Emergency Committee For American Trade - Publications

Major Trade Policy Issues

Following the enactment last year of several major pieces of trade-liberalizing legislation, ECAT is hopeful that even greater progress can be made on the U.S. trade agenda in 2001. Many believe that the chief successes of the 106th Congress were in the area of trade liberalization. Both the House and Senate overwhelmingly passed, in a bipartisan manner, legislation authorizing the President to establish Permanent Normal Trade Relations (PNTR) with China. This legislation, combined with China’s accession in 2001, will have enormous economic benefits for the United States and foster linkages and progress in China itself. After years of negotiations, the Clinton Administration, the House and Senate also reached a compromise on the Trade and Development Act of 2000, which provides enhanced trade benefits to eligible countries in the Caribbean Basin and sub-Saharan Africa and authorized the President to extend PNTR to Albania and Kyrgyzstan. Although the benefits provided to the Caribbean and sub-Saharan African countries by this legislation are not as great as some had sought, this legislation represents an important continuation of the U.S.-CBI trade relationship and a landmark achievement in fostering greater U.S.-sub-Saharan African trade. The Clinton Administration and Congress were also able to develop and enact within an extremely short timeframe legislation to comply with WTO rulings regarding the U.S. Foreign Sales Corporation provisions of the U.S. tax code. The EU has, however, challenged these new provisions in the WTO. The 106th Congress also passed two tariff bills, the Tariff Suspension and Trade Act of 2000 and the Miscellaneous Trade and Technical Corrections Bill of 1999, which contained several substantive provisions, including an authorization to extend PNTR to Georgia. The 106th Congress was also able to renew through September 30, 2001 the Generalized System of Preferences program and the three Trade Adjustment Assistance programs.

In 2001, there are several trade policy challenges that await the Bush Administration and the 107th Congress. At the forefront is the need to rebuild the consensus on trade and investment liberalization that faltered in the 1990s. This is particularly important in the face of public skepticism about the value of trade policy, a possible slowdown in the U.S. economy, continued expectations of a large trade deficit and increasing evidence that U.S. trading partners are moving forward with agreements that exclude the United States and undermine U.S. trade policy goals. It is essential for the Administration, Congress and the private sector to develop concrete trade and investment liberalization objectives that will not only support continued growth of the U.S. economy and a high U.S. standard of living, but greater public support for U.S. trade policy.

That consensus will form an important foundation for the passage of trade promotion authority (so-called fast-track or trade-negotiating authority legislation) that expired in 1994. The Bush Administration and key members of Congress have already indicated that they will be pursuing this legislation vigorously as part of a broader effort to reassert U.S. leadership in the trade arena.

Another critical part of the trade agenda in 2001 will be the promotion of several key trade negotiations and agreements. First and foremost is the conclusion of China’s negotiations to join the WTO. Congress will also be asked to approve the U.S.-Vietnam Bilateral Commercial Agreement reached in July 2000 that is a prerequisite to the grant of annual NTR to Vietnam. Another top priority is to continue to move forward and accelerate if possible negotiations to conclude a Free Trade Area of the Americas before or by 2005 and to launch broad WTO negotiations this year. The Administration and Congress may also pursue several bilateral negotiations and agreements, including the U.S.-Jordan Free Trade Agreement (FTA) and negotiations to conclude FTAs with Singapore and Chile.

The relationship between trade and other policy issues, including labor, environment, food policy, and health policy, will also be considered again this year, as will renewed efforts to modify the trade remedy laws. Another key part of the trade agenda will be efforts to review and reformulate the trade adjustment assistance programs, which are up for renewal in 2001, to ensure that they provide effective adjustment assistance to today’s U.S. workers. There will also be efforts to renew the Generalized System of Preferences program, which expires on September 30, 2001, and the Andean Trade Preference Act, which expires on December 4, 2001. As well, efforts will be renewed in 2001 to ensure that the U.S. Customs Service has the necessary funding to modernize its outdated computer system and its overall operations.

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.

Building a Consensus on Trade and Investment Objectives

The post-World War II consensus on the value of liberalizing trade and investment policies as a critical part of maintaining economic growth and a high standard of living in the United States has been shaken in recent years. Congress’ failure to renew trade-negotiating authority legislation since its expiration over six years ago and protests against globalization in Seattle, Washington, D.C., and elsewhere are symptoms of an underlying uncertainty among the American public and many in Congress over the value of trade and investment liberalization for the United States.

From an historical view, most striking is the failure to renew trade-negotiating authority legislation that had previously been provided to all presidents, Republican and Democratic, from 1975 onward. Indeed, the forerunner to the modern fast-track procedures contained in the Trade Act of 1974 was tariff proclamation authority which had been granted to all presidents, almost continuously since the Reciprocal Trade Agreements Act of 1934; even that is no longer provided to the President except for some limited leftover authority from the Uruguay Round Agreements Act.

In 2000, substantial progress was made in rebuilding the consensus through Congress’ passage of several major pieces of trade legislation, most prominently the authorization of PNTR for China and the Trade and Development Act of 2000. Indeed, the 106th Congress passed more trade legislation than any other Congress in the last decade; but it did not pass, nor did it even consider, trade promotion authority legislation.

Despite these successes, there remain deep divides on the role, objectives, and value of U.S. trade policy. These divides not only hamper Congress’ ability to pass trade promotion authority, they limit the United States’ ability to play a leadership role in negotiations for a Free Trade Area of the Americas (FTAA), in the World Trade Organization and elsewhere. Our farmers, manufacturers, and service providers should not be left behind, particularly as our trading partners continue to move forward with their own trade and investment pacts.

It is critical, therefore, that the United States rebuild a national and bipartisan consensus on the value of trade and investment liberalization as the foundation for Congress’ consideration of trade promotion authority in 2001. We must effectively demonstrate that expansionary trade and investment policies are essential to U.S. economic growth, including the growth of the new economy, and the high U.S. standard of living.

ECAT is working with the Administration, Congress and others in the private sector to define a set of concrete trade and investment liberalization objectives that will promote U.S. prosperity. Among the objectives are the specific benefits that the United States can reap from ongoing negotiations to conclude an FTAA and the launch of broad negotiations in the WTO, as well as other specific negotiations.

U.S. objectives should also recognize the importance of expansionary trade and investment policies as essential components in the continued growth of the new economy. As discussed in Section 1, ECAT has commissioned a new study, from Dartmouth College economist Dr. Matthew Slaughter on the linkages between the growth of the new economy and trade and investment policies, as one way to help reinvigorate the debate on the importance of trade and investment liberalization. In addition, ECAT supports concrete trade and investment objectives that will promote the growth of digital trade and ensure that electronic commerce benefits from trade liberalization in the WTO and in bilateral and regional trade agreements.

ECAT POSITION: ECAT supports efforts by the Administration, Congress, and the private sector to rebuild the consensus on the importance of trade and investment liberalization through the development of concrete trade and investment priorities. This consensus is critical to establish the foundation for the passage of trade promotion authority legislation in 2001.

Congressional Consideration of Trade Promotion Authority Legislation

History of Trade-Negotiating Authority Legislation

Trade-negotiating authority legislation (so-called "fast track or trade promotion authority) defines the framework for Administration-Congressional consultation and implementation of trade agreements and assumed its modern form in the Trade Act of 1974. These procedures were developed following President Johnson’s failure to win Congressional approval of the GATT Kennedy Round agreements (which dealt with non-tariff (as well as tariff) measures and needed to be implemented by U.S. statute). Congress’ rejection of these agreements poisoned the atmosphere for future trade negotiations domestically and internationally. In particular, U.S. trading partners believed that the United States was incapable of implementing its international trade commitments. In order to assure U.S. trading partners that new GATT agreements could not be similarly rejected, trade-negotiating procedures were developed in the Trade Act of 1974, essentially as a compromise between Congressional and Administration prerogatives.

Trade-negotiating authority legislation was legislatively extended three times with strong bipartisan support and remained in force almost continuously between January 3, 1975 and the end of the Uruguay Round negotiations on April 15, 1994. Throughout this period, this legislation remained essentially the same. Trade-negotiating authority legislation limited Congress’ legislative procedures for considering trade agreements in three primary ways in return for extensive consultations by the Administration prior to and during the negotiation of bilateral and multilateral trade agreements. First, the procedures guaranteed an up-or-down vote within a time certain. Second, the procedures limited the length of the debate. Third, the procedures prevented consideration of any amendments to the implementing legislation once it had been introduced (to avoid the need to renegotiate an agreement if Congress were permitted to amend the implementing legislation). In return, a trade agreement and its implementing legislation were only granted these special procedures as long as the President consulted with Congress before and during the negotiation of the agreement and on the drafting of the implementing legislation.

Trade-negotiating authority procedures have been used by Congress to consider five different trade agreements, all of which were approved and implemented: the GATT Tokyo Round Agreements (implemented by the Trade Act of 1979), the U.S.-Israel Free Trade Agreement (1985), the U.S.-Canada Free Trade Agreement (1989), the North American Free Trade Agreement (NAFTA) (1993), and the Uruguay Round Agreements (1994).

The consensus on renewal of trade-negotiating authority legislation faltered, however, in the mid-1990s, particularly following the negotiation of the NAFTA labor and environmental side agreements. Chief among the contentious issues (which continues to impede its renewal) is the extent to which, if any, labor and environmental provisions can or should be included in trade agreements (either as side agreements as they were with the NAFTA or as integral to the agreement, such as the U.S.-Jordan FTA). Proposals to renew trade-negotiating authority legislation failed in Congress in 1995, 1997 and 1998 (when the House, on September 25, 1998, formally rejected trade-negotiating authority legislation for the first time by a vote of 180-to-243).

Importance of Trade Promotion Authority

The Constitution grants the President authority to conduct foreign policy negotiations, including negotiations related to international trade agreements, yet directly provides Congress the authority "to regulate Commerce with foreign nations." Trade promotion authority legislation is not necessary to permit the President to conduct actual trade negotiations. Renewal of this type of legislation is, however, viewed as critical for at least three reasons: (1) to enhance U.S. leadership on trade and the President’s ability to conclude negotiations with foreign trading partners; (2) to facilitate Congress’ consideration and implementation of such agreements; and (3) to provide for greater Administration-Congressional consultations on issues where both the President and the Congress have overlapping constitutional prerogatives.

Trade promotion authority legislation is critical for the United States to regain its leadership role in international trade negotiations. Following their experience in the Kennedy Round negotiations and the adoption of the trade-negotiating authority procedures in 1975, U.S. trading partners have generally supported, indeed sought, assurances that the President would have such authority to implement future trade agreements. Although only technically necessary to facilitate implementation of a final agreement by Congress, these procedures have taken on a much greater role in the eyes of U.S. trading partners, many of which have refused to take U.S. negotiators seriously (particularly in the context of multilateral negotiations) since this authority expired. Others have used the expiration of this legislation as an excuse to stall negotiations and not make important concessions. Timely renewal of such authority is critical in order to give U.S. negotiators the clout necessary to extract concessions and successfully conclude negotiations. Lack of this authority represents a serious impediment to the United States’ ability to lead on trade issues, particularly with respect to both the FTAA and WTO negotiations. Our farmers, manufacturers, and service providers, should not be left behind, particularly as our trading partners continue to move forward with their own trade pacts.

Equally important is the role that trade promotion authority legislation plays in facilitating Congress’ implementation of trade agreements, particularly in the U.S. Senate where filibusters and amendments are part of the normal order of business. With Congress’ assent, trade-negotiating authority legislation has limited certain Congressional prerogatives to expedite congressional consideration and implementation of trade agreements and to preserve the integrity of the trade agreements and prevent their renegotiation.

Trade promotion authority procedures also require the Administration to consult extensively with Congress and seek Congressional input on the conduct of trade negotiations. Indeed, it was the primary mechanism for the executive and legislative branches to come together to reach agreement on U.S. trade policy objectives and trade pacts and facilitates both the Administration’s and Congress’ ability to fulfill their constitutional roles.

Labor and Environmental Issues

While the link between trade and investment and labor and environmental issues pervades the trade debate in the United States, much of that debate is focused on the narrow issue of how labor and environmental provisions should be treated in trade promotion authority legislation. Some members of Congress and labor and environmental groups insist that any trade agreements subject to these trade promotion authority procedures should include labor and environmental provisions, and a subset of those have called for mandating the use of sanctions for a country’s failure to comply with labor and environmental provisions. Other members and groups in the private business sector have sought to exclude non-trade related labor and environmental issues from trade agreements or at least prevent the use of trade sanctions.

Given the President’s broad constitutional authority to negotiate international agreements, the expired trade-negotiating authority procedures and proposals to renew that authority in 1995, 1997 and 1998 have not attempted to limit the items that the President is able to negotiate. Rather, they have set negotiating priorities, required consultations (in some cases on whether non-trade issues are being negotiated), and provided some limit on the nature of the provisions that could be inserted into the implementing bills actually subject to trade-negotiating authority procedures. The expired trade-negotiating authority legislation was written broadly such that implementation of trade-related labor and environmental provisions included in a trade agreement would likely have been permissible.

While labor and environmental provisions may be included in trade agreements subject to trade promotion authority procedures, mandating their inclusion in future agreements as part of the renewal of these procedures would be extraordinarily counterproductive. As the World Bank and others have documented, it is precisely through increased trade and economic growth that developing countries are better able and increasingly motivated by a growing middle class to improve labor and environmental standards. Mandating the inclusion of labor and environmental provisions -- over which there remains much disagreement in the developing world -- is likely to impede, rather than promote, the very trade liberalization and economic growth that support the adoption of higher labor and environmental standards. Furthermore, the use of trade sanctions is likely to be ineffective in improving those standards and may well have the unintended effect of undermining labor and environmental standards.

As discussed below, it is essential to define U.S. international labor and environmental objectives and only then attempt to determine the appropriate solution. For the most part, ECAT believes that labor and environmental issues may be better addressed directly through separate agendas in organizations with technical expertise, rather than as add-ons to the trade agenda. Efforts in the International Labor Organization, the Commission for Environmental Cooperation, the North American Development Bank and other organizations, for example, can be intensified. And, in those cases where complementarity between U.S. trade and U.S. labor and/or U.S. environmental objectives exists, efforts should be made to address these objectives jointly and in a cooperative manner.

Outlook for Trade Promotion Authority in 2001

The Bush Administration and several Members of Congress have indicated that renewal of trade promotion authority is a top priority in 2001. At his confirmation hearing before the Senate Committee on Finance, U.S. Trade Representative Robert Zoellick indicated that upon confirmation he would work with the Senate Finance and House Ways and Means Committees to consider how to "reestablish trade promotion authority for the President, based on the fast-track precedent and the broadest possible support." He emphasized "in the absence of this authority, other countries have been moving forward with trade agreements while America has stalled."

In Congress, Senator Gramm introduced four first-day bills on trade-negotiating authority: S. 136 to extend the grant of trade-negotiating authority legislation from the 1988 Omnibus Trade and Competitiveness Act, S. 137 proposing trade-negotiating authority legislation for the Americas, S. 138 proposing trade-negotiating authority legislation for Chile to join the NAFTA, and S. 140 proposing trade-negotiating authority legislation for the United Kingdom to join the NAFTA). Identical bills were also introduced in the House and Senate to renew trade-negotiating authority legislation as part of the Rural Prosperity Act of 2001 (H.R. 627 and S. 333).

ECAT POSITION

: ECAT believes that Congress’ passage of broad, multi-year trade promotion authority is critical this year to create the necessary infrastructure to achieve further liberalization of international trade and investment. If we are to achieve future economic growth and a higher standard of living through expanding trade and investment; bilateral, regional, and multilateral trade agreements must remain focused on the liberalization of trade and investment. While there may be areas of complementarity in which labor and/or environmental provisions may be cooperatively addressed in the context of a trade agreement, ECAT strongly opposes mandating the inclusion of labor and/or environmental sanctions or specific provisions as a prerequisite to the application of trade promotion authority procedures.

Promotion of Comprehensive and Trade-Oriented Bilateral, Regional and Global Trade Agreements

ECAT Member Companies also support the negotiation and implementation of comprehensive and trade-oriented bilateral, regional, and global trade and investment agreements. While the United States led trade and investment liberalization efforts in the early 1990s with the NAFTA, the Uruguay Round Agreements and the WTO Agreements on Information Technology and Basic Telecommunications, the United States did not proceed with substantial new negotiations or trade-liberalizing agreements at the close of the century. At the same time, U.S. trading partners, particularly the European Union (EU) and Mexico, have embarked on a series of free trade agreements that leave U.S. farmers, manufacturers, service providers and workers behind. Renewing the consensus on trade and investment liberalization and passage of trade promotion authority legislation will allow the United States to regain its leadership in pursuing trade-oriented bilateral, regional and global trade and investment agreements. ECAT member companies are focused in particular on the following priorities:

Completion of China’s Negotiations to Enter the WTO

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. The United States took a crucial step in facilitating China’s entry through the enactment in 2000 of legislation authorizing the President to grant Permanent Normal Trade Relations (PNTR) with China. While China has concluded all but one bilateral agreement and reached agreement with Working Party members on most issues in the protocol of accession and Working Party report, there remain a few issues that remain to be negotiated. It is expected that China will join the WTO well before the end of the year, although it is increasingly possible that China’s formal accession -- that is a necessary prerequisite for the President’s grant of PNTR -- may not occur until after the time period for the annual renewal of NTR required by the Jackson-Vanik provisions of the Trade Act of 1974. As a result, Congress may once again engage in the annual debate of whether to disapprove NTR relations with China.

China was the United States’ 4th largest trading partner in 2000, with total trade between the two countries exceeding $116 billion, according to Department of Commerce statistics.

U.S.-China Relations Act

The Administration, many Members of Congress and the business community redoubled their efforts in 2000 to support Congress’ approval of PNTR with China. For most businesses engaged in international trade and most of the major business associations, passage of this legislation was the top priority in 2000. ECAT and ECAT Member Companies worked with other companies and associations in the Coalition for U.S.-China Trade to coordinate materials and outreach efforts on Capital Hill and throughout the country to support passage of this legislation.

The Clinton Administration formally transmitted legislation to authorize the President to grant PNTR with China on March 8, 2000. This legislation was introduced by then-Chairman Roth (R-DE) and then-Senator Moynihan (D-NY) of the Senate Finance Committee on March 23, 2000 (S. 2277) and, on May 15, 2000, by then-Chairmen Archer (R-TX 7th) and Subcommittee Chairman Crane (R-IL 8th) of the House Ways and Means Committee and by Representatives Matsui (D-CA 5th) and Tanner (D-TN 8th) (H.R. 4444). The original legislation authorized the President to determine that Title IV of the Trade Act of 1974 should no longer apply to China, and to proclaim the extension of PNTR treatment to China. The legislation also required that, before making that determination, the President must certify to Congress that the terms and conditions for China=s accession to the WTO are at least equivalent to those agreed by the United States and China on November 15, 1999 (the date on which the United States and China concluded their bilateral market access agreement). It also provided that the extension of PNTR shall be effective no earlier than the effective date of China=s accession to the WTO.

The Senate Finance Committee marked-up this legislation without amendment on May 17, 2000 and favorably reported it by a bipartisan vote of 19-to-1.

Prior to the mark-up of this legislation by the House Ways and Means Committee, Representatives Sander Levin (D-MI 12th) and Doug Bereuter (R-NE 1st), in consultation with the Clinton Administration and the private sector, prepared a substantial amendment to the original legislation. The trade-related portion of the "Levin-Bereuter" amendment -- dealing with import surges -- was included as part of the Chairman’s mark before the Ways and Means Committee. This anti-surge safeguard provision implements the product-specific safeguard included in the November 1999 U.S.-China bilateral WTO agreement that will be incorporated into China=s protocol of accession to the WTO and will be available to all WTO members. The safeguard permits WTO members to impose temporary import restrictions in cases where products from China Aare being imported into the territory of any WTO member in such increased quantities or under such conditions as to cause or threaten to cause market disruption@ to competing domestic producers. This special safeguard will apply to China for 12 years following China=s accession to the WTO.

The Ways and Means Committee approved the amended legislation by a bipartisan vote of 34-to-4 on May 17, 2000.

The remaining portion of the Levin-Bereuter amendment and other provisions were added during the House Rules Committee consideration of this legislation on May 23, 2000. The following additions were made to the legislation:

Congressional-Executive Commission on China: Title III establishes a Congressional-Executive Commission on China, modeled loosely after the Commission on Security and Cooperation in Europe (Helsinki Commission). The China Commission will consist of nine members of each House plus five Presidential appointees. It is charged with monitoring human rights and labor market issues, and monitoring and encouraging the development of the rule of law and democracy-building in China. The House Committee on International Relations is required to hold hearings on the Commission=s annual reports, including any recommendations for legislation or executive action that the Commission makes.
Monitoring and Enforcement: Title IV requires the United States Trade Representative (USTR) to issue an annual report on China=s compliance with its WTO obligations. It also instructs the President to press for a WTO mechanism to review China=s compliance on an annual basis. Title IV also authorizes appropriations for the Departments of Agriculture, Commerce and State, as well as USTR, to monitor and enforce Chinese and other foreign governments= compliance with trade agreements.
Task force on prison labor: Title V instructs the President to establish an interagency task force, chaired by the Secretary of the Treasury, to monitor, investigate, and enforce the prohibition on imports made by prison labor as provided for in section 307 of the Tariff Act of 1930 (which bars imports of goods made with forced or indentured labor).
Technical assistance for China: Title V authorizes appropriations for the Departments of Commerce, State, and Labor to establish programs to provide training and technical assistance in China to develop the rule of law with respect to commercial and labor-market standards. These programs would assist China in bringing its domestic laws into compliance with WTO and International Labor Organization standards.
Taiwan's accession to the WTO: Title VI expresses the sense of the Congress that the WTO General Council should approve China=s and Taiwan=s accessions at the same General Council session.
Broadcasting: Title VII authorizes additional appropriations for Radio Free Asia and Voice of America to expand and enhance U.S. international broadcasting operations throughout China and nearby countries.

The full House approved H.R. 4444, the U.S.-China Relations Act, on May 24, 2000 by a vote of 237-to-197 (with 164 Republicans and 73 Democrats supporting the legislation). After several weeks of debate and votes against 13 amendments, the Senate approved H.R. 4444 without amendment on September 19, 2000 by a vote of 83-to-15 (with 47 Republicans and 36 Democrats supporting the legislation).

Benefits of China’s WTO Accession

China’s accession to the WTO will provide tremendous new opportunities for American goods, services, and agriculture in the world’s largest and fastest growing market. The U.S.-China bilateral agreement that sets out terms for China’s accession is: (1) comprehensive, removing major trade barriers in all major sectors of the economy, (2) fully enforceable, and (3) designed to produce rapid results. The bilateral agreement builds upon reforms obtained in previous negotiations and reflects U.S. experience in enforcing previous agreements. Highlights of some of the major achievements in the bilateral WTO agreement are summarized below.

Agriculture: The bilateral agreement provides expanded market access for U.S. wheat, corn, soybeans, cotton, barley, and rice under a new system of tariff-rate quotas, reduces Chinese tariffs on priority products such as beef, citrus, and dairy from over 30 percent to 12 percent, and eliminates Chinese export subsidies. In a separate side agreement, the Chinese have agreed to eliminate non-science-based food safety measures that restrict entry of U.S. beef, pork, poultry, and wheat. The United States is currently working with the Chinese Government to implement fully that side agreement.
Trading and Distribution Rights: The bilateral agreement provides full trading rights for U.S. companies to import, export, and distribute products directly to Chinese customers, including after-sales service and repair, without going through a local trading company or distributor.
Tariffs: The bilateral agreement cuts Chinese tariffs from the current overall average of 24.6 percent to 9.4 percent by 2005, including major tariff reductions on the farm products noted above. In the auto sector, China agreed to reduce its current 80 to 100 percent tariffs on autos to 25 percent by 2006 and to reduce tariffs on auto parts from 23 percent to 10 percent. China also will join the WTO’s Information Technology Agreement (ITA) that will require China to reduce its tariffs on computers, semiconductors, telecommunications, and other high-technology products to zero.
Services: The bilateral agreement requires China to provide comprehensive market access for U.S. telecommunications and financial services under the WTO Telecommunications and Financial Services Agreements. China has made specific market-access commitments in all services industries of primary interest to the United States, including the Internet, audio-visual, banking, insurance, securities, and auto finance. U.S. publishing and information services also will benefit from China’s commitment to remove restrictions on distribution and to reduce restrictions on investment.
Safeguards: As discussed above, the bilateral agreement contains an unprecedented 12-year product-specific safeguard provision that ensures that the United States can take action against increased imports from China that cause market disruption in the United States. The agreement also guarantees the United States the right for the next 15 years to continue to use special non-market economy methodologies in antidumping cases brought against China.

The Congressional Research Service projects that a China WTO agreement would increase annual U.S. exports by $11.5 billion by 2005. The U.S. Department of Agriculture estimates that U.S. farm exports would grow by $2.2 billion annually as a result of China’s WTO accession.

Bringing China into the WTO is the best means to stem our rising trade deficit with China, as China would have to reduce its high tariffs and eliminate quotas and other major market-access barriers. It is to the U.S. advantage to be able to have China enter into binding market-access commitments that are enforceable under WTO dispute settlement procedures, rather than have to enforce existing bilateral agreements unilaterally and in a piecemeal fashion. The longer China’s WTO accession is delayed, the more business opportunities are lost for U.S. suppliers and the greater the pressure within the United States to impose unilateral, trade-disrupting measures against China.

While it is critical to lock in the historic market-access commitments in the U.S.-China WTO bilateral agreement, we must also continue to press China to remove remaining barriers, such as agricultural subsidies, tariffs on industrial goods, and remaining restrictions in services. Once China is in the WTO, the United States will be able to seek the removal of these and other restrictions as part of the next round of multilateral negotiations.

It is also in China’s interest to move forward with WTO membership as a means to future growth and prosperity. China’s President Jiang Zemin and Premier Zhu Rongji have committed China to move away from isolation and a state-led economy to a more open, market-driven one that plays a major role in the world trading system. China’s WTO membership is key to locking in China’s ongoing reforms. In opening the National People’s Congress on March 5, 2001, Premier Zhu presented a five-year blueprint for economic growth and reform in China that emphasized the need to adopt market reforms in part to ready China for the foreign competition that WTO membership will bring. While, in the short term, the necessary economic reforms in China and its dismantling of state-owned enterprises will not be an easy process, China’s market-opening measures and the certainty of WTO commitments and rules will create a more open climate for imports and investment that will spur economic growth. For example, ending existing barriers to distribution rights in China will create new business activity and increase dramatically access for U.S. manufacturers, farmers, and service providers.

WTO membership is important to China in order to improve its access to markets other than the United States that are now able to erect barriers to Chinese imports without violating WTO rules. China must seek markets beyond the United States if it is to ensure its continued economic growth.

WTO Requirements for China’s Final Accession

Negotiations on the terms of a country’s accession to the WTO result in four documents: (1) the consolidated schedules containing a country’s market-access commitments for goods and services, the so-called market-access package; (2) the protocol, containing the terms of accession; (3) the working party report; and (4) the draft decision of the working party on the applicant’s request for accession. The market-access package consists of schedules of tariff reductions and other commitments that the applicant country has made on goods, services, and agriculture. Market-access commitments are negotiated bilaterally with WTO member countries and then combined into a single package of concessions, which applies to all WTO member countries on a MFN basis.

The protocol of accession is negotiated multilaterally within the WTO working party on accession. The protocol sets out the applicant country’s commitments to abide by WTO rules and provides for transition periods or other special rules. The working party report also contains a discussion of the terms a country has agreed to and the specific commitments that it has made in the course of negotiations. Once the market-access schedules are finalized, they are incorporated into the protocol of accession. The working party then must reach consensus on the draft protocol package that is sent to the WTO General Council for approval. While the General Council has approved all previous accessions by consensus, a country may request a vote. In such a case, approval of an applicant’s accession requires a two-thirds majority vote.

Status of Negotiations and Outlook for 2001

China remains in the final stages of completing its bilateral and multilateral negotiations on the terms of its WTO membership. China has concluded bilateral market access agreements with 36 Members of the Working Party on China’s accession, including the United States and the EU. The only bilateral negotiation not yet completed with a Working Party member as of the beginning of March 2001 is with Mexico, with which China has remaining antidumping issues. Negotiations with Mexico have not, however, held up progress on the multilateral negotiations on the protocol and Working Party Report.

Since March 2000, the Working Party on China’s accession has met six times. In March and June 2000, the Working Party considered the agreements that China had negotiated with the United States and the EU and incorporated those provisions in the current draft of the protocol and Working Party Report.

By January 2001, the Working Party was able to narrow differences on many issues that had been open. Agreement was largely reached on transparency, judicial review, uniform administration of laws, the transitional review mechanism, China’s conformity to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, industrial subsidies, non-tariff measures (i.e., administration of tariff-rate quotas, quota and licensing requirements, services licensing), and product-specific safeguard provisions.

At the end of the January Working Party meeting, the EU informally presented a "package" proposal on agriculture and services which neither the United States or China found to be acceptable. As of the beginning of March 2001, issues remaining to be formally concluded include the application of developing country provisions of the WTO Agreement to China, particularly regarding domestic subsidies and agriculture, certain services issues, the phasing-in of trading rights, and implementation of non-market economy methodology in antidumping investigations, among others. Informal consultations are continuing in February and March before the next Working Party meeting.

It is expected that the Working Party on China’s accession will soon conclude negotiations for China’s entry. Following consensus approval by the Working Party, the Working Party will present the protocol of accession, the working party report and the schedules of China’s market access concessions to the WTO General Council for its approval by consensus or, at a minimum, a two-thirds majority. Following the General Council’s approval of its accession, China must complete its own domestic ratification of the agreement and will formally become a WTO member 30 days thereafter.

By the terms of the U.S.-China Relations Act, the President will have to certify to Congress that the terms and conditions for China' s accession to the WTO are at least equivalent to those agreed by the United States and China on November 15, 1999 prior to extending PNTR to China. The extension of PNTR to China will only become effective once China has actually joined the WTO.

In addition, section 1106 of the 1988 Omnibus Trade and Competitiveness Act requires that the President determine whether (1) China’s state-trading enterprises account for a significant share of either China’s exports or goods that are subject to import competition in China; and (2) these enterprises adversely affect U.S. foreign trade or the U.S. economy. If both determinations are affirmative, the WTO agreement cannot apply between the United States and China, unless China enters into a bilateral agreement addressing its state enterprises, or Congress enacts legislation approving the U.S. extension of WTO benefits to China. It is anticipated that the President will make a determination that the provisions of Section 1106 should not be invoked based on China’s current effort to reduce the level of state ownership and the commitments China has made under the U.S.-China WTO bilateral agreement.

The U.S. Trade Representative is also required by the Uruguay Round Agreements Act to consult with appropriate congressional committees before any WTO General Council vote on WTO membership if the vote would substantially affect U.S. rights or obligations under the WTO or require a change in federal law. In view of the importance of China’s economy to the United States, this consultation requirement would clearly apply to a vote on China’s membership. The Administration is engaging in intensive consultations with the Congress on the details of the U.S.-China WTO bilateral agreement and on the progress of China’s overall accession negotiations.

Given the timetable for China’s accession, it appears increasingly likely that China will not formally accede to the WTO (and receive PNTR) prior to period for the annual renewal of its Jackson-Vanik freedom-of-emigration waiver, which begins on May 3, 2001 when the President must announce his intent to request an extension of the annual waiver. The President must submit his request for such extension to the Congress by June 3, 2001 (30 days prior to the expiration of the waiver on July 3, 2001). Congress would then have until September 3, 2001 to approve or disapprove the waiver. Given the strong votes in favor of PNTR last year, it is expected that the Congress will not disapprove an annual waiver if it is required.

ECAT POSITION: ECAT strongly supports the timely conclusion of China’s negotiations to enter the World Trade Organization and its formal entry into the WTO. ECAT also supports the President’s formal authorization of PNTR with China to become effective once China becomes a WTO member and the timely conclusion of Taiwan’s negotiations to enter the WTO and its formal entry into the WTO.

Congressional Approval of U.S.-Vietnam Bilateral Commercial Agreement

On July 13, 2000, the United States and Vietnam concluded the Agreement Between the United States of America and the Socialist Republic of Vietnam on Trade Relations ("U.S.-Vietnam Bilateral Commercial Agreement") addressing market access, services, intellectual property, import surge protections, and investment. This represents a major step in the normalization of U.S. trade relations with Vietnam, building on prior decisions to open some travel and allow commercial sales to Vietnam in 1991 and 1992, resume international lending and U.S. involvement in development projects in 1993, lift the economic embargo in 1994, open normal diplomatic relations in 1995, and waive the Jackson-Vanik freedom-of-emigration provisions between 1998 and 2000. Congressional approval of the bilateral commercial agreement (and a continuation of the annual Jackson-Vanik waiver) would permit the extension of NTR to Vietnam on an annual basis.

Vietnam applied to become a member of the WTO in 1995, but did not submit the required information on its trade regime until 1998. Vietnam has asked that it be allowed to join the WTO as a developing country and be granted more lenient developing country terms in its protocol of accession. The United States has indicated that Vietnam must be held to rigorous standards in its protocol of accession, including agreeing to join the WTO Information Technology Agreement.

Despite the lack of a bilateral commercial agreement, U.S. trade with Vietnam has grown substantially since the resumption of economic relations between the two countries in 1994. U.S.-Vietnamese trade has grown over five-fold, from $223.3 million in 1994 to $1.19 billion in 2000. By 2000, Vietnam had also become the United States’ sixth largest trading partner in Southeast Asia. Major U.S. exports to Vietnam include industrial machinery, fertilizers, and semiconductors and major imports include crude oil, footwear, shrimp, and coffee.

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Last year, the House considered and rejected H.J. Res. 99 disapproving the President’s extension of the waiver to Vietnam (introduced by Representative Rohrabacher (R-CA 45th) by a vote of 91-to-331 on July 26, 2000. The companion resolution in the Senate, S.J. Res. 47, was introduced by Senator Smith of New Hampshire and was never reported from the Senate Committee on Finance.

U.S.-Vietnam Bilateral Commercial Agreement

The three-year bilateral commercial agreement is divided into six principal chapters. In Chapter 1 on market access for goods and agriculture, Vietnam committed to NTR-tariff treatment and national treatment with respect to tariffs and other related trade rules and formalities, including technical and sanitary and phytosanitary standards. Vietnam agreed to cut tariffs on agricultural and manufactured goods by a third or half in most cases. As well, Vietnam committed to eliminate quantitative restrictions over three to seven years on agricultural and industrial goods and to eliminate discretionary import licensing. Vietnam also agreed to provide, for the first time, trading rights to both Vietnamese and foreign businesses to permit them to import and export products, phased in over three to seven years. Vietnam agreed to comply with WTO rules on customs valuation and customs fees within two years. In addition, Vietnam committed that state trading would be carried out in accordance with WTO rules requiring that state-trading firms make sales and purchases solely in accordance with commercial considerations.

In Chapter 2 on intellectual property rights, Vietnam agreed to implement WTO-level patent and trademark protection within one year and copyright and trade secret protection within 18 months. It has also agreed to strengthen intellectual property protection in other areas, including encrypted satellite signals.

In Chapter 3 on services, Vietnam guaranteed WTO-level protection for the existing rights of foreign service providers in Vietnam and made substantial new commitments. In telecommunications, Vietnam agreed to the principles of the WTO Basic Telecommunications Reference Paper and to liberalize basic and value-added telecommunications markets. For basic telecommunications, including mobile cellular and satellite, Vietnam agreed to permit U.S.-Vietnamese joint ventures four years with a 49 percent U.S. equity limit. For value-added telecommunications, Vietnam agreed to joint ventures within two to three years with a 50 percent U.S. equity limit. For voice telephone services, Vietnam will permit joint ventures after six years with a 49 percent equity limit. In financial services, Vietnam agreed to the General Agreement on Trade in Services financial annex and made specific commitments in the insurance and banking areas. In life and non-mandatory insurance sectors, Vietnam agreed to permit U.S.-Vietnamese joint ventures three years with a 50 percent equity limit in year three to increase to 100 percent equity in five years. In mandatory sectors, e.g., motor vehicle and construction services, Vietnam agreed to 100 percent equity after six years for U.S. firms. In banking, Vietnam agreed to permit U.S. banks to open branches in Vietnam and to form joint ventures with equity between 39 percent and 49 percent, increasing to 100 percent after nine years. U.S. securities firms will be allowed to open representation offices in Vietnam. Vietnam also agreed to permit joint ventures with 100 percent equity shares after three years for non-bank and leasing company providers. In professional services, Vietnam agreed to allow 100 percent U.S. equity in legal, accounting, architectural and engineering firms. U.S. accounting, architectural and engineering firms will be able to provide services to foreign-invested firms for the first two years and to Vietnamese firms afterwards. In the audio-visual sector (including film production, distribution and motion picture projection services), Vietnam agreed to permit 49 percent equity joint ventures on implementation of the agreement and 51 percent equity after five years. For wholesale distribution, Vietnam agreed to permit 49 percent equity joint ventures after three years, with the equity limit to be eliminated after six years. All U.S. retailers will be permitted to open one outlet, with further approvals on a case-by-case basis. Vietnam also made other services commitments addressing computer services, advertising, market research, management consulting, construction, distribution, private education, health services and travel and tourism.

In Chapter 4 on investment, Vietnam agreed to a series of commitments to facilitate investment, reduce paperwork and ensure national treatment of foreign investors. In particular, Vietnam agreed to protections against expropriation, the right to repatriate profits and conduct other financial transfers on a national treatment basis, the phase out of local content and export performance requirements within five years, the termination of investment screening and discriminatory pricing, and the reduction of government controls and screening requirements for joint ventures.

In Chapter 5 on business facilitation, Vietnam agreed to guarantee the right of U.S. persons to conduct routine business practices, including establishing offices, advertising, and conducting market research.

In Chapter 6 on transparency and the right of appeal, Vietnam made substantial commitments, including advance notice of all laws, regulations and other administrative procedures covered by the agreement, and publication of laws and regulations. In particular, Vietnam agreed that all laws governing issues covered in the agreement must be made public and readily available and agreed to designate an official journal for their publication. Vietnam committed to the uniform, impartial, and reasonable application of all laws, regulations, and administrative procedures and to form administrative and judicial tribunals for review and correction of all matters covered in the agreement, with the right of appeal.

Extension of Normal Trade Relations to Vietnam

Vietnam remains one of six countries to which the United States does not extend normal trade relations status, even on an annual basis. (The other countries are Afghanistan, Cuba, Laos, North Korea, and Serbia.) As a result, imports from Vietnam are subject to column 2 tariffs (enacted as part of the Smoot-Hawley Tariff Act of 1930) averaging 40 percent, more than 10 times the applied tariffs for countries with an NTR relationship to the United States.

As a result of the waivers of the Jackson-Vanik freedom-of-emigration provisions between 1998 and 2000, Vietnam has been eligible for Overseas Private Investment Corporation (OPIC) and Export-Import Bank programs. By the terms of the Jackson-Vanik provisions of the Trade Act of 1974, a country like Vietnam may only become eligible for NTR status if there is both a presidential waiver of the freedom-of-emigration provisions and Congressional approval of a bilateral commercial agreement between the United States and that country.

Once the President transmits the agreement to Congress, Congress will be required to consider it under the so-called "fast-track" procedures established in the 1974 Act. In particular, an approval resolution for the agreement shall be introduced by the Majority Leaders of the House and the Senate and other designated members on the day that it is transmitted. The approval resolution shall be referred to the House Committee on Ways and Means and the Senate Committee on Finance. If the Ways and Means Committee has not reported the measure by the end of the 45th calendar day after its introduction, the Committee shall be automatically discharged of the approval resolution. A vote on the approval resolution shall take place in the House within 15 days after the approval resolution is reported by or discharged from the Ways and Means Committee. If the Senate Finance Committee has not reported the resolution within 15 days of its receipt from the House or 45 days after its introduction in the Senate, it shall be automatically discharged of the resolution. The Senate floor vote on the approval resolution must take place by the end of the 15th day after it is reported by or discharged from the Finance Committee. Floor debate in the House and Senate is limited to 20 hours and amendments are prohibited. Upon Congressional approval of the bilateral commercial agreement with Vietnam, the President is authorized to proclaim the extension of NTR to Vietnam on an annual basis.

The current Jackson-Vanik waiver for Vietnam must also be renewed annually. The President must announce his intent to request an extension of the waiver by May 3, 2001 and submit his request for such extension to the Congress by June 3, 2001. Congress would then have until September 3, 2001 to approve or disapprove Vietnam’s Jackson-Vanik waiver. It is expected that the Congress will not disapprove the request.

ECAT POSITION: ECAT supports prompt Congressional approval of the U.S.-Vietnam Bilateral Commercial Agreement, a Presidential proclamation extending NTR to Vietnam and the renewal of Vietnam’s Jackson-Vanik waiver in order to provide NTR status to Vietnam, as well as provide for its continued eligibility for Overseas Private Investment and Export-Import Bank programs.

Accelerating Negotiations to Create a Free Trade Area of the Americas

The ongoing Free Trade Area of the Americas (FTAA) negotiations, formally launched in 1998 and set to conclude in 2005, have the potential for creating the largest free trade area in the world, covering approximately 800 million people with a combined GDP of nearly $11 trillion. At the third Summit of Americas, to be held in Quebec City on April 20-22, 2001, the leaders of the 34 nations negotiating the FTAA will work to reach agreement on how best to move forward and maximize the benefits of these negotiations. The United States has enormous benefits to reap from the FTAA and will need to play a leadership role to help move negotiations forward and possibly to accelerate them.

Total U.S. trade with the Western Hemisphere has grown 170 percent over the last decade, rising to $778,433 billion in 2000. The share of the total value of U.S. trade accounted for by countries participating in the FTAA negotiations increased from 33 percent in 1990 to 38 percent in 2000. U.S. exports to the region accounted for 44 percent of total U.S. exports to all destinations in 2000.

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Background on the Negotiations

At the 1994 Miami Summit of the Americas, the United States joined the 33 other nations of the Western Hemisphere -- excluding Cuba -- in agreeing to conclude a FTAA by 2005. FTAA negotiations were officially launched at the second Summit of the Americas meeting held in Santiago, Chile, in April 1998. The Santiago Summit Declaration endorsed the start of the FTAA negotiations and reaffirmed the goal of completing negotiations by 2005. It called for concrete progress, including specific business-facilitation measures, to be achieved by 2000. The Declaration states that the FTAA is to be balanced, comprehensive, and WTO-consistent, as well as to constitute a single undertaking (meaning signatories must adhere to all aspects of the agreement). The Declaration further provides that the negotiating process must be transparent and take into account the differences in the level of development and size of the economies in the Americas.

The Declaration established the following negotiating groups: market access, agriculture, investment, services, government procurement, dispute settlement, intellectual property rights, subsidies, antidumping and countervailing duties, and competition policy. The following three consultative committees were established to provide support to negotiators: the FTAA Consultative Group on Smaller Economies, the FTAA Committee of Experts on Electronic Commerce, and the FTAA Committee on Civil Society. There is a FTAA Trade Negotiating Committee (TNC) that oversees the entire negotiation process.

The FTAA Trade Ministerial in Toronto, Canada in November 1999 directed negotiators to begin to develop a draft text of an FTAA agreement to be ready for the next ministerial meeting to be held in Buenos Aires, Argentina, in April 2001. Trade ministers also endorsed the launch of a round of WTO trade negotiations and the goal of seeking the complete elimination of agricultural export subsidies. The trade ministers adopted eight customs facilitation measures to be implemented by January 2000. USTR announced the conclusion of an Inter-American Mutual Recognition Agreement (MRA) for conformity assessment of telecommunications equipment. The MRA will simplify the conformity assessment procedures for testing and certification of telecommunications equipment. Throughout 2000, the nine FTAA negotiating groups met to discuss and put together draft bracketed texts on each of the issues. The United States submitted comprehensive proposals on each of the main issues.

Status of Negotiations and Outlook for 2001

In January 2001, USTR announced that the nine FTAA negotiating groups had completed the draft bracketed text as they were directed to do at the Toronto Ministerial. The draft text, which has not been made public, reflects the negotiating positions of each of the countries involved and is not considered a negotiated document. On January 17, 2001, USTR also released public summaries of U.S. negotiating positions on the nine areas.

Between January 24 and 25, 2001, the TNC met in Lima, Peru to discuss recommendations for moving forward with the FTAA negotiations. They reviewed the draft bracketed FTAA text and considered reports from the nine FTAA negotiating groups and other issues. The TNC was unable to reach consensus on timetables or the methods and modalities of how the negotiations would progress. On March 1, 2001, the FTAA’s rotating secretariat, which has been in Miami, Florida, is scheduled to move to Panama City (and then to Mexico City in 2003).

Trade Ministers from the 34 countries are scheduled to meet April 6-7, 2001 in Buenos Aires, Argentina to draft a ministerial declaration with recommendations on the timetables, methods and modalities for the leaders to consider at the April 20-22 Summit in Quebec City, Canada.

At the Summit, leaders are expected to approve the Ministerial Declaration and make pronouncements on the timetable and structure of the negotiations, including on Chile and Canada’s proposal to conclude the FTAA by 2003. Brazil has expressed opposition to accelerating the timetable, particularly with its own general election in 2002. It is also expected that the 34 countries will agree to a set of business facilitation measures, which are currently being considered by negotiators. The leaders may also attempt to make decisions on the treatment of labor and environment and other social issues, although there remain deep divides between the 34 countries on how to address these issues, if at all, in the context of the negotiations.

There remain major differences between the Western Hemisphere countries on a range of issues and in aspirations for the FTAA. For example, Brazil appears to prefer consolidating the MERCOSUR agreement before making concrete FTAA commitments. There are also indications that Mexico is less interested in accelerated FTAA negotiations, as it enjoys the preferential access it currently has to the U.S. and Canadian markets under NAFTA and is pursuing its own discussions with MERCOSUR.

While the FTAA negotiations remain in their very early stages, U.S. trade and investment continue to be put at a competitive disadvantage in Latin America, as a result of the proliferation of preferential trading relationships that exclude the United States. The MERCOSOR arrangement, which provides preferential tariff treatment and access to member countries, is rapidly encompassing all of Latin America. The four MERCOSOR nations of Brazil, Paraguay, Uruguay, and Argentina have been joined by Chile as an associate MERCOSOR member. MERCOSOR has a tariff-reduction agreement with the Andean Pact nations of Colombia, Venezuela, Peru, Ecuador, and Bolivia and is attempting to expand its linkages to Canada and the EU. Canada has entered into a bilateral trade agreement with Chile, putting U.S. firms at a competitive disadvantage in vying for business in Chile against Canadian firms. U.S. firms are also at a disadvantage in Latin America in competing with Chilean and other Latin American firms that are eligible for MERCOSOR benefits.

For the United States to regain leadership in these negotiations and move them forward, it is critical that the United States rebuild the consensus on trade and renew trade promotion authority.

Importance of the FTAA Negotiations

The FTAA negotiations present an enormous possibility to eliminate barriers to trade and investment in the Western Hemisphere, which already accounts for 38 percent of total U.S. trade and 44 percent of total U.S. exports. A completed FTAA will provide U.S. farmers, manufacturers and service providers expanded export and investment opportunities that will help sustain U.S. economic growth and the high standard of living in the United States. Improved disciplines in intellectual property and investment and strong dispute settlement rules will help ensure that U.S. interests are protected. The FTAA also has the opportunity to adopt groundbreaking commitments on e-commerce to enhance the development of information technology and the new economy. As trade alliances deepen, so too will political, economic and security alliances that are critical to the United States in the century ahead.

ECAT POSITION: ECAT supports the FTAA negotiations and efforts at the Third Summit of the Americas to reach agreement on a concrete and, if possible, accelerated timetable for the negotiations to ensure that they are concluded before or by 2005.

Launching Broad WTO Negotiations in 2001

Efforts to launch a broad round of WTO negotiations will again come to the forefront this year as the WTO prepares for its 4th Ministerial Conference in Doha, Qatar between November 9 and 13, 2001. During the last year, WTO members took some steps forward to prepare for the launch of these negotiations, including: (1) beginning the built-in agenda negotiations on agriculture and services; (2) proceeding with consultations and case-by-case decisions on implementation issues; (3) developing confidence-building measures to reinforce support for moving forward with WTO reform and addressing developing-country concerns; and (4) making progress in WTO accession negotiations.

Agriculture Negotiations

Pursuant to the mandate of Article 20 of the WTO Agreement on Agriculture, the WTO agreed to launch negotiations on agriculture on February 7, 2001. Prior to that decision, the WTO Committee on Agriculture had carried out preparatory work, identifying general negotiating objectives covering: (1) export subsidies; (2) tariff reduction; (3) reduction of trade-distorting domestic support levels; (4) greater market orientation of agricultural state-trading entities; and (5) expanded market access opportunities for products subject to tariff-rate quotas. The United States also has continued to press for the inclusion of non-discriminatory access for biotechnology products in the negotiating objectives.

In March 2000, WTO members agreed to establish a December 31, 2000 deadline for the submission of proposals, with flexibility for additional or more detailed proposals in early 2001. There have been negotiating meetings (so-called "special sessions" of the Agriculture Committee) in March, June, September and November 2000, and February 2001. So far, 93 WTO member governments have submitted a total of 38 proposals. The next meeting, scheduled for late March 2001, will enable member countries to take stock of the proposals and work on a timetable for future action. The U.S., EU, Japanese, Swiss, Mauritian, and Indian proposals are comprehensive, covering the full range of subjects, and other proposals address specific issues.

No timeframes have been set for concluding the agriculture negotiations. The United States previously has suggested that negotiations be concluded within three years and has noted that the expiration of the WTO provision barring action against certain agricultural subsidies, the so-called "peace clause," which expires in 2003, should help move negotiations forward.

The United States continues to press the EU for greater flexibility on agricultural issues and to delink concessions on agriculture from progress on an agreement to include investment and competition issues in a new round agenda. To date, the EU, based on strong member state resistance, particularly from France, has been unwilling to agree to language providing for the progressive elimination of export subsidies.

ECAT supports the stated objective of the United States to secure substantial, progressive reductions in support and protection, including deep cuts in bound tariff rates and elimination of export subsidies. ECAT also supports U.S. efforts to ensure that the world’s agricultural producers can use biotechnology, without fear of trade discrimination either by outright bans or discriminatory and/or burdensome labeling requirements.

The agriculture negotiations should aim to reduce tariffs across the board and a special effort should be made to reduce the highest tariffs to levels that would not prohibit imports. The negotiations should clarify that tariff-rate quotas are only transitional measures and provide for their phase-out. Sectoral zero-for-zero tariff agreements should also be encouraged.

The negotiations should seek a reduction in the aggregate measure of support beyond that agreed in the Uruguay Round. The agreement on domestic support should be structured to provide incentives for market-oriented reform. In addition, the negotiations should strive for an immediate end to export subsidies.

The United States also should seek to eliminate the monopoly control of state trading entities (STEs) and discipline their non-market behavior. The monopoly powers of STEs should be ended in ways that ensure the rights of establishment, non-discrimination, and national treatment for foreign and domestic firms.

As discussed below with regard to food issues, ECAT has developed and supports adoption of the Food Chain proposal as a principle to seek to eliminate barriers at all levels of the food chain.

Services Negotiations

WTO members reached a consensus in Seattle in 1999 on services negotiations, agreeing that such negotiations should be comprehensive and not exclude any sector. WTO members agreed that services market-access discussion would include financial services, telecommunications, professional services, energy services, and distribution. They also agreed to promote pro-competitive, non-discriminatory domestic regulatory regimes.

On February 7, 2000, the WTO agreed to begin services negotiations, as mandated by Article XIX of the General Agreement on Trade in Services (GATS) and the negotiations were formally launched on February 25, 2000. It was decided that the services negotiations would take place in special negotiating sessions of the Council for Trade in Services. The WTO set a deadline of March 2001 for receiving member country proposals on the framework and substance of the negotiations.

Many member countries have already submitted proposals on how to proceed with the services negotiations. The United States made two proposals, one in July 2000 addressing the framework of the negotiations, and a second in December 2000 proposing a sector-specific plan focusing on barriers in 12 sectors: financial services, telecommunications, energy, audiovisual services, accounting, distribution services, education and training, environmental services, express delivery, legal services, the movement of skilled labor across national borders, and tourism.

At the request of the members, the WTO Secretariat circulated draft guidelines for services negotiations in January 2001, which will be reviewed by members at the stocktaking meeting in March 2001. It addresses several issues, including the mode of the negotiations, suggesting that complementary methods, including request-offer, can be used if agreed to by members. The United States has proposed alternatives, such as the use of clusters or model schedules, to the request-offer method to achieve quicker and more comprehensive liberalization.

ECAT supports efforts to expand significantly the liberalization commitments under the GATS. In particular, ECAT supports efforts by the United States to have the WTO agree on a negotiating strategy that aims to narrow reservations, as a means to secure broader, more meaningful market-access commitments. In addition, ECAT supports global commitments to:

Ensure rights of establishment and ownership for U.S. foreign investors through wholly-owned entities or other business structures;
Secure national treatment for U.S. companies operating overseas to ensure that foreign investors have the same market access as domestic companies;
Eliminate unnecessary restrictions on cross-border transactions;
Promote pro-competitive, regulatory reform through the promulgation of adequate, consistent rules and the establishment of transparent, impartial regulatory administration;
Remove obstacles to the free movement of people by allowing business personnel easy access to visas; and
Improve market-access and national-treatment commitments in all sectors.

In the e-commerce sectors, it will be increasingly important to seek greater liberalization of basic and value-added telecommunications services. In addition, negotiations should ensure that broadly defined market access commitments apply to evolving information technology services, which evolve too rapidly to keep pace with trade designations, and that such services are not misclassified as regulated telecommunications services.

The establishment of transparent, impartial regulatory regimes in local markets is essential to make the existing GATS national treatment provisions and market-access commitments meaningful and to promote the international competitiveness of service providers.

Other Sectors

While most WTO member countries support the inclusion of industrial tariffs in market-access negotiations in a new round, disagreements remain over the Accelerated Tariff Liberalization (ATL) initiative and efforts to conclude an agreement to remove non-tariff barriers to information technology products under a second Information Technology Agreement (ITA II). It is hoped that continued progress could be made on these initiatives this year.

ATL Negotiations

The ATL initiative covers chemicals, energy products, environmental products, fish, forest products, gems and jewelry, medical and scientific equipment, and toys. The sectoral liberalization initiative originated in APEC in 1997, and APEC sought its expansion to the WTO in 1998 with the goal of achieving the critical mass of participation necessary to conclude the agreements. The eight sectors represent a balanced package and reflect the interests of both developed and developing countries. These sectors accounted for over $200 billion in U.S. exports in 2000, equal to approximately one-third of total U.S. industrial exports.

The EU opposed the inclusion of the forest products sector in the ATL initiative, as well as the attempt to reach an early conclusion to the ATL negotiations. In an effort to reach a compromise, the United States, Canada, Australia, and New Zealand offered to agree to comprehensive tariff negotiations, beyond the eight ATL sectors, in exchange for an agreement to conclude the ATL sectoral initiative in 2000. That agreement was never reached.

ITA II Negotiations

In September 1997, WTO members from 43 ITA signatory countries launched the ITA II negotiations to extend the number of products covered under the original Information Technology Agreement (ITA) and to address non-tariff barriers to trade in information technology products. Finalization of the ITA II, originally scheduled to be implemented in January 2001, has not been achieved due to unresolved differences over products proposed to be added to ITA coverage. Malaysia and India have been the main impediments to completion.

In December 1998, participating countries, with the exception of India and Malaysia, agreed on a list of roughly 200 products to be added to ITA coverage. The items covered under the list include manufacturing, testing, and measuring equipment used in printed circuit boards; radar navigation equipment; satellite equipment, digital copiers and multifunction printers. A number of countries, including South Korea, Taiwan, Israel, and Australia, said that they would invoke provisions in the agreement allowing participating countries a delay of up to five years in implementing tariff cuts on sensitive items. Participating countries were also interested in continuing efforts to eliminate non-tariff barriers to information technology products in areas such as standards.

The United States was unsuccessful in its efforts to finalize the ITA II agreement during the Seattle Ministerial due to Malaysia’s refusal to sign on to the agreement. Once the agreement is final, the United States will be required to seek legislative authority to implement those tariff reductions not covered under its residual tariff-cutting authority under the Uruguay Round Agreements Act. The Administration also lacks authority to agree to the elimination of non-tariff barriers under ITA II and will need to be granted appropriate legislative authorization.

ECAT supports efforts to conclude ITA II and to have other countries accede to the ITA II agreement. Governments and business must continually update the definition of what constitutes an "IT product" to keep pace with technological developments.

E-Commerce

E-commerce is an increasingly important venue for international trade that is now used in all sectors of the economy and will become increasingly important in the first decade of the millennium. Industry analysts estimate that e-commerce will generate more than $3 trillion in sales by 2003 and that in the next six years nearly half of the U.S. workforce will be employed by industries that sell their products online.

One of the biggest challenges for the WTO will be to ensure that the Internet economy is allowed to flourish and support the growth of the global economy. Conflicting national regulations on e-commerce regarding privacy standards, the imposition of duties on Internet commerce, and market-access barriers to various levels of the e-commerce value chain can impede the growth of e-commerce. It is important that the WTO, in close coordination with other relevant international institutions and the U.S. business community, be ready to address the potentially wide range of barriers to e-commerce. The WTO work program on e-commerce is an important venue for continuing the examination of the trade-related aspects of e-commerce, although efforts should be made to address these issues in bilateral and regional agreements as well. Also of key importance to the growth of e-commerce is the early ratification and implementation of the WIPO "Internet" treaties.

In addressing e-commerce, several principles should guide negotiators. First, current WTO obligations, rules, disciplines and commitments (e.g., the GATT, GATS and TRIPS agreements) should apply to e-commerce. Second, goods and services delivered electronically should receive no less favorable treatment than goods and services delivered in physical form. Third, governments should refrain from imposing trade and other barriers that unnecessarily impede e-commerce. As well, efforts should continue to develop strong intellectual property protection rules.

In November 2000, the WTO General Council failed to reach consensus on the establishment of an e-commerce working party as sought by the United States, Canada and Japan largely because of opposition by the EU. The WTO General Council will continue to explore how best to address these issues and may consider an ad hoc task force or special sessions of the General Council.

Trade Facilitation

Efforts should also continue this year to seek a WTO agreement on trade facilitation. UNCTAD estimates that the average customs transaction involves 20 to 30 different parties, 40 documents, and the entry of 200 data elements. With the lowering of average tariffs around the globe, the cost of complying with customs requirements can exceed the cost of duties paid. The 1996 Singapore Ministerial declaration established a WTO work program to assess the scope of WTO rules concerning simplification of trade procedures. While WTO rules contain a number of provisions that require transparency and minimum procedural standards in trade administration, with the exception of customs valuation of goods, there are no specific WTO provisions governing customs procedures.

The United States, the EU, Korea, and Switzerland support the negotiation of a WTO agreement on trade facilitation aimed at reducing and simplifying administrative barriers to import and export transactions, and they proposed that trade facilitation negotiations be included in a new trade round. A number of developing country WTO members oppose a WTO agreement on trade facilitation on the grounds that they do not have the resources to modernize their customs operations to implement such an agreement. These countries have proposed that instead of a new WTO agreement, the WTO should establish a comprehensive technical assistance program in trade facilitation in coordination with other organizations such as the World Customs Organization.

ECAT supports the adoption of a binding WTO agreement on trade facilitation, based on the rules contained in the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), a work program on trade facilitation, and a commitment to simplify rules of origin. The United States should urge the WTO to support the efforts of the World Customs Organization to strengthen the Kyoto Convention. The United States should propose that the revised convention be used as a basis to develop a set of binding rules establishing high standards for customs procedures to be adopted by WTO members.

Transparency in Government Procurement

Another important initiative to expand market access and to combat corruption is to secure greater transparency in foreign government procurement practices. The 1996 Singapore Ministerial Declaration established a working group to conduct a study on transparency in government procurement practices and to develop elements for inclusion in an appropriate agreement. The United States had hoped to gain consensus on moving forward with an agreement on transparency in government procurement at the Seattle Ministerial. The effort was stalled when developing countries refused to agree to Japanese and European demands that the agreement include commitments to provide greater market access to foreign suppliers as well greater transparency in government procurement practices. WTO members generally have agreed to try to conclude a transparency agreement by the next WTO ministerial.

In continuing its effort to negotiate a government procurement transparency agreement, the United States should seek to include the following elements that have been developed through regional and WTO discussions on transparency in procurement:

The laws, regulations, and policies pertaining to any part of the government procurement process should be transparent and readily available to the public;
Adequate notice must be provided of bidding opportunities;
Bid specifications should be prepared based on neutral standards, and performance standards should be used to ensure that equivalent products are treated equally;
Objective criteria should be used in evaluating bids;
Bids should be opened in public in the presence of bidders to provide accountability;
Contracts should be awarded to the most highly-rated bidder, based on objective criteria;
Contracting agencies should provide bidders access to adequate dispute settlement procedures, including independent review of the bid process and remedies for non-compliance, including injunctive relief and monetary damages; and
Any preference levels or requirements must be notified to the WTO and made available to the public.

An agreement on transparency based on the principles outlined above is essential to promote predictable and competitive bidding environments within WTO member countries. ECAT also believes that efforts should continue to broaden the membership and coverage of the WTO Government Procurement Agreement and to harmonize its provisions on transparency with the text of any new transparency agreement.

The United States should also consider an alternative approach to removing barriers to procurement. Once a transparency agreement is negotiated and existing WTO member preferences, restrictions, and content requirements have been notified under the agreement, the United States could seek to initiate negotiations with WTO member countries to reduce domestic preference levels over time on an MFN basis, in the same manner that tariff rates have been reduced over time. This approach may be a way to broaden WTO member country compliance with transparency rules because, unlike the Government Procurement Agreement, it would not require a commitment to immediately eliminate all discriminatory procurement practices.

In 2000, the Working Group on Transparency in Government Procurement continued to develop and refine proposals and continued efforts to address the appropriate scope and coverage of a Transparency Agreement and the application of dispute settlement procedures to such an agreement.

Outlook for the Launch of Broad WTO Negotiations in 2001

The 3rd WTO Ministerial in Seattle, Washington, failed to produce the hoped for agreement to launch a major new round of trade negotiations. While the street protests and disruptions in Seattle complicated the logistics of the ministerial meetings, they did not determine the outcome of the meetings. Instead, deep divisions between the United States and its major trading partners, as well as between developed and developing countries, on the scope of the round and other major issues; the diversity of WTO membership; the heavily bracketed draft ministerial declaration; and the inexperience of the new WTO Director General combined to prevent trade ministers from reaching a consensus in Seattle.

While there remains some hope that the WTO will be able to launch a new round at its 4th Ministerial Meeting in Doha, Qatar, many of the substantive differences that prevented the launch of a new round in 1999 remain, including differences over the scope of the round and agricultural objectives:

Scope of the round: In 1999, the United States proposed a narrow agenda focused on market access and the built-in agenda negotiations on services and agriculture. The developing countries also favored a narrow agenda, but wanted the opportunity to renegotiate existing agreements in areas such as textiles and antidumping and address implementation issues as indicated below. The United States adamantly opposed efforts to reopen existing agreements, particularly the antidumping and subsidies agreements. The EU and Japan promoted a broad agenda for the new round, including areas such as competition and investment. Developing countries opposed the inclusion of new issues such as investment and competition in the agenda. While the EU has signaled some flexibility in how competition policy and investment issues may be considered, it continues to press for a broad round, as suggested in the European Commission’s draft paper, State of Play and Strategy for the New WTO Round.
Agriculture: In 1999, the EU and Japan refused to accept proposals made by the United States and the Cairns Group countries, including major agricultural exporting nations such as Australia and New Zealand, to eliminate export subsidies and substantially reduce farm supports. This issue remains unresolved.
Implementation issues: As deadlines for the implementation of WTO agreements covering intellectual property, trade-related investment measures, customs valuation, and other areas were reached at the end of 1999 and in 2000, developing countries sought to delay implementation through a blanket extension of transition periods. Developing countries also wanted to review other countries’ implementation of commitments in other areas, such as textiles and apparel and antidumping, where developing countries have complained that developed countries have not fully implemented their commitments. These issues remain unresolved and are discussed in Section 4.

Despite these obstacles, there is increasing interest in the United States, EU and elsewhere on pursuing a broader round of negotiations with a defined structure and timetable. Efforts will be made throughout the year to determine if a round can be launched by the end of the year. The preparatory process for the Qatar Ministerial was formally launched on March 8th, and members are discussing how to bridge the differences, including, for example, whether a short Ministerial declaration that does not define the final objectives of the negotiations may be acceptable.

ECAT POSITION: ECAT supports the launch in 2001 of comprehensive negotiations on agriculture, services, industrial tariffs and other issues to expand market-access opportunities and reduce barriers across all sectors. ECAT supports efforts to reach a final agreement in the ATL negotiations on toys, chemicals, forest products, fish, energy, environmental goods and services, telecommunications products, medical equipment and scientific instruments, and jewelry. ECAT supports the accelerated negotiation of ITA II and the enactment of necessary implementing legislation. ECAT supports efforts to ensure that WTO provisions are developed and applied in a manner that eliminates barriers to and supports the growth of the Internet and all levels of the e-commerce value chain.

Concluding and Implementing Comprehensive and Trade-Oriented Bilateral Free Trade Agreements

In 2000, the Clinton Administration negotiated a free trade agreement (FTA) with Jordan and launched free-trade-agreement negotiations with Singapore and Chile. During the 106th Congress, individual Members of Congress also proposed negotiating free trade agreements with the EU, Korea, New Zealand, the Pacific Rim countries, Turkey, and others.

U.S.-Jordan Free Trade Agreement

On October 24, 2000, the United States and Jordan signed the U.S.-Jordan Free Trade Agreement. This is only the fourth FTA that the United States signed (after Israel, Canada, and Mexico). As explained by then-USTR Barshefsky, the agreement has "broader political significance" because of Jordan’s role in promoting peace in the Middle East. The United States has a limited trade relationship with Jordan, with bilateral trade flows totaling only $386 million in 2000.

The FTA provides for the elimination of virtually all industrial and agricultural tariffs within 10 years and includes commitments with respect to services, intellectual property rights, e-commerce, and transparency. It also includes, for the first time ever in the text of a trade agreement, enforceable labor and environmental provisions.

While recognizing the strategic considerations that led to the negotiation of the U.S.-Jordan FTA, ECAT is concerned by several aspects of that agreement from a trade perspective, including the agreement’s limited and non-binding dispute settlement provisions, its long tariff phase-down periods, its unprecedented labor and environmental provisions (discussed further below), and its restrictive rules of origin. These provisions do not represent an appropriate model for other FTAs that are entered into for predominately economic, not foreign policy, reasons.

ECAT does support, however, the efforts made to address e-commerce and information technology in this agreement. With ratification of this agreement, Jordan will become the first Middle East country to become a member of the Information Technology Agreement by committing to an accelerated reduction of all tariffs to zero on high technology goods. This agreement is also the first trade agreement to include commitments covering electronic commerce and represents an important starting point for future negotiations over these issues. In particular, the agreement includes a binding commitment not to impose customs duties on electronic transmissions, not to impose unnecessary regulation on electronic commerce and not to place unnecessary barriers to market access for digitized products or on delivery services through electronic means. As well, Jordan agreed to strong protections for intellectual property, beyond the WTO TRIPs agreement, including adherence to the provisions of the WIPO Digital Treaties and strong guarantees on enforcement.

The Clinton Administration sent draft legislation to Congress that is necessary to implement the tariff provisions of this agreement. With the lack of trade-negotiating authority legislation, there is no specific timetable for Congress’ consideration of that legislation.

U.S.-Singapore Free Trade Agreement Negotiations

On November 16, 2000, President Clinton and Prime Minister Goh Chok Tong of Singapore agreed to launch FTA negotiations. Two rounds of negotiations were held in Washington, D.C. (from December 4 to 21, 2000 and from January 10 to 18, 2001) and U.S. experts conducted a fact-finding mission in Singapore during the week of January 8, 2001. U.S. and Singaporean negotiators discussed the major areas of trade, including trade in agricultural goods; rules of origin and customs procedures; safeguards; antidumping, countervailing duties and subsidies; sanitary and phytosanitary (SPS) measures; technical norms and standards; investment; services; financial services; e-commerce; temporary entry of business people; competition policy; intellectual property; government procurement; transparency; and dispute settlement, as well as labor and environmental issues. Since there is no bilateral investment treaty between the two countries, investment issues are also being discussed in the context of the FTA negotiations.

As announced in a Joint Declaration on January 17, 2001, "substantial progress has been achieved," but "{m}uch work remains to be done to result in a final Agreement." Negotiations are scheduled to resume with the Bush Administration between May 21 and 26, 2000.

Singapore is the United States’ largest trading partner in Southeast Asia and our 10th largest trading partner. Bilateral trade between the United States and Singapore has more than doubled in the past decade, from $17.8 billion in 1990 to $37 billion in 2000. Singapore is a member of APEC and ASEAN and has an FTA with New Zealand. Singapore is also discussing FTAs with Australia, Canada, and Japan and, in February 2001, announced that it would begin exploratory talks with the four-member European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland) in March 2001.

U.S.-Chile Free Trade Agreement Negotiations

On November 29, 2000, the United States and Chile agreed to begin negotiations on a comprehensive FTA. The FTA will build on the efforts of the U.S.-Chile Joint Commission on Trade and Investment that was established in April 1998 to resolve areas of bilateral dispute and examine areas in which bilateral trade agreements could be reached in areas such as services, customs, and e-commerce. As part of this Commission, the two countries agreed to work together in APEC and the FTAA negotiations. The Commission also established ad hoc working groups to address a number of issues, including e-commerce, business facilitation, and mutual recognition agreements on the certification of technical standards.

U.S. and Chilean negotiators held two rounds of negotiations in late 2000 and early 2001 discussing the following major issues: trade in agricultural goods; rules of origin and customs procedures; safeguards; antidumping, countervailing duties and subsidies; SPS measures; technical norms and standards; investment; services; financial services; e-commerce; temporary entry of business people; competition policy; intellectual property; government procurement; transparency and dispute settlement, as well as labor and environmental issues. Bush Administration officials have indicated that they will be continuing discussions with Chilean negotiators at the end of March in Miami.

Bilateral trade between the United States and Chile has more than doubled in the past decade from almost $3 billion in 1990 to $6.7 billion in 2000. Chile is a member of APEC and MERCOSUR and has free trade agreements with Canada and Mexico. It has begun trade agreement talks with the EU and South Korea and is exploring the possibility of negotiations with New Zealand, Singapore and Japan.

ECAT POSITION: ECAT supports the negotiation and implementation of comprehensive and trade-oriented bilateral and regional free trade agreements.

Addressing Concerns about Trade and Investment Liberalization

As the Bush Administration and Congress work to develop a consensus on U.S. trade and investment objectives, there will be much pressure to address labor, environmental, food safety, health, and other issues through trade agreements and trade sanctions. Without question, there are serious labor, environmental, food safety, and health issues that should be addressed. Before rushing to adopt solutions that may not be effective, however, it is critical that policymakers first work to define the United States’ objectives and then determine how they can best be achieved.

Labor and Environment Issues

As the World Bank and others have documented, it is precisely through increased trade and economic growth that developing countries are better able and increasingly motivated by a growing middle class to improve labor and environmental standards. 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. Proposals that would impede trade liberalization and economic growth must, therefore, be seriously questioned.

For the most part, labor and environmental issues may be better addressed directly through separate agendas in organizations with technical expertise, rather than as add-ons to the trade agenda. Efforts in the International Labor Organization, the Commission for Environmental Cooperation, the North American Development Bank and other organizations, for example, can be intensified. And, in those cases where complementarity between U.S. trade and U.S. labor and/or U.S. environmental objectives exists, efforts should be made to address these objectives jointly and in a cooperative manner. We review below the major trade-related labor and environmental efforts, with the exception of NAFTA related issues, which are addressed in Section 9.

Labor Issues

International Labor Organization Activities

Over the past several years, there has been substantial progress in developing a greater consensus on labor standards in the International Labor Organization (ILO). Since 1998, when the ILO began a major push for country ratifications of the core conventions, ratifications of these conventions have increased by 20 percent (or 168 ratifications). The eight core conventions are:

No. 29, Forced Labor, 1930;
No. 87, Freedom of Association and Protection of the Right to Organize, 1948;
No. 98, Right to Organize and Collective Bargaining, 1949;
No. 100, Equal Remuneration, 1951;
No. 105, Abolition of Forced Labor, 1957
No. 111, Discrimination (Employment and Occupation), 1958
No. 138, Minimum Age Convention, 1973; and
No. 182, Worst Forms of Child Labor (1999).

In 1998, the ILO also adopted the Declaration on Fundamental Rights and Principles at Work to promote the observance of basic labor rights with a follow-up mechanism to promote countries’ compliance with these labor principles. In 1999, the ILO published "Your Voice at Work," the first report following up on that Declaration, which focused on ILO members’ observance of two conventions: ILO Conventions No. 87 (Freedom of Association and Protection of the Right to Organize) and No. 98 (The Right to Organize and Collective Bargaining). (While not having ratified either convention, the United States agreed to observe the core principles of freedom of association and the right to organize as part of the 1998 Declaration.)

In 1999, the ILO adopted a new convention, No. 182, banning the worst forms of child labor. The United States became the second country to ratify this convention, which had 62 ratifications by late February 2001.

The United States is currently the largest donor to the ILO’s International Programme to Eliminate Child Labor (IPEC) (established in 1992), which seeks to take children out of unhealthy work environments and place them in schools. Under the IPEC 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. Between fiscal years 1995 and 2000, Congress appropriated over $68 million to the Department of Labor for international child labor activities and funding of the IPEC.

Perhaps most significantly, in November 2000, the ILO Governing Body, for the first time ever, allowed measures to go forward to compel a country, the Government of Myanmar (Burma), to eliminate forced labor. As a result of an inquiry initiated under Article 33 of the ILO Constitution, the ILO has been reviewing whether Myanmar is complying with its obligations under the Forced Labor Convention, 1930 (No. 29) that Myanmar ratified in 1955. An ILO technical cooperation mission in October 2000 found that despite prior recommendations, Myanmar continued to violate the Convention through the "pervasive use of forced labor imposed by the authorities and the military." As a result, the Governing Body permitted implementation of an ILO Conference resolution requiring an ongoing review of Myanmar’s activities and recommending that Member Countries review their relations with Myanmar and "take appropriate measures to ensure that such relations do not perpetuate or extend the system of forced or compulsory labor in that country." The ILO also recommended a review of whether the ILO, United Nations or United Nations Economic and Social Council should cease any activities in Myanmar. Article 33 which establishes a process for reviewing countries’ compliance with ratified conventions had been used little prior to this point and had never resulted in recommendations for action as was issued with respect to Myanmar.

The ILO is also involved in reviewing Cambodia’s labor practices as part of the U.S.-Cambodian textile agreement discussed below.

Section 307 of the Tariff Act of 1930

The United States has stepped up U.S. Customs Service enforcement of section 307 of the Tariff Act of 1930, which bans the importation of goods, made from forced or indentured labor. On June 12, 1999, President Clinton issued Executive Order 13126 ("Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor") to prevent federal agencies from buying products that have been made with forced or indentured child labor. Under procurement regulations implementing the Executive Order, federal contractors who supply products on a list published by the Department of Labor must certify that they have made a good faith effort to determine whether forced or indentured child labor was used to produce the items. On January 18, 2001, the Department of Labor in consultation and cooperation with the Department of the Treasury and the Department of State, developed the list of products, identified by country of origin, which they believe might have been made with forced or indentured child labor. The list will be updated periodically.

The Trade and Development Act of 2000 also modified section 307, in a provision authored by Senator Harkin (D-IA), clarifying that forced or indentured labor includes forced or indentured child labor.

Generalized System of Preferences and Other Preference Programs

The Trade and Development Act of 2000, enacted on May 18, 2000, added a new eligibility requirement to the Generalized System of Preferences (GSP) program (and, as a result, to the sub-Saharan African (SSA) program) and to the expanded Caribbean Basin Initiative (CBI) program that focuses on whether a country has "implemented its commitments to eliminate the worst forms of child labor." This statute also added a general eligibility provision on worker rights to the expanded CBI program. In determining country eligibility under both the new SSA and CBI programs, USTR considered these factors as required and was able to seek greater labor rights protections in several countries.

USTR also continues to enforce the worker rights provision of the GSP statute. On July 3, 2000, the President suspended Belarus' GSP benefits based on a finding by an interagency committee, chaired by USTR, that Belarus has not taken sufficient steps to conform to internationally recognized worker rights and continued to suppress trade union rights and harass union leaders. At the same time, USTR announced the termination of the GSP investigation concerning the provision of core worker rights in Thailand, following Thailand’s enactment of the State Enterprises Labor Relations Act (SELRA) in February 2000.

WTO Working Group on Worker Rights

The United States remains obligated by section 131 of the Uruguay Round Agreements Act to propose the creation of a WTO working group on trade and worker rights. 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. As discussed in Section 4, the EU proposed an alternative proposal under which a special standing committee would be created outside the WTO to study the ways in which global trade affects workers around the world. Angered by President Clinton’s statements in a news article that appeared in Seattle during the ministerial meetings, developing countries refused to consider any compromise on the labor issue.

U.S.-China Relations Act

The U.S.-China Relations Act, which authorized the extension of PNTR to China, also contained three major provisions related to labor issues. Title III established a Congressional-Executive Commission to examine human rights in China, including China’s "protection of internationally recognized worker rights." Sections 501-505 established a task force to promote better enforcement of the Section 307 import prohibition on products made with forced or prison labor particularly from China. Section 511(b) authorized the Secretary of Labor to set up a rule-of-law program related to the protection of internationally-recognized worker rights in China.

U.S.-Cambodia Bilateral Textile Agreement

The United States and Cambodia signed a three-year bilateral textile agreement on January 21, 1999 that establishes base quota levels for Cambodian textile and apparel products. For the first time ever, the agreement allows for an annual quota increase, up to 14 percent in the base quota levels (on top of the traditional six percent annual growth rate), pending an annual U.S. determination on whether worker rights in Cambodian textile and apparel factories "substantially comply" with Cambodian labor laws and internationally-recognized core labor standards.

In the agreement’s first annual review in December 1999, the United States found that Cambodia was "not in substantial compliance." The United States agreed, however, to award Cambodia with a five percent increase in its base quota levels contingent upon the establishment of an industry-monitoring program to be administered by the ILO that would be funded by the United States, the Cambodian Government and the Cambodian Garment Manufacturers Association. Cambodia fulfilled that mandate and was awarded the five percent increase in May 2000. At that time, the United States laid out five additional areas where progress was needed, and in September 2000, the United States acknowledged gains in four of the five areas and awarded Cambodia an additional four percent increase in its 2000 quota levels, equaling a total increase of nine percent out of a possible 14 percent in 2000.

In January 2001, after the second annual review by the United States, Cambodia was awarded a nine percent (out of a possible 14 percent and on top of the traditional six percent annual growth rate) increase in its 2001 quota levels. This increase was based on an assessment that while Cambodia is making progress on many labor issues, it was falling short on internationally recognized standards.

U.S.-Jordan Free Trade Agreement

Signed on October 24, 2000, the U.S.-Jordan FTA contains, for the first time ever in a trade agreement, enforceable labor and environmental provisions. Both the labor and environmental provisions include hortatory language recognizing the importance of maintaining high labor and environmental standards. More significantly, both provisions include an enforceable commitment that the parties "shall not fail to effectively enforce its [labor and environmental] laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties." Additional language is included explaining that a Party remains in compliance with these provisions if a course of action or inaction reflects the "reasonable exercise" of its investigatory, prosecutorial, or regulatory discretion. It appears that these provisions permit the imposition of trade sanctions more readily and on a broader range of issues than the NAFTA side agreements (which authorize the imposition of monetary fines before sanctions can be imposed and limit, particularly in the labor side agreement, the issues for which sanctions can be imposed). It remains unclear what problems the provisions in the Jordan Agreement are seeking to address since the Clinton Administration had argued that Jordan maintains high labor and environmental standards.

Environment Issues

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.

WTO Activities

The multilateral trading system 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 1994, WTO member states agreed to establish the Committee on Trade and the Environment (CTE) to try to address many of the environment-trade issues that have arisen. In March 1999, the WTO held a high-level symposium to discuss such issues further. In November 1999, the WTO announced 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 CTE held three meetings in 2000, focusing on market-access issues and the relationship between the provisions of the multilateral trading and environmental systems (including multilateral environmental agreements and dispute settlement provisions). The WTO Secretariat also updated the Environmental Database (EDB) in 2000 with all environment-related notifications to the WTO. As well, the Secretariat organized a second series of regional seminars on trade and environment for government officials from certain developing and least-developed countries to raise awareness on the linkages between trade, environment, and sustainable development and to enhance the dialogue between policymakers from ministries of both trade and environment in developing and least-developed WTO Member Governments.

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 96 dispute settlement cases involving the United States. In each of these cases, the final WTO dispute settlement panel or Appellate Body report 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-excluder devices on nets used by shrimping boats to Asian countries was discriminatory, but the panel did not question the validity of the law itself as an appropriate exception to WTO rules under Article XX of the 1994 GATT. 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. On 12 October 2000, Malaysia challenged the United States’ implementation of this matter, which the WTO Dispute Settlement Body referred to the original panel. In a third important environmental case at the WTO, not involving the United States, a WTO panel upheld France’s ban on imports of asbestos as justified under GATT Article XX as necessary to protect human health or the environment. Canada has appealed this decision to the Appellate Body.

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 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.

Environmental Reviews of Trade Agreements

Following up on the 1999 Executive Order 13141 directing USTR to conduct environmental reviews of certain trade agreements, USTR and the Council on Environmental Quality issued Guidelines for the Implementation of Executive Order 13141 in December 2000. These guidelines are intended to identify "reasonably foreseeable impacts of trade agreements (both positive and negative)," as well as the "complementarities between trade and environmental objectives."

Import Ban on Products Containing Dog and Cat Fur

The only major piece of trade legislation focusing on environmental issues during the last Congress was the prohibition on imports of products containing dog and cat fur that was contained in the Trade and Tariff Suspension Act of 2000.

U.S.-Jordan Free Trade Agreement

As described above under labor issues, the U.S.-Jordan FTA contains, for the first time ever in a trade agreement, enforceable environmental provisions. It remains unclear what problems the provisions in the Jordan Agreement are seeking to address since the Clinton Administration had argued that Jordan maintains high environmental standards.

Food Trade Issues

Unsubstantiated concerns about the safety of Genetically Modified Organisms and hormone-fed beef and implementation of the Biosafety Protocol will remain major issues this year.

Genetically-Modified Organisms

Fueled by food-safety scares over "mad cow" disease and other cases involving contamination of animal feed, public opposition to genetically-modified organisms (GMOs) is widespread in Europe and has extended to Asian countries and the United States. At the same time, the need for and use of GMO crops is spreading worldwide. Genetically engineered crops have higher yields and reduce farmers’ dependence on dangerous pesticides. 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. Subsequent studies have shown, however, that the effect of GMOs on monarch butterflies is no different than non-GMO agricultural practices.

Since 1998, producers have sought approvals on at least 14 varieties of GMOs, but the European Commission has effectively maintained a moratorium and has not granted any approvals since 1998. On February 14, 2001, the European Parliament began a process that may lift this moratorium by approving (by a vote of 338-52) Directive 90/220, which will regulate the introduction, and licensing of GMO foods. This legislation requires an independent scientific assessment of possible risks, surveillance after the crops are released and labeling and may require new approvals for GMOs that the EU had approved prior to 1998. This legislation could take up to 18 months to be implemented by EU member states. However, six countries -- France, Austria, Italy, Denmark, Luxembourg and Greece -- announced even before the vote that they would not approve any GMO products until additional regulations are in place on traceability of GMO products, labeling and environmental liability. Given the 18-month implementation period, EU officials have indicated that it may take two years before any GMO products are actually approved. The Administration and U.S. agriculture producers are closely reviewing this legislation and monitoring prospects for its implementation.

The European Commission is also considering draft proposals on traceability and genetically-modified animal feed. The traceabilty proposal would require shipments to identify specific GMO varieties, which is not possible under the U.S. system, which permits the commingling of different varieties in bulk shipments. Separately, the feed directive would mandate new requirements for the approval of processed feeds, which are not currently covered by EU rules since the products cannot be reproduced. U.S. agriculture producers and the U.S. government are concerned that these proposals will impose unjustified and burdensome trade barriers and are monitoring these developments closely.

Beyond the EU, Australia, New Zealand, Japan, and Korea have passed mandatory GMO labeling laws over opposition of the United States, which 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 SPS Measures, which permits 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 supports the establishment of a WTO biotechnology working group. No final agreement has been reached as yet on the creation of the working group.

Biosafety Protocol

In January 2000, the Cartagena Protocol on Biosafety was negotiated under the framework of the 1992 United Nations Convention on Biological Diversity (CBD), to which the United States is not a party. This represents the first international agreement regulating trade in GMOs. The Protocol was signed in May 2000 and will only go into effect after 50 countries have ratified it. Because the United States has not ratified the CBD, the United States only had "observer" status at the negotiations and worked through the so-called "Miami group" of agricultural allies (e.g., Canada, Australia, and Argentina). The United States must adhere to trade rules imposed by countries signing the Protocol, but as a non-CBD ratifier, does not have to implement the Protocol.

The Protocol requires exporters to obtain advance approval from the importing country, in the form of advance informed agreements (AIA), for initial shipments of GMOs intended for release into the environment (i.e., seeds, microbes, or fish to be put in a river) 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. It 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." It also contains a savings clause to preserve countries’ existing rights and obligations under other international agreements such as the WTO, in other words, the Protocol is not to be interpreted as changing any rights. The Protocol will be reviewed five years after its entry into force, and at least every five years thereafter.

EU Beef-Hormone Case

In July 1999, 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 and passage (as part of the Trade and Development Act of 2000) of the carousel retaliation provision requiring the periodic modification of the products targeted for retaliation in both the beef and bananas case. This provision, which is discussed in more detail in section 3, has yet to be implemented.

In 2000, U.S. and EU negotiators discussed proposals for resolving this dispute by expanding the quota for U.S. hormone-free beef. Negotiators were unable to reach an agreement that would substantially compensate U.S. beef producers.

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 costs 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 princi