Emergency Committee For American Trade - Publications

SECTION 2: MAJOR TRADE NEGOTIATIONS

ECAT Member Companies actively support the negotiation and implementation of comprehensive and trade-oriented bilateral, regional, and global trade and investment agreements. In the 1990s, the United States led trade and investment liberalization efforts with the North American Free Trade Agreement (NAFTA), the Uruguay Round Agreements and the WTO Agreements on Information Technology, Basic Telecommunications and Financial Services. With the approval of Trade Promotion Authority last year, the Administration was able to accelerate and conclude key negotiations and contemplate new ones. As discussed in Section 3, the Administration completed negotiations of the U.S.-Chile Free Trade Agreement (FTA) in December 2002 and the U.S.-Singapore FTA in January 2003. In early 2003, the Administration launched new free trade agreement negotiations with Central America, Morocco, Southern Africa and Australia. These are important not only for the trade and investment liberalization that they bring, but also in maintaining a level playing field, as many of the United States' trading partners, particularly the European Union (EU), Canada and Mexico, have embarked on a series of bilateral free trade agreements that provide special benefits to their farmers, manufacturers, service providers and workers to the exclusion of the United States. ECAT Member Companies are focused in particular on the following priority negotiations:

World Trade Organization negotiations;
Free Trade Area of the Americas negotiations;
U.S-Central America FTA negotiations;
U.S-Australia FTA negotiations;
U.S-Southern Africa negotiations;
Negotiation of other bilateral and regional trade- and investment-liberalizing agreements.

The Trade Promotion Authority Framework

Almost 10 years after is expiration in 1994, Congress passed and the President signed into law trade promotion authority legislation last year as part of the Trade Act of 2002, Pub. L. 107-210. The Bipartisan Trade Promotion Authority Act of 2002 (TPA Act) revives and extends trade-negotiating authority legislation (formerly called "fast track"), which was developed over two decades ago as part of the Trade Act of 1974. This legislation serves several purposes, including setting forth:

Congress' overall and principal negotiating objectives;
procedures for Presidential consultation with Congress;
procedures for Congressional consideration of legislation to implement a trade agreement; and
procedures for extending TPA.

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).

TPA is important to: (1) enhance U.S. leadership on trade and the President's ability to conclude negotiations with foreign trading partners; (2) facilitate Congress' consideration and implementation of such agreements; and (3) provide for greater Administration-Congressional consultations on issues where both the President and the Congress have overlapping constitutional prerogatives.

Major Provisions

Duration: Provides TPA authority for agreements entered into before June 1, 2005, with potential two-year extension. TPA procedures are extended if the President requests extension and neither House adopts an extension disapproval resolution (considered under expedited procedures) prior to June 30, 2005.

Negotiating Objectives: Provides the most extensive negotiating objectives ever included in a trade-negotiating authority bill and specifically directs the Administration to seek agreements that:

eliminate and reduce barriers to trade in manufacturing, services, electronic commerce, and agriculture;
eliminate and reduce barriers to investment, while providing strong protections for investments abroad;
promote adequate and effective protection of intellectual property rights, reflecting a standard of protection similar to U.S. law;
obtain wider and broader application of the principles of transparency and anti-corruption;
achieve full implementation of the WTO agreements and extend their coverage;
achieve increased transparency and non-discrimination in foreign government regulation;
promote the effective enforcement of a country's labor and environmental laws; reduce or eliminate government practices that unduly threaten sustainable development and seek market access for U.S. environmental technologies, goods and services;
seek effective and timely resolution of disputes with respect to all principal negotiating objectives, including the ability to use dispute settlement and the availability of equivalent procedures and equivalent remedies;
preserve the ability of the United States to enforce rigorously its trade remedy laws, avoid agreements that lessen the effectiveness of such laws; and address and remedy market distortions that lead to dumping and subsidization;
obtain a revision of WTO rules related to the treatment of border adjustments for internal taxes;
obtain reciprocal market access for U.S. exports of textiles and apparel; and
seek commitments to vigorously enforce a country's laws prohibiting the worst forms of child labor.

Promotion of Other Priorities: Directs the President to pursue additional priorities, including to:

seek greater cooperation between the WTO and ILO;
establish consultative mechanisms to strengthen the capacity of countries to promote respect for core labor standards and to implement standards to protect the environment and human health based on sound science;
conduct labor and environmental reviews of future trade and investment agreements;
take into account legitimate domestic objectives, including the protection of legitimate health, safety, essential security and consumer interests;
provide technical assistance with respect to another country's labor laws;
report to Congress on the labor rights of countries with which the United States is negotiating and on the extent to which a country has in effect laws governing exploitative child labor;
promote consideration of multilateral environmental agreements;
report to the House Ways and Means and Senate Finance Committees on the effectiveness of penalties or remedies imposed under a trade agreement; and
seek to establish consultative mechanisms on unanticipated currency movements.

Progress towards Negotiating Objectives: Provides that no trade agreement may qualify for expedited procedures unless its "makes progress" in meeting the applicable negotiating objectives and the President fulfills the consultations requirements. President is also required to report to Congress on how the final agreement makes progress towards the bill's objectives.

Expedited Procedures: Authorizes expedited procedures as contained in the original trade-negotiating authority legislation for implementing bills that contain provisions "necessary or appropriate" to implement the underlying trade agreement. Procedures require that 45 session days after an implementing bill is introduced, the relevant House committee(s) must report the implementing bill (without amendment) or be automatically discharged. The Senate committee(s) must report the bill (without amendment) or be automatically discharged 15 session days after its receipt from the House or 45 session days after its introduction, whichever is later. The implementing bill can be considered for up to 20 hours, without amendment on both the House and Senate floors.

Congressional Consultations: Provides extensive provisions for Congressional consultations beyond that included in prior trade-negotiating authority legislation, including the establishment of a permanent Congressional Oversight Group (COG) to provide ongoing oversight of negotiations. TPA Act provides that TPA procedures are not applicable if both Houses separately agree to procedural disapproval resolutions (under expedited floor procedures) for lack of notice or consultations within 60 days of each other.

TPA TIMELINE
Pre-Negotiations

90 calendar days before initiating negotiations - Notify Congress of intent to initiate FTA negotiations.
Consult with COG, Finance and Ways and Means and other committees before and after notification and meet with COG before initiating negotiations if majority of COG requests meeting. Additional consultations required if initiating agriculture, fishery or textile negotiations.
Initiation of Negotiations

Consult with COG, Finance and Ways and Means, Agriculture (if relevant) and other committees during negotiations, immediately before initialing agreement and before signing agreement.
180 calendar days before agreement signed (90 days for Chile and Singapore) - Administration must report to Finance and Ways and Means Committees on trade remedy law issues.
90 calendar days before agreement signed - President must notify Congress of intent to enter into the agreement and provide details of the agreement to the ITC and request preparation of ITC assessment.
30 calendar days after notification - Advisory Committees to submit reports on the proposed agreement.
After Agreement is Signed

60 calendar days after agreement signed - President must submit description of changes to existing laws required to bring United States into compliance with agreement.
90 calendar days after agreement signed - ITC submits report of its assessment to the President and Congress.
No deadline - President submits final text of agreement, draft implementing bill, statement of administrative action and supporting information on day when House and Senate are both in session.
After Implementing Bill Introduced

Implementing bill introduced in House and Senate on same day it is submitted by the President.
45 session days after implementing bill introduced - House committee(s) must report implementing bill or be automatically discharged.
15 session days after Senate's receipt of the implementing bill from the House or 45 session days after its original introduction in the Senate, whichever is later - Senate Committee(s) must report out bill or be automatically discharged.
20 hours each of House and Senate floor debate, followed by final votes on the implementing bill.

World Trade Organization Negotiations

After several years of discussions and a failed attempt at the Third Ministerial Conference in Seattle, Washington, in 1999, the World Trade Organization (WTO) successfully launched broad new trade-liberalizing negotiations at its Fourth Ministerial Conference in Doha, Qatar on November 14, 2001, to be completed by January 1, 2005. As discussed below, the so-called "Doha Development Agenda" includes negotiations on both the "built-in agenda" items of agriculture and services, as well as additional areas, such as goods market access and planned-for negotiations in other areas. This year, WTO Ministers will meet in Cancun, Mexico, from September 10^th through 14^th, for the Fifth Ministerial to assess progress, provide additional guidance; and potentially launch negotiations in additional areas - trade facilitation, government procurement, investment and competition policy - if a consensus can be reached.

Background

In the Uruguay Round Agreements establishing the WTO in 1995, WTO members agreed to a "built-in" agenda to start negotiations in agriculture and services no later than the end of 1999. During the intervening years, WTO members discussed the possibility of launching new negotiations, but differences remained on what issues would be addressed. These discussions came to the forefront in 1999 as the WTO unsuccessfully sought to launch negotiations at the Third Ministerial Conference in Seattle. In particular, the United States sought a narrow agenda focused on market access and the built-in agenda negotiations on services and agriculture, while the European Union (EU) and Japan promoted a broad agenda, including new areas such as competition policy and investment. The European Union also opposed any language suggesting that negotiations in agriculture should aim to eliminate export subsidies, as sought by the United States and the Cairns Group of countries. The developing countries favored a narrow agenda, but also sought the opportunity to renegotiate existing agreements in areas such as textiles and antidumping and address implementation issues, as discussed in more depth in Section 6. The United States and EU adamantly opposed efforts to reopen existing agreements, and the United States particularly opposed efforts to renegotiate the antidumping and subsidies agreements. These differences were not overcome and negotiations were not launched in 1999.

Following the failure of the Seattle Ministerial, WTO Director-General Michael Moore and General Council Chairman Stuart Harbinson worked assiduously to bridge differences between WTO members and broaden the participation of all countries. The United States and EU also worked to reconcile their own differences; for example, the United States agreed not to oppose the EU's efforts to include competition policy and investment in the new negotiations. The United States worked as well with many developing countries to emphasize the benefits of a new WTO round. In the lead-up to the Doha Ministerial, Harbinson prepared several draft Ministerial Declarations and sought to reach agreement on major issues with interested countries. As a result of these preparations, compromise by WTO members and, in some cases, ambiguous wording, WTO members were well prepared to reach agreement on the Ministerial Declaration and associated documents on implementation (discussed in Section 6) and health policy issues (discussed in Section 3).

Doha Development Agenda

The 52-paragraph Ministerial Declaration agreed to in Doha launched a new round of negotiations that began in January 2002 and is scheduled to conclude by January 1, 2005. It covers the following issues:

Agriculture
Services
Goods market access
WTO rules
Transparency in government procurement
Investment and competition policy

Electronic commerce
Environment
Intellectual property rights
Trade Facilitation
Dispute Settlement

On February 1, 2002, WTO countries agreed on the organization of the negotiations mandated by the Doha Declaration. Acting as part of the Trade Negotiations Committee (TNC), they agreed to the establishment of seven negotiating bodies on the following issues:

agriculture
services
non-agricultural market access
rules
trade and environment

geographical indications for wines and spirits
reform of the Dispute Settlement Understanding (DSU)

The negotiating groups on agriculture, services, environment, TRIPS and DSU reform are being held in Special Sessions of existing committees and councils. New negotiating bodies were established for non-agricultural market access and rules issues. In addition, the Committee on Trade in Development will hold special sessions to consider issues related to special and differential treatment for developing countries.

Agriculture

Despite the failure of the Seattle Ministerial to launch a new round, WTO negotiations were launched on agriculture on February 7, 2000, pursuant to the built-in agenda mandate of Article 20 of the WTO Agreement on Agriculture. At the Doha Ministerial, compromise language was finally reached, which allowed a broader round of negotiations to be included as part of a single undertaking. In particular, WTO members agreed "without prejudging the outcome of the negotiations," to "comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support." This language met the objectives of the United States and Cairns Group governments on pressing forward on the elimination of export subsidies, but the EU was successful in qualifying these provisions by including the "without prejudging" language as a chapeau. Like much of the Doha Ministerial Declaration, the agricultural section provides that "special and differential treatment" will be "integral" to the negotiations. As well, non-trade issues will be taken into account as provided by the Agreement on Agriculture. Modalities for the negotiations are to be established by March 31, 2003, with comprehensive draft schedules due at the Fifth Ministerial Conference in Mexico.

On March 26, 2002, WTO members agreed to a work program to produce the key negotiating principles/modalities by March 31, 2003. In July 2002, the United States tabled a far-reaching and comprehensive proposal to expand market access, eliminate export subsidies and reduce domestic support. With regard to export subsidies, the United States proposed:

the elimination of export subsidies, with reductions phased in over a five-year period in equal annual increments:
the elimination of export monopolies and ending special financing privileges for state traders;
the prohibition of export taxes on agricultural products, with an exception for developing countries;
the establishment of specific rules to govern export credit activity; and
the expansion of reporting requirements and analysis of food aid activities.

With regard to market access, the United States proposed:

using the Swiss formula to harmonize and reduce agricultural tariffs from applied rates by cutting high tariffs more than low tariffs, ensuring no individual tariff exceeds 25 percent after a five-year phase-in period;
an agreement among WTO members on a specific date for the elimination of all agricultural tariffs;
expanding all TRQs by 20 percent and eliminating in-quota duties, phased in over a five-year period;
tightening rules on TRQ administration to encourage quota-fill and greater transparency; and
expanding trading rights to allow any interested entity to import products.

With regard to domestic support, the United States proposed:

using a formula to limit all countries' use of trade-distorting support to 5 percent of the total value of agricultural production, with reductions made from current caps over a five-year period;
simplifying the current system of calculating trade-distorting domestic support by including trade-distorting support linked to production limitations against the WTO cap; and
an agreement by WTO members on a specific date for the elimination of all trade-distorting support.

The Cairns Group of agricultural exporting countries and other developing countries made similarly aggressive proposals supporting substantial reform, while the EU, Japan and others made much more limited proposals.

In February 2003, Chairperson Stuart Harbinson circulated the first draft of the modalities paper, in which he called for the elimination of export subsidies within nine years; the elimination of monopolies held by exporting stat-trading entities (STEs); tariff reductions from bound rates (less aggressive than proposed by the United States); and equal percentage reductions in trade-distorting domestic support which leave in place the unbalanced domestic support status quo (allowing the EU to maintain much higher domestic support levels). On March 18^th, a second draft of the modalities paper was circulated, which changed little from the prior draft. Harbinson called for more technical work related to disciplines for export credits, state trading enterprises, tariff-rate quota (TRQ) administration, a special safeguard for developing countries and a concept for allowing developing countries to self-designate a to-be-negotiated number of "special products" that would be subject to lower tariff reduction rates than other products. WTO officials have indicated that the March 31, 2003 deadline for agreement on modalities will be missed.

ECAT supports the stated objective of the United States to secure substantial, progressive reductions in support and protection, including deep cuts in applied 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. As proposed by the United States, the agriculture negotiations should aim to reduce tariffs across the board and 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 in Section 3 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

Services are currently covered in the WTO under the General Agreement on Trade in Services (GATS). The GATS covers four "modes of supply" of services, including cross-border delivery of services from one market to another by electronic or other means, establishment of a commercial presence in another market, travel by individuals to foreign markets to supply services, and the provision of a service from one market to the service consumer of another market.

WTO members reached a consensus in Seattle in 1999 on services negotiations to extend the coverage of the GATS, agreeing that such negotiations should be comprehensive and not exclude any sector. WTO members also agreed that services market-access discussion would include financial services, computer and related services, telecommunications, professional services, energy services, and distribution. They also agreed to promote pro-competitive, non-discriminatory domestic regulatory regimes. Notwithstanding the failure of the Seattle Ministerial, the WTO launched services negotiations on February 25, 2000, in accordance with the "built-in agenda" mandated by Article XIX of the General Agreement on Trade in Services (GATS). Throughout 2000 and early 2001, member countries submitted proposals on the framework and substance of the negotiations. In March 2001, the Council for Trade in Services agreed to "Guidelines and Procedures for the Negotiations," which indicated that the main method of negotiation would be "request-offer." Following the March 2001 stocktaking meeting, member countries submitted negotiating proposals in a number of areas.

At the Doha Ministerial, ministers reaffirmed the Guidelines and set the following deadlines:

Initial requests for specific commitments by June 30, 2002; and
Initial offers by March 31, 2003.
On July 1, 2002, the United States made its initial services requests seeking:
transparency in services regulation;
increased access for telecommunications services, including basic and value-added services and the adoption of pro-competitive principles;
increased market access in insurance, banking, securities, asset management, pension funds, financial information and advisory services, and other financial services, as well as regulatory transparency, fairness in the application of financial services regulations; and additional regulatory framework protections for insurance;
increased access for express delivery services (excluding services reserved to postal authorities and services related to air transport or maritime transport services);
increased access for energy services, including exploration and development services; services incidental to energy transmission and distribution; energy marketing services; and other services important to energy, energy products, and fuel;
increased access for environmental services;
full market access for retail, wholesale, and franchising services rendered either directly to customers from a fixed location or away from a fixed location via direct person-to-person, catalog, telephone, video or electronic sales;
increased access for higher education, training services and testing services provided in traditional institutional settings;
increased access for tourism related services;
increased access for professional services;
increased access for data processing services, software- and hardware-related services, and other computer and related services;
increased access for advertising services;
scheduled commitments that reflect current levels of market access in areas such as motion picture and home video entertainment production and distribution services, radio and television production services, and sound recording services;
the removal of unclear, discriminatory, or market-restricting procedures and investment barriers; and
increased access for temporary entry and stay of highly-skilled workers.

On March 6, 2003, the Special Session of the Council for Trade in Services adopted modalities for the treatment of liberalization measures taken unilaterally by WTO Members since the previous multilateral negotiations.

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, and on the liberalization identified in the U.S. proposal. 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 information technology service sector, continued efforts must be made to achieve full market access and national-treatment commitments for all services related to information technology, including consulting, software-related services, data-processing services, database services, information technology outsourcing, web hosting, application hosting, information technology security services, computer maintenance and repair, customer support, information technology training, and other related services. It is critical, as well, that liberalization be taken at the highest level across modes 1, 2 and 3 (cross-border trade, consumption abroad and physical presence), rather than for sub-sectors. It will also 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 services and software made available over the Internet and to other evolving information technology services, which evolve too rapidly to keep pace with trade designations. In addition, WTO members should commit not to erect new regulatory or technical obstacles in this area.

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

Non-agricultural Market Access

At Doha, WTO Ministers also agreed to launch negotiations on market access for non-agricultural goods to "reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers." This issue, which was not part of the "built-in agenda," was a primary goal of the United States in the launch of the new negotiations. The Declaration specified that product coverage would be "comprehensive" with nothing off the table. Like other parts of the Declaration, it emphasized that the special needs of the least developed countries be considered and that appropriate studies and capacity-building measures be included.

The WTO Negotiating Group on Non-Agricultural Market Access set forth its work plan requesting proposals for approaches on the negotiations to be submitted between November 1 and December 31, 2002, and established May 31, 2003, as the deadline for an agreement on the modalities. The Negotiating Group also agreed to provide information on the types of non-tariff barriers that should be addressed by January 31, 2003 and to reach a consensus on approaches to address non-tariff barriers by May 31, 2003.

On November 26, 2002, the United States proposed a comprehensive and forward-leaning approach that would eliminate all non-agricultural tariffs by 2015. This proposal set forth two steps: First, WTO members would eliminate tariffs at or below 5 percent by 2010 and cut all other tariffs through a "tariff equalizer" formula to less than 8 percent by 2010. Tariffs in certain highly traded industry sectors should be eliminated as soon as possible, but not later than 2010. Second, WTO members would make equal annual cuts in remaining tariffs between 2010 and 2015, resulting in zero tariffs. U.S. tariffs cost American consumers $18 billion in 2000. A University of Michigan study found that the U.S. economy would expand by $95 billion as a result of tariff-free trade.

ECAT strongly supports efforts to eliminate tariffs and non-tariff barriers worldwide. Tariffs distort efficient trade flows to the detriment of both the exporting and importing countries. Tariff elimination can represent an important force in the spurring of economic growth, as the elimination of tariffs under the 1997 WTO Information Technology Agreement (ITA) did for industries producing and consuming information technology products. ECAT strongly supports the inclusion of all WTO members in the ITA and the expansion of that agreement to cover other products and non-tariff barriers. ECAT also supports the Accelerated Tariff Liberalization (ATL) initiative, started in the Asian Pacific Economic Cooperation forum, to eliminate tariffs on chemicals, energy products, environmental products, fish, forest products, gems and jewelry, medical and scientific equipment, and toys; these eight sectors represent a balanced package and reflect the interests of both developed and developing countries. These sectors accounted for approximately one-third of total U.S. industrial exports in 2001.

WTO Rules - Antidumping and Countervailing Duty

One of the most contentious issues at the Seattle Ministerial was whether to include negotiations on WTO trade remedy rules (e.g., antidumping and countervailing duty provisions). The United States strongly opposed such negotiations, while Japan, Korea, Brazil and other countries strongly sought the inclusion of these issues into any new negotiation.

In Doha, Ministers reached a carefully worded agreement to open negotiations on the agreements on antidumping and subsidies and countervailing measures. The Declaration states that negotiations are aimed "at clarifying and improving disciplines" under these agreements, "while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking into account the needs of developing and least-developed participants." The Declaration also directed negotiators to indicate in the initial phase of the negotiations which disciplines they seek to clarify.

The Rules Group held five formal meetings in 2002 and focused on the numerous written submissions of its members. In October 2002, the United States submitted its paper identifying four core principles:

negotiations must maintain the strength and effectiveness of the trade remedy laws and complement a fully effective dispute settlement system;
trade remedy rules must operate in an open and transparent manner;
disciplines must be enhanced to address more effectively trade-distorting practices; and
dispute settlement panels and the Appellate Body should follow the appropriate standard of review in interpreting obligations related to trade remedy laws.

In November 2002, the United States proposed methods to improve investigatory procedures in antidumping and countervailing duty investigations, including through greater transparency. In March 2003, the United States submitted a paper identifying several substantive areas where additional clarification and improvement in WTO antidumping rules may be required:

relating to cases involving producers of seasonal and cyclical agricultural products;
to clarify how overall weighted-average dumping margins should be calculated (including the issue of zeroing);
to ensure that governments can use appropriate and reasonable methods for calculating an "all-others";
to clarify the application of antidumping and countervailing duties to "new shippers" who represent a company that had been subject to an order but reincorporated in a new form;
clarifying what provisional measures would be appropriate to preserve the right to impose duties retroactively where "critical circumstances" is found; and
to improve the capacity of members to address issues of persistent dumping; and
to improve the ability of developing countries to adopt trade remedy laws.

Simultaneously, the United States submitted a paper identifying several substantive areas where additional clarification and improvement in WTO subsidies rules may be required, including to:

prohibit additional types of subsidies, including large domestic subsidies and government debt-forgiveness,
increase the remedy for cases of serious prejudice, and
establish stricter rules against government loans and investment in private sector companies;
establish stricter provisions on government sales of natural resources, such as timber and natural gas;
clarify issues related to the provision of equity capital to specific companies;
provide for greater equalization of treatment of direct and indirect taxation systems; and
modify rules for handling cases involving fragmented industries.

The "Friends of Antidumping" group (including Brazil, Chile, Colombia, Costa Rica, Hong Kong, Israel, Japan, Korea, Mexico, Norway, Singapore, Switzerland, Taiwan, Thailand and Turkey) has made several proposals to modify the Antidumping Agreement to ensure that it does not impose unnecessary burdens on exporters and importers. Other papers have been tabled on subsidies and the relationship of these rules to regional free trade agreements.

ECAT has long supported the inclusion of these issues as part of the new round of negotiations - both to ensure that negotiations go forward and to ensure that these rules do not impose unnecessary costs or burdens on U.S. companies, their workers or the U.S. economy. ECAT supports reforms of these rules in a manner that promotes balance between the interests of the petitioning industry and the interests of other U.S. industries and consumers.

Transparency in Government Procurement

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.

The Doha Ministerial Declaration provides that negotiations on transparency in government procurement will take place after the Fifth WTO Ministerial Conference on the basis of a "consensus" to be reached on the modalities of the negotiations. The Declaration specified that negotiations would be limited to transparency and not address market-access issues. The Declaration also provides that member countries commit to provide adequate technical assistance and support for capacity building.

The Working Group made progress in 2002 in identifying the key elements of a potential agreement, including:

publication of information regarding the regulatory framework for procurement; publication of information regarding opportunities for participation in government procurement;
clear specification in tender documents of evaluation criteria for the award of contracts;
availability to suppliers of information on contracts that have been awarded; and
availability of mechanisms to challenge contract awards and procurement decisions.

The Working Group also discussed technical assistance and capacity-building needs. The United States is seeking to launch negotiations of an Agreement on Transparency in Government Procurement at the Cancun Ministerial.

ECAT strongly supports negotiations on a government procurement transparency agreement. In addition to the elements described above, the United States should seek to include the following elements that have been developed through regional and WTO discussions on transparency in procurement:

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.

Investment

The EU has long sought the inclusion of investment issues as part of new WTO negotiations. At the First Ministerial in Singapore in 1996, the WTO agreed to set up working groups on investment. In Doha, Ministers agreed to new negotiations to begin after the Fifth Ministerial Conference based on a consensus agreement to be reached at that Ministerial.

The Doha Declaration directed the Working Group on the Relationship between Trade and Investment to focus on clarifying the following issues: scope and definition, transparency, and 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.

The Working Group held several meetings in 2002 at which WTO members expressed divergent views. The EU and Japan continue to strongly advocate the launch of negotiations, while some developing countries are less inclined. The United States has looked for a middle position, proposing a focus on such core principles as transparency and non-discrimination. WTO members also continue to debate the scope of an investment agreement, with the United States advocating a broad-based definition of investment that addresses commercial realities. At the Cancun Ministerial, WTO members will have to take a decision on whether to begin negotiations on these issues. These issues are discussed in more depth in section 4.

ECAT supports a continuing effort to build a consensus on the importance of strong investment protections. ECAT also believes it is critical that negotiations move forward to promote a high-standards agreement where possible. ECAT also strongly opposes efforts by some countries to use these discussions to restrict or place barriers on investment.

Competition Policy

Like investment, the EU has long sought the inclusion of competition policy issues as part of new WTO negotiations. At the First Ministerial in Singapore in 1996, the WTO agreed to set up working groups on these issues. In Doha, Ministers agreed to new negotiations on competition policy to begin after the Fifth Ministerial Conference based on a consensus agreement to be reached at that Ministerial.

On competition policy, the Declaration directed the Working Group on the Relationship between Trade and Competition Policy to focus on clarifying the following issues: 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. As with investment, there remains disagreement about the inclusion of these issues.

The Working Group held several meetings in 2002 and received numerous documents on issues identified in the Declaration. The United States submitted papers on U.S. experience in providing technical assistance on antitrust issues, cartels, voluntary cooperation, transparency, non-discrimination and procedural fairness. At the Cancun Ministerial, WTO members will have to take a decision on whether to begin negotiations on these issues.

ECAT supports a continuing effort to build a consensus on these issues.

Electronic Commerce

Electronic commerce or 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 five 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. There are many barriers that can impede the growth of e-commerce, including conflicting national regulations on e-commerce regarding privacy standards, the imposition of duties on Internet commerce, and market-access barriers to various goods and services that are needed to create the infrastructure for electronic 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.

At the Second WTO Ministerial in 1998, Ministers urged the General Council to establish a work program on e-commerce. The General Council adopted the plan for this work program in September 1998, which directed a series of discussions to be held in the Goods, Services, and Intellectual Property Councils and Trade and Development Committee. 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. As a result, the WTO General Council and separate Councils have continued to explore how best to address e-commerce issues in accordance with the work program.

At the Doha Ministerial, Ministers agreed to continue the existing e-commerce work program and directed the General Council to consider the most appropriate institutional arrangements for considering e-commerce and to report to the Fifth Ministerial in Mexico. WTO members did agree to maintain the current moratorium on the imposition of customs duties on electronic transmissions until the Fifth Session.

ECAT strongly supports efforts to ensure that trade and investment rules promote and do not inhibit the growth of e-commerce. In addressing e-commerce, several principles should guide negotiators. First, current WTO obligations, rules, disciplines and commitments (e.g., the GATT, General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)) 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. E-commerce issues are also discussed above with respect to services and non-agricultural goods market access.

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. The CTE's work is discussed in more detail in Section 6.

At the 2001 Ministerial Conference in Doha, Ministers agreed to launch negotiations on the following issues:

the relationship between WTO rules and specific trade obligations set out in multilateral environmental agreements (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.

In addition, in the paragraph on rules, member countries also agreed to clarify and improve disciplines on fisheries subsidies in the context of the negotiations, while taking into account the importance of this sector to developing countries.

In 2002, the CTE in Special Session commenced negotiations on these issues. WTO members expressed differing views on the scope of the mandate, whether the mandate should be defined and how to phase the negotiations. WTO members agreed to further discussions in 2003 focusing on specific trade obligations contained in MEAs, while not precluding a discussion of other issues. Members generally agreed on the need for finding additional mechanisms to enhance communication and cooperation with MEA secretariats. The United States, which made the first proposal, supported a more formal structure for sharing information with MEAs and new procedures for considering observer status. With respect to market access for environmental goods and services, WTO members discussed and made proposals for defining what constituted environmental goods and services. The United States proposed starting with the APEC definition.

ECAT supports efforts to pursue complementary trade and environmental objectives, including, in particular, the reduction and elimination of tariff and non-tariff barriers to environmental goods and services. ECAT also strongly supports increased transparency and communication between the WTO and MEA secretariats. ECAT strongly supports efforts by WTO members to ensure that there is a positive relationship between WTO rules and MEA trade provisions and, in particular, that efforts are made to prevent disguised protectionism that will undermine growth in trade and investment that is critical to raising environmental standards worldwide.

Intellectual Property Rights

Much of the discussion about intellectual property rights issues in the lead-up to the Doha Ministerial concerned (1) developing countries' requests to delay implementation of their commitments under the TRIPS Agreement, and (2) views that the TRIPS Agreement somehow undermined countries' ability to protect the public health, particularly in the case of health-care crises such as the AIDS epidemic in Africa. With regard to implementation issues (as discussed in more depth in Sections 6 and 11), the Ministers were unable to reach agreement in Doha on how to address such concerns. As a result, these issues will be treated as part of the negotiations and the TRIPS Council was directed to report on its attempts to address these issues to the Trade Negotiations Committee by the end of 2002. On public health (as discussed in more depth in Section 3), a separate Declaration was issued to clarify that the TRIPS Agreement should not be interpreted to undermine countries' ability to take measures to protect public health. Resolution of the both the implementation and health issues is viewed as very important by developing countries.

In addition to these issues, the Ministers agreed to negotiate the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits by the Fifth Session of the Ministerial Conference. Issues related to the extension of the protection of geographical indications will be address in the TRIPS Council. The Declaration also instructed the TRIPS Council to examine the relationship between the TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and folklore, and other relevant new developments raised by Members.

In discussions in the TRIPs Council in 2002, members remained far apart on the issue of geographic indications.

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 have long supported 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 such negotiations 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.

At the Doha Ministerial, Ministers agreed that negotiations on trade facilitation would take place after the Fifth Ministerial Conference in 2003 on the basis of a consensus on the modalities of the negotiations. In the interim, the Declaration instructed the Council for Trade in Goods to review and clarify the existing GATT agreement and to identify the trade facilitation needs and priorities of Members, in particular developing and least-developed countries. Member countries also committed themselves to ensuring technical assistance and support for capacity-building.

During 2002, the Council on Trade in Goods held several meetings to identify the trade facilitation needs and priorities of WTO members, while also seeking to ensure adequate capacity-building and technical assistance. The United States continues to play a leadership role in helping to develop the consensus needed to ensure that negotiations in this critical area are launched at the Cancun Ministerial.

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.

Dispute Settlement

Under the WTO built-in agenda, discussions on reform of the WTO dispute settlement process that began in 1998 were to have been completed in July 1999, but no agreement was reached due to lack of consensus. Efforts to reach a final agreement during the Seattle Ministerial were also unsuccessful.

At the November 2001 Doha Ministerial, the Conference agreed to negotiations "on improvements and clarifications of the Dispute Settlement Understanding," based on the work done thus far and new proposals. The Doha Declaration indicated that agreement should be reached not later than May 2003.

The reforms under consideration include shortening the time period for pre-panel consultations, allowing panels to be established on first request, establishing a "compliance panel" to handle disagreements over implementation of panel reports, and delaying retaliation until after a compliance review has been completed. The United States has indicated its willingness to accept these reforms, but wants to include additional transparency measures, such as permitting early publication of non-confidential panel submissions and final panel rulings, opening panel proceedings to the public, and allowing NGOs to file "friends of the court" briefs in dispute settlement cases.

In August 2002, the United States proposed measures to increase transparency and public access to dispute settlement proceedings, including through public hearings, public briefs, early public release of panel reports, and rules for the consideration of amicus curiae submissions. In December 2002, the United States (joined by Chile) also proposed several additional changes, including:

establishing a procedure for the interim review of Appellate Body decisions;
permitting countries to accept and reject specific aspects of a panel or Appellate Body report (rather than a "take it or leave it approach");
permitting countries to suspend panel and appellate body cases; and
providing additional guidance to the panels and Appellate Body on issues of interpretation and the nature and scope of their tasks.

Members are expected to prepare draft legal text with a view to completing the review by May 2003.

ECAT strongly supports efforts to reform the WTO dispute settlement system to make it more transparent and make it function more effectively.

Importance of WTO Negotiations

The Doha Development Agenda has the potential to open markets on a broad range of goods and services that are critical to spur economic growth in the United States and throughout the world. The completed agreements could dramatically change agricultural trade, eliminating export subsidies and creating enormous new market opportunities for U.S. farmers. If U.S. proposals are adopted, it will result in the elimination of all tariffs by 2015 and provide enormous opportunities for U.S. service providers and others.

Even if agreement were reached only to cut global tariffs by a third, it would add $177 billion per year to the U.S. economy, equivalent to a $2,500 per year tax cut for the typical family of four. The expected gain from these negotiations for the developing world will also be significant, adding $90 to $190 billion in higher incomes. These economic gains will help promote a dramatically improved standard of living at home and abroad.

ECAT POSITION: ECAT strongly supports the Doha Development Agenda agreed to in November 2001. ECAT supports comprehensive negotiations on agriculture, services, industrial tariffs and other issues to expand market-access opportunities and reduce barriers across all sectors. ECAT also supports efforts to ensure that WTO provisions are developed and applied in a manner that eliminates barriers to and supports the growth of information technology goods and services. In particular, ECAT supports:

substantial, progressive reductions in support and protection, including deep cuts in applied tariff rates and elimination of export subsidies;
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 and liberalization of services;
efforts to eliminate tariffs and non-tariff barriers worldwide;
reforms of antidumping and countervailing duty rules in a manner that promotes balance between the interests of the petitioning industry and the interests of other U.S. industries and consumers;
efforts to negotiate an agreement committing members to transparency in government procurement;
efforts to build a consensus on the importance of strong investment protections and negotiations that promote a high-standards agreement;
efforts to ensure that trade and investment rules promote and do not inhibit the growth of e-commerce;
increased transparency and communication with multilateral environmental agreement bodies;
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; and
efforts to reform the WTO dispute settlement system to make it more transparent and make it function more effectively.

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 in April 2001, the leaders of the 34 nations negotiating the FTAA agreed that negotiations would be completed by January 2005. In 2002, trade ministers initiated market access negotiations, began a review of the second draft FTAA text and launched a Hemispheric Cooperation Program. The United States, which became a co-chair of the negotiations with Brazil in November 2002, has enormous benefits to reap from the FTAA and will need to play a leadership role to help move negotiations forward.

Total U.S. trade with the Western Hemisphere has more than doubled since 1990 to $725 billion in 2002. 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 39 percent in 2002. U.S. exports to the region accounted for 45 percent of total U.S. exports to all destinations in 2002.

Background on the Negotiations

At the 1994 Miami Summit of the Americas, the United States joined 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 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.

The sixth Ministerial meeting was held in Buenos Aires, followed by the Third Summit of the Americas held in Quebec City in April 2001. Negotiating groups presented a draft text of the FTAA to the Ministers who recommended its public release. For the first time in a major negotiation, the heads of state agreed to the public release of the draft negotiating text, which was made public on July 3, 2001. The Summit also fixed the end date of the negotiations as January 2005, with entry into force as soon as possible, but no later than December 2005. The Summit also set dates for 2002 for the initiation of market access negotiations, as discussed further below.

Status of the Negotiations and Outlook for 2003

On May 15, 2002, the market access phase of the negotiations was initiated. Initial offers in agricultural and industrial products, services, investment and government procurement were due between December 15, 2002, and February 15, 2003. Currently, members are submitting requests for improvements on those offers through June 15, 2003. Countries will begin exchanging improved offers no later than July 15, 2003. At the seventh Ministerial in Quito, the second draft FTAA text was presented to ministers and also made public and solicitations for public comment were put forth. With the strong leadership of the United States, the ministers also agreed to a Hemispheric Cooperation Program through which countries would identify their capacity-building needs and programs would be developed to assist small and developing countries so that they can fully reap the benefits of the FTAA.

In March 2003, the FTAA Administrative Secretariat will be moved from Panama to Mexico. The eighth Ministerial will take place in Miami from November 20^th to 21^st. In 2004, the Ministerial will be held in Brazil.

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. Argentina's financial collapse creates further strain on the negotiations and their planned conclusion in 2005. In the United States, reluctance to negotiate on trade remedy issues will hinder progress on the negotiations.

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 39 percent of total U.S. trade and 45 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. On investment, the FTAA carries the possibility of creating regulatory environments open to new investment. This will not only promote increased investment and the trade flows that oftentimes follow, but will also promote the rule of law and respect for private property that are critical for the economic development of many of these countries. Finally, 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 timely completion of a comprehensive, high-standard and commercially-meaningful trade- and investment-liberalizing agreement to establish a Free Trade Area of the Americas by 2005.

Comprehensive and Trade-Oriented Bilateral and Regional Free Trade Agreements

The Bush Administration has concluded free trade agreement (FTA) negotiations with Chile and Singapore (discussed in section 3), and is undertaking new negotiations with Central America, Morocco, Southern Africa and Australia.

U.S.-Central America Free Trade Agreement Negotiations

On January 8, 2003, the United States and the Central American governments of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua formally launched negotiations to create a U.S.-Central America Free Trade Agreement (CAFTA). The trade ministers agreed to nine rounds of negotiations with the expectation of concluding an agreement by December 2003.

Three rounds of negotiations have been held (in Costa Rica in late January, in Cincinnati in late February, and in San Salvador in late March). At the request of the United States, the Ministers agreed to work off of U.S. text, a small portion of which was presented in Cincinnati. The Ministers also agreed to five negotiating groups and a non-negotiating group on capacity-building:

Agricultural and non-agricultural market access (tariffs and non-tariff barriers)
Services and investment
Miscellaneous - IPR, government procurement
Labor and environment
Legal - dispute settlement, final provisions, etc.

U.S. Objectives in the CAFTA Negotiations

The Administration seeks a commercially-meaningful agreement that eliminates barriers to trade and investment, strengthens democracy, and promotes prosperity.

ECAT also supports the negotiation of a comprehensive, high-standard FTA agreement that expeditiously eliminates barriers between the United States and Central America; substantially expands trade; promotes a durable economic partnership that can support continued prosperity and long-term progress on democracy and the rule of law; and establishes an appropriate model for regional and hemispheric trade liberalization in future FTAs. To this end, ECAT agrees that the negotiations should be guided by the following principles enunciated by the Business Coalition for U.S.-Central America Trade¹, for which ECAT is serving as the secretariat:

Principles of a Successful U.S.-Central America Free Trade Agreement
An agreement that is comprehensive.
A high-standard agreement that is commercially-meaningful and expands opportunities for U.S. farmers, companies, workers and their families.
An agreement that benefits U.S. and Central American families and consumers through lower prices and greater availability of products.
An agreement that is completed and implemented quickly enough to foster meaningful commercial partnerships within the region.
An agreement that promotes a transparent and predictable business environment that will strengthen the rule of law, attract needed investment, and spur economic growth and development in Central America.
An agreement that facilitates trade and harmonizes customs procedures to spur increased economic activity.
An agreement that encourages trade, investment and economic development through high standards of protection for investment.
An agreement that encourages trade, investment and economic development through high standards of intellectual property protection.
As the agreement is being negotiated, countries will comply with existing obligations and lock-in existing reforms.
An agreement that supports economic development and is complemented by steps to strengthen the rule of law, such as capacity building and technical assistance, to ensure that the benefits of the agreement are broadly realized.

Importance of the CAFTA Negotiations

U.S. exports to Central America² already total over $9 billion, making the region America's 18th largest export market - on a par with such advanced industrialized countries as Switzerland and Italy. U.S.-Central American trade (imports and exports) totals about $20 billion. In the aggregate, Central America is America's 20^th largest trading partner. U.S. trade with Central America exceeds trade with markets such as Australia, Sweden, Chile, Russia, and Spain.

U.S. products account for approximately 50 percent of Central America's imports. The region is already an important export market for American electrical machinery, high technology, motor vehicles, chemicals, energy, food, agricultural products, textiles and apparel, paper, and fertilizer. U.S. services exports to Central America already total approximately $2 billion. Leading U.S. services providers include aviation, tourism, telecommunications, and banking/financial transfers.

By tearing down barriers to intra-regional trade, CAFTA can create a vibrant, expanding, integrated marketplace of nearly 34 million people in Central America with a combined GDP of $56.6 billion. The United States has a great deal to gain from a commercially-meaningful, ambitious CAFTA that sets high standards for open, rules-based, regional trade with our neighbors, and provides a model for future agreements. Further elimination of U.S. tariffs would reduce costly and regressive taxes for all Americans, including working families.

CAFTA and an expanded U.S. commercial presence in the region could strengthen the rule of law and help establish a more transparent, stable, and predictable foundation for expanded regional commerce, trade, and investment, and for the broader development and prosperity of a region where the U.S. has vital economic and security interests. Central America continues to suffer from high rates of poverty and requires support for developing institutions to further progress on democracy and the rule of law. The best way for America to help the region is through new and durable partnership with our Central American neighbors.

A comprehensive and commercially-meaningful CAFTA would represent a model for future regional trade expansion. It is also an important strategic building block for U.S. efforts to forge a hemispheric-wide Free Trade Agreement of the Americas (FTAA), and a strategic counterweight to those who seek to delay or prevent the lowering of barriers in the hemisphere.

ECAT POSITION: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially-meaningful CAFTA that will liberalize trade and investment.

U.S.-Morocco Free Trade Agreement Negotiations

On January 21, 2003, the United States and Morocco launched negotiations for a free trade agreement with a goal of completing the negotiations by the end of 2003. The first round of negotiations was held in January in Washington, D.C., with subsequent rounds alternate between the two countries. Negotiators will seek to achieve liberalization in all key sectors including non-agricultural goods, services and investment. Negotiations will be based on U.S. text, and eleven negotiating groups have been set up:

market access
textiles
agriculture
services
investment
intellectual property

labor
environment
customs rules
e-commerce
government procurement

U.S. Objectives in the Morocco Negotiations

The Administration is seeking a comprehensive agreement that will focus on key trade and investment issues. It is seeking to eliminate tariff and non-tariff barriers to trade and investment that will also help create new opportunities and lock in important economic reforms that Morocco is undertaking.

Importance of the Morocco Negotiations

Morocco is an emerging market with imports from the United States amounting to $475 million in 2002 (out of a total of $11 billion in imports, much of that from Europe). Leading U.S. exports include aircraft, corn, and machinery, and there have been recent increases in U.S. exports of textiles and pharmaceutical products. Nevertheless, significant barriers exist, including an average tariff of over 20 percent on U.S. imports. This agreement is important to create new opportunities for U.S. companies, workers, farmers and their families. A U.S.-Morocco FTA will help U.S. companies, which are currently at a disadvantage with the EU (which has an association agreement with Morocco covering industrial goods). This agreement will also help Morocco lock in key economic reforms, including initiatives to streamline investment procedures and eliminate barriers to investment.

ECAT POSITION: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially-meaningful U.S.-Morocco FTA that will liberalize trade and investment.

U.S.-Australia Free Trade Agreement Negotiations

The United States and Australia launched free trade agreement negotiations in March 2003 and held their first round of negotiations.

U.S. Objectives in the Australia Negotiations

The Administration is seeking a comprehensive agreement that will focus on key trade and investment issues. It is seeking to eliminate tariff and non-tariff barriers to trade. Key issues on which the Administration and business are focused include unjustified sanitary and phytosanitary barriers on agricultural products, Australia's investment screening system, and real estate and media ownership rules.

Importance of the Australia Negotiations

The United States and Australia already share an important trading relationship; Australia is the United States' 24th largest trading partner, and the United States is one of Australia's largest trading partners. Two-way trade equaled $18.7 billion in 2002. The U.S.-Australia FTA represents, therefore, an opportunity to improve this relationship by eliminating existing trade and investment barriers for the benefit of the United States, its companies and workers. A U.S.-Australia FTA will also strengthen relations and promote even greater cooperation in the WTO and the Asia Pacific Economic Cooperation (APEC) forum.

ECAT POSITION: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially-meaningful U.S.-Australia FTA that will liberalize trade and investment.

U.S.-South Africa Customs Union Free Trade Agreement Negotiations

The United States is also readying to launch FTA negotiations in May 2003 with the South African Customs Union (SACU), comprised of South Africa, Botswana, Swaziland, Namibia, and Lesotho. On November 5, 2002, Ambassador Zoellick notified Congress of the Administration's intent to negotiate an FTA. The 90-day period required by TPA has now elapsed, such that negotiations can begin. In January, 2003, Ambassador Zoellick met with the SACU trade ministers to discuss their goals for the FTA and a roadmap for the upcoming negotiations. The United States also announced $2 million in additional U.S. trade-capacity building funds (beyond the almost $5.6 million in such assistance the United States provided to these countries in 2001).

U.S. Objectives in the SACU Negotiations

The Administration is seeking a comprehensive agreement that will focus on key trade and investment issues. It is seeking to eliminate tariff and non-tariff barriers to trade and investment, which will also help create new opportunities for the United States and Southern Africa.

Importance of the SACU Negotiations

The SACU already represents the largest U.S. export market in sub-Saharan Africa, with U.S. exports totaling more than $2.6 billion in 2002. Major exports include machinery, vehicles, aircraft, medical instruments, plastics, chemicals, cereals, pharmaceuticals and wood and paper products. U.S. foreign direct investment in the SACU countries totaled $2.8 billion in 2000, largely in manufacturing, wholesaling and services. This relationship represents in part the use of the African Growth and Opportunity Act (AGOA), of which these countries are the largest non-fuel beneficiaries.

ECAT POSITION: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially-meaningful U.S.-SACU FTA that will liberalize trade and investment.

¹ The Business Coalition for U.S.-Central America Trade is a broad-based and cross-sectoral group of companies and associations who have joined together to promote the negotiation and implementation of a comprehensive, high-standard, commercially-strong CAFTA.
² Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.