recognition of the precautionary principle under the SPS agreement, the United States agreed to support a Canadian proposal to establish a WTO biotechnology working group. No final agreement has been reached as yet on the creation of the working group.

In January of this year, the United States and 134 other countries agreed to a protocol on biosafety that provides regulations on the shipment of GMOs and requires the labeling of GMOs that are intended for use as food or animal feed, or for processing. The agreement does not apply to agricultural commodities to be used for food, feed, or processing. The negotiations were conducted under the auspices of the UN Environment Program. The protocol recognizes the right of a country to enforce its own laws. It also requires that risk assessments of GMOs be carried out in a scientifically sound manner. The protocol notes that "trade and environment agreements should be mutually supportive with a view to achieving sustainable development."

EU Beef-Hormone Case

Last July, the United States imposed 100 percent retaliatory tariffs on roughly $117 million worth of U.S. imports from the EU in response to the EU’s failure to comply with a WTO dispute panel ruling requiring the removal of its ban on imports of hormone-fed beef from the United States. The WTO panel ruled that the EU has failed to demonstrate that U.S. hormone-fed beef causes health risks. Congressional frustration over the EU’s refusal to lift its ban on hormone-fed beef prompted the introduction of the carousel retaliation provision requiring the periodic modification of the EU products targeted for retaliation. As discussed above, the carousel retaliation provision was included in the Senate-passed trade bill.

ECAT’s Food Chain Coalition Proposal

One of the ways ECAT is supporting efforts to address the human side of trade liberalization is through its Food Chain Coalition proposal that was presented to WTO member countries during the Seattle WTO ministerial. The Food Chain Coalition is intended to 1) provide a framework for trade liberalization in terms of meeting human needs, and 2) create greater leverage in pursuing market access and other trade liberalization goals by creating a cross-sectoral alliance of interests organized around eliminating barriers to food trade.

Removal of barriers to food trade provides one of the clearest examples of the importance of trade liberalization in meeting basic human needs. Population increases, rising standards of living, and growing urbanization around the world are producing dramatic increases in the demand for food. This rising demand for food presents tremendous global market opportunities in the broad array of sectors involved in producing and handling food on its journey from the farm to the table. In addition to farmers, seed companies, agro-chemical firms, grain handlers and processors, manufacturers of farm machinery, food manufacturers, retailers, financial services companies, insurers, and transportation firms benefit directly from a global increase in food demand. Indirectly, all businesses gain because meeting food demand at lower cost allows a greater amount of discretionary income to be spent on other goods and services.

The Food Chain proposal can provide a new approach to gaining enhanced leverage in negotiations on agriculture, services, and other areas by using the elimination of barriers at all levels of the food chain as an organizing principle. Based on this principle, the Coalition seeks to create cross-sectoral alliances in support of common negotiating priorities such tariff liberalization, elimination of restrictions on investment and distribution, customs facilitation, and prohibitions on the use of unilateral food sanctions. Placing these issues in the context of the food chain can also create the means to avoid existing roadblocks between developed and developing member countries, as well as between the United States and the EU, particularly as efforts are now underway to move ahead with the built-in negotiations on agriculture and services.

ECAT’s Food Chain proposal is not intended as a substitute for discrete negotiating groups on agriculture, services, and other areas. Instead, it is intended as a way to enhance the chances for overall liberalization by establishing the elimination of barriers to food trade, at all levels from production to distribution, as an overall negotiating objective and calling for the adoption or a review mechanism to monitor achievement of this objective.

ECAT will continue its efforts to build international support for its Food Chain Coalition proposal this year through the sponsoring of an international conference and by maintaining a dialogue with interested WTO member countries.

Transparency

The Administration and the WTO have taken steps to allow greater participation of non-governmental organizations (NGO) in trade policy discussions. The WTO has sponsored a series of NGO forums on labor and environment issues, as well as held a daylong seminar for NGOs in Seattle just prior to the opening of the WTO ministerial meeting.

As part of the "Civil Society" initiative, the Administration has proposed a number of changes to WTO procedures to create greater transparency, including earlier release of documents and decisions, improved consultative procedures, the opportunity to file amicus briefs in dispute settlement proceedings, and the opening of panel proceedings to the public. The Administration has proposed similar transparency measures in the FTAA negotiations. At the same time, the Administration has initiated a consultation process with NGOs and other interested parties to develop procedures for broadening the opportunity for NGO input in the trade policy advisory process.

ECAT POSITION: Continued global trade expansion is the bedrock of progress in achieving greater international observance of high labor and environmental standards. Progress on the human side of trade requires that the United States continue its leadership in the multilateral trading system promoting a strong set of WTO rules based on the right of member countries to set and enforce high environmental, labor, or other domestic standards. For the United States to continue to enjoy the full benefits of global trade expansion that encompasses China, we must extend PNTR treatment to China and support its WTO membership. Making China a full participant in the global trading system will also raise Chinese living standards, expand individual freedom in China, and strengthen the platform for improved environmental, labor, and human rights standards in China.

ECAT also believes that while expanding U.S. international trade and investment raises U.S. living standards overall, dislocations occur and must be addressed through adequate working retraining and assistance programs. ECAT supports efforts to reform existing TAA programs to ensure that they provide improve retraining and reemployment assistance to dislocated workers.
Efforts to Amend U.S. Unfair Trade Laws and Section 201

The impetus for changes in U.S. unfair trade laws and Section 201 has come principally from U.S. steel producers and unions. Last year, the steel industry filed a large number of unfair trade complaints against major steel exporting nations in response to a surge in U.S. steel imports in 1998. The steel industry also rallied around draconian steel import quota legislation, H.R. 975, sponsored by Congressman Ralph Regula (R-16 OH) and Peter Visclosky (D-1 IN) in the House and Senator Jay Rockefeller (D-WV) in the Senate. The quota bill would have rolled U.S. steel imports back to 1997 levels in flagrant violation of U.S. international obligations, subjecting hundreds of millions of dollars worth of U.S. exports, particularly in the agricultural sector, to the risk of foreign retaliation. H.R. 975 passed the House, but failed to gain sufficient support to pass in the Senate.

The steel industry also mounted an effort to block any multilateral reform of U.S. and foreign antidumping and countervailing duty laws through supporting H.R. 298, introduced by Congressman Peter Visclosky (D-1 IN), directing the President not to participate in any international negotiation in which antidumping or subsidy rules are part of the negotiating agenda. House Republicans, blocked consideration of H.Res. 298 by tabling Congressman Visclosky’s request for a ruling on whether the resolution could be brought up as a privileged matter on the House floor.

The steel industry also supported several bills proposing changes to Section 201, but none of the proposals were adopted in the House or Senate. In the Senate, Finance Committee Chairman Roth (R-DE) sponsored S.1254, the Steel Trade Enforcement Act of 1999, which proposed a comprehensive strategy for responding to increased steel imports, including amendments to Section 201. Senator Baucus on behalf of agricultural interests, introduced S. 1008, the Import Surge Relief Act, which would establish a monitoring program for steel and agricultural imports, require the ITC to investigate anticompetitive practices in steel and agricultural products trade, and modify the injury standard under Section 201. In the House, Congressmen Sander Levin (D-12 MI) and Amo Houghton (R-31 NY) introduced H.R. 1120, proposing modifications to Section 201. In addition, Congressman Phil English (R-21 PA) introduced H.R. 1505, the Fair Trade Law and Enhancement Act of 1999, which would establish a steel import-monitoring program, strengthen U.S. antidumping and countervailing duty laws, and lower the injury standard under Section 201.

None of the Section 201 amendments contained in the four House and Senate bills are warranted. Section 201 provides for the imposition of relief measures against fairly traded imports and, therefore, its standards triggering relief are higher than those under the antidumping and countervailing duty laws which govern unfairly traded imports. In addition, the standards for granting relief under the current Section 201 provisions reflect a careful balance between the interests of the industry seeking relief and other U.S. industries and consumers. The changes to the injury and causation standards proposed under the House and Senate bills would upset that balance and tilt the relief standard overwhelmingly in favor of the petitioning domestic industry.

The section 201 amendments in the House and Senate bills would not bring U.S. law into conformity with the WTO Safeguards Agreement. The proposal to slant the President’s determination in favor of import restrictions, not only is not in the national interest, but also has no basis in the WTO Safeguards Agreement. Moreover, the proposals to weaken the causation standard under Section 201 do not conform to the WTO Safeguards Agreement. Section 201 currently provides that increased imports must be a "substantial cause of serious injury." The House and Senate bills propose replacing this standard with language from the Safeguards Agreement that provides imports must cause or threaten to cause serious injury. The problem is that the House and Senate bills do not incorporate the other key provision from the Safeguards Agreement found in Articles 2.1 and 4.2(b) requiring that imports alone, not other factors, must be found to be causing or threatening to cause injury. The House and Senate bills would be inconsistent with the Safeguards Agreement because they allow Section 201 relief to be granted even if imports contributed less to an industry’s injury than other causes.

The Administration responded to steel industry petitions and legislative proposals by announcing a major program to help the industry, including 1) expedited consideration of unfair trade complaints, 2) enhanced efforts to negotiate reductions in steel imports from Japan, Brazil, and Russia, 3) increased monitoring of steel imports, and 3) a pledge to resist efforts to weaken U.S. antidumping and countervailing duty laws. In addition to the Administration program, the President signed legislation granting the steel industry one billion dollars in loan guarantees.

Outlook for this Year

Despite rising steel prices and steel import levels which have fallen to pre-1998 levels, steel industry representatives insist that the import crisis is not over and that they will continue their efforts to obtain relief through legislation and new trade cases. It is likely that the steel industry will continue to support the English bill, H.R. 1505 that in addition to lowering the Section 201 injury standards would make a number of changes to U.S. antidumping and countervailing duty laws. If enacted, the amendments in the English bill would 1) increase the duties imposed in antidumping and subsidies cases, 2) make it easier for the ITC to make affirmative injury determinations in antidumping, subsidies, and Section 201 cases, 3) increase the number of cases in which the ITC makes critical circumstances findings allowing for the earlier provision of relief, and 4) make it far more difficult to resolve unfair trade complaints through suspension agreements.

In addition to the English bill, the steel industry is likely to continue to oppose any efforts to reopen the WTO Antidumping Agreement or modify U.S. antidumping or countervailing duty laws in response to adverse findings by WTO dispute settlement panels. Last year, the WTO ruled against the United States in a case involving the imposition of antidumping duties on U.S. imports of semiconductors from South Korea, and found in another case that the United States had erred in determining that subsidies provided by the British government to a state steel manufacturer were automatically passed through to a private purchaser. This year, a WTO panel is expected to rule in favor of a EU complaint challenging the U.S. Antidumping Act of 1916, and Japan has brought a WTO challenge against the imposition of U.S. antidumping duties on its hot-rolled steel exports.

The steel industry may also renew its effort to seek amendments to Section 201. In mid-February of this year, President Clinton announced that he would provide import relief to the domestic line pipe and steel wire rod industries in the form of tariffs and tariff-rate quotas for a three-year period. U.S. steel wire rod producers praised the President’s decision to grant relief to the industry. The decision in the steel wire rod case should provide further evidence that amendments to Section 201 are unwarranted.

ECAT POSITION: It is vitally important that both U.S. unfair trade laws and Section 201 maintain a careful balance between the interests of the petitioning industry and the interests of other U.S. industries and consumers. It is also critical that these laws conform to U.S. international obligations and that the Congress and Administration oppose any efforts to amend U.S. antidumping, countervailing duty, or safeguards laws in ways which would invite foreign retaliation and encourage restrictive foreign mirror legislation.

Expiration of "Green Light" Non-Actionable Subsidies Provision

Article 8 of the WTO Subsidies Code identifies the class of subsidies that is non-actionable under the WTO. Non-actionable or so-called "green light" subsidies include certain assistance to further research and development at higher education institutions, to promote regional development, or to allow compliance with environmental requirements. The green light subsidies provisions under Article 8 formally expired at the end of last year, and there must be an agreement to extend their application. To date, developing countries have refused to agree to extend the greenlight provisions until the WTO members decide how to treat the issue of the implementation of deadlines for other WTO agreements. The Chairman of the Subsidies Code Committee has proposed that the greenlight provisions be extended until the overall consultations on implementation deadlines have been completed. The United States, Canada, the EU, and some Eastern European countries support the extension of the greenlight provision. The United States only can agree to this extension if Congress passes legislation approving the extension. The implementing legislation would be eligible for consideration under fast-track procedures.

ECAT POSITION: ECAT supports extension of the "green light" subsidy provisions and urges the Congress to enact necessary implementing legislation.

Reauthorization of U.S. Trade-Negotiating Authority

The trade-negotiating provisions of the Trade Act of 1974 created a framework for the negotiation of trade agreements that incorporates extensive congressional notification and consultation, and expedited congressional approval procedures to preserve the integrity of trade agreements and prevent their renegotiation. Since its enactment in 1974, trade-negotiating authority has been renewed three times with strong bi-partisan support. The authority expired in 1994 and has yet to be renewed.

Last year, Senate Finance Committee Chairman Bill Roth (R-DE) made considerable effort to move forward with trade-negotiating authority legislation in the context of trying to develop clear negotiating objectives for a new WTO trade round. Despite extensive hearings and consultations, the effort was unsuccessful due to a continuing lack of consensus on the inclusion of labor and environmental provisions in trade-negotiating authority legislation. In an effort to find a possible compromise, a number of proposals were introduced to provide more limited trade-negotiating authority. One proposal authorized the negotiation of a free-trade area with Chile. Another proposal, introduced by Congressman Phil Crane (R-8 IL), encouraged the United States to pursue the negotiation of bilateral free trade agreements with eligible Pacific Rim nations.

There is little chance that the Congress will act on trade-negotiating authority legislation this year. Deep partisan divisions over how to treat labor and environment issues, the impending presidential election, and the failure to reach an agreement on a new WTO round agenda have reduced the impetus for renewing trade-negotiating authority this year.

While trade-negotiating authority may not be prominent on the trade agenda this year, it nonetheless remains an essential part of the infrastructure necessary to maintain the continued expansion of U.S. trade and investment. It is the primary mechanism for the executive and legislative branches to come together to reach agreement on U.S. trade policy objectives and trade agreements. A vacuum will continue to exist until this mechanism is restored.

Trade-negotiating authority is critical to maintaining U.S. leadership in global and regional trade arenas. While the negotiations on agriculture and services under the WTO built-in agenda are proceeding, the United States cannot fully participate until U.S. trade-negotiating authority is renewed. Similarly, the U.S. ability to participate in sectoral ATL negotiations is severely restricted by the lack of trade-negotiating authority. In addition, the United States cannot credibly maintain a leadership role in FTAA negotiations without trade-negotiating authority. While the debate over the renewal of U.S. trade negotiating authority has remain unresolved, U.S. competitors in Europe and Asia have continued to strengthen their bilateral and regional trade ties to the increasing disadvantage of U.S. goods and services, particularly in Latin America.

While election-year considerations may make renewal of trade-negotiating authority unlikely this year, it is imperative that the new Congress and Administration make the issue a top priority on the trade agenda next year.

ECAT POSITION: ECAT believes that while trade-negotiating authority may not be renewed this year, broad, multi-year trade-negotiating authority remains essential to create the necessary infrastructure to achieve further liberalization of international trade and investment. If we are to achieve future economic growth and higher standards of living through expanding trade and investment, bilateral, regional, and multilateral trade agreements must remain focused on the liberalization of trade and investment. They should not be encumbered by non-trade related labor and environment issues on which there is no domestic or international consensus. U.S. business, the Administration, and the Congress should work together to identify those labor and environment issues on which consensus and cooperation can be achieved in order to promote genuine progress in these areas through appropriate fora.

Customs Issues

Last year, the Administration and the U.S. importing community were unable to reach an agreement on how to fund the development and implementation of the Automated Commercial Environment (ACE). The ACE system would replace the outdated Automated Commercial Service (ACS) that currently processes import entries. The Administration proposed that importers share the cost of implementing the new ACE system through a user fee. Importers rejected the user fee proposal on the grounds that the ACE system is the financial responsibility of the U.S. government. The lack of funding for the ACE system, expected to cost $1.3 billion over the next four years, is delaying the implementation of Customs modernization.

The Administration has again proposed user fees in the 2000 Budget to fund the ACE system and did not request any funds from general revenues for the system. Any new user fee proposals are likely to meet strong opposition from the U.S. importing community that is already paying a user fee in the form of a merchandise-processing fee. It is hoped that the current ACS system can continue to operate while the funding issue is resolved, but the ACS system suffers frequent breakdowns and is having difficulty accommodating the rising volume of U.S. imports.

The U.S. Customs Service is also reviewing ways in which the Customs Modernization Act of 1993 can be improved. It is possible that any amendments to the Act would be included in a Miscellaneous Tariff bill.

ECAT POSITION: ECAT supports full funding of the Automated Commercial Environment (ACE) from general revenues and opposes the imposition of new user fees to fund the program.

Vietnam

It is hoped that this year the United States and Vietnam will conclude a bilateral commercial agreement that will enable the United States to extend Normal Trade Relations (NTR) status to Vietnam. Last year, progress towards a final agreement was stalled when Vietnamese government officials became concerned about the impact of the agreement on the Vietnamese economy. The proposed agreement includes provisions on market access, services, intellectual property, import surge protections, and investment.

The President granted Vietnam a waiver from the Jackson-Vanik freedom of emigration provisions in 1998. The waiver was extended last year. Without a U.S.-Vietnam bilateral trade agreement, Vietnam is only eligible for Overseas Private Investment Corporation (OPIC) and Export-Import Bank programs. Once the bilateral trade agreement is in place, Vietnam will also become eligible for NTR treatment. The current Jackson-Vanik waiver for Vietnam must be renewed annually. The President must announce his intent to request an extension of the waiver by May 3, 2000 and submit his request for such extension to the Congress by June 3, 2000. It is expected that the request will not be dissapproved by the Congress.

ECAT POSITION: ECAT supports the renewal of Vietnam’s Jackson-Vanik waiver allowing its continued eligibility for Overseas Private Investment (OPIC) and Export-Import Bank programs.

Antibribery Initiative

The OECD Convention on Combating Bribery of Foreign Public Officials went into effect in February of last year. Nonetheless, many OECD member countries have yet to ratify the agreement and pass implementing legislation. The United States is urging those OECD countries that have not ratified the agreement to do so within the next six months, and to enact effective implementing legislation that prohibits bribery of foreign public officials and ends the practice of granting tax deductions for foreign commercial bribes. The Convention was adopted to require OECD member countries to criminalize bribery of public officials during business transactions. The Convention is based on the U.S. Foreign Corrupt Practices Act that prohibits bribery of foreign public officials and political candidates. The United States would like to expand the coverage of the OECD Convention to include bribery of foreign political parties, party officials, and candidates for political office. It is also important that the United States continue to monitor OECD country implementation of the anti-bribery convention to ensure that it is effectively enforced.

The United States is continuing its anti-corruption efforts outside the OECD Convention by working with the World Bank to improve anti-fraud and anti-corruption efforts in administration of World Bank contracts. The Administration is also continuing its effort to move forward with an Agreement on Transparency in Government Procurement in the WTO and encouraging greater regional anti-corruption efforts under the OAS Antibribery Convention and other regional agreements.

ECAT POSITION: ECAT supports Administration efforts to convince OECD member countries to ratify the OECD Antibribery Convention, pass effective implementing legislation, and ensure effective enforcement of the agreement once it is ratified. Foreign corruption remains a major barrier to U.S. trade and investment, and ECAT supports Administration efforts to combat the problem through international agreements.

Miscellaneous Tariff Bill

Senate Finance Committee Chairman Roth has begun to develop a miscellaneous tariff bill and Finance Committee staff is reviewing tariff measures and technical corrections for inclusion in the bill. To be eligible for consideration for inclusion in the Committee bill, measures must be introduced by March 3, 2000. The Committee will request public comment on the bill after it is drafted.

ECAT Position: ECAT supports passage of a miscellaneous tariff bill early this year.