SECTION II.1: WORLD TRADE ORGANIZATION
The World Trade Organization (WTO) marked its 11th anniversary on January 1, 2006, although its origins are much older, starting with the creation of the General Agreement on Tariffs and Trade (GATT) under the Bretton Woods Agreement in 1947. The United States was instrumental in the creation of and a founding member of both the GATT and the WTO.
The trade liberalization shaped by the GATT and now the WTO has been a major engine of global economic growth, helping to lift hundreds of millions of people out of poverty over the past five decades. Since the founding of the multilateral trading system and the eight successful rounds of trade negotiations, the world economy has grown six-fold and per capita income worldwide has tripled. With a membership of 23 countries in 1947, the WTO has now grown to 149 members. World trade in goods alone grew from approximately $50 billion in 1947 to $8.9 trillion in 2004. Between 1948 and 2005, the United States economy has grown, with an amazing increase in U.S. GDP per capita (in 2000 dollars) from $12,000 in 1948 to almost $38,000 in 2005.
In the past 11 years since the establishment of the WTO, U.S. exports and overall trade have expanded significantly, with:
- a $392 billion or 76-percent increase in U.S. manufacturing exports; and
- a $159 billion or 97-percent increase in U.S. services exports.
Such increases have contributed to substantial increases in U.S. GDP and U.S. per capita GPD. Imports into the United States also grew significantly by $1 trillion, improving the variety, quality and availability of products throughout the United States, lowering the cost of products for U.S. consumers and manufacturers, increasing the competitiveness of U.S. companies, and helping to dampen inflationary pressures.
The Uruguay Round Agreements and successor agreements on information technology, telecommunications and financial services have contributed importantly to gains in the U.S. economy. It is also notable that the three post-Uruguay Round WTO agreements – on information technology, financial services and telecommunications – have lowered other countries’ barriers in sectors where the United States is highly competitive, creating new opportunities for U.S. manufacturing and service companies and their workers.
Since the advent of binding dispute settlement rules in 1995 – dispute settlement rules strongly advocated by successive U.S. Administrations – the WTO has also considered over 300 cases, helping developed and developing countries to resolve their disputes peaceably and fairly. For the United States, as one of the most active participants in the dispute settlement system, this has meant the successful resolution of 48 cases where the United States has challenged other governments’ trade restrictive measures. The United States has also been a defendant many times, successfully negotiating and/or winning 28 of the cases brought against it. The WTO dispute settlement system is discussed in more detail at the end of this section.
Most recently and perhaps most significantly, the United States has been instrumental in energizing the Doha Development Agenda negotiations, which seek to achieve:
- greatly improved market access for manufactured goods through the substantial reduction and/or elimination of tariff and non-tariff barriers;
- substantial progress in opening services markets;
- significant reform of customs procedures; and
- agricultural export subsidy elimination, the reform of other trade-distorting agricultural subsidies, and significant improvements in agricultural market access.
These, and other aspects of the Doha Agenda, including improving dispute settlement, trade remedy and fishery rules and promoting the reduction of barriers to environmental goods and services, are hugely important to level the playing field in many key areas, putting U.S. farmers, companies and workers on an equal footing with their competitors who already enjoy relatively open markets in the United States. These negotiations are discussed in greater depth below.
Doha Development Agenda Negotiations
After several years of discussions and a failed attempt at the Third Ministerial Conference in Seattle, Washington, in 1999, the World Trade Organization (WTO) successfully launched broad new trade-liberalizing negotiations at its Fourth Ministerial Conference in Doha, Qatar, on November 14, 2001. In the summer of 2004, WTO member countries reached a Framework Agreement to move the negotiations forward in a number of key areas -- agriculture, non-agricultural market access, services, rules and trade facilitation. However, WTO member countries decided not to proceed with negotiations on transparency in government procurement – the other major issue on which ECAT and the U.S. business community sought agreement – or investment or competition policy.
Modest progress on the Doha negotiations was achieved at the Sixth WTO Ministerial Conference in Hong Kong in December 2005, but 2006 will prove to be a very important year in determining whether these negotiations can be completed in 2007 before the expiration of the United States’ trade- negotiating-authority (so-called Trade Promotion Authority, discussed in depth in section II.2).
The continuation of the Doha Development Agenda negotiations presents both opportunities and challenges for ECAT and other U.S. companies. The negotiations present prospects of increased market access, and other benefits that will spur economic growth both at home and abroad. At the same time, other countries will seek to carve back on intellectual property protections and other commitments that are already part of the WTO agreements.
Over the past two years, the United States has strengthened considerably its leadership in the WTO through very ambitious proposals and a willingness to eliminate U.S. barriers if other countries eliminate theirs. In addition, the United States has shown the strength of its convictions through implementation of the decisions of several key WTO dispute settlement panels against U.S. practices, including, most recently, the elimination of the Continued Dumping and Subsidy Offset Act (the so-called Byrd Amendment).
ECAT and ECAT member companies will continue their efforts to promote further concrete progress on the Doha Development Agenda. In particular, ECAT will continue to focus its work on several key areas, including market access, trade remedies, trade facilitation, dispute settlement and work on strengthening the United States’ role in the WTO.
Background
In the Uruguay Round Agreements establishing the WTO in 1995, WTO members agreed to a “built-in” agenda to start negotiations in agriculture and services no later than the end of 1999. During the intervening years, WTO members discussed the possibility of launching new negotiations, but differences remained on what issues would be addressed.
These discussions came to the forefront in 1999 as the WTO unsuccessfully sought to launch negotiations at the Third Ministerial Conference in Seattle. In particular, the United States sought a narrow agenda focused on market access and the built-in agenda negotiations on services and agriculture, while the European Union (EU) and Japan promoted a broad agenda, including new areas such as competition policy and investment. The European Union also opposed any language suggesting that negotiations in agriculture should aim to eliminate export subsidies, as sought by the United States and the Cairns Group of countries. The developing countries favored a narrow agenda, but also sought the opportunity to renegotiate existing agreements in areas such as textiles and antidumping and address implementation issues. The United States and EU adamantly opposed efforts to reopen existing agreements, and the United States particularly opposed efforts to renegotiate the antidumping and subsidies agreements. These differences were not overcome and negotiations were not launched in 1999.
Following the failure of the Seattle Ministerial, then WTO Director-General Michael Moore and General Council Chairman Stuart Harbinson worked assiduously to bridge differences among WTO members and broaden the participation of all countries. The United States and EU also worked to reconcile their own differences; for example, the United States agreed not to oppose the EU’s efforts to include competition policy and investment in the new negotiations. The United States worked as well with many developing countries to emphasize the benefits of a new WTO round.
In the lead-up to the Fourth WTO Ministerial Conference in Doha, Chairman Harbinson prepared several draft Ministerial Declarations and sought to reach agreement on major issues with interested countries. As a result of these preparations, compromise by WTO members and, in some cases, ambiguous wording, WTO members were well prepared to reach agreement on the Ministerial Declaration and associated documents and health policy issues.
Doha Development Agenda
The Doha Development Agenda (DDA) negotiations are the ninth round of negotiations under the auspices of the GATT and WTO. The 52-paragraph Ministerial Declaration agreed to in Doha launched a new round of negotiations that began in January 2002 and was scheduled to conclude by January 1, 2005. That deadline was not achieved, and no new deadline has been formally established.
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Issues Covered in the Doha Declaration |
On February 1, 2002, WTO countries agreed on the organization of the negotiations mandated by the Doha Declaration. Acting as part of the Trade Negotiations Committee (TNC), they agreed to the establishment of seven negotiating bodies on the following issues:
- Agriculture
- Services
- Non-agricultural market access
- Rules
- Trade and environment
- Geographical indications for wines and spirits
- Reform of the Dispute Settlement Understanding (DSU)
The negotiating groups on agriculture, services, environment, TRIPS and DSU reform are being held in Special Sessions of existing committees and councils. New negotiating bodies were established for non-agricultural market access and rules issues. In addition, the Committee on Trade in Development has held special sessions to consider issues related to special and differential treatment for developing countries.
The Fifth Ministerial meeting of the WTO in Cancun, Mexico, was expected to reenergize and give a more specific direction to negotiators in all key areas. The draft Declarations sought to define, for example, the framework for negotiations in agriculture and non-agricultural market access and whether to proceed with negotiations in four additional areas – transparency in government procurement, trade facilitation, investment and competition policy. Despite several attempts at compromise, Ministers were unable to agree on a joint Declaration and decisions were, thus, not made with respect to key issues related to the framework for the negotiations going forward. Major sticking points included how ambitious the frameworks would be with regard to the elimination of export subsidies and other trade-distorting support, and with regard to the elimination of tariffs on agricultural and non-agricultural goods, and whether the negotiations would focus as well on any of the four so-called “Singapore” issues – trade facilitation, transparency in government procurement, investment and competition policy.
Following the Cancun Ministerial, the WTO Director-General and key ministers, including the U.S. Trade Representative, consulted widely on how to restart the process and find a way forward. In December 2003, the General Council met to determine how to proceed and it was agreed that negotiations should resume despite the lack of agreed upon frameworks.
2004 Framework Agreement
After months of discussions and meetings following the Cancun Ministerial, many led by the United States, the WTO’s General Council adopted, on August 1, 2005, the so-called Framework Agreement to move forward the Doha negotiations by establishing the following structure for the negotiations:
Agriculture: Negotiators will seek:
- Elimination of agricultural export subsidies
- Reductions in trade-distorting domestic subsidies, with higher levels cut more
- Tariff cuts, with deeper cuts of higher tariffs, and quota expansion
- Disciplines on export credits and guarantees
- New disciplines on state trading enterprises
- Special focus on cotton subsidies and tariffs
Manufactured Goods: Negotiators will seek:
- Formula tariff cuts, with higher tariffs being cut more
- Sectoral tariff elimination/harmonization
- Reduction of non-tariff barriers
Services: Negotiators will seek intensified market-access negotiations, with revised offers due May, 2005.
Trade Facilitation: Negotiators will launch negotiations to clarify and improve customs procedures to expedite the movement of goods and to enhance cooperation and technical assistance.
Development: Negotiators will reflect development concerns through:
- Special and differential treatment provisions, particularly for least developed countries
- Technical assistance
- Continued work on implementation issues, including related to the TRIPS agreement
Other Issues: The General Council directed negotiators to continue other negotiations, including:
- Trade remedies (antidumping, countervailing duties, safeguards), to clarify and improve disciplines;
- Environment, to explore the relationship between WTO rules and multilateral environmental agreements and the reduction or elimination of tariff and non-tariff barriers on environmental goods and services;
- Dispute Settlement, to improve and clarify the WTO’s dispute settlement system
Negotiations Not Launched:
- transparency in government procurement
- competition policy
- investment
Sixth WTO Ministerial Conference in Hong Kong
The Sixth WTO Ministerial Conference in Hong Kong in December 2005 sought to achieve concrete progress towards setting the parameters for the DDA negotiations. That result was not fully achieved, as Ministers were only able to agree to a rough path forward, with much of the significant negotiations left for 2006. In addition, the Hong Kong Ministerial Conference was able to address several corollary issues, which the United States hoped would lead to more progress in 2006.
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Agricultural Export Subsidies
Agricultural and Consumer and Industrial Market Access
Services Market Access
Trade Facilitation
Market Access for Developing Countries
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ECAT remains disappointed, however, that U.S. trading partners in Europe and elsewhere were unable to match the ambitions of the United States, resulting in the lack of more concrete progress in defining the negotiating parameters more clearly in agriculture, manufacturing and services. In many respects, significant progress on some of the most important issues that will determine whether these negotiations can promote significant growth and alleviate poverty – overall liberalization in agriculture, manufacturing and services – have been again delayed.
2006 Developments
Efforts to meet the deadlines set by the Sixth WTO Ministerial Conference in Hong Kong – particularly the April 30th deadline for establishment of modalities – have been slow. Several informal meetings with key trade ministers have failed to result in any significant breakthrough on agriculture and other issues. In February 2006, the United States joined with other major trading partners in submitting collective requests in a number of key services sectors, including audiovisual, computer and related, construction, educational, distribution, energy, express delivery, environmental, financial, and telecommunications. These requests largely seek removal of foreign investment restrictions, limitations on the form of establishment or cross-border supply of services, discriminatory regulatory policies, nationality requirements and restrictions on competition.
ECAT Priorities
Market Access
Critical to the ultimate success of the DDA is comprehensive, substantial and meaningful market access in the three key areas of trade – agriculture, manufacturing and services – by developed and developing countries alike. Anything less than a highly ambitious and comprehensive approach – such as efforts to define too narrowly U.S. interests – will almost assuredly lead to a least common denominator approach and the failure of this opportunity to make substantial progress towards the type of market liberalization that is critical for economic growth and higher standards of living. It is important as well that efforts be made to move each of the negotiating areas forward.
Agricultural Market Access
The removal of barriers across all levels of agricultural trade is not only a commercial imperative, it is also critical to help promote access to affordable food and better living conditions throughout the world where many live on less than $2 a day. The key priority of U.S. negotiators in agriculture must remain ambitious and comprehensive market liberalization in agriculture. Key objectives for the United States should include:
- A comprehensive agreement that does not exempt any commodity or product. To do otherwise would open the floodgates to a myriad of exceptions that will substantially undermine the opportunities for the United States’ competitive agricultural and non-agricultural sectors;
- Elimination of agricultural export subsidies as quickly as possible, with early deep cuts for the highest level of subsidies;
- Elimination of all agricultural tariffs, with deep cuts as early as possible to reduce prohibitively high tariffs;
- Elimination of agricultural tariffs on a sectoral basis (zero-for-zero) where possible;
- Elimination of trade-distorting domestic support;
- Minimal use of “sensitive product category" since the very products the many developed countries want to protect, such as sugar, are the ones that could most benefit developing countries; and
- Elimination of monopolistic practices of state trading enterprises.
Consumer and Industrial Goods Market Access
Tariff and non-tariff barriers distort efficient trade flows to the detriment of both the exporting and importing countries; their reduction and elimination represent an important factor in generating economic growth and achieving development goals. In the non-agricultural market-access (NAMA) sector comprising consumer and industrial products, the U.S. negotiators should seek:
- Full Tariff Elimination by a Date Certain: Continued promotion of U.S. proposals to eliminate all consumer and industrial tariffs by a date certain is critical to spur an ambitious outcome of the DDA in a manner that will truly promote economic growth, development and higher living standards.
- Zero-for-Zero Initiatives: Negotiation and implementation of zero-for-zero initiatives in key sectors in a critical mass of countries are also vitally important to spur progress and interest in the DDA, as well as to foster the competitiveness of U.S. products. Zero-for-zero initiatives should be included such key sectors such as entertainment products, information technology and related products (not already covered by the ITA), energy, chemicals, toys, environmental products, medical and scientific equipment, forest products, fish, and gems and jewelry. These sectors, many of which were identified first in APEC discussions, represent a balanced package and reflect the interests of both developed and developing countries.
- Non-Tariff Barriers: Reduction of NTBs has been established as an integral component of the Doha mandate, and negotiators should continue to identify and eliminate these barriers. NTBs range from discriminatory or inhibiting import, tax and investment or technology-sharing policies to unjustified rules, technical standards, specifications, certifications and other regulatory procedures that function as de facto barriers by favoring local suppliers or otherwise placing U.S. firms at a competitive disadvantage. Rules that are unnecessarily complex, technical specifications not based in terms of performance and functional requirements, and arbitrary customs valuation procedures can represent more substantial barriers to trade than tariffs. Accordingly, negotiations should make it a priority to eliminate current NTBs, while preventing the establishment of new ones. For example, standards included as technical specifications should be developed under an open, voluntary, consensus-based process; publicly available; vendor neutral; and, where applicable, based on international standards. As well, customs valuation disciplines should also be negotiated to provide that software, entertainment and similar products delivered on a physical medium be assessed on the value of the physical medium, not on the imputed value of the content. As discussed below, new barriers should not be created for content delivered electronically, for which the WTO should adopt a permanent moratorium on customs duties for electronic transmissions.
- E-Commerce: As technology has advanced, many of the products that previously have been distributed in physical form are more efficiently and productively distributed through a variety of media, such as the Internet, satellite and cable. The final outcome of the DDA should ensure that new barriers are not erected on products now being delivered electronically or in similar formats. Software, entertainment and other products delivered online should be subject to the same trade rules and protections as these products enjoy when delivered on physical medium, including full market access, national treatment, MFN protections, and commitments under the Agreement on Technical Barriers to Trade, the Agreement on Government Procurement, and the Agreement on Trade-Related Investment Measures. In addition, the WTO moratorium on customs duties on electronic transmissions should be made permanent.
Services
Services are a key component of global trade that must be considered on par with agriculture and industrial goods market access. Indeed, services are essential inputs into the production of products in virtually all sectors of the economy, and the price and quality of services are important components in the cost and productivity of the agricultural and manufacturing sectors. More liberalized, efficient services trade is, therefore, an essential component in promoting the competitiveness of the entire economy. The key priorities of U.S. negotiators in the services negotiations should include seeking global commitments to:
- Increase market access and national treatment commitments across all sectors, including advertising, audiovisual, distribution, education, energy, financial, computer and related services, print media and publishing, retail, basic and value-added telecommunications, wholesaling, express delivery and professional services;
- Ensure rights of establishment and ownership for U.S. foreign investors through wholly-owned entities or other business structures;
- Eliminate unnecessary restrictions on cross-border transactions;
- Promote pro-competitive, regulatory reform through the promulgation of adequate, fair and consistent rules and regulations;
- Establish transparent, impartial and independent regulatory administration processes through the (a) public publication of texts of proposed and existing regulations, including substantive rules of general applicability, policies and interpretation of rules and regulations and (b) institution of due process for the making of rules and regulations which would establish how and within what timeframe public comment may be made;
- Ensure that market-access commitments apply to services, including software and entertainment products made available over the Internet, and to other evolving information technology services, which develop too rapidly to keep pace with trade designations;
- Remove obstacles to the free movement of people by streamlining and improving the administration of U.S. business visa policies in order to facilitate the entry of business travelers (a broader discussion of temporary entry provisions is found in section III.10);
- Commence negotiation of government procurement commitments within the GATS; and
- Ensure that the rights of U.S. companies that have already been acquired are guaranteed going forward.
Special and Differential Treatment
Recognition of the different situations of developing, particularly least developed, countries is important as recognized by the DDA. Yet, that recognition should not be expanded to undermine the benefits of trade liberalization that are so critical to help spur economic growth in such countries. Proposals to extend transition times should be viewed on a case-by-case basis, and efforts to exempt countries from making commitments should be actively discouraged.
Trade Facilitation
The Framework Agreement’s commencement of trade facilitation negotiations is an important development that can help developed and developing countries alike reduce administrative burdens, increase efficiencies and lower costs for consumers. Indeed, APEC has calculated that progress on trade facilitation could cut export costs by five to 15 percent. Key objectives should be to produce tangible progress to reduce customs clearance times and costs and promote more efficient trade movement and processing. Key priority areas for the negotiations should include the work by APEC, including addressing such issues as:
- Transparency and greater government-private sector communication and coordination;
- Simplification, harmonization and greater efficiency in processing, with special programs for major shippers;
- Modernization and automation, including through the use of paperless transactions and secure methods for electronic payment; and
- Consistent and predictable resolution of issues, including an expeditious right to appeal rulings.
WTO Rules - Antidumping and Countervailing Duty Rules
As recognized by the DDA, negotiations are also necessary to clarify and improve disciplines under the trade remedy rules (e.g., antidumping and countervailing duty provisions). In that regard, U.S. negotiating priorities should include:
- Increased transparency in the operation of trade remedy rules;
- Improvements in processes for reviewing standing of petitioners in bringing trade remedy cases;
- Improved requirements for notifying foreign business of the launch of trade remedy cases;
- Increased recognition of commercial business practices as normal, not unfair, pricing behavior, particularly for agricultural, cyclical and other products;
- Increased fairness in the calculation of antidumping and countervailing duty provisions and full implementation of WTO decisions, such as on zeroing;
- Improvements in the sunset review processes;
- Application of de minimis and fair comparison rules to administrative reviews;
- Increased balance in the rules to account for public interest considerations, including consideration of proposals on the lesser duty rule and a public interest test.
Dispute Settlement
While the United States may not agree with all WTO panel decisions, the WTO dispute settlement system on balance has been a very effective mechanism in enforcing U.S. rights. The United States has made aggressive use of the dispute settlement process, bringing more complaints than any other WTO member. It has prevailed in or favorably settled the majority of the cases that it has filed.
In order to promote continued respect for this very important and innovative system of dispute settlement, longstanding U.S. initiatives to reform and improve the operation of the WTO dispute settlement system should continue to be included as U.S. priorities. In particular, greater transparency and openness for documents and hearings are critical to foster a greater understanding of this system. As well, efforts should continue to clarify the rules to promote greater flexibility in settling disputes among members.
Government Procurement
Government procurement comprises a significant share of the global economy. For many WTO Members, government procurement may represent 10 to 15 percent of GDP, and this figure may reach as high as 20 percent of GDP in some developing countries. The WTO Agreement on Government Procurement (GPA) provides a strong framework for ensuring that the procurement practices of signatory nations are open and competitive, and respect the core WTO principles of national treatment, MFN, and transparency.
ECAT remains very disappointed that transparency in government procurement negotiations were not formally commenced by the July Framework Agreement. Nevertheless, U.S. priorities in this area remain no less important, and we urge the United States to emphasize the importance of further government procurement liberalization in the course of the DDA negotiations. Work is ongoing to improve the text of the GPA, and efforts to expand the membership of the GPA should intensify. Accession to the GPA should remain a key U.S. negotiating priority for ongoing WTO accession negotiations, such as with Russia and Vietnam and particularly with such key markets as China, India and Brazil during the course of the Doha Development Agenda negotiations.
The importance of obtaining market access to China’s government procurement market cannot be overstated. China’s government is the largest single purchaser of goods and services in China, yet it has enacted a law that requires procurement of only domestic goods, services, and public works. ECAT is very troubled by the summary of the draft regulations that would severely restrict the ability of U.S. software makers to sell to China’s government. This is a troubling precedent. We urge the United States to join with its major trading partners to seek that China begin WTO GPA accession negotiations, and that China join the GPA no later than the conclusion of the DDA.
Importance of WTO Negotiations
The Doha Development Agenda has the potential to open markets on a broad range of goods and services that are critical to spur economic growth in the United States and throughout the world. The completed agreements could dramatically change agricultural trade, eliminating export subsidies and creating enormous new market opportunities for U.S. farmers. Adoption of U.S. proposals would result in the elimination of all tariffs by 2015 and provide enormous opportunities for U.S. service providers and others.
Depending upon the final outcome, some estimates predict that the DDA would provide a net increase of $2,500 for a typical American family of four and could lift 500 million people out of poverty and help promote a dramatically improved standard of living at home and abroad. Even agreement only to cut global tariffs by a third would add $177 billion per year to the U.S. economy, equivalent to a $2,500 per year tax cut for the typical family of four. The expected gain from these negotiations for the developing world will also be significant, adding $90 to $190 billion in higher incomes. These economic gains will help promote a dramatically improved standard of living at home and abroad.
ECAT Position: ECAT strongly supports conclusion of a comprehensive and commercially meaningful Doha Development Agenda covering agriculture, services, industrial tariffs and other issues to expand market-access opportunities and reduce and ultimately eliminate barriers across all sectors. ECAT also supports efforts to ensure that WTO provisions are developed and applied in a manner that eliminates barriers to and supports the growth of information technology and digitally delivered goods and services. In particular, ECAT supports:
WTO Institutional Framework
The legal framework of the WTO encompasses:
- the rules of the multilateral trading system under the original GATT, set out under GATT Articles I through XXVIII;
- the agreements negotiated during successive GATT negotiations to which all WTO members must subscribe, including the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Intellectual Property Rights (TRIPS), and the Agreement on Trade-Related Investment Measures (TRIMs);
- plurilateral agreements on government procurement, aircraft, meat, and dairy in which membership is voluntary; and
- dispute settlement and trade policy review mechanisms.
The WTO Agreement is a “single-undertaking,” under which member countries must adhere to the basic WTO rules and all of the other broad agreements that have been negotiated under the GATT and the WTO.
The WTO is not a static institution; it has sought to keep the trading system in step with technological development through the negotiation of agreements on information technology, telecommunications, financial services, and electronic commerce and other initiatives. The WTO rules also have promoted global economic stability by requiring WTO member countries to maintain open markets. The willingness of the United States and other WTO members to resist protectionist pressures to close their markets during the recent Asian financial crisis laid the foundation for a speedier financial recovery.
The GATT/WTO has grown from 23 members in 1947 to 90 members in 1986 to 149 members by the end of 2005, accounting for over 90 percent of world trade. An additional 31 countries are in the process of applying for WTO membership, including Russia and Vietnam. Since the early 1980s, WTO membership has grown increasingly diverse, as developing countries now account for more than 80 percent of total WTO membership.
Although WTO dispute settlement is binding, compliance with WTO panel recommendations is voluntary. The WTO has no authority to force a member country to change its domestic laws or policies and, therefore, does not pose a threat to enforcement of U.S. health, safety, or environmental standards. In cases in which a WTO member chooses not to bring itself into conformity with a panel decision, the affected WTO member countries have the right to request compensation or to retaliate.
Despite some adverse decisions against the United States, it is important to remember that the binding dispute settlement process is the backbone of the WTO. While the United States may not agree with every WTO panel decision, overall the United States has been a major beneficiary of the WTO dispute settlement process, and has prevailed in most of the WTO disputes that it has initiated.
Efforts to increase the transparency of the WTO are discussed in section III.5
Implementation of WTO Agreements
Implementation of WTO commitments remains a core issue for the U.S. government and U.S. industry. From agriculture to intellectual property to unfounded barriers to trade, the United States and ECAT companies actively seek improved compliance through negotiation, technical assistance, formal consultations and potentially formal dispute settlement. Key issues of focus for ECAT companies include the following:
- The failure of countries to meet their TRIPS commitments and provide effective enforcement of intellectual property rights and the protection of data privacy.
- Subsidies, including the EU’s aircraft subsidies.
- Standards, licensing and customs barriers, including the EU’s customs procedures and its proposed new chemical regulations.
- Agricultural barriers, such as the unscientific barriers to genetically modified organisms and other agricultural products in Europe, China and elsewhere.
At the same time, other countries have very different agendas. Since 1999, major developing countries, such as Egypt, India, Indonesia, and Nigeria, have sought flexibility in the application of implementation deadlines for certain WTO agreements as a pre-condition to their support for further WTO liberalization, including the Doha Development Agenda negotiations. In particular, these countries asked that the moratorium on bringing certain cases against developing countries under the TRIPS agreement be extended, and that implementation deadlines under the TRIMs and Customs Valuation agreements also be extended. Developing countries also sought a review of developed countries’ implementation of their commitments under other agreements, such as the WTO Agreements on Textiles and Clothing, Agriculture, Antidumping, and Subsidies and Countervailing Measures.
After extensive negotiations in the lead-up to and during the Doha Ministerial, WTO member countries agreed to a separate decision on Implementation-Related Issues and Concerns (Implementation Decision) in addition to the Ministerial Declaration that launched the negotiations. The Implementation Decision set forth approximately 50 initiatives to help developing countries comply with existing Agreements on Sanitary and Phytosanitary Measures, Trade-Related Aspects of Intellectual Property Rights, Subsidies and Countervailing Measures, Antidumping, Textiles and Clothing, Trade-Related Investment Measures and Technical Barriers to Trade. In some cases, the Member Countries agreed to certain interpretations or to refrain from certain actions; in other cases, WTO committees were directed to consider issues further. Among the most significant provisions agreed to were the following:
- With regard to textiles and apparel, countries agreed to exercise “particular consideration” before initiating antidumping cases on products from developing countries from 2005 to 2007 and to non-binding language on the early integration of products and effective quota elimination. The United States and Canada resisted, however, developing country demands to liberalize quota growth calculations.
- In agriculture, countries agreed to exercise restraint in challenging measures notified under the green box by developing countries to promote rural development and adequately address food security concerns.
- In antidumping, countries agreed not to initiate a new investigation on a product within one year of the initiation of a previous investigation, unless circumstances have changed.
- In subsidies, countries agreed that countries would be moved off the list of least developed countries excluded from the export subsidy prohibition only if their per capita gross national product exceeded $1,000 for three consecutive years.
- In intellectual property, countries agreed not to initiate nullification and impairment cases while the TRIPS Council was reviewing how to handle developing countries’ implementation of the TRIPS agreement. The Implementation Decision also required the WTO to “put into place a mechanism for ensuring the monitoring and full implementation” of the requirement that developed countries provide incentives to encourage technology transfer to developing countries.
- The Committee on Trade and Development is directed to make recommendations regarding extending mandatory special and differential treatment to least developed countries.
- In several areas, the Implementation Decision urges countries to provide financial or technical assistance to least developed countries.
The final Doha Ministerial Declaration also clarifies that negotiations on outstanding implementation issues will be an “integral part of the Work Programme.” Issues for which there is a negotiating mandate shall be addressed under the mandate and other outstanding issues shall be addressed by relevant WTO bodies.
WTO members also made several new commitments on technical cooperation and capacity-building. The Doha Ministerial Declaration directed the development of a plan to ensure long-term funding for technical assistance. In accordance with this direction, the WTO General Council established the Doha Development Agenda Global Trust Fund in December 2001, with a proposed budget of $9 million, which increases technical assistance by 80 percent.
ECAT Position: Full implementation of WTO agreements is the cornerstone of the multilateral trading system and must remain a top priority on the WTO agenda. The United States should continue to insist that all WTO Members implement the WTO Agreements in a timely and comprehensive manner. Technical assistance and assistance for capacity-building are important tools to help advance the United States’ implementation goals. Developing country concerns regarding implementation should be addressed through increased technical assistance and not become the pretext for renegotiating existing WTO agreements. ECAT urges the Administration to oppose efforts to reopen the TRIPS, TRIMs, or other agreements or to delay full implementation of these agreements.
WTO Accessions
Another important area of WTO activity this year will be achieving progress on the accession of the 331 countries that have applied to join the WTO. Accession negotiations involve a review of a country’s trade regime and its consistency with WTO obligations. WTO applicants must agree to abide by WTO rules and enter into commercially viable, market-access commitments on goods, services, and agriculture that are negotiated both bilaterally and multilaterally.
Negotiations take place in a Working Party established by the WTO and bilaterally. These negotiations result in four documents: (1) the consolidated schedules containing a country’s market-access commitments for goods and services, the so-called market-access package; (2) the protocol, containing the terms of accession; (3) the working party report; and (4) the draft decision of the working party on the applicant’s request for accession. The market-access package consists of schedules of tariff reductions and other commitments that the applicant country has made on goods, services, and agriculture. Market-access commitments are negotiated bilaterally with WTO member countries and then combined into a single package of concessions, which applies to all WTO member countries on a MFN basis. The protocol of accession is negotiated multilaterally within the WTO working party on accession. The protocol sets out the applicant country’s commitments to abide by WTO rules and provides for transition periods or other special rules. The working party report also contains a discussion of the terms a country has agreed to and the specific commitments that it has made in the course of negotiations. Once the market-access schedules are finalized, they are incorporated into the protocol of accession. The working party then must reach consensus on the draft protocol package that is sent to the WTO General Council for approval. While the General Council has approved all previous accessions by consensus, a country may request a vote. In such a case, approval of an applicant’s accession requires a two-thirds majority vote.
Once accession negotiations are complete, the applicant country must be prepared to implement its WTO obligations and commitments. Each current WTO member country must decide whether to sign the country’s protocol of accession and extend WTO benefits to the new WTO member. WTO members may choose not to apply WTO benefits to a new member pursuant to Article 13 of the WTO. In 2002, WTO members also agreed to accelerate and simplify the accession process for least-developed applicants.
Accession of Saudi Arabia
Twelve years after the establishment of the Working Group on Saudi Arabia’s accession on July 21, 1993, Saudi Arabia formally joined the WTO on December 11, 2005. With its accession, Saudi Arabia committed itself to major reforms that will liberalize trade and investment, including commitments on overall transparency, the rule of law, distribution, market access for agricultural, industrial goods and services, and the protection of intellectual property rights.
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Key elements of Saudi Arabia’s accession package include:
- Binding of tariffs on over 75 percent of U.S. industrial exports at an average rate of 3.2 percent.
- Binding of 90 percent of agricultural tariffs at 15 percent or lower, with low tariffs in particular on key U.S. agricultural products, such as corn, rice, soybean meal, apples, raisins and many baked goods.
- Participating fully in key sectoral initiatives, including the Information Technology Agreement, chemical harmonization, and the elimination of all duties on aircraft and parts.
- Commitments to the Technical Barriers to Trade Agreement, including the elimination of pre-approval requirements.
- Commitments to WTO sanitary and phytosanitary rules and commitment to eliminate ban on hormone-treated beef and unnecessary shelf-life requirements.
- New market access for key services sectors, including audiovisual, computer and related, distribution, energy, express delivery, financial and telecommunications services.
- Implementation of all WTO rules upon accession, including with respect to intellectual property rights, transparency and state-owned enterprises.
ECAT welcomes the important commitments that Saudi Arabia has made to reduce tariffs, discriminatory policies against foreign entities and other non-tariff barriers. With this agreement, Saudi Arabia has signaled its commitment to economic reform and made concrete its more than decade-long effort to join the WTO.
Russia’s Proposed Accession
The Working Group on Russia’s accession was established on June 16, 1993, and negotiations have been ongoing since 1995. Russia indicated its interest in accelerating negotiations starting in 2002. At the 26th meeting of the Working Party in February 2005, WTO members reported significant progress, although several major issues remain outstanding. The Working Party held its 28th meeting in June 2005 and continues work to finalize Russia’s accession.
In addition to plurilateral discussions, Russia is engaged in active bilateral negotiations as part of its WTO accession bid, although most WTO members, including the EU, have concluded those negotiations, leaving the United States as the main country with bilateral issues yet to be resolved.
Areas that have been identified where additional work is necessary before completing Russia’s accession include the following:
Protection of Intellectual Property Rights. There continue to be significant concerns over both Russia’s legal protections of intellectual property rights, as well as its lack of adequate enforcement and high piracy rates. Russia was identified as a “Priority Watch List” country in the United States’ 2005 Special 301 review. Russia’s laws need further reform to come into compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including protecting clinical data from unfair commercial use and provisions on geographical indications. Russia also has failed to ratify the WIPO Internet treaties. Russia is currently considering legal revisions to its intellectual property rights regime, although early reports indicate that the reforms would weaken, not strengthen, Russia’s regime. Russia’s copyright piracy is one of the most serious of any country, with over $1.7 billion in losses in 2005. Furthermore, piracy has gotten worse as Russia has become one of the world’s largest producers and distributors of illegal optical media material, with 36 known plants. There is also concern over Russia’s reimbursement lists for state-healthcare entities that discourage the use of foreign innovative medicines which are often more effective and safer than local pharmaceuticals. Russia will need to take several steps to address this issue, from making it a political priority to implementing effective enforcement measures, including unannounced inspections, and making modifications to the optical disc licensing regime necessary to ensure better enforcement.
Financial Services. There is also need for improved market access and liberalization of Russia’s financial services sector, which includes significant entry and capitalization barriers, foreign equity limits, as well as employment requirements. With respect to insurance, there are also entry barriers and capitalization restrictions.
Tariff Barriers. Russia continues to maintain significant tariffs on key U.S. export products, such as aircraft and farm equipment, which need to be eliminated through the accession negotiations.
Barriers to Agricultural Trade. Russia also maintains a host of barriers to agricultural trade, including non-scientific barriers, tariff rate quotas, and barriers to access, which need to be addressed through the accession negotiations.
Regulatory Barriers. Russia continues to maintain a number of regulatory barriers. These barriers, such as Russia’s import controls on commercial cryptography products, impede, for example, U.S. exports of high-technology goods to Russia. Other regulatory problems include selective application of laws and regulations, which has permitted, for example, Russian importers to misstate Customs codes to lower their duty rates. These and other regulatory barriers need to be addressed through the accession negotiations.
Government Procurement. Russia’s government procurement market lacks transparency and non-discriminatory access. To address these and other problems in Russia’s government procurement market, Russia should commit to accede to the WTO Government Procurement Agreement by a date certain, i.e., two years, after its accession to the WTO itself.
Transparency. Lack of transparency is a persistent and widespread problem that needs to be addressed in a concrete and fulsome way.
State-Owned Enterprises. Russia should also commit to treat state-owned enterprises as private enterprises upon accession.
Other Barriers. ECAT companies are also concerned also about other market access barriers and urge continued efforts through the accession negotiations and bilaterally to address very economically significant rule of law and investment issues.
Work on Russia’s accession will continue and potentially conclude this year if Russia moves forward to commit to needed reforms to ensure a strong and commercially meaningful accession package.
Vietnam’s Proposed Accession
The Working Group on Vietnam’s accession was established on January 31, 1995, but Vietnam did not submit the required information on its trade regime until 1998. Vietnam has asked that it be allowed to join the WTO as a developing country and be granted more lenient developing country terms in its protocol of accession. The United States has indicated that Vietnam must be held to rigorous standards in its protocol of accession, including agreeing to join the WTO Information Technology Agreement and adopting strong protections for intellectual property and in other areas.
The tenth meeting of the Working Party was held in September 2005, when the Working Party reviewed the first revision of its Working Party report. Vietnam submitted a new tariff offer in December 2005. Vietnam has closed bilateral agreements with several WTO members, including Argentina, Brazil, Chile, Cuba, the EU and Singapore, and is close to concluding with several others.
Key areas that have been identified where additional work is necessary before completing Vietnam’s accession include the following:
Market Access. Vietnam should commit to strong market access in all sectors, consumer and industrial goods and services, at least to the level of China’s commitments, including in the area of wholesale and refined fuels.
Agricultural Trading and Distribution Rights. Vietnam should commit to full liberalization of trading and distribution rights in agriculture upon accession.
Protection of Intellectual Property Rights. Additional reform is necessary to Vietnam’s laws protecting intellectual property. In addition, Vietnam has significant problems in the enforcement of intellectual property rights, including copyright piracy and trademark infringement.
Services Barriers. Vietnam maintains a host of discriminatory and opaque barriers in key service areas, including audiovisual, energy, financial and telecommunications services, that need to be resolved in a commercially meaningful manner.
Transparency. Lack of transparency is a persistent and widespread problem that needs to be addressed in a concrete and fulsome way.
Government Procurement. Vietnam’s government procurement market lacks transparency and non-discriminatory access. Vietnam should commit to accede to the WTO Government Procurement Agreement within a date certain.
ECAT is very concerned by suggestions that Vietnam must agree to restrictions on textile and apparel exports as a condition of its accession. Limiting Vietnam’s access to the U.S. apparel market, more than every other WTO member but China (whose apparel safeguard provisions expire in two years), would severely undermine Vietnam’s ability to make important reforms that are strongly in the interest of the United States.
ECAT Position: ECAT welcomes Saudi Arabia’s entry into the WTO in 2005, which will foster important economic reform and liberalization. ECAT also strongly supports the timely accession of Russia, Vietnam and other major countries to the WTO on strong, commercially meaningful terms that are, at a minimum, comparable to those agreed to with China and other WTO members, if not improved in key areas.
Status of WTO Committees and Working Parties
Rules of Origin
The WTO began work on the development of harmonized global rules of origin in 1995, with the deadline of completing the work in three years. The new harmonized system would be based on the principle of substantial transformation, under which a product is considered to originate from the country in which substantial transformation takes place. In June 1999, the Technical Committee on Rules of Origin at the World Customs Organization (WCO), which is assisting the WTO in this effort, forwarded to the WTO Committee on Rules of Origin several hundred product-specific issues that could not be resolved on a technical basis.
Progress in the WTO Committee on Rules of Origin has been slow, and the deadline for completion of the harmonized system has been extended several times. In particular, there remain significant unresolved issues in the agriculture and textile chapters.
Trade and Environment
The WTO Committee on Trade and Environment (CTE) was established in 1995. The committee’s mandate is to make recommendations on what changes should be made to WTO rules to encourage a positive interaction between trade and environment measures and to avoid protectionism. Since its formation, one of the main areas of the CTE’s focus has been the relationship between the WTO and trade measures applied pursuant to multilateral environmental agreements (MEAs). Discussions in the CTE have supported pursuing environmental problems through cooperative, multilateral action under MEAs. There is no consensus within the CTE on the use of trade sanctions in MEAs, except that in the event a dispute arises between WTO members who are also signatories to a MEA, they should first try to resolve the dispute under the provisions of the MEA.
The CTE has discussed the call for greater transparency in the WTO’s relationship with “civil society,” the term used by the United States to refer to labor, environment, and other non-governmental organizations. To this end, the CTE has held a number of sessions with representatives of civil society on trade and environment issues. In March 1999, the CTE sponsored the High-Level Symposium on Trade and Environment, which was attended by 130 NGOs.
The CTE has stated that trade-related environmental measures should not be required to meet more burdensome transparency requirements than other measures that affect trade. The CTE also has stated that no modifications are needed in WTO rules to ensure adequate transparency for trade-related environmental measures. The CTE established a WTO Environmental Database (EDB) available to WTO members, consisting of all trade-related environmental measures notified to the CTE. With regard to eco-labeling requirements, the CTE has said that such requirements must be non-discriminatory and that the processes for developing and adopting such requirements should be transparent. The CTE is also discussing services and the environment. The CTE met in regular session three times in 2005.
The CTE also continues to work in special session to negotiate the environmental provisions of the Doha Development Agenda discussed above.
WTO Dispute Settlement
While the United States may not agree with all WTO panel decisions, the WTO dispute settlement system on balance has been an effective mechanism in enforcing U.S. rights. The United States has made aggressive use of the dispute settlement process, bringing more complaints than any other WTO member. It has prevailed in the majority of the cases that it has filed and successfully defended America’s ability to enforce its rights under international trade agreements under Section 301 of the Trade Act of 1974 from a challenge brought by the EU.
Since the establishment of the WTO, 335 complaints have been filed. While many involve the United States, EU and other developed countries, there are also a significant number of cases involving developing country challenges to barriers in other developing countries.
Through the end of 2005, the United States brought 70 complaints, of which 24 were successfully resolved without litigation. Of the 28 cases that have been resolved through panel proceedings, the United States has won 24 and only lost four cases on the core issues raised. The United States has been the subject of 98 complaints filed by other countries (including multiple complaints involving the same underlying matter). The United States has successfully negotiated resolutions in 15 cases without litigation and successfully defended 13 completed panel proceedings; the United States has lost 26 cases and the remaining cases are in consultations, litigation or inactive. As explained by the 2004 Economic Report of the President, “these statistics suggest that WTO complaints are not brought frivolously, in the sense that complaints, whether by or against the United States, have a high probability of success.”
Foreign Trade Barriers Addressed through the WTO Dispute Settlement System
Through numerous complaints regarding measures in many different countries, the United States has been able to address barriers in other countries. For example, WTO dispute settlement has resulted in:
- China’s elimination of discriminatory tax policies on semiconductors.
- Canada’s elimination of dairy export subsidies
- Korea’s elimination of unnecessary shelf-life restrictions
- Resolution of intellectual property issues with Portugal, Pakistan, India, Sweden, Brazil, Greece, Ireland, and Denmark.
- Changes to Romania’s customs valuation barriers.
- Korea’s elimination of barriers to certain beef imports.
- Mexico’s opening of its telecommunications market to allow the negotiation of interconnection rates and the resale of international and long distance services.
- Canada’s termination of discriminatory practices in grain handling and its rail transport system.
With recent WTO decisions finding for the United States, it is hoped that the following issues will also be resolved:
- Mexico’s taxes on high fructose corn syrup.
- Mexico’s antidumping orders on rice and beef.
- Japan’s import restrictions on apples.
The WTO dispute settlement system is currently being tested in several disputes between United States and the EU on taxation, the EU’s ban on hormone-treated beef, and U.S. trade remedy cases, which are discussed in more depth in sections III.1, III.9, and IV.2. In a number of cases, the United States and EU have failed to implement the WTO’s rulings. While several of these cases are politically sensitive, it is critically important for the United States and the EU to set a positive example for other WTO members that decisions of the WTO will be respected. ECAT strongly supports efforts by the United States and EU to address these differences in a mutually agreeable manner and find solutions that liberalize trade and ensure that the competitiveness of U.S. companies is not undermined. Other dispute settlement cases are discussed in sections III.1 (trade remedy cases) and IV.3 (lumber).
Despite the fact that the United States was the chief architect of the WTO dispute settlement system and one of its largest beneficiaries, concern has grown in the United States over a number of WTO decisions against the United States. This led to a number of legislative proposals to establish a commission to review WTO dispute decisions. It is not clear, however, that a review body of judges or retired judges is either necessary or appropriate to review WTO cases. While the goal of depoliticizing this issue is important, such a review body, particularly with its narrow focus on cases adverse to the United States, could just as easily heighten, not diminish, political sensitivities. If such a review body were formed, it is extremely important that it look at WTO decisions broadly, including perhaps decisions in which the United States is not even a party, rather than focus primarily or exclusively on cases with rulings adverse to the United States. Focusing only on cases adverse to the United States would necessarily result in a slanted view of the activities of WTO dispute settlement. Furthermore, unlike current proposals, the members of any review body must have expertise in the area of trade and international law, in particular relating to the WTO, in order to ensure the highest possible caliber review. While federal judges, whether active or retired, may have considered a wide range of issues when on the Federal Court, it is a different matter entirely to engage in a systematic review of a multitude of highly technical, complex cases decided under WTO – not U.S. – jurisprudence. To provide a thorough report that is respected and will address these issues appropriately, expertise in this field is required. To ensure impartiality and objectivity, the members of any such body must be chosen in a non-political manner, unlike the current proposals. Finally, ECAT strongly opposes any effort to link such reports to resolutions of disapproval or withdrawal. Congress already enjoys the authority to review the WTO. The creation of an additional expedited process would only serve to undermine U.S. participation in the WTO.
ECAT Position: ECAT believes that the WTO dispute settlement mechanism has been effective in resolving many disputes, but has had difficulty in addressing a few highly political disputes, particularly those between the United States and EU. ECAT supports efforts by the United States and EU to address these issues quickly and in a trade-liberalizing manner.
ECAT does not believe that the formation of a body to review WTO decisions adverse to the United States is either necessary or appropriate. If established, any such mechanism should require a review of all relevant cases, not just those adverse to the United States, include only members who are impartial and are experts in trade and international law, and provide a thorough, objective and non-political review of WTO cases.
1Afghanistan, Algeria, Andorra, Azerbaijan, the Bahamas, Belarus, Bhutan, Bosnia Herzegovina, Bhutan, Cambodia, Cape Verde, Ethiopia, Iraq, Iran, Kazakhstan, Laos, Lebanese Republic, Libya, Republic of Montenegro, Nepal, Russian Federation, Samoa, Republic of Serbia, Seychelles, Sudan, Tajikistan, Tonga, Ukraine, Uzbekistan, Vanuatu, Vietnam, and Yemen.
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