Emergency Committee For American Trade - Publications

World Trade Organization

The trade liberalization shaped by the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT) has been a major engine of global economic growth. Since the founding of the multilateral trading system, the world economy has grown six-fold, per capita income worldwide has tripled, and hundreds of millions of families around the globe have risen from poverty. The liberalization under the Uruguay Round Agreements alone is expected to produce a $230 billion increase in world GDP and a $745 billion increase in world trade by 2005. For the United States alone, the Uruguay Round is expected to provide an income gain of $600 to $800 a year for the average family of four. Since the Uruguay Round, the WTO has produced agreements on information technology, financial services, and telecommunications, thereby opening up market opportunities in new areas of commerce that will produce even greater global economic growth.

For the United States, this global economic growth has helped the U.S. economy grow from $7 trillion in 1992 to over $10 trillion last year. U.S. exports have grown over 70 percent since 1992. A strong multilateral trading system is essential to maintain the historic growth in the U.S. and the world economy that has occurred over the last half-century.

As discussed in detail in Section 3, the WTO has embarked on new negotiations initiated at the Fourth Ministerial Conference in Doha, Qatar. This section describes the WTO Framework and reviews ongoing WTO activities apart from the negotiations.

WTO Framework

The WTO was created in 1995 by the Uruguay Round Agreements and is the primary multilateral institution governing the conduct of trade between member nations. It is the successor organization to the GATT, which was founded in 1947 under the Bretton Woods Agreement. It is based on the fundamental principles of non-discrimination and most-favored-nation treatment. The legal framework of the WTO encompasses:

the rules of the multilateral trading system under the original GATT, set out under GATT Articles I through XXVIII;
the agreements negotiated during successive GATT negotiations to which all WTO members must subscribe, including the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Intellectual Property (TRIPS), and the Agreement on Trade-Related Investment Measures (TRIMS);
plurilateral agreements on government procurement, aircraft, meat, and dairy in which membership is voluntary; and
dispute settlement and trade policy review mechanisms.

The WTO Agreement is a "single-undertaking," under which member countries must adhere to the basic WTO rules and all agreements that have been negotiated under the GATT and the WTO.

The WTO is not a static institution; it has kept the trading system in step with technological development through the negotiation of agreements on information technology, telecommunications, financial services, electronic commerce and other initiatives. The WTO rules also have promoted global economic stability by requiring WTO member countries to maintain open markets. The willingness of the United States and other WTO members to resist protectionist pressures to close their markets during the Asian financial crisis laid the foundation for the financial recovery that is now underway.

The GATT/WTO has grown from 90 members in 1986 to 144 members at the beginning of 2002, accounting for over 90 percent of world trade. An additional 28 countries are in the process of applying for WTO membership, including Russia and Saudi Arabia. Since the early 1980s, WTO membership has grown increasingly diverse as developing countries now account for more than 80 percent of total WTO membership.

Although WTO dispute settlement is binding, compliance with WTO panel recommendations is voluntary. The WTO has no authority to force a member country to change its domestic laws or policies and, therefore, does not pose a threat to enforcement of U.S. health, safety, or environmental standards. In cases in which a WTO member chooses not to bring itself into conformity with a panel decision, the affected WTO member countries have the right to request compensation or to retaliate.

Despite some adverse decisions against the United States, it is important to remember that the binding dispute settlement process is the backbone of the WTO. While we may not agree with every WTO panel decision, overall the United States has been a major beneficiary of the WTO dispute settlement process, and has prevailed in nearly all of the WTO disputes that it has initiated.

To encourage ongoing liberalization, the WTO framework agreed to in 1994 established the so-called "built-in" agenda that sets out a timetable for the review of existing agreements and a schedule for new negotiations on agriculture and services. The built-in agenda played an important role in maintaining the momentum for trade liberalization in the absence of a consensus on a broad new round of negotiations. The WTO agenda is also set through bi-annual ministerial meetings required under the WTO Agreement.

Major Issues

Implementation of WTO Agreements

At the Seattle WTO Ministerial and subsequently, major developing countries, such as Egypt, India, Indonesia, and Nigeria, demanded flexibility in the application of implementation deadlines for certain WTO agreements as a pre-condition to their support for further WTO liberalization. In particular, these countries asked that the moratorium on bringing certain cases against developing countries under the TRIPS agreement be extended, and that implementation deadlines under the TRIMS and Customs Valuation agreements also be extended. Developing countries also sought a review of developed countries' implementation of their commitments under other agreements, such as the WTO Agreements on Textiles and Clothing, Agriculture, Antidumping, and Subsidies and Countervailing Measures.

These issues continued to be raised through 2000 and early in 2001 with little resolution. In 2001, the WTO decided that decisions on implementation issues would be considered along with the launch of new negotiations at the Fourth WTO Ministerial Conference in Doha, Qatar.

After extensive negotiations in the lead-up to and during the Doha Ministerial, WTO member countries agreed to a separate decision on Implementation-Related Issues and Concerns (Implementation Decision) in addition to the Ministerial Declaration that launched the negotiations. The Implementation Decision set forth approximately 50 initiatives to help developing countries comply with existing Agreements on Sanitary and Phytosanitary Measures, Trade-Related Aspects of Intellectual Property Rights (TRIPS), Subsidies and Countervailing Measures, Antidumping, Textiles and Clothing, Trade-Related Investment Measures and Technical Barriers to Trade. In some cases, the Member Countries agreed to certain interpretations or to refrain from certain actions; in other cases, WTO committees were directed to consider issues further. Among the most significant provisions agreed to were the following:

With regard to textiles and apparel, countries agreed to exercise "particular consideration" before initiating antidumping cases on products from developing countries from 2005 to 2007 and to non-binding language on the early integration of products and effective quota elimination. The United States and Canada resisted, however, developing country demands to liberalize quota growth calculations.
In agriculture, countries agreed to exercise restraint in challenging measures notified under the green box by developing countries to promote rural development and adequately address food security concerns.
In antidumping, countries agreed not to initiate a new investigation on a product within one year unless circumstances have changed.
In subsidies, countries agreed that countries would be moved off the list of least developed countries excluded from the export subsidy prohibition only if their per capita gross national product exceeded $1,000 for three consecutive years.
In intellectual property, countries agreed not to initiate nullification and impairment cases while the TRIPS Council was reviewing this issue. The Implementation Decision also required the WTO to "put into place a mechanism for ensuring the monitoring and full implementation" of the requirement that developed countries provide incentives to encourage technology transfer to developing countries.
The Committee on Trade and Development is directed to make recommendations regarding extending mandatory special and differential treatment to least developed countries.
In several areas, the Implementation Decision urges countries to provide financial or technical assistance to least developed countries.

The final Doha Ministerial Declaration also clarifies that negotiations on outstanding implementation issues will be an "integral part of the Work Programme"; issues for which there is a negotiating mandate shall be addressed under the mandate and other outstanding issues shall be addressed by relevant WTO bodies which are directed to report to the Trade Negotiations Committee by the end of 2002.

WTO members also made several new commitments on technical cooperation and capacity building. The Doha Ministerial Declaration directed the development of a plan to ensure long-term funding for technical assistance. In accordance with this direction, the WTO General Council established the Doha Development Agenda Global Trust Fund in December 2001, with a proposed budget of $9 million, which increases technical assistance by 80 percent. The United States announced in January that it would donate $1 million to this fund. A pledging conference is scheduled for March 2002. Countries also agreed to the New Strategy for WTO Technical Assistance and Capacity Building and Integration. As well, members undertook specific commitments in particular areas, such as market access, trade and investment, trade and competition policy, transparency in government procurement, trade facilitation, and the environment. The Declaration also directs the WTO Secretariat, in coordination with other relevant agencies to encourage WTO developing country members to include trade measures in their development strategy as a significant element for reducing poverty. The WTO is also directed to provide technical assistance with other relevant international organizations within a coherent policy framework. The Director-General is directed to report to the General Council in December 2002 and the Fifth Ministerial Conference on progress in this area. On February 26, 2002, heads of the WTO, the World Bank, the International Monetary Fund (IMF), the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD), and the United Nations Development Programme (UNDP) agreed to provide concrete and coordinated support and technical assistance to help developing and least-developed countries to participate in negotiations and take advantage of the international trading system. On February 27, 2002, the WTO and Inter-American Development Bank signed a memorandum of understanding to deepen cooperation and provide technical assistance on trade negotiations and capacity-building to Latin American and Caribbean countries. The WTO and IADB will establish joint programs to support regional and subregional workshops, meetings, training courses, and analysis of trade policy and multilateral negotiations issues.

ECAT POSITION: Full implementation of WTO agreements is the cornerstone of the multilateral trading system and must remain a top priority on the WTO agenda. The United States should continue to insist that all WTO Members implement the WTO Agreements in a timely and comprehensive manner. Technical assistance and assistance for capacity building are important tools to help advance the United States' implementation goals. Developing country concerns regarding implementation should be addressed through increased technical assistance and not become the pretext for renegotiating existing WTO agreements. ECAT urges the Administration to oppose efforts to reopen the TRIPS, TRIMS, or other agreements or to delay full implementation of these agreements.

WTO Institutional Reforms

Efforts to promote greater participation in the WTO decision-making process by a larger number of WTO member countries and to make the WTO more transparent to the public continued in 2001. The WTO has held meetings with NGO representatives on labor and environment issues, as well as the ministerial agenda. Before a permanent process is created, however, the threshold question of the standing of NGOs groups must be addressed. Some NGO organizations have large memberships with elected representatives; others are small organizations that do not represent identifiable constituencies.

At the Doha Ministerial Conference, countries agreed to continue to pursue the goals of greater participation and greater transparency, stating:

"Recognizing the challenges posed by an expanding WTO membership, we confirm our collective responsibility to ensure internal transparency and the effective participation of all Members. While emphasizing the intergovernmental character of the organization, we are committed to making the WTO's operations more transparent, including through more effective and prompt dissemination of information, and to improve dialogue with the public. We shall therefore at the national and multilateral levels continue to promote a better public understanding of the WTO and to communicate the benefits of a liberal, rules-based multilateral trading system."

ECAT POSITION: ECAT supports efforts to expand participation by WTO Members in the WTO process and to increase overall transparency in the WTO, as well as transparency in the dispute settlement process.

WTO Accessions

Another important area of WTO activity this year will be achieving progress on the accession of the 28 countries that have applied to join the WTO. Accession negotiations involve a review of a country's trade regime and its consistency with WTO obligations. WTO applicants must agree to abide by WTO rules and enter into commercially-viable, market-access commitments on goods, services, and agriculture that are negotiated both bilaterally and multilaterally.

Negotiations take place in a Working Party established by the WTO and bilaterally. These negotiations 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.

Once accession negotiations are complete, the applicant country must be prepared to implement its WTO obligations and commitments. Each current WTO member country must decide whether to sign the country's protocol of accession and extend WTO benefits to the new WTO member. WTO members may choose not to apply WTO benefits to a new member pursuant to Article 13 of the WTO.

There were four new members of the WTO in 2001: China, Taiwan, Lithuania and Moldova. For these four, particularly China given the size of its economy and the extent of its commitments to reform, the focus must now turn to their implementation of their WTO commitments.

China's Entry into the WTO

The General Council of the WTO formally approved an agreement on China's accession to the WTO on November 10, 2001. China signed the agreement and submitted its ratification on November 11th. On December 11, 2001, China became the 143rd member of the WTO. The President certified that China had met the requirements Congress set forth and extended permanent normal trade relations (PNTR) to China in accordance with the U.S.-China Relations Act discussed below.

China's WTO Commitments

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 terms for China's accession are: (1) comprehensive, removing major trade barriers in all major sectors of the economy, (2) fully enforceable, and (3) designed to produce rapid results. Highlights of some of the major achievements 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: China agreed to provide full trading rights for U.S. and other foreign 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: China agreed to cut 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: China agreed 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: China also agreed to a 12-year product-specific safeguard provision that ensures that the United States and other countries can take action against increased imports from China that cause market disruption in the their economies. 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.

U.S.-China Relations Act and Congressional-Executive Commission on China

In 2000, Congress passed and the President signed into law the U.S.-China Relations Act. In addition to authorizing 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 (after certifying 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), it also included the following key provisions:

Import Surge Safeguard. Title II implements the product-specific safeguard included in the November 1999 U.S.-China bilateral WTO agreement and China's protocol of accession. The safeguard permits a WTO member to impose temporary import restrictions in cases where products from China are being imported into its territory 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.
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.
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 Congressional-Executive Commission is chaired by Finance Committee Chairman Baucus (D-MT). Congressman Doug Bereuter (R-NE), Chairman of the International Monetary Policy and Trade Subcommittee of the House Financial Services Committee is co-chair. It held its first hearing on February 7, 2001 and considered human rights in the context of the rule of law. Following the hearing, Senator Baucus and Congressman Bereuter sent a letter to the President requesting that he raise certain human rights and rule of law issues during his February 2002 visit to China. On March 18, 2001, all eighteen members of the Commission sent a letter to President Bush urging him to push for passage of a resolution on human rights in China at the upcoming U.N. Human Rights Commission (UNHRC) meeting in Geneva. The next hearing will take place on April 11th.

Ensuring Implementation of Commitments

China's accession to the WTO will not, of course, be the end of the process; China will not magically be transformed overnight or in a year. It is critical, therefore, that the Administration and the business community work on the ground in China in a constructive manner to promote the change that China's WTO accession promises. It will be most effective to help identify at an early stage potential or actual implementation concerns and work with Chinese officials and other governments to help avoid or rectify any problems. Successful implementation of China's commitments will also require capacity building and technical assistance from the United States government and business community and from the WTO and its other members as well.

The Administration has undertaken a review of China's new tariff schedule and found a few isolated discrepancies. In December 2001, the Administration created a Trade Policy Staff Subcommittee on China to guide the Administration's monitoring approach on China. While formal decisions have not been made, statements by Administration officials indicate that the Administration will have a multi-pronged approach, including:

Using State Department economic officers, Foreign Commercial Service and Multilateral Agreements Compliance officers from the Commerce Department, and Foreign Agricultural Service officers to gather information and help companies address day-to-day concerns.
Using an inter-agency team of experts to monitor compliance and seek information from U.S. business, trade associations and other sources.
Educating and assisting Chinese officials to improve compliance with complicated WTO commitments in a constructive manner.
Actively participating in the WTO's annual Transitional Review Mechanism on China.
Taking action to resolve issues quickly, using bilateral means, the Transitional Review Mechanism, and WTO consultations under the Dispute Settlement Understanding where appropriate.

In 2000, the Senate Finance Committee and House Ways and Means Committee requested the General Accounting Office (GAO) to monitor China's compliance with its WTO commitments with a report one year after China's accession and yearly thereafter. GAO has already begun a process to survey the business community on their view of China's progress in implementing its commitments.

Russia's Proposed Accession

Prospects for Accession

The Working Group on Russia's accession was established on June 16, 1993 and negotiations have been ongoing since 1995. The most recent Working Party meeting was held on January 23-34, 2002, during which WTO Member countries noted Russia's improved market-access offer, but pressed for greater liberalization commitments, particularly in its services sectors. Issues that have been discussed include agriculture, customs, excise taxation, national treatment, import licensing, industrial subsidies, intellectual property, sanitary and phytosanitary measures, services, technical barriers to trade, and trade-related investment measures.

Plurilateral negotiations were also held before the most recent Working Party sessions at the request of the United States and other countries on (1) telecommunications to review Russia's new telecommunications law, including possible investment restrictions, which is expected to consolidate approximately 80 state telephone companies; and (2) agriculture, to review Russia's provision of domestic support.

Russia is engaged in active negotiations with approximately 50 countries on goods and 29 countries on services. In November 2001, the WTO Secretariat circulated a report reviewing Russia's economic and trade policies. It outlined a number of problem areas that need to be resolved before completing Russia's accession negotiations - including restrictions on imported pharmaceuticals, antidumping rules, and state-owned enterprises. The report also noted many areas where additional information was required, including on agricultural support, its value-added tax, privatization plans, trading rights and registration requirements to import and export, and its system for auctioning quota licenses.

The first draft of the Working Party report is due this spring or early summer. WTO Director-General Michael Moore and WTO Director General-designate Supachai Panitchpakdi have both indicated that Russia's accession could be completed within the next 18 months or sooner if Russia and WTO member countries actively engage in the negotiations and allow for some flexibility in the time period for Russia's implementation of its commitments.

Permanent Normal Trade Relations for Russia

The Bush Administration is seeking Congressional passage of permanent normal trade relations (PNTR) for Russia this year, regardless of whether it completes its negotiations to enter the WTO.

Russia has been in full compliance with the Jackson-Vanik's freedom-of-emigration provisions of the Trade Act of 1974 since 1994.

On December 20, 2001, Ways and Means Committee Chairman Thomas introduced H.R. 3553 to extend PNTR to Russia. Senator Lugar (R-IN) introduced companion legislation, S. 1861, on the same date.

Concerns have been raised by some in the business community and by Members of Congress that granting PNTR prior to WTO accession will weaken the United States' ability to secure important trade liberalizing commitments as part of the accession process. The Administration has argued that this additional leverage is not necessary.

ECAT POSITION: ECAT supports the full implementation of China's and other new WTO members' commitments. With respect to China, ECAT strongly supports full funding for the commercial, labor, legal system and civil society programs authorized by the U.S.-China Relations Act and for the efforts of the United States Trade Representative and the Department of Commerce and other parts of the U.S. government to monitor and work constructively to promote full implementation of China's WTO commitments. ECAT also supports the timely accession of Russia and other major countries on terms comparable to that agreed to with China and other WTO members.

Status of WTO Committees and Working Parties

Rules of Origin

The WTO began work on the development of harmonized global rules of origin in 1995, with the deadline of completing the work in three years. The new harmonized system would be based on the principle of substantial transformation, under which a product is considered to originate from the country in which substantial transformation takes place. In June 1999, the Technical Committee on Rules of Origin at the World Customs Organization (WCO), which is assisting the WTO in this effort, forwarded to the WTO Committee on Rules of Origin several hundred product-specific issues that could not be resolved on a technical basis.

Progress in the WTO Committee on Rules of Origin has been slow, and the deadline for completion of the harmonized system has been extended several times. Work accelerated and significant progress was made in all sectors in 2001. Nevertheless, there remain significant unresolved issues in the agriculture and textile chapters. The Rules of Origin committee is seeking a further extension to complete this work in 2002.

Trade and Competition Policy

The Working Group on Trade and Competition Policy was established under the Singapore Ministerial Declaration in 1996. It studies issues related to the interaction between trade and competition policy in order to determine if any of the issues should be raised in the WTO. The creation of the working group did not reflect a decision to initiate WTO negotiations to establish rules on competition. It was established as a compromise between the EU proposal to negotiate an agreement on competition policy within the WTO and the view of the United States and other WTO member countries that competition issues are not ripe for negotiation within the WTO. Some in the United States have been concerned that WTO discussions on competition policy would be used by Japan, Canada, and other WTO countries to debate antidumping issues.

The Working Group held three meetings in 2001 and discussed several issues, including the relationship between WTO rules and competition policy, ways to promote cooperation on competition policy, and technical assistance.

As discussed in Section 3, the WTO agreed at the Doha Ministerial that negotiations would begin after the Fifth WTO Ministerial to be held in Mexico. In the meantime, the Working Group on Trade and Competition Policy will seek to clarify core principles, including transparency, non-discrimination and procedural fairness, and provisions on hardcore cartels; modalities for voluntary cooperation; and support for progressive reinforcement of competition institutions in developing countries through capacity-building.

Trade and Investment

The WTO Working Group on Trade and Investment was established pursuant to the 1996 Singapore Ministerial Declaration to examine the relationship between trade and investment. The Working Group discussions have generated a number of proposals for the possible scope of investment discussions including: (1) that an agreement on investment only should cover foreign direct investment; (2) that an agreement on investment must respect the ability of host governments to regulate the activity of investors; and (3) that WTO dispute settlement rules should apply but should not include investor-state dispute settlement provisions.

The Working Group held three formal meetings in 2001. Issues under discussion included the pros and cons of bilateral investment treaties and multilateral rules on investment, the relationship between investment and technology transfer, and the relationship between investment and economic growth.

As discussed in Section 3, the WTO agreed at the Doha Ministerial that negotiations would begin after the Fifth WTO Ministerial to be held in Mexico. In the meantime, the Working Group on Trade and Investment will seek to clarify the following: scope and definition; transparency; non-discrimination; modalities for pre-establishment commitments based on a GATS-type, positive-list approach; development provisions; exceptions and balance-of-payments safeguards; and consultation and the settlement of disputes between Members.

Trade and Environment

The WTO Committee on Trade and Environment (CTE) was established in 1995. The committee's mandate is to make recommendations on what changes should be made to WTO rules to encourage a positive interaction between trade and environment measures and to avoid protectionism. Since its formation, one of the main areas of the CTE's focus has been the relationship between the WTO and trade measures applied pursuant to multilateral environmental agreements (MEAs). Discussions in the CTE have supported pursuing environmental problems through cooperative, multilateral action under MEAs. There is no consensus within the CTE on the use of trade sanctions in MEAs. There is agreement within the CTE that in the event a dispute arises between WTO members that are also signatories to a MEA, they should first try to resolve the dispute under the provisions of the MEA.

The CTE has discussed the call for greater transparency in the WTO's relationship with "civil society," the term used by the United States to refer to labor, environment, and other non-governmental organizations. To this end, the CTE has held a number of sessions with representatives of civil society on trade and environment issues. In March 1999, the CTE sponsored the High-Level Symposium on Trade and Environment, which was attended by 130 NGOs.

The CTE has stated that trade-related environmental measures should not be required to meet more burdensome transparency requirements than other measures that affect trade. The CTE also has stated that no modifications are needed in WTO rules to ensure adequate transparency for trade-related environmental measures. The CTE established a WTO Environmental Database (EDB) available to WTO members, consisting of all trade-related environmental measures notified to the CTE. With regard to eco-labeling requirements, the CTE has said that such requirements must be non-discriminatory and that the processes for developing and adopting such requirements should be transparent. The CTE is also discussing services and the environment.

The CTE held three meetings in 2001, focusing on market-access issues, technical assistance, and the relationship between the provisions of the multilateral trading and environmental systems (including multilateral environmental agreements and dispute settlement provisions). It also organized a regional seminar on trade and environment in Thailand 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.

As discussed in Section 3, the WTO agreed at the Doha Ministerial to launch negotiations on:

the relationship between WTO rules and specific trade obligations set out in MEAs.
procedures for regular information exchange between MEA Secretariats and the relevant WTO committees; and
the reduction or elimination of tariff and non-tariff barriers to environmental goods and services.

The CTE was also directed to focus on the following issues and recommend, where appropriate, the desirability of future negotiations: (1) the effect of environmental measures on market access and those areas where the reduction or elimination of trade restrictions would benefit trade, the environment and development; (2) relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights; and (3) labeling requirements for environmental purposes. The Ministerial Declaration also emphasized the importance of technical assistance and capacity-building and directed that a report should be prepared for the Fifth Ministerial on such activities.

Treatment of Labor Issues in the WTO

The 1996 Singapore Ministerial Declaration did not establish a WTO working party on trade and labor. Instead, the declaration: (1) renewed the WTO's commitment to the observance of internationally-recognized core labor standards, (2) recognized the International Labor Organization (ILO) as the appropriate forum to deal with labor issues, and (3) endorsed the continued collaboration between the WTO and the ILO to support core labor rights.

Since the Singapore Ministerial, the Administration has maintained its efforts to broaden support for core labor rights within the ILO and the WTO. Core labor rights include freedom of association, collective bargaining, non-discrimination, and prohibition of forced labor and abusive child labor. As discussed in Section 2, the United States supported the ILO Declaration on Fundamental Rights and Principles at Work adopted in 1998, recognizing core labor rights and establishing a mechanism to monitor compliance. The United States increased funding for the ILO to improve its monitoring and enforcement capabilities. The United States also has sought to build a consensus for greater action against child labor and worked for the adoption of the ILO Convention against the worst forms of child labor which the United States signed and ratified last year.

At the Seattle Ministerial, the United States proposed that the WTO establish a working party to examine the relationship between market-opening measures and the observance of internationally-recognized workers rights, as required by the Uruguay Round Agreements Act. Developing countries led by India, Egypt, and Brazil, adamantly opposed the U.S. proposal on the grounds that it would open the door to protectionist measures and trade sanctions. Such issues, they argued, are best addressed in the ILO. The EU offered a compromise 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. The committee would be comprised of representatives from the WTO, the ILO, the World Bank, the IMF, and other multilateral institutions. 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.

In the lead up to the Fourth WTO Ministerial in Doha, the United States and EU again explored what if any relationship could be established between the WTO and labor issues. Not surprisingly, they faced the same opposition from the developing countries on any linkage at all. As a result, the only discussion of labor issues in the Doha Declaration reaffirmed the declaration from Singapore and took note of the work underway in the ILO on such issues.

ECAT POSITION: ECAT supports efforts to make the WTO more transparent and to conclude the rules of origin harmonization in a timely manner. On issues of labor and environment, ECAT believes that these issues are, for the most part, best addressed in alternative fora and through alternative policy approaches. In those cases, however, where there is complementarity between these issues and WTO objectives, efforts should be made to address these objectives jointly and in a cooperative manner.

Dispute Settlement

While the United States may not agree with all WTO panel decisions, the WTO dispute settlement system on balance has been an effective mechanism in enforcing U.S. rights. The United States has made aggressive use of the dispute settlement process, bringing more complaints than any other WTO member. It has prevailed in the majority of the cases that it has filed and successfully defended America's ability to enforce its rights under international trade agreements under Section 301 of the Trade Act of 1974 from a challenge brought by the EU.

Since the establishment of the WTO, 244 complaints have been filed involving 176 distinct matters. The United States has brought complaints involving 55 distinct matters, of which the United States has prevailed in litigation in 15 cases, has resolved 19 without litigation, has lost 3, and remains in consultations or in the panel process with an additional 7; and 11 cases are in monitoring or inactive. Complaints have been filed against the United States involving 51 distinct matters, of which the United States has prevailed in 2 litigated cases, has lost 16 in litigation, has resolved 12 without litigation, and is in the appellate, panel or consultation phase with an additional 13 cases; and 8 cases are in monitoring or in active.

The WTO dispute settlement system is currently being tested in several disputes between United States and the EU on hormone-treated beef and the U.S. Foreign Sales Corporation (FSC) provisions, which are discussed in more depth in Sections 3 and 11, although the United States and EU were able to reach a compromise agreement in the United States' challenge to the EU banana regime. It is critical that the United States and EU work to address these differences in a mutually agreeable manner and find solutions that liberalize trade and ensure that the competitiveness of U.S. companies is not undermined.

ECAT POSITION: ECAT believes that the dispute settlement mechanism has been effective in resolving many disputes, but has had difficulty in addressing a few highly political disputes, particularly those between the United States and EU. ECAT supports efforts by the United States and EU to address these issues quickly and in a trade-liberalizing manner.