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SECTION 3: MAJOR TRADE POLICY ISSUES
Major progress was made last year on trade and investment policies. Most notable was the Congressional passage and enactment of the Trade Act of 2002 that incorporated several important components - most prominently, Trade Promotion Authority, as well as the renewal and expansion of the Andean Trade Preference Act and Trade Adjustment Assistance. ECAT actively supported the development and the passage of this legislation. As well, 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.
ECAT seeks continued progress throughout 2003. ECAT will actively continue its efforts to rebuild a bipartisan consensus for trade. ECAT will also continue to work for the implementation of key aspects of the Trade Act of 2002 and to ensure the timely implementation of the U.S.-Chile and U.S.-Singapore FTAs.
As well, efforts will be continued in 2003 to address changes in U.S. Customs Service's processes that are needed to modernize and improve efficiency and that result from the movement of the U.S. Customs Service to the new Department of Homeland Security.
In addition to the ongoing and new trade negotiations discussed in section 2, investment, unilateral sanctions, export financing, export control policy, and the taxation of foreign source income will also be on the trade agenda and are discussed in sections 4, 7, 8, 9 and 12, respectively, of this report.
Building a Consensus on Trade and Investment Liberalization
Last year, Congress took important steps in building a consensus on trade and investment liberalization policies with the passage of the Trade Act of 2002. Nevertheless, there remain deep divides on the role, objectives and value of U.S. trade policy.
ECAT believes it is critical for the United States to rebuild a national and bipartisan consensus on the value of trade and investment liberalization - a consensus that existed for decades following World War II. We must effectively demonstrate that expansionary trade and investment policies are essential to U.S. economic growth, including the growth of the new economy, and the high U.S. standard of living.
ECAT is working with the Administration, Congress and others in the private sector to help rebuild this consensus. An important part of this endeavor involved the release earlier this year of ECAT's new study on the importance of trade and investment liberalization in generating prosperity in the United States in the 1990s, as discussed in more depth in section 1.
ECAT POSITION: ECAT supports efforts by the Administration, Congress, and the private sector to rebuild the consensus on the importance of trade and investment liberalization.
Implementation of U.S.-Chile and U.S.-Singapore Free Trade Agreements
Later in 2003, Congress will consider legislation to implement both the U.S.-Chile and U.S.-Singapore Free Trade Agreements (FTAs) - the first two agreements to be considered under the recently renewed TPA legislation.
U.S.-Chile Free Trade Agreement
After years of discussion, the United States and Chile began negotiating a free trade agreement on December 6, 2000. Following the enactment of Trade Promotion Authority as part of the Trade Act of 2002 (discussed in section 2), an agreement was concluded on December 11, 2002. The President notified Congress of his intention to enter into the agreement on January 30th.
Bilateral trade between the United States and Chile has almost doubled from nearly $3 billion in 1990 to $5.9 billion in 2002. Chile is the United States' 37th largest trading partner. The United States is Chile's largest trading partner, although its share of Chile's market has declined by one-third since 1997, as Chile has implemented preferential FTAs with Canada, Mexico and Central America, and other preferential market access agreements with Bolivia, Venezuela, Colombia, Ecuador and Peru. Chile is also an associate member of MERCOSUR (South American Common Market). It signed an FTA with South Korea in October 2002 and is in discussions with the EU, New Zealand, Singapore and Japan.
As of January, Chile imposes a flat six-percent tariff on all imports (except for goods from countries with whom it has a preferential trade relationship) and maintains other barriers to U.S. exports, services and investment. The FTA between the United States and Chile effectively addresses many of these issues.
Major Provisions
Among the principal provisions of the U.S.-Chile FTA are the following:
- Non-agricultural market access: Tariffs will be eliminated immediately for more than 85 percent of two-way trade in consumer and industrial goods, with most remaining tariffs eliminated in four years and all tariffs eliminated within 12 years. Key U.S. export sectors that will benefit include agricultural and construction equipment, automobiles and automobile parts, computers and information technology products, medical products, and paper products. The United States and Chile also agreed to establish a forum to address technical obstacles to trade.
- Agricultural market access: Within four years of implementation, tariffs will be eliminated on more than three-quarters of U.S. agricultural exports to Chile, with all tariffs phased out over 12 years. Key U.S. agricultural export sectors that will benefit include beef, durum wheat, feed grains, pork, potatoes, soybeans and processed foods (e.g., distilled spirits, pasta, and breakfast cereal). The United States and Chile also agreed to establish a bilateral process to address sanitary and phytosanitary and related issues.
- Rules of origin: The FTA incorporates relatively flexible rules of origin to promote trade, except with respect to the textile and apparel sector (where a NAFTA-like, yarn-forward rule is employed).
- Services: The FTA commits Chile to increased access for U.S. banks and financial services, insurance, telecommunications, securities, express delivery and professional services. Commitments also include strong transparency and consultation requirements to ensure the fair and impartial regulation of services.
- Intellectual property rights: The FTA commits Chile to strong protections for intellectual property rights, with patent and trade secret protections stronger than prior agreements.
- Investment: The FTA includes many of the same protections included in U.S. Bilateral Investment Treaties to promote a secure and predictable legal framework for U.S. investors. The United States made some changes to the investment framework, as discussed in section 4, that should not be repeated in future agreements.
- Government procurement: The FTA includes important new anti-corruption and transparency rules for government contracting.
- Transparency: The FTA includes state-of-the-art transparency standards, including in such important areas as customs and regulatory rulemaking.
- Labor and environment: The United States and Chile commit to enforce effectively their domestic labor and environmental laws. They also agreed to set up a Council of Labor Affairs and a Council of Environmental Affairs. The countries also agreed to cooperative projects to protect wildlife, improve resource management, reduce the use of dangerous chemicals and environmental hazards from mining, and promote internationally recognized labor principles through a Labor Cooperation Mechanism.
- Dispute settlement: Obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.
Next Steps
The United States and Chile are currently finalizing the technical language of the agreement and creating a Spanish version. Based on TPA procedures, the agreement could be signed as early as May 1, 2003. Following the signing of the agreement, legislation implementing the agreement will be drafted cooperatively by Congress and the Administration and then sent to Congress. Congressional consideration of this agreement is expected by the fall of 2003. The International Trade Commission (ITC) is also required to submit a report on the economic effects of the agreement within 90 days of its signing.
ECAT POSITION: ECAT supports the timely implementation of the U.S.-Chile FTA. It will create significant opportunities for U.S. companies, workers, farmers, consumers and their families through the elimination of tariff and non-tariff barriers in most major sectors. Many of the provisions in this agreement are state-of-the-art, model provisions that should be sought by the United States in future agreements. In other areas, including those related to certain sensitive U.S. import sectors and foreign investment rules, ECAT supports efforts to further develop agreed provisions to make them more trade facilitating in future agreements.
U.S.-Singapore Free Trade Agreement
On November 16, 2000, the United States and Singapore agreed to launch FTA negotiations. Negotiations were completed in January 2003 and the President notified Congress of his intention to enter into the agreement on January 30th.
Singapore is the United States' 12th largest trading partner. Bilateral trade between the United States and Singapore has strongly increased in the past decade, from $17.8 billion in 1990 to $28.8 billion in 2002. U.S. foreign direct investment in Singapore equaled $27.3 billion in 2001. Singapore is a member of APEC and ASEAN and has FTAs with Japan and New Zealand. Singapore is also in FTA discussions with Canada and the four-member European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland).
Singapore maintains no tariffs on goods. Thus, the primary focus of U.S. negotiators was on opening up Singapore's services market and seeking the elimination of non-tariff barriers to trade and investment.
Major Provisions
Among the primary provisions of the U.S.-Singapore FTA are the following:
- Services: The FTA commits both parties to provide fair and non-discriminatory treatment on cross-border services and the right to establish a local services presence. Services commitments cover a wide range of sectors, including financial, computer and information technology, telecommunications, direct selling, audiovisual, construction, express delivery, distribution (including wholesaling and retailing), environmental and energy. With regard to banks, the agreement includes the core obligations and requires that the ban on new licenses for full-service banks be lifted within 18 months and within three years for wholesale banks. U.S. insurance firms will also have full rights to establish subsidiaries, branches and joint ventures, and Singapore agreed to end its prohibition on the cross-border supply of insurance services. The FTA also includes important commitments on telecommunications, including reasonable and non-discriminatory access to the telecom network, reasonable and transparent rights of interconnection, and non-discriminatory leasing ability. The FTA applies the non-discrimination principle to products delivered electronically, prohibits tariffs on digital products delivered electronically, and makes binding the voluntary e-commerce commitments made in the WTO. Commitments also include strong transparency and consultation requirements to ensure the fair and impartial regulation of services.
- Intellectual property rights: The FTA commits Chile to strong protections for intellectual property rights, with patent and trade secret protections stronger than prior agreements. It also includes very strong enforcement provisions, including criminal penalties for pirated products and both statutory and actual damages for violations.
- Competition policy: The FTA commits Singapore to enact legislation regulating anti-competitive business conduct and create a competition commission by 2005. Singapore has also undertaken commitments to ensure commercial enterprises in which the government has effective influence will operate on the basis of commercial considerations.
- Investment: The FTA includes many of the same protections included in U.S. Bilateral Investment Treaties to promote a secure and predictable legal framework for U.S. investors. The United States made some changes to the investment framework, as discussed in section 4, that should not be repeated in future agreements.
- Government procurement: The FTA includes important new anti-corruption and transparency rules for government contracting.
- Tariffs: The United States agreed to eliminate tariffs on most goods immediately, with remaining tariffs to be phased out over three to 10 years. The United States agreed to eliminate its 50-percent ad valorem tax on shipbuilding repairs that take place outside of the United States. Singapore guaranteed that U.S. products would continue to enter duty-free.
- Rules of origin: The FTA incorporates relatively flexible rules of origin to promote trade, except with respect to textile and apparel sector (where a NAFTA-like, yarn-forward rule is employed).
- Customs procedures: The FTA includes requires transparency and efficiency in customs administration, with commitments to publish laws and regulations on the Internet. The parties also included provisions to combat transshipment.
- Transparency: The FTA includes state-of-the-art transparency standards, including in such important areas as customs and regulatory rulemaking
- Labor and environment: The United States and Chile commit to enforce effectively their domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
- Dispute settlement: Obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.
Next Steps
The United States and Singapore are finalizing the technical language of the agreement, a draft of which was released in March 2003. Based on TPA procedures, the agreement could be signed as early as May 1, 2003. Following the signing of the agreement, legislation implementing the agreement will be drafted cooperatively by Congress and the Administration and then sent to Congress. Congressional consideration of this agreement is expected by the fall of 2003. The International Trade Commission (ITC) is also required to submit a report on the economic effects of the agreement within 90 days of its signing.
ECAT POSITION: ECAT supports the timely implementation of the U.S.-Singapore FTA. It will create significant opportunities for U.S. companies, workers, farmers, consumers and their families through the elimination of tariff and non-tariff barriers in most major sectors. Many of the provisions in this agreement are state-of-the-art, model provisions that should be sought by the United States in future agreements. In other areas, including those related to certain sensitive U.S. import sectors and foreign investment rules, ECAT supports efforts to further develop agreed provisions to make them more trade-facilitating in future agreements.
Import Restraints and Trade Remedy Law Issues
The coming year will require continued attention to import restraints on steel and other products and proposals to amend the U.S. trade remedy laws. As well, U.S. trade remedy laws will continue to be subject to WTO review in several significant dispute settlement cases.
Steel 201 Case
On March 5, 2002, the President decided to impose a temporary safeguard measure, largely in the form of substantial tariffs, on imports of steel. In particular, the President imposed the following measures for a three-year period (with tariffs scheduled to decline somewhat each year):
- A 30-percent tariff on imports of plate, hot-rolled, cold-rolled and corrosion-resistant sheet products, tin mill products, and hot-rolled and cold-finished bar.
- A 15-percent tariff on imports of rebar, certain welded tubular products, stainless steel bar, and stainless steel wire.
- A 13-percent tariff on imports of carbon and alloy fittings and flanges.
- An 8-percent tariff on imports of stainless steel wire.
- A tariff rate quota (TRQ) on imports of slab, with an in-quota quantity of 5.4 million short tons and an out-of-quota tariff of 30 percent.
The President excluded both Canada and Mexico and developing countries with only small exports (such as Argentina, India, South Africa and Thailand) from these measures. The President also imposed an import licensing system to monitor imports of steel and indicated that additional safeguard measures would be imposed if there were a surge in imports. The Administration also considered numerous exclusion requests, some of which were granted.
ECAT was deeply disappointed by the Bush Administration's decision to impose high tariffs on imports of fairly-traded steel. As indicated in the study that ECAT released on January 22, 2002, "Import Restrictions on Steel: Doubtful Benefits, High Costs" written by Gary Hufbauer and Ben Goodrich, ECAT argued that such restraints will cost domestic users and foreign suppliers approximately $34 billion over four years. Indeed, the cost of import restraints to domestic steel users, per job saved in the steel industry, would run about $500,000 per job per year.
Since the imposition of tariffs in March 2002, domestic steel-consuming manufacturers have faced the double-edged sword of price increases and steel shortages. Steel prices skyrocketed by up to 30 percent last year in certain types of most commonly-used steel and the small price declines this year have provided little relief. Even more harmful for some manufacturers have been the shortages and uncertain availability. Some American manufacturers who have traditionally only purchased domestic steel were suddenly put on allocation or cut off by U.S. steel producers who were faced with a marked increase in demand after imports declined. These problems have continued into 2003, so that many American steel-consuming manufacturers face significant difficulty in getting the quantity and quality of steel required to compete internationally. The tariffs have hurt both big and small companies in numerous industrial sectors from construction equipment to appliance manufacturing to the automotive sector. As a result, U.S. steel-consuming manufacturers have suffered losses, employees have been laid off, and in some cases, have been under pressure to move facilities offshore where there is a more predictable source of steel supply than is available in the United States.
On March 21, 2003, the Administration announced a limited number of additional product exclusions. It also announced the automatic reduction of the safeguard tariffs for year two to 24 percent for flat-rolled products, tin mill products, hot-rolled and cold-finished bar; to 12 percent for rebar, welded pipe & tube, stainless steel bar and rod; and to 10 percent for carbon/alloy flanges; and to 7 percent for stainless steel wire. The Administration also announced the automatic adjustment to the tariff rate quota for slab to 5.9 million short tons in-quota, with an out-of-quota tariff rate of 24 percent.
Immediately following the decision, the EU requested WTO consultations on the imposition of safeguards under section 201 and separately under the Agreement on Safeguards; the EU has indicated that it will seek $2.5 billion in compensation. Japan, South Korea, Australia, New Zealand, China and Norway also requested WTO consultations on the President's decision. In June 2002, a panel was established to hear the complaints and subsequent panel requests were consolidated. According to press reports in late March 2003, the panel's interim report finds that the safeguard action is not consistent with the United States' WTO obligations in several respects:
- The ITC failed to explain how there was an increase in imports of steel;
- The ITC improperly excluded Canada and Mexico from the remedy while at the same time including their imports in the injury analysis;
- The ITC failed to explain adequately the causal link between the imports and the injury; and
- The ITC failed to explain how any surge was the result of "unforeseen circumstances."
The final panel decision is expected later this spring.
On March 5, 2003, the International Trade Commission (ITC) instituted an investigation to review the effect of the safeguard action at its midpoint and has planned a briefing schedule and hearings for this summer. Under the statute, the ITC is required to monitor developments with respect to the domestic industry, including efforts to make a positive adjustment to import competition. The ITC is not required to examine the effect of such tariffs on consuming industries in the United States. On January 29, 2003, Representative Knollenberg (R-MI) introduced H. Con. Res. 23 to urge the President to request the ITC to monitor and report on the impact of the temporary safeguards on domestic steel-consuming industries. As of mid-March 2003, there were 68 cosponsors. Senate companion legislation is expected to be introduced shortly. In late March 2003, the Ways and Means Committees requested the ITC seek this type of information.
Following the President's receipt of the ITC report (due in September 2003), the President will have the authority to modify or eliminate the remedy previously imposed. A portion of the domestic steel industry has already requested the Administration to expand the tariffs to developing countries, including Mexico, which increased somewhat exports into the United States.
International Steel Negotiations
Following the initiation of the section 201 action, the Bush Administration initiated international negotiations to reduce global overcapacity and market distortions. USTR and the Commerce Department have pursued these efforts in the steel committee of the Organization for Economic Cooperation and Development (OECD).
In December 2002, the High-Level Steel Group of the OECD agreed to work on the structure of a negotiation of an agreement to curb steel subsidies, although it has not agreed on a voluntary standstill on subsidization. The United States and EU are pressing to add these talks to the WTO by this fall. Despite pressure from several countries, the High-Level Steel Group did not link these discussions to efforts to reform trade remedy rules themselves.
ECAT POSITION: ECAT supports efforts to remedy the devastating effects that steel tariffs imposed pursuant to section 201 have had on steel-consuming manufacturers and to secure the early termination of these tariffs. ECAT supports H. Con. Res. 23 and efforts to ensure that the Administration considers the consumer effect of these tariffs, in addition to a serious review of the effect of these tariffs and other factors on the adjustment of the domestic industry and overall domestic economic growth. ECAT also urges the United States and other steel-producing nations to intensify their efforts in the OECD to reduce excess global capacity and refrain from a dangerous protectionist spiral.
Proposals to Amend U.S. Trade Remedy Laws
Several pieces of legislation have already been introduced in 2003, in addition to the Knollenberg resolution discussed above, that would amend the trade remedy laws, including the following:
- S. 136, Expedited Remedy for Persistent Dumping Act, introduced by Senator Lincoln (D-AR) in the Senate, to provide for an expedited antidumping investigation when imports increase materially from new suppliers after an antidumping order has been issued, and to amend the provision relating to adjustments to export price and constructed export price. Representative Berry (D-AR) and Senator Lincoln had introduced the same bill last year in the House and the Senate respectively.
- H.R. 1073, introduced by Judiciary Chairman James Sensenbrenner (R-WI) and Ways and Means Committee Chairman Thomas (R-CA), to repeal the antidumping provisions contained in the antidumping Act of September 8, 1916 (discussed under WTO cases below).
- S. 219, introduced by Senator Larry Craig (R- ID), to modify adjustments made in determining export price and constructed export price. This legislation would effectively increase the margin of countervailing duties if an exporter had previously paid countervailing duties on the same product.
As discussed in more depth in section 6, Senator Baucus (D-MT) introduced S. 676, World Trade Organization Dispute Settlement Review Commission Act, and Senator Hollings (D-SC) has also introduced S. 592, Save American Manufacturing Act of 2003, which would also review a commission to review WTO dispute settlement findings involving trade remedy and other issues. .
As Congress considers modifying U.S. trade remedy laws, ECAT urges that consideration be given to the balance that these laws need to achieve between the interests of the industry seeking relief and other U.S. industries and consumers. Prior proposals to modify the causation and injury standards of section 201 and some of the proposals to amend the antidumping and countervailing duty laws would not establish that balance, but instead tilt the relief standard overwhelmingly in favor of the petitioning domestic industry. Such a result is not in the interest of the United States as a whole. Furthermore, many of these provisions are contrary to U.S. international commitments.
ECAT strongly urges that any modifications to U.S. law be consistent with U.S. international obligations in the WTO, the NAFTA and other trade agreements. As described below, U.S. trade remedy provisions and decisions have already been the subject of numerous challenges in the WTO. The enactment of WTO-inconsistent provisions, as has been proposed in the past two years, undermines U.S. leadership in the world trading system and our ability to convince other countries to honor their commitments. It also undermines U.S. competitiveness and subjects U.S. exporters to the risk of retaliation.
WTO Dispute Settlement Cases Involving U.S. Trade Remedy Laws
U.S. trading partners have already sought several reviews of U.S. trade remedy provisions (in addition to the steel case discussed above) that may require consideration and legislative action in 2003.
Byrd Amendment
Senator Byrd (D-WV) successfully attached an amendment, the "Continued Dumping and Subsidy Offset Act," (CDSOA) to the FY 2002 agriculture appropriations bill approved in October 2000. This provision requires that antidumping and countervailing duties be distributed to affected domestic producers who supported the antidumping and countervailing duty actions in the first place, rather than deposited in the general treasury. Eleven parties -- the EU, Mexico, Australia, Brazil, Chile, Canada India, Indonesia, Japan, South Korea, and Thailand -- sought WTO dispute settlement consultations with the United States arguing that the legislation violates several WTO provisions.
In September 2002, the panel reviewing the case found that the CDSOA is an impermissible action against dumping and subsidies under the WTO Antidumping and Subsidies Agreements, respectively, because it is a remedy in addition to what is already authorized under those agreements. The Appellate Body agreed with the panel in January 2003. The United States has stated its intention to implement the DSB recommendations and rulings.
ECAT strongly opposed enactment of the CDSOA because it undercuts U.S. leadership in the global trading system and is inconsistent with U.S. trade obligations. As well, it sets a precedent that we do not want other countries to follow by increasing the incentives for filing antidumping and countervailing duty cases. Through this provision, domestic companies that are successful in having antidumping and/or countervailing duties imposed on foreign competitors, receive a cash reward for their success. This is not in the interest of U.S. exporters who may face similar laws abroad.
Notably, the adoption of the CDSOA helped guarantee that the WTO antidumping and countervailing duty agreements are once again be on the table in the next round of trade negotiations, diverting us from our broader trade and investment objectives.
A much better use of these duties would be to distribute them to adjustment assistance or similar programs. Redirecting the money to workers, rather than providing it as a windfall to a select group of companies, would at least be helpful in promoting the consensus that we need to build in this country for our broader trade and investment liberalization objectives.
During 2001, the Customs Service distributed nearly half of the more than $206 million in duties to two manufacturers of steel ball bearings - the Torrington Company and Timken. Customs distributed the remaining funds to domestic producers of steel, pasta and other products. In 2003, Customs distributed $329.9 million to various U.S. companies.
The fiscal year 2004 budget would repeal the CDSOA, explaining that:
"These corporate subsidies effectively provide a significant 'double dip' benefit to industries that already gain protection from the increased import prices provided by countervailing duties." (The repeal is included in the Treasury Department budget on page 244, as the U.S. Customs Service administers the program.)
Congress is currently examining how best to come into compliance with the WTO decision regarding the CDSOA.
Privatization Methodology under the U.S. Countervailing Duty Law
U.S. trading partners have also brought several cases against the methodology used by the Commerce Department in determining whether government subsidies to a government-owned company continue after the company has changed ownership or been privatized (so-called privatization methodology). In May 2000, the WTO Appellate Body found that the U.S. privatization methodology used in the case of hot-rolled lead and bismuth carbon steel products (Leaded Bar decision) was inconsistent with the WTO Agreement on Subsidies and Countervailing Measures. The United States terminated the duties, but did not propose any legislative modifications as the EU had sought.
On November 13, 2000, the EU requested consultations in 14 separate U.S. countervailing duty proceedings (involving imports of steel and other products) with respect to the Commerce Department's privatization methodology, arguing that this methodology was found to be inconsistent in the earlier Leaded Bar decision. Consultations were held in December 2000, and a panel was formed in September 2001. The panel ruled in July 2002 that the statutory provision on privatization (section 771(5)(F) of the Tariff Act of 1930) and the Commerce Department's privatization methodology were inconsistent with the WTO Subsidies Agreement. In December 2002, the Appellate Body upheld the panel's finding that the Commerce Department's methodology was inconsistent with the Subsidies Agreement. It rejected, however, the panel's reasoning that an arm's length sale of a government-owned firm for fair market value always extinguishes prior subsidies; rather it creates a rebuttable presumption that prior subsidies are extinguished. The Appellate Body found that the statutory provision was not, therefore, inconsistent with WTO rules. The United States has stated its intention to implement these recommendations.
On December 21, 2000, Brazil requested consultations on the same issue with respect to countervailing duties imposed on Brazilian carbon steel products; consultations were held in January 2001. Brazil has not yet requested a panel.
Safeguard Measures
U.S. trading partners have challenged the United States' application of section 201 of the Trade Act of 1974 with respect to wheat gluten (complaint by EU), lamb meat (complaints by New Zealand and Australia), circular welded carbon line pipe (complaint by Korea), and line pipe and wire rod (complaint by EU).
On December 22, 2000, the WTO Appellate Body circulated its decision in the wheat gluten case finding that the U.S. causation standard was consistent with the WTO Agreement on Safeguards (reversing, thereby, the earlier panel's finding that increased imports "alone," "in and of themselves," or "per se," must be capable of causing serious injury). The Appellate Body found, however, that the U.S. International Trade Commission had not adequately examined certain causation issues, and improperly included imports from Canada in its causation analysis (while later excluding such imports from the application of the safeguard measure). The United States indicated that it would need a reasonable period of time to implement the Appellate Body ruling. On January 24, 2001, the EU imposed punitive duties on U.S. exports of corn gluten feed in retaliation for the United States' maintenance of the safeguard measures on wheat gluten imports into the United States. The United States requested WTO dispute settlement consultations on the imposition of these tariffs on January 25, 2001. In March 2001, the ITC recommended a two-year extension of the quota imposed under the safeguard. In June, the President decided not to extend the quota, but provided wheat gluten producers with $40 million for funding for marketing, product development and capital expenditures. In response to the decision to lift the quota, the EU lifted tariffs on corn gluten imports from the United States.
On December 21, 2000, the WTO panel in the lamb case found that certain aspects of the U.S. safeguard measure on lamb, including the causation standard, were inconsistent with WTO rules. On May 1, 2001, the Appellate Body circulated its report reversing the Panel's interpretation of the causation requirement, but criticized the ITC's analysis for failing to ensure that injury caused by other factors was not attributed to imports. The Appellate Body did uphold the Panel's findings that the ITC's decisions regarding "domestic industry" and "unforeseen circumstances" were inconsistent with WTO rules. On August 31, 2001, the Bush Administration announced that it would comply with the WTO decision and withdraw in November the tariff-rate quota on imports of lamb meat imposed pursuant to the safeguard action. At the same time, the Administration announced that it would provide $40 million to U.S. sheep producers for a new breeding program and a direct payment program for feeder lambs and slaughter lambs.
On October 29, 2001, the WTO panel in the circular welded pipe case brought by Korea found that the United States' imposition of safeguard measures against such imports violated the WTO Agreement on Safeguards. In particular, the Panel ruled against the ITC's analysis of causation, unforeseen circumstances, and domestic industry. The United States appealed the decision to the Appellate Body in November 2001. In February 2002, the Appellate Body largely upheld the panel's ruling finding that the ITC failed to establish the requisite causal link and failed to demonstrate that the measure was necessary to prevent or remedy serious injury, among other issues. On July 29, the United States and Korea agreed that the reasonable period of time to comply with the recommendations and rulings of the DSB would end on September 1, 2002, and that, after that date, the United States would increase the volume of Korean line pipe exempt from the safeguard from 9,000 tons per year to 17,500 tons per quarter.
The WTO panel in the EU's challenge to the same safeguard action was formed on September 10, 2001.
Antidumping Act of 1916
On August 28, 2000, the WTO Appellate Body issued its decision finding that Title VII of the Revenue Act of 1916 (the so-called Antidumping Act of 1916) is inconsistent with U.S. commitments under the WTO Agreement on Antidumping. The primary problems cited by the Appellate Body were inconsistencies between the statute's material injury test and its civil and criminal penalties and the requirements of the Antidumping Agreement. The panel and Appellate Body reports were adopted by the Dispute Settlement Body on September 26, 2000, and the United States indicated on October 23, 2000 that it would seek to implement the rulings. On November 17, 2000, the EU and Japan (who originally brought the complaint) asked for arbitration to determine the reasonable period of time that the United States should have to comply with these decisions. A WTO arbitrator has ruled that the United States will have until July 26, 2001 to bring its law into conformity with this decision. At the request of the United States, the WTO Dispute Settlement Body approved an extension of the deadline until the end of the 1st session of the 107th Congress or December 31, 2001, whichever came first. The EU and Japan have proposed a suspension of concessions as a result of the failure of the United States to come into compliance. The amount of damages was referred to arbitration. In February 2002, the United States, EU and Japan reached an agreement giving the United States until June 30, 2002 to come into compliance.
On December 20, 2001, Ways and Means Committee Chairman Thomas introduced H.R. 3557 to repeal the Antidumping Act of 1916. In the 108th Congress, Judiciary Chairman Sensenbrenner and Chairman Thomas reintroduced the same legislation (H.R. 1073).
Hot-Rolled Steel from Japan
On July 24, 2001, the WTO Appellate Body issued its report finding that the United States' application of antidumping duties on imports of hot-rolled steel from Japan violated the WTO agreement on antidumping measures. In particular, the Appellate Body (and lower panel) found that the U.S. methodology for calculating the so-called "all-others rate" did not rely fully on actual company information, but included some calculations based on "facts available." The Appellate Body also found fault with the ITC's injury analysis. An arbitrator determined that the United States would have 15 months, until November 23, 2002, to comply with this ruling. This deadline was extended until December 31, 2003, or the end of the first session of Congress, whichever is earlier.
Steel Plate from India
India requested consultations with the United States on its final antidumping and countervailing duty findings against steel plate products from India, alleging violations by both the Commerce Department and the ITC. In June 2002, the panel rejected three of India's four claims, but found on the fourth that the United States' use of total facts available was incorrect. The United States announced its intention to comply with the panel's report and both parties agreed that the reasonable period of time to implement the panel's rulings would end on January 31, 2003.
Corrosion-Resistant Steel from Germany
The EU requested consultations with the United States on its sunset review decision not to revoke a countervailing duty order on corrosion-resistant steel from Germany, alleging that the Commerce Department should have revoked the order because the rate of subsidization is less than 1 percent. The United States and EU held consultations in December 2000 and March 2001. A panel was established on September 10, 2001. In July 2002, the panel rejected most of the EU's claims, finding that the U.S. system of automatically self-initiating sunset reviews is WTO-consistent. The panel found, however, that the Commerce Department's failure to apply the 1 percent de minimis standard from CVD investigations to sunset reviews is WTO-inconsistent. The panel also found that Commerce's decision in the German steel sunset review lacked a sufficient factual basis. In November 2002, the Appellate Body affirmed the findings of the panel that had been appealed by the EU and reversed the finding that the 1 percent de minimis rule must be applied in sunset reviews too.
Other Trade Remedy Cases
In addition to the cases discussed above, U.S. trading partners have challenged several U.S. antidumping and countervailing duty decisions, including: an Argentine complaint on antidumping duties on oil country tubular goods; an EU complaint against the imposition of antidumping duties on steel pipe from Italy; a Brazilian complaint against antidumping duties on silicon metal; a Japanese complaint against antidumping duties on corrosion-resistant steel; Mexican complaints against antidumping duties on oil country tubular goods and cement and countervailing duties on steel plate; and Canadian complaints against softwood lumber decisions (discussed in section 10).
ECAT POSITION: It is vitally important that both U.S. unfair trade laws and Section 201 maintain - in both the legal provisions and their application - a careful balance between the interests of the petitioning industry and the interests of other U.S. industries and consumers. It is critical that the Congress and the Administration oppose any efforts to impose import restraints or amend U.S. antidumping, countervailing duty, or safeguards laws in ways that would invite foreign retaliation, encourage restrictive foreign mirror legislation, and/or violate the United States' international trade commitments.
Restructuring and Modernization of the U.S. Customs Service
The U.S. Customs Service represents a key element in the United States' trade competitiveness. Its role has changed dramatically since it was first authorized to collect customs duties on goods in 1789. While duty collection remains important, the Customs Service plays an integral role in facilitating legitimate trade and protecting the nation's borders.
Most recently, Customs faces a new challenge as it becomes part of the new Department of Homeland Security. As emphasis shifts to bolster Customs' border security functions, it is also critical to ensure that Customs' commercial functions are maintained.
In recent years, outdated technology, understaffing and other impediments to modernization have hampered the ability of the Customs Service to operate efficiently and effectively in several areas. In order for U.S. farmers, manufacturers, service providers, and retailers to remain competitive, efforts must be made to help the U.S. Customs Service keep pace with technological developments and the changing international economic environment.
Transfer to Department of Homeland Security
In November 2002, Congress approved H.R. 5005, the Homeland Security Act of 2002. This legislation establishes a new Department of Homeland Security (DHS), to prevent terrorist attacks within the United States and reduce the vulnerability of the United States to terrorism. As part of the consolidation of numerous U.S. Government functions, the U.S. Customs Service was moved from the Department of the Treasury to the DHS. Customs was placed within the Directorate of Border and Transportation Security, along with the Transportation Administration of the Transportation Department, the Federal Protective Service of the General Services Administration, the Federal Law Enforcement Training Center of the Department of the Treasury, and the Office of Domestic Preparedness of the Office of Justice Programs.
The Commissioner of Customs remains as head of the Customs Service within the new DHS.
Nevertheless, the statute provides that the customs revenue functions are not transferred to the DHS and that the Secretary of DHS may not consolidate, discontinue or diminish the customs revenue functions of the Customs Service or reduce staffing levels or resources attributable to these functions. Further, the Treasury Secretary is authorized to appoint up to 20 persons to work with the DHS in performing customs revenue functions.
No funds available to the Customs Service or customs user fees collected by Customs as part of the Consolidated Omnibus Budget Reconciliation Act may be transferred to any other agency or office of the DHS. The President is required to include a separate budget request for the Customs Service.
As part of the DHS, the Customs Service plans to expand its security initiatives, including the Customs Trade Partnership Against Terrorism (Customs-TPAT) initiative to enhance security throughout the entire import-export process and the Container Security Initiative, pursuant to which Customs has negotiated agreements with 18 of the world's largest 20 ports to put into place tougher international security standards.
Automation Modernization
While progress has been made in appropriating limited funds for the modernization of the Customs Service's automated systems, substantial appropriations are still required in order to ensure that Customs is able to continue to function in the coming years.
Customs has sought to develop and implement the so-called Automated Commercial Environment (ACE) to enable Customs to process more efficiently and cost-effectively imports and exports and to better protect U.S. borders from threats from abroad. Customs currently relies on the outdated Automated Commercial Systems (ACS) to process import entries. That technology is, however, almost two decades old, and system failures have already impeded Customs' ability to provide needed services. While minor improvements have been made to the existing ACS system to keep it operational in recent years, it remained overburdened and may suffer catastrophic failure as it continues to face a rising volume of U.S. imports.
Congressional appropriators have also been concerned by GAO studies that have sought greater information and definition of Customs Service objectives in the ACE project. In 2000 to 2001, the Customs Service engaged in a major effort to define its operational and automated requirements to the satisfaction of GAO investigators. In the final appropriations package for FY 2003, Customs received $435,332,000 for automation modernization, of which $312,900,000 was specifically earmarked for the development of ACE. This represents a significant increase from 2002 funding. Congressional appropriators provided that none of these funds could be obligated to Customs, however, until Customs (1) meets the capital planning and investment control review requirements established by the Office Management and Budget, including OMB Circular A-11, part 3; (2) complies with the United States Customs Service's Enterprise Information Systems Architecture; (3) complies with the acquisition rules, requirements, guidelines, and system acquisition management practices of the Federal Government; (4) is reviewed and approved by the Customs Investment Review Board, the Department of Treasury, and the Office of Management and Budget; and (5) is reviewed by the General Accounting Office and the Committees of Appropriation. As part of the Trade Act of 2002, Congress also approved an authorization for ACE of $308 million for FY 2004 and required Customs to file reports with the Senate Finance and the House Ways and Means Committees on the status and cost-effectiveness of ACE development.
ECAT continues to support full funding of the ACE program to ensure the modernization of Customs' operations in order to promote more cost-efficient and effective commercial and enforcement programs.
Understaffing
The Customs Service has also faced in recent years enormous challenges in meeting its mission and objectives because staffing and technological advances have not kept up with the increasing imports and exports and the increased sophistication of drug traffickers and others who threaten the U.S. border. After efforts by many Congressional members - including Finance Committee Chairman Grassley (R-IA), Ways and Means Chairman Thomas (R-CA), Ways and Means Trade Subcommittee Chairman Crane (R-IL), Senators Bingaman (D-NM), Boxer (D-CA), Domenici (R-NM), Hutchison (R-TX), Kyl (R-AZ) and McCain (R-AZ), and former Senators Gramm (R-TX) and Moynihan (D-NY) - substantial additional funding authorization to address these issues was included as part of the Trade Act of 2002, enacted on August 6, 2002 (Pub. L. 107-210).
Customs Modernization
The U.S. Customs Service also continues to be engaged in implementing the provisions of the Customs Procedural Reform and Simplification Act of 1978 (1978 Procedural Reform Act) and the Customs Modernization Act (the so-called Mod Act), which was enacted as title VI of the NAFTA Implementation Act of 1993. The 1993 Mod Act eliminated statutory requirements for paper documentation and provided authority for full electronic processing of customs-related transactions. In return for waiving paperwork requirements, the Mod Act imposed certain recordkeeping requirements on importers and required the production of some information after the fact. The Mod Act also authorized several automation initiatives based on the 1978 Procedural Reform Act, including remote-entry filing, periodic entry and duty payment. As well, the Mod Act required modifications in duty drawback provisions and procedural safeguards.
Under Mod Act authority and prior authority provided by the 1978 Procedural Reform Act, the Customs Service has engaged in a significant reorganization of its activities and functions. While Customs' reorganization has resulted in some greater efficiency, the importing and exporting communities remain very concerned that implementation and interpretation of authorized reforms are not yet complete, nor fully consistent with the goals and requirements of 1978 Procedural Reform Act and the Mod Act. In particular, concerns have been raised regarding:
- Customs' Compliance Assessment and its Trade Compliance Risk Management processes, including Customs' reliance on audit-based evidentiary standards (relying on the Generally Accepted Government Audit Standards (GAGAS) rather than the reasonable care standard of the Generally Accepted Accounting Principles (GAAP)).
- Customs' Compliance Measurement and its associated penalty processes (increased cargo inspections, etc.) which penalize otherwise compliant and unsuspecting importers for errors or omissions caused by licensed brokers and express couriers.
- Customs' failure to implement provisions of the 1978 Procedural Reform Act and the 1993 Mod Act in a timely or complete manner.
ECAT supports efforts to further modernize the Customs Service to promote greater trade facilitation and efficiency in a manner consistent with its mandate. In particular, ECAT believes that Customs could substantially improve its operations to better achieve border and economic security through adoption of the following proposals:
- Elimination of reconciliation for all entries that provide statistical updates only and have no impact on revenue;
- Simplify and reduce the Harmonized Tariff Schedule;
- Provide a total electronic interface for all required data to eliminate paper documents;
- Eliminate the release of confidential and trade sensitive date to non-governmental agencies;
- Operate ports 24 hours/7 days a week;
- Reduce the required data for exports and imports to a single set of data to satisfy both transactions as conceived under the ITDS model.
ECAT is also very concerned about Customs' adoption of the "24-hour manifest rule," which became effective in December 2002. Pursuant to Customs' regulations, all carriers and non-vessel operating common carriers (NVOCCs) are required to file their cargo declarations 24-hours before their cargo is laden aboard a vessel at a foreign port. While ECAT recognizes and supports the U.S. Government's interest in evaluating the contents of shipments for national security and other reasons, this rule does not substantially advance that goal. Rather, it will impede commercial shipments, which oftentimes do not have fully complete manifest information ready that far in advance of shipment. This regulation is overly restrictive and will impede the legitimate commercial flow of goods into the United States to the detriment of U.S. companies, workers and their families. At the same time, it will do little to deter those who seek to evade U.S. laws who can continue to file fraudulent manifests.
ECAT POSITION: ECAT looks forward to working with the Customs Service, the Department of Homeland Security and the Department of Treasury to help ensure that Customs' restructuring progresses in a manner that fulfills our national security and enforcement goals, while also facilitating the flow of legitimate commercial trade that provides enormous economic benefits to the United States. ECAT strongly supports full funding of the Automated Commercial Environment (ACE) from general revenues. The ongoing failure to modernize Customs' automated systems threatens to undermine U.S. productivity and competitiveness in the global marketplace and ECAT supports efforts to resolve these issues quickly. ECAT strongly supports the authorization of additional funding for Customs Service personnel and technology included in the Trade Act of 2002 and supports full appropriations of these funds. ECAT also strongly supports improvements in the operation of the Customs Service, including through full and improved implementation of the Customs Modernization Act and the Customs Procedural Reform and Simplification Act of 1978 in a manner that facilitates trade.
Reform of Trade Adjustment Assistance and Worker Retraining Programs
The original Trade Adjustment Assistance (TAA) programs for workers and for firms were enacted as part of the Trade Expansion Act of 1962. These programs were premised on the recognition that while trade liberalization supports economic growth and prosperity for the United States as a whole, certain workers and companies may be adversely affected by the adjustment to trade liberalization. The TAA for Workers and the TAA for Firms programs enacted in 1962 were last modified in the Trade Act of 1974. The third TAA program, NAFTA-TAA for Workers, was enacted as part of the NAFTA Implementation Act in 1993 and is focused on workers adversely impacted by trade with Canada and/or Mexico. Both the general TAA and the NAFTA-TAA programs have provided direct assistance and training to workers who are laid off in trade-impacted industries. Approximately 163,000 workers per year have used the programs, which cost $457 million annually. The main beneficiaries have been apparel/textile, oil and gas, electronics, and the metal/machinery industries. The NAFTA Implementation Act also established a fourth program, the Community Adjustment and Investment Program (CAIP), to provide funds for community adjustment and investment.
In 2002, Congress approved a substantial modernization and reform of the TAA programs as part of the Trade Act of 2002. This legislation was based on legislation authored by Senator Bingaman (D-NM) and cosponsored by Senator Baucus (D-MT) and Minority Leader Daschle (D-SD).
Major Provisions of Trade Adjustment Assistance as Reformed by the Trade Act of 2002
The Trade Act of 2002 made the first major reforms of the TAA programs since 1974 and extended the programs through September 30, 2007. The major provisions include:
TAA for Workers and NAFTA-TAA Programs
Implementation and Continued Review of TAA Reforms
Given the significant reforms undertaken in the Trade Act of 2002 and key demonstration projects on wage insurance and health care coverage, careful implementation and continued review of the effectiveness of these programs will be critical.
Private Sector Retraining Efforts
Many companies, including ECAT members, have developed their own worker retraining programs to help address the concerns about dislocations caused by technological developments, trade, and other forces. These companies have focused on continued education and intensive retraining through the use of community colleges, the Internet, and other education resources. These programs, in conjunction with government efforts, represent an important facet of worker readjustment efforts.
ECAT POSITION: ECAT recognizes that while expanding U.S. international trade and investment raises the U.S. standard of living overall, dislocations occur and must be addressed through public and private worker retraining and assistance programs. ECAT supports efforts to implement the trade adjustment assistance provisions of the Trade Act of 2002 and to continue to review the effectiveness of these programs in addressing the needs of today's workers.
Addressing Concerns about Trade and Investment Liberalization
As the Bush Administration and Congress move forward on policies to promote trade and investment liberalization, there will continue to be much pressure to address labor, environmental, food safety, health, and other issues through trade and investment agreements. Without question, there are serious labor, environmental, food safety, and health issues that should be addressed. Before rushing to adopt solutions that may not be effective, however, it is critical that policymakers work to determine how the United States' objectives in these areas can best be achieved.
Labor and Environment Issues
The relationship between trade liberalization and labor is a complex one that goes far beyond the narrow debate about whether labor standards should be enforceable through trade sanctions. What is oftentimes lost in the discussion is the positive role that trade plays in raising living standards and, therefore, labor and environmental standards worldwide. As the World Bank and others have documented, it is precisely through increased trade, economic growth, and a growing middle class that developing countries are better able and increasingly motivated to improve labor and environmental standards. Since World War II, the liberalization of trade has produced a six-fold growth in the world economy and a tripling of per capita income and enabled hundreds of millions of families to escape from poverty and enjoy higher living standards.
A study by Dartmouth University economists Eric Edmonds and Nina Pavnick, "Does Globalization Increase Child Labor," also documents this conclusion with regard to labor standards. This study found that the removal of some of Vietnam's trade barriers - export quotas on rice - decreased child labor because parents were able to earn more money from their rice crops. As efforts continue to link trade and labor issues, it is critical that the positive relationship between trade liberalization and labor standards be recognized and incorporated into this policy debate. Proposals that would impede trade liberalization and economic growth must, therefore, be seriously questioned.
For the most part, labor and environmental issues may be better addressed directly through separate agendas in organizations with technical expertise, rather than as add-ons to the trade agenda. Efforts in the International Labor Organization, the Commission for Environmental Cooperation, the North American Development Bank and other organizations, for example, can be intensified. And, in those cases where complementarity between U.S. trade and U.S. labor and/or U.S. environmental objectives exists, efforts should be made to address these objectives jointly and in a cooperative manner. We review below the major trade-related labor and environmental efforts, with the exception of the U.S.-Chile and U.S.-Singapore Free Trade Agreements (FTAs) that are discussed in section 3 and NAFTA-related issues that are addressed in section 10.
Labor Issues
Trade Promotion Authority
As discussed in section 2, the Bipartisan Trade Promotion Authority Act (TPA Act), enacted as part of the Trade Act of 2002, includes wide-ranging negotiating objectives. With respect to labor issues, the TPA Act includes the most extensive labor negotiating objectives ever included in a trade-negotiating authority law. The principal provisions include:
- Overall negotiating objectives to:
- foster economic growth, raise living standards, and promote full employment in the United States and to enhance the global economy;
- promote respect for worker rights and the rights of children consistent with core labor standards of the International Labor Organization (as defined in section 2113(2)) and an understanding of the relationship between trade and worker rights; and
- seek provisions in trade agreements under which parties to those agreements strive to ensure that they do not weaken or reduce the protections afforded in domestic environmental and labor laws as an encouragement for trade.
- Principal negotiating objectives to:
- ensure that parties to any trade agreement do not fail to enforce effectively their labor laws through a sustained or recurring course of action or inaction, in a manner affecting trade;
- strengthen the capacity of United States trading partners to promote respect for core labor standards (as defined in section 2113(2));
- ensure that the labor, health, or safety policies and practices of the parties to trade agreements with the United States do not arbitrarily or unjustifiably discriminate against United States exports or serve as disguised barriers to trade;
- prevent distortions in the conduct of international trade caused by the use of the worst forms of child labor, in whole or in part, in the production of goods for export in international commerce; and
- redress unfair and illegitimate competition based upon the use of the worst forms of child labor, in whole or in part, in the production of goods for export in international commerce.
- Requirements for the Administration to:
- promote greater cooperation between the WTO and ILO (Uruguay Round Act provides ongoing requirement for the Administration to seek a working group on trade and labor at the WTO).
- seek to establish consultative mechanisms among parties to trade agreements to strengthen the capacity of United States trading partners to promote respect for core labor standards;.
- have the Secretary of Labor consult with any country seeking a trade agreement with the United States concerning that country's labor laws and provide technical assistance to that country if needed;
- submit to the Ways and Means and Finance Committees a meaningful labor rights report of the country, or countries, with respect to which the President is negotiating;
- review the impact of future trade agreements on U.S. employment, modeled after Executive Order 13141; and
- report on child labor laws for each country with which the President seeks a negotiation.
In addition, H.R. 3005 includes an enforcement negotiating objective directing U.S. negotiators to seek to treat all principal negotiating objectives equally, and would give the flexibility to determine the mechanism that will most effectively encourage compliance.
WTO Activities
At the Fourth Ministerial Conference in Doha, Qatar, in November 2001, the WTO agreed to the following statement on labor issues:
"We reaffirm our declaration made at the Singapore Ministerial Conference regarding internationally recognized core labour standards. We take note of work under way in the International Labour Organization (ILO) on the social dimension of globalization."
Efforts by the European Union (EU) and the United States to promote a more activist WTO role, either through the formation of a WTO Forum on labor or to "support" the work of the ILO were rejected overwhelmingly by the developing countries on the grounds that linking labor issues to trade agreements could lead to disguised restrictions on trade and that the ILO is the appropriate forum to deal with labor issues.
Nevertheless, the United States remains obligated by section 131 of the Uruguay Round Agreements Act to propose the creation of a WTO working group on trade and worker rights.
International Labor Organization Activities
Over the past several years, there has been substantial progress in developing a greater consensus on labor standards in the International Labor Organization (ILO). Since 1998, the ILO began a major push for country ratifications of the core conventions. The eight core conventions are:
No. 29, Forced Labor, 1930;
No. 87, Freedom of Association and Protection of the Right to Organize, 1948;
No. 98, Right to Organize and Collective Bargaining, 1949;
No. 100, Equal Remuneration, 1951;
No. 105, Abolition of Forced Labor, 1957;
No. 111, Discrimination (Employment and Occupation), 1958;
No. 138, Minimum Age Convention, 1973; and
No. 182, Worst Forms of Child Labor (1999).
In 1998, the ILO also adopted the Declaration on Fundamental Rights and Principles at Work to promote the observance of basic labor rights with a follow-up mechanism to promote countries' compliance with these labor principles. In 1999, the ILO published "Your Voice at Work," the first report following up on that Declaration, which focused on ILO members' observance of two conventions: ILO Conventions No. 87 (Freedom of Association and Protection of the Right to Organize) and No. 98 (The Right to Organize and Collective Bargaining). In 2000, the ILO published a report entitled "Freedom of Association and the Effective Recognition of the Rights to Collective Bargaining." In 2001, the ILO published "The Elimination of All Forms of Compulsory Labour" with respect to ILO Conventions Nos. 29 and 105.
In 1999, the ILO adopted a new convention, No. 182, banning the worst forms of child labor. The United States became the second country to ratify this convention, which had 115 ratifications by February 2002. Congress also directed the Department of Labor to prepare a report on international child labor, including the feasibility of efforts to reduce by 50 percent the number of children engaged in the worst forms of child labor.
The United States has ratified only Convention No. 105 on forced labor and No. 182 on the worst forms of child labor; it has agreed to observe all of the core principles as part of the 1998 Declaration.
The United States remains a significant donor to the ILO's International Programme to Eliminate Child Labor (IPEC) (established in 1992), which seeks to take children out of unhealthy work environments and place them in schools. Under the IPEC program, thousands of children are being given educational opportunities and phased out of garment factories in Bangladesh, the soccer ball industry in Pakistan, and fireworks production in Guatemala. In FY 2001, the United States began efforts to promote a new education initiative to improve access to quality education in areas with a high incidence of child labor. The United States expects to award $30 million in FY 2003 pursuant to this program.
Perhaps most significantly, in November 2000, the ILO Governing Body, for the first time ever, allowed measures to go forward to compel a country, the Government of Myanmar (Burma), to eliminate forced labor. As a result of an inquiry initiated under Article 33 of the ILO Constitution, the ILO has been reviewing whether Myanmar is complying with its obligations under the Forced Labor Convention, 1930 (No. 29) that Myanmar ratified in 1955. An ILO technical cooperation mission in October 2000 found that despite prior recommendations, Myanmar continued to violate the Convention through the "pervasive use of forced labor imposed by the authorities and the military." As a result, the Governing Body permitted implementation of an ILO Conference resolution requiring an ongoing review of Myanmar's activities and recommending that Member Countries review their relations with Myanmar and "take appropriate measures to ensure that such relations do not perpetuate or extend the system of forced or compulsory labor in that country." The ILO also recommended a review of whether the ILO, United Nations or United Nations Economic and Social Council should cease any activities in Myanmar. Article 33 which establishes a process for reviewing countries' compliance with ratified conventions had been used little prior to this point and had never resulted in recommendations for action as was issued with respect to Myanmar.
The ILO also remains involved in reviewing Cambodia's labor practices as part of the U.S.-Cambodian textile agreement discussed below.
Section 307 of the Tariff Act of 1930
The United States has stepped up U.S. Customs Service enforcement of section 307 of the Tariff Act of 1930, which bans the importation of goods, made from forced or indentured labor. On June 12, 1999, then President Clinton issued Executive Order 13126 ("Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor") to prevent federal agencies from buying products that have been made with forced or indentured child labor. Under procurement regulations implementing the Executive Order, federal contractors who supply products on a list published by the Department of Labor must certify that they have made a good faith effort to determine whether forced or indentured child labor was used to produce the items. On January 18, 2001, the Department of Labor in consultation and cooperation with the Department of the Treasury and the Department of State, developed the list of products, identified by country of origin, which they believe might have been made with forced or indentured child labor. The list is updated periodically.
Generalized System of Preferences and Other Preference Programs
The Trade and Development Act of 2000, enacted on May 18, 2000, added a new eligibility requirement to the Generalized System of Preferences (GSP) program (and, as a result, to the sub-Saharan African (SSA) program) and to the expanded Caribbean Basin Initiative (CBI) program that focuses on whether a country has "implemented its commitments to eliminate the worst forms of child labor." This statute also added a general eligibility provision on worker rights to the expanded CBI program. In determining country eligibility under both the new SSA and CBI programs, USTR considered these factors as required and was able to seek greater labor rights protections in several countries.
U.S.-Cambodia Bilateral Textile Agreement
The United States and Cambodia signed a three-year bilateral textile agreement on January 21, 1999, that established base quota levels for Cambodian textile and apparel products. For the first time ever, the agreement allowed for an annual quota increase, up to 14 percent in the base quota levels (on top of the traditional six-percent annual growth rate), pending an annual U.S. determination on whether worker rights in Cambodian textile and apparel factories "substantially comply" with Cambodian labor laws and internationally recognized core labor standards.
In December 2001, the United States and Cambodia agreed to extend the agreement by three years (until December 31, 2004) in a memorandum of understanding that opens most textile trade between the two countries. The Memorandum of Understanding increases Cambodia's quota for textile imports by nine percent, in addition to a six-percent increase that is normal for most textile import quotas - a total increase of 15 percent. The nine-percent increase for 2002 reflects Cambodia's progress towards ensuring that working conditions in its garment sector are in "substantial compliance" with internationally recognized labor standards and provisions of Cambodia's labor law.
While textile and apparel trade between the United States and Cambodia has increased substantially since this agreement was signed, several suggestions have been made with regard to its improvement. In particular, it would be useful and effective to develop a clearer and more concrete definition of what "substantial compliance" means (e.g., should factories that do not ship to the United States be included) and better implementation of the quota bonus (to ensure that those factories in compliance receive the benefit and those that are not in compliance do not). Additionally, greater transparency is required, and Cambodia should be given the possibility of asking for a review of an initial finding of noncompliance.
U.S.-Jordan Free Trade Agreement
Signed on October 24, 2000 and enacted in 2002, the U.S.-Jordan FTA contains, for the first time ever in a trade agreement, enforceable labor and environmental provisions. Both the labor and environmental provisions include hortatory language recognizing the importance of maintaining high labor and environmental standards. More significantly, both provisions include an enforceable commitment that the parties "shall not fail to effectively enforce its [labor and environmental] laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties." Additional language is included explaining that a Party remains in compliance with these provisions if a course of action or inaction reflects the "reasonable exercise" of its investigatory, prosecutorial, or regulatory discretion. It appears that these provisions permit the imposition of trade sanctions more readily and on a broader range of issues than the NAFTA side agreements (which authorize the imposition of monetary fines before sanctions can be imposed and limit, particularly in the labor side agreement, the issues for which sanctions can be imposed). It remains unclear what problems the provisions in the Jordan Agreement are seeking to address, since the Clinton Administration had argued that Jordan maintains high labor and environmental standards.
On July 23, 2001, the Governments of the United States and Jordan exchanged letters clarifying that they would try to work out differences under the agreement without resort to formal dispute settlement procedures and, in any event, would not try to block trade through the use of trade sanctions.
Environment Issues
Trade Promotion Authority
As discussed in section 2, the Bipartisan Trade Promotion Authority Act (TPA Act), enacted as part of the Trade Act of 2002, includes wide-ranging negotiating objectives. With respect to environmental issues, the TPA Act includes - for the first time ever in a trade-negotiating authority law - provisions related to trade and the environment. The principal provisions include:
- Overall negotiating objectives to:
- ensure that trade and environmental policies are mutually supportive and to seek to protect and preserve the environment and enhance the international means of doing so, while optimizing the use of the world's resources; and
- seek provisions in trade agreements under which parties to those agreements strive to ensure that they do not weaken or reduce the protections afforded in domestic environmental laws as an encouragement for trade.
- Principal negotiating objectives to:
- ensure that a party to a trade agreement with the United States does not fail to effectively enforce its environmental laws, through a sustained or recurring course of action or inaction, in a manner affecting trade;
- strengthen the capacity of United States trading partners to promote respect for core labor standards (as defined in section 2113(2));
- strengthen the capacity of United States trading partners to protect the environment through the promotion of sustainable development;
- reduce or eliminate government practices or policies that unduly threaten sustainable development;
- seek market access, through the elimination of tariffs and nontariff barriers, for United States environmental technologies, goods, and services; and
- ensure that environmental, health, or safety policies and practices of the parties to trade agreements with the United States do not arbitrarily or unjustifiably discriminate against United States exports or serve as disguised barriers to trade.
- Requirements for the Administration to:
- seek to establish consultative mechanisms among parties to trade agreements to strengthen the capacity of United States trading partners to develop and implement standards for the protection of the environment and human health based on sound science
- conduct environmental reviews of future trade and investment agreements, consistent with Executive Order 13141; and
- continue to promote consideration of multilateral environmental agreements and consult with parties to such agreements regarding the consistency of any such agreement that includes trade measures with existing environmental exceptions under Article XX of the GATT 1994.
In addition, H.R. 3005 includes an enforcement negotiating objective directing U.S. negotiators to seek to treat all principal negotiating objectives equally, and would give the flexibility to determine the mechanism that will most effectively encourage compliance.
WTO Activities
The multilateral trading system recognizes the importance of environmental protection as reflected in the WTO Preamble which makes the promotion of sustainable development a key objective and in the numerous exceptions provided to WTO obligations allowing for the enforcement of environmental, health, and safety measures. In 1994, WTO member states agreed to establish the Committee on Trade and the Environment (CTE) to try to address many of the environment-trade issues that have arisen. In March 1999, the WTO held a high-level symposium to discuss such issues further. In November 1999, the WTO announced that it had entered into a cooperative agreement with the United Nations Environment Program (UNEP) to help build awareness of the important link between trade, environment, and sustainable development in developing countries.
At the 2001 Doha Ministerial, WTO members agreed to new negotiations on environmental issues as part of the Doha Development Agenda. In particular, the Doha Declaration provides for new negotiations on:
"(i) the relationship between existing WTO rules and specific trade obligations set out in multilateral environmental agreements (MEAs). The negotiations shall be limited in scope to the applicability of such existing WTO rules as among parties to the MEA in question. The negotiations shall not prejudice the WTO rights of any Member that is not a party to the MEA in question;
(ii) procedures for regular information exchange between MEA Secretariats and the relevant WTO committees, and the criteria for the granting of observer status; and
(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services."
In addition, the Declaration directed the Committee on Trade and Environment to focus particular attention on the following issues, with an instruction to identify whether there needs to be any clarification of WTO rules or new negotiations at the Fifth Ministerial Conference:
(i) the effect of environmental measures on market access, especially in relation to developing countries, in particular the least-developed among them, and those situations in which the elimination or reduction of trade restrictions and distortions would benefit trade, the environment and development;
(ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights; and
(iii) labeling requirements for environmental purposes.
The Declaration also recognized the importance of technical assistance and capacity-building and encourages information sharing with respect to environmental reviews at the national level. WTOP work on these issues is discussed in more depth in sections 2 and 6.
The WTO dispute-settlement process also has maintained a core respect for environmental protection and conservation. WTO challenges to U.S. environmental policies have been rare, arising to date in only two out of a total of 96 dispute settlement cases involving the United States. In each of these cases, the final WTO dispute settlement panel or Appellate Body report did not question the soundness of the U.S. laws being challenged or the right of the United States to enforce those laws.
In the first WTO case involving a U.S. environmental law, a WTO panel found that a part of the regulations implementing the Clean Air Act pertaining to foreign refineries was applied in a discriminatory manner. In response, the Environmental Protection Agency eliminated the discriminatory aspect of its regulations without undermining the enforcement of the Clean Air Act. Similarly, in the second case involving a U.S. environmental law, a WTO panel found that the application of U.S. law requiring turtle-excluder devices on nets used by shrimping boats to Asian countries was discriminatory, but the panel did not question the validity of the law itself as an appropriate exception to WTO rules under Article XX of the 1994 GATT. The United States responded to this decision by expanding technical assistance to other countries to encourage compliance with the law and increased efforts to resolve the issue through a multilateral agreement. In October 2000, Malaysia challenged the United States' implementation of this matter, which the WTO Dispute Settlement Body referred to the original panel. In October 2001, the Appellate Body found that the United States' implementation of this law was fully consistent with WTO rules and complied with the earlier Appellate Body recommendations.
In a third important environmental case at the WTO, not involving the United States, a WTO panel upheld France's ban on imports of asbestos as justified under GATT Article XX as necessary to protect human health or the environment. Canada appealed this decision to the Appellate Body, which upheld the panel's finding in March 2001.
The United States is also promoting trade and environmental protection in mutually supportive ways by promoting trade liberalization objectives that will contribute to a cleaner environment. For example, the United States is seeking an agreement to eliminate barriers to trade in environmental goods in the Doha Development Agenda, end tariffs on energy equipment and scientific instruments, and eliminate fishery subsidies. These measures would both facilitate environmental protection abroad and create new U.S. export opportunities.
Environmental Reviews of Trade Agreements
Following up on the 1999 Executive Order 13141 directing USTR to conduct environmental reviews of certain trade agreements, USTR and the Council on Environmental Quality issued Guidelines for the Implementation of Executive Order 13141 in December 2000. These guidelines are intended to identify "reasonably foreseeable impacts of trade agreements (both positive and negative)," as well as the "complementarities between trade and environmental objectives."
U.S.-Jordan Free Trade Agreement
As described above under labor issues, the U.S.-Jordan FTA contains, for the first time ever in a trade agreement, enforceable environmental provisions.
Foreign Assistance
The President's budget includes $286 million in development assistance funding for environmental programs in FY 2004. The United States continues to be the largest donor to the Global Environment Facility that helps developing countries mitigate environmental problems with a potential global impact.
Food Trade Issues
Unsubstantiated concerns about the safety of Genetically Modified Organisms and hormone-fed beef and implementation of the Biosafety Protocol will remain major issues this year.
Biotechnology and Genetically-Modified Organisms
Fueled by food-safety scares over "mad cow" disease and other cases involving contamination of animal feed, public opposition to genetically-modified organisms (GMOs) is widespread in Europe, has extended to Asian and African countries and to a much more limited extent in the United States. At the same time, the need for and use of GMO crops is spreading worldwide. Genetically-engineered crops have higher yields and reduce farmers' dependence on pesticides. By increasing productivity, bioengineered crops have the potential to ensure food security and to reduce hunger worldwide. Biotech crops have also been developed that reduce demands on scarce water resources, that provide additional nutritional benefits (i.e., golden rice which adds beta-carotene to rice), and that can lower labor demand.
Despite these benefits, some groups have argued that GMOs present potential ecological hazards, citing studies that suggest that genetically-engineered crops may harm monarch butterflies and other beneficial insects. Subsequent studies have shown, however, that the effect of GMOs on monarch butterflies is no different than that of non-GMO agricultural practices.
Since 1998, producers have sought EU approvals on at least 14 varieties of GMOs, but the European Commission has effectively maintained a moratorium and has not granted any approvals since 1998. In February 2001, the European Parliament and Council of Ministers approved Directive 90/220 to regulate the introduction and licensing of GMO foods. This legislation required an independent scientific assessment of possible risks, surveillance after the crops are released, and labeling. While it was hoped that this legislation would result in the approval of GMO crops, six countries - France, Austria, Italy, Denmark, Luxembourg and Greece - announced even before the vote that they would not approve any GMO products until additional regulations are in place on traceability of GMO products, labeling and environmental liability. The United States continues to consider whether to bring a WTO action against the EU for its failure to lift this moratorium.
In July 25, 2001, the EU Commission issued directive 2001/18 on pre-marketing approvals of GMOs and their release into the environment, which sets up traceability and labeling requirements for food and feed. In November 2002, EU agriculture ministers reached a compromise on tolerance levels, allowing up to 0.9 percent of a product to be derived from approved genetically-modified crops without facing mandatory labeling requirements. While the United States pushed for significant changes to the directive before its issuance, the changes made by the EU are insufficient and the final directive poses serious problems for U.S. agriculture producers and farmers. In particular, the food labeling requirements are onerous and a serious trade barrier. While the regulation does not appear to require precise traceability for raw materials for food, feed and processing, it is unclear how this proposal will be implemented. As well, these proposals are of questionable compatibility with the WTO Agreements on Technical Barriers to Trade, Sanitary and Phytosanitary Measures and the underlying GATT agreement.
Beyond the EU, Japan and Korea have passed mandatory GMO labeling laws over the opposition of the United States, which has urged countries not to enact labeling laws on the grounds that they could be applied inconsistently and create major new trade barriers. Zambia and other Southern African countries have also refused U.S. food aid because it may contain GM products. The United States has argued that GMO labeling issues should be dealt with under the WTO Agreement on SPS Measures, which permits SPS restrictions to be placed on imports only when enough scientific evidence exists to justify the restrictions. The EU and certain developing countries argue in response that the SPS Agreement allows the use of the so-called "precautionary principle," permitting restriction of genetically-modified foods in certain circumstances, based on environmental or health concerns, even if the science behind the concerns remained uncertain.
The United States is also concerned about recent GMO regulations introduced by the Ministry of Agriculture and State Administration for Quality Supervision, Inspection and Quarantine concerning the requirement for obtaining permanent safety certificates for GMO products such as soybeans, corn and canola under China's biotechnology regulations and the more recent requirement to obtain import permits for these commodity shipments into China. While industry is currently operating under temporary or "interim" safety certificates and applying for necessary import permits on the basis of these certificates, the approval process for import permits is slow and permanent safety certificates have yet to be issued by the Chinese government. In addition, the United States is also concerned about recent Chinese testing of GMO products before their approval. The United States is in consultations with China to ensure that these regulations do not disrupt trade in GMOs, particularly soybeans, which represent the predominate U.S. exports of GMO crops to China.
Biosafety Protocol
In January 2000, the Cartagena Protocol on Biosafety was negotiated under the framework of the 1992 United Nations Convention on Biological Diversity (CBD), to which the United States is not a party. This represents the first international agreement regulating trade in GMOs. The Protocol was signed in May 2000 and will only go into effect after 50 countries have ratified it. Because the United States has not ratified the CBD, the United States only had "observer" status at the negotiations and worked through the so-called "Miami group" of agricultural allies (e.g., Canada, Australia, and Argentina). The United States must adhere to trade rules imposed by countries signing the Protocol, but as a non-CBD ratifier, does not have to implement the Protocol.
The Protocol requires exporters to obtain advance approval from the importing country, in the form of advance informed agreements (AIA), for initial shipments of GMOs intended for release into the environment (i.e., seeds, microbes, or fish to be put in a river) and requires the labeling of GMOs that are intended for use as food or animal feed, or for processing. The agreement does not apply to agricultural commodities to be used for food, feed, or processing. It requires that risk assessments of GMOs be carried out in a scientifically sound manner. The protocol notes that "trade and environment agreements should be mutually supportive with a view to achieving sustainable development." It also contains a savings clause to preserve countries' existing rights and obligations under other international agreements such as the WTO; in other words, the Protocol is not to be interpreted as changing any rights. The Protocol will be reviewed five years after its entry into force, and at least every five years thereafter.
The exact impact of the Protocol upon international trade is unknown and will depend upon how the Protocol is interpreted and implemented by each ratifying country. While rules must adequately address the preservation of global biodiversity, we must also ensure we do not impose unnecessary costs or barriers in order to preserve a low cost bulk handling system to transport the world's commodities.
EU Beef-Hormone Case
In July 1999, the United States imposed 100 percent retaliatory tariffs on roughly $117 million worth of U.S. imports from the EU in response to the EU's failure to comply with a WTO dispute panel ruling requiring the removal of its ban on imports of hormone-fed beef from the United States. The WTO panel ruled that the EU has failed to demonstrate that U.S. hormone-fed beef causes health risks. Congressional frustration over the EU's refusal to lift its ban on hormone-fed beef prompted the introduction and passage (as part of the Trade and Development Act of 2000) of the carousel retaliation provision requiring the periodic modification of the products targeted for retaliation in both the beef and bananas case. This provision is discussed in more detail in section 5.
In 2000, U.S. and EU negotiators discussed proposals for resolving this dispute by expanding the quota for U.S. hormone-free beef. Negotiators were unable to reach an agreement that would substantially compensate U.S. beef producers.
ECAT's Food Chain Coalition Proposal
One of the ways ECAT is supporting efforts to address the human side of trade liberalization is through its Food Chain Coalition proposal that was presented to WTO member countries during the Seattle WTO ministerial. The Food Chain Coalition is intended to (1) provide a framework for trade liberalization in terms of meeting human needs; and (2) create greater leverage in pursuing market access and other trade liberalization goals by creating a cross-sectoral alliance of interests organized around eliminating barriers to food trade.
Removal of barriers to food trade provides one of the clearest examples of the importance of trade liberalization in meeting basic human needs. Population increases, rising standards of living, and growing urbanization around the world are producing dramatic increases in the demand for food. This rising demand for food presents tremendous global market opportunities in the broad array of sectors involved in producing and handling food on its journey from the farm to the table. In addition to farmers, seed companies, agro-chemical firms, grain handlers and processors, manufacturers of farm machinery, food manufacturers, retailers, financial services companies, insurers, and transportation firms benefit directly from a global increase in food demand. Indirectly, all businesses gain because meeting food demand at lower costs allows a greater amount of discretionary income to be spent on other goods and services.
The Food Chain proposal can provide a new approach to gaining enhanced leverage in negotiations on agriculture, services, and other areas by using the elimination of barriers at all levels of the food chain as an organizing principle. Based on this principle, the Coalition seeks to create cross-sectoral alliances in support of common negotiating priorities such as tariff liberalization, elimination of restrictions on investment and distribution, customs facilitation, and prohibitions on the use of unilateral food sanctions. Placing these issues in the context of the food chain can also create the means to avoid existing roadblocks between developed and developing member countries, as well as between the United States and the EU, particularly as WTO efforts continue on the built-in negotiations on agriculture and services.
ECAT's Food Chain proposal is not intended as a substitute for discrete negotiating groups on agriculture, services, and other areas. Instead, it is intended as a way to enhance the chances for overall liberalization by establishing the elimination of barriers to food trade, at all levels from production to distribution, as an overall negotiating objective and calling for the adoption of a review mechanism to monitor achievement of this objective.
Health Policy and Intellectual Property Rights Protection
There have been increasing attempts in recent years to weaken the application of U.S. and multilateral intellectual property rights provisions with respect to certain pharmaceutical products, particularly those used in the treatment of HIV-AIDS. In particular, some developing countries, private organizations and charities, and some Members of Congress have sharply criticized attempts by the United States to promote intellectual property rights protection involving pharmaceuticals used in the treatment of HIV-AIDS, arguing that health policy concerns justify the weakening of intellectual property rights protections.
There is no question that the HIV-AIDS crisis has reached monumental proportions in sub-Saharan Africa and that the virus continues to spread in other regions. Over 34 million people living in sub-Saharan Africa have contracted HIV-AIDS and, of these, over 12 million people have died. HIV-AIDS-related deaths in sub-Saharan Africa represent 83 percent of worldwide HIV-AIDS-related deaths.
As with each of the issues discussed above, efforts must continue to identify the sources of and best solutions for addressing this crisis. It is important to understand, therefore, that drug prices are not the single or perhaps even most important issue in handling this crisis. Many reports have documented that problems of infrastructure (including the lack of medical health professionals and clinics), along with other social and governmental barriers, represent substantial problems in treating and preventing HIV-AIDS in developing countries.
In an effort to address concerns over the price of HIV-AIDS-related pharmaceuticals being sold in developing countries, several major U.S. and European pharmaceutical companies, particularly those that make anti-retroviral drugs, have developed initiatives to donate or provide at very low prices such products to developing countries. These companies are also involved in other efforts to support infrastructure development and treatment and prevention efforts in these countries.
In May 2000, the Clinton Administration issued Executive Order No. 13155 providing that the United States "shall not seek, through negotiation or otherwise, the revocation or revision of any intellectual property law or policy of a beneficiary sub-Saharan African country, as determined by the President, that regulates HIV/AIDS pharmaceuticals or medical technologies" if the law or policy of the country promotes access to HIV/AIDS pharmaceuticals and provides adequate and effective intellectual property protection consistent with the TRIPs agreement. If found to be applicable, this provision appears to allow both compulsory licensing (where non-patent holders are licensed to manufacture a patented pharmaceutical) and parallel imports (where the country permits imports from entities other than those authorized by the original patent-holder). While technically applicable only to sub-Saharan African countries, the Clinton Administration indicated that they would consider requests for similar treatment from other countries on a case-by-case basis. Thailand requested and was granted such an arrangement. In February 2001, Bush Administration officials indicated that they were prepared to maintain the Executive Order.
At the WTO Ministerial in Doha in November 2001, WTO countries agreed on a Declaration on the TRIPs Agreement and Public Health. In particular, the declaration reaffirmed countries' commitment to implement the TRIPS Agreement, while emphasizing that interpretations of TRIPS should be supportive of measures meant to protect public health. In particular, the declaration states that:
"We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all."
The declaration also clarifies that countries have the right to use compulsory licensing and to define what is a national health emergency. As well, the declaration instructs the TRIPS Council to examine the issue of compulsory licensing in countries with insufficient pharmaceutical manufacturing capabilities and to report to the General Council at the end of 2002. Efforts to reach consensus language on the scope of permissible compulsory licensing has resulted in deadlock, as developing countries seek an open-ended definition of diseases that could give rise to compulsory licensing and the United States seeks to use a more limited definition -- HIV/AIDS, malaria or tuberculosis or other infectious epidemics of comparable scale and gravity.
In late December 2002, the United States indicated that it would unilaterally impose a moratorium on proceeding with WTO dispute settlement in certain cases involving compulsory licensing. USTR Ambassador Zoellick wrote to the WTO on December 27, 2002, to express the United States' interest in reaching a workable solution. He also identified the key elements of the United States' unilateral moratorium for countries exporting to eligible importing economies. The letter defined eligible importing economies as those economies, other than those classified by the World Bank as "High Income Economies," that: "(1) are facing a grave public health crisis associated with HIV/AIDS, malaria or tuberculosis or other infectious epidemics of comparable scale and gravity, including those that may arise in the future; (2) have no or insufficient production capacities in the pharmaceutical sector; and (3) have so notified the TRIPS Council." The moratorium will also include measures to guard against product diversion.
ECAT strongly supports efforts to promote effective solutions to address the HIV-AIDS crisis in Africa and elsewhere. ECAT is concerned, however, that too much emphasis is being placed on intellectual property rights protections and the perceived link to drug prices as the main problem, when it is precisely intellectual property rights protections that foster the development of the pharmaceuticals necessary to treat and, one day, cure and prevent these diseases. Increased efforts are needed to promote infrastructure development and other solutions that will help stem this crisis. In particular, U.S. and other developed nations must increase foreign assistance, including debt relief, to developing countries so that they can finance much needed improvements in public health, education, and other social programs. ECAT believes U.S. businesses receive insufficient recognition for their efforts in helping developing countries to tackle these issues.
Transparency
The United States and the WTO have taken steps to allow greater participation of non-governmental organizations (NGOs) in trade policy discussions. The WTO has sponsored a series of NGO forums on labor and environment issues, as well as held a daylong seminar for NGOs in Seattle just prior to the opening of the WTO ministerial meeting.
As part of the "Civil Society" initiative, the United States proposed a number of changes to WTO procedures to create greater transparency, including earlier release of documents and decisions, improved consultative procedures, the opportunity to file amicus briefs in dispute settlement proceedings, and the opening of panel proceedings to the public. The United States has proposed similar transparency measures in the FTAA negotiations. The United States also initiated a consultation process with NGOs and other interested parties to develop procedures for broadening the opportunity for NGO input in the trade policy advisory process.
ECAT POSITION: Continued global trade expansion is the bedrock of progress in achieving greater international observance of high labor and environmental standards and in promoting better access to food and health care. Progress on the human side of trade requires that the United States continue its leadership in the multilateral trading system promoting a strong set of WTO rules based on the right of member countries to set and enforce high environmental, labor, or other domestic standards. Before rushing to adopt trade-oriented solutions that may not be effective, it is critical that policymakers first work to define the United States' objectives in each of these areas, and then determine how those objectives can best be achieved. Many of these issues may be better addressed directly through separate agendas in organizations with technical expertise, rather than as add-ons to the trade agenda. And, in those cases where complementarity between U.S. trade and U.S. labor and/or U.S. environmental objectives exists, efforts should be made to address these objectives jointly and in a cooperative manner.
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