Emergency Committee For American Trade - Publications

SECTION IV.4: ASIA

U.S. trade and investment with Asia have expanded significantly over the last decade. In 2006, U.S. goods exports to all of Asia reached $258.8 billion, accounting for almost 25 percent of all U.S. goods exports and a $70.9 billion increase over U.S. goods exports over the last 10 years. U.S. goods imports from Asia totaled $671.5 billion, accounting for 36.2 percent of all U.S. goods imports. U.S.-Asia services trade has also expanded rapidly, with U.S. services exports equaling $99.4 billion in 2005, expanding $42.3 billion over the last 10 years. U.S.-Asia services imports totaled $68.3 billion in 2005, growing $36.7 billion over the last 10 years. U.S. foreign direct investment in Asia was nearly $377 billion in 2005, an increase of almost 250 percent from the U.S. foreign direct investment level of $108.5 billion in 1994. Asian investment in the United States totaled $252.6 billion in 2005, up almost 124 percent from an investment level of $113 billion in 1993.

In recent years, the United States has actively sought free trade agreements (FTAs) with several of our most important trading and investment partners in Asia. U.S. FTAs with our 16th and 23rd largest trading partners – Singapore and Australia – entered into force in 2004 and 2005 respectively. On April 1, 2007, the United States and Korea concluded negotiations of a bilateral free trade agreement. The United States had also begun negotiating FTAs with Thailand and Malaysia. The Thai negotiations are currently on hold and negotiations with Malaysia are stalled over fundamental differences. The recently concluded FTA with Korea and the negotiations with Malaysia and Thailand are discussed in section II.4.

This section discusses the two primary trading blocs in Asia – the Asia Pacific Economic Cooperation forum and the Association of Southeast Asian Nations –as well as U.S. trade and investment relations with a number of its largest trading partners in Asia: Japan, Singapore, India, Australia, Indonesia and Vietnam. U.S.-China trade and investment relations are discussed in section IV.1.

Asia Pacific Economic Cooperation Forum

The Asia Pacific Economic Cooperation (APEC) forum has 21 members and accounts for approximately 46 percent of global trade. In addition to the United States, APEC members are Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Chinese Taipei, Thailand, and Vietnam.

Total U.S. trade with APEC members increased to $1.8 trillion in 2006, representing 63.2 percent of total U.S. trade last year. In 2006, U.S. goods exports to APEC countries totaled $645 billion and U.S. goods imports from APEC countries equaled $1.18 trillion.

Background on APEC

The 1994 APEC Bogor Declaration established the goal of achieving free and open trade in the Asia-Pacific region by the year 2010 for developed countries and 2020 for developing countries. The 1995 Osaka Action Agenda established a plan for achieving liberalization consistent with the Bogor Declaration goals in 14 areas, including tariffs, non-tariff measures, services, investment, customs, intellectual property, and government procurement. APEC members have developed individual and collective action plans to implement liberalization in these areas. In 1997, APEC members established the Accelerated Tariff Liberalization (ATL) initiative to seek to eliminate tariffs in eight sectors: chemicals, energy products, environmental products, fish, forest products, gems and jewelry, medical and scientific equipment, and toys. APEC sought its expansion to the WTO in 1998 with the goal of achieving the critical mass of participation necessary to conclude the agreements. The eight sectors represent a balanced package and reflect the interests of both developed and developing countries. These sectors account for approximately one-third of total U.S. industrial exports in 2001. While not formally part of the Doha Declaration, efforts will continue to push for a WTO agreement to eliminate tariffs in these sectors.

At the 13th APEC Summit in Shanghai, China, in 2001, APEC Ministers “reaffirmed their strong commitment to launch the WTO new round of multilateral trade negotiations in 2001.” The Ministers reiterated support for the WTO accession of China and Taiwan and the “advancement” of accession by Russia and Vietnam. APEC Ministers also agreed to extend the APEC-wide moratorium on the imposition of customs duties on electronic transmissions until the next WTO Ministerial Conference.

Recent APEC Initiatives

At the 14th APEC Summit in Los Cabos, Mexico, in 2002, APEC leaders agreed to take a leading role in the multilateral trading system to pursue concrete negotiations across all areas of the Doha Development Agenda (DDA). In particular, APEC Trade Ministers agreed to adopt the specific transparency standards in the 2001 APEC Shanghai Accord to bring about openness and predictability in government, and to reduce trade obstacles crucial for the digital economy by creating cooperative settings among groups of countries called “Pathfinder Initiatives,” in which 16 economies have agreed to participate. They also initiated a Trade Facilitation Action Plan that could decrease international business transactional costs by five percent over the course of five years within the APEC region.

At the 15th APEC Summit in Bangkok, Thailand, in 2003, APEC leaders committed to move the Doha Development Agenda forward and agreed to work to abolish all forms of agricultural export subsidies and unjustifiable export restrictions and to continue to work on rules issues. Work on the Pathfinder Initiatives and Trade Facilitation Action plan continued, and the APEC Ministers endorsed the Future Work Agenda on International Implementation of the APEC Privacy Framework, which includes instructing APEC members to continue efforts to develop a regional approach to privacy that will support global business models, such as privacy codes.

At the 16th APEC Summit in Santiago, Chile, in 2004, APEC leaders:

Identified WTO negotiations as their “first priority;”
Launched the Santiago Initiative for Expanded Trade in APEC to take concrete steps towards trade and investment liberalization and trade facilitation; and
Endorsed the Santiago Commitment to Fight Corruption and Ensure Transparency.

During 2004, APEC completed work on the APEC Privacy Framework, which seeks to promote a consistent approach to information-privacy protection across APEC Member economies, while also avoiding the creation of unnecessary barriers to information flows. Creation of the APEC Framework also contributes to broader APEC e-commerce objectives to increase cross-border trade and growth in e-commerce in the region. The APEC Framework seeks to achieve four main goals: (1) develop appropriate privacy protections for personal information; (2) prevent the creation of unnecessary barriers to information flows; (3) enable multinational businesses to implement uniform approaches to the collection, use and processing of data; and (4) facilitate both domestic and international efforts to promote and enforce information privacy protections. APEC economies are now working to implement the framework and have agreed to:

Develop a multilateral mechanism for promptly, systematically and efficiently sharing information among APEC Member economies;
Develop cooperative arrangements between privacy investigation and enforcement agencies of Member economies; and
Support the development and recognition of organizations’ cross-border privacy codes across the APEC region.

The APEC privacy initiative is particularly important given concerns about the proliferation of different privacy standards around the world, as discussed with respect to the European Union in section IV.2.

The 17th APEC Summit was held in Busan, Korea, in November 2005, just weeks before the 6th Ministerial Conference of the World Trade Organization in Hong Kong in December 2005. In order to help propel the WTO Doha Development Agenda negotiations forward, APEC leaders issued a strong stand-alone statement on maintaining a “high level of ambition” in those negotiations, emphasizing that the APEC economies alone represented nearly 50 percent of world trade. The APEC leaders also endorsed the so-called Busan Roadmap, which includes:

Support for the multilateral trading system;
Strengthening collective and individual actions;
Promotion of high-quality regional and free trade agreements;
Support for the Busan Business Agenda, including reductions in trade transaction costs by five percent by 2010 and improved business facilitation, protection of intellectual property rights, anti-corruption, investment and secure trade; and
Support for a strategic approach to capacity building.

APEC leaders also endorsed the APEC Anti-Counterfeiting and Piracy Initiative and model guidelines to reduce trade in pirated and counterfeit goods and the sale of such goods over the Internet, as well as several initiatives to promote secure trade, including the APEC Framework for the Security and Facilitation of Trade.

The 18th APEC Summit was held in Vietnam in November 2006. The Leaders reaffirmed their strong commitment to resuming the WTO Doha Development Agenda negotiations and the promotion of greater trade and investment among APEC countries through the Hanoi Action Plan, promoting the Busan Roadmap. The Leaders endorsed new intellectual property guidelines as discussed in section III.4 and programs on ant-corruption and the promotion of technology and Internet access.

The 2007 APEC Summit will be held in Australia. APEC initiatives on government procurement and transparency are discussed in sections III.3 and III.5 respectively.

ECAT Position: ECAT supports the APEC forum as a vital part of expanding trade and investment in the Asia-Pacific region. ECAT supports ongoing efforts to promote trade and investment liberalization and trade facilitation, as well as APEC’s transparency programs. ECAT strongly supports concrete work within APEC to implement APEC’s recommendations regarding investment, intellectual property protection, infrastructure, harmonization of standards for agriculture and food trade (e.g., cooked poultry), and energy issues. ECAT also supports work to implement the APEC Privacy Framework to achieve a streamlined approach to the recognition of cross-border privacy codes.

Association of Southeast Asian Nations

Formed in 1967, by Indonesia, Malaysia, the Philippines, Singapore and Thailand, the Association of Southeast Asian Nations (ASEAN) works to promote political and economic cooperation and regional stability. Membership in ASEAN now also includes Brunei, Vietnam, Laos, Myanmar, and Cambodia.

At the fourth ASEAN summit in 1993, the members agreed to establish an ASEAN free trade area (AFTA) by 2008. At the 1999 ASEAN summit, members agreed to speed up AFTA efforts and conclude the agreement by 2002. At their annual meeting in Hanoi in September, 2001, ASEAN countries agreed to eliminate tariffs on information and communication technology goods by 2005. The group of four will have until 2010 to eliminate such tariffs. The AFTA will require that tariff rates on certain goods be reduced to between zero and five percent and that quantitative and other non-tariff barriers be eliminated.

Although tariffs will not be fully eliminated until 2010 for the group of six (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) and 2018 for the group of four (Cambodia, Laos, Myanmar and Vietnam), the group of six has already implemented significant tariff cuts, eliminating tariffs for most non-sensitive products.

ASEAN countries also moved up the deadlines for full implementation of the ASEAN Investment Area. Exceptions for investment in the manufacturing, agriculture, forestry, fisheries and mining sectors were set for elimination by 2003 for the group of six and 2015 for the group of four.

In 2001, ASEAN also agreed to a Closer Economic Partnership with Australia and New Zealand to establish a broad framework to improve trade and economic ties. ASEAN countries have also begun to pursue an FTA with China, which could open up a $2 trillion market with 1.7 billion consumers.

In October 2002, President Bush announced a new trade initiative with ASEAN countries called the Enterprise for ASEAN Initiative (EAI). Under this initiative, individual countries will be allowed to pursue bilateral FTAs with the United States as long as potential FTA partners are members of the World Trade Organization and have concluded a Trade and Investment Framework Agreement (TIFA), thereby laying the foundation for a future FTA. The United States and Singapore FTA entered into force in 2004, as discussed below. In August 2006, the United States entered into TIFAs with the ten ASEAN countries and developed a specific workplan to advance trade. The United States has also begun FTA negotiations with Thailand and Malaysia, as discussed in section II.4.

U.S.-ASEAN trade and investment continues to expand, particularly with the continued growth of the ASEAN economies. U.S. goods exports to the region equaled $49.6 billion in 2005, up slightly from 2004 goods exports of $47.9 billion. U.S. goods imports from the ASEAN countries totaled $98.9 billion in 2005, up 12 percent from 2004 goods exports of $88.2 billion.

Japan

U.S.-Japan trade and investment remain very substantial. Total U.S.-Japan goods trade totaled $206.8 billion in 2006, with U.S. goods exports increasing moderately to $59.7 billion in 2006 from $55.4 billion in 2005. U.S. goods imports from Japan equaled $148.1 billion in 2006, up 7.2 percent from 2005 imports. Japan remains the United States’ third largest goods export market and its fourth largest trading partner in goods overall. U.S. services exports to Japan equaled $41.8 billion and U.S. services imports from Japan totaled $22.3 billion in 2005. U.S. foreign direct investment in Japan totaled $75.5 billion in 2005, up 121.4 percent from 1994 investment levels of $34.1 billion. Japanese foreign direct investment in the United States equaled $190.3 billion in 2005, nearly double the $98.5 billion in Japanese investment in the United States in 1994.

In addition to the specific U.S.-Japan trade and investment relations discussed below, the United States continues to work to press Japan to provide greater leadership in the WTO Doha Development Agenda negotiations. Japan is a leading member of the Group of 10 developed countries that continues to seek protect for key sensitive products, particularly agricultural products.

In June 2001, President Bush and former Japanese Prime Minister Koizumi inaugurated the new U.S.-Japanese Economic Partnership for Growth. This Partnership includes a Subcabinet Economic Dialogue, the Regulatory Reform and Competition Initiative, the Investment Initiative, the Financial Dialogue, and the Trade Forum.

The Regulatory Reform and Competition Policy Initiative, which replaced the earlier Deregulation Initiative, includes government officials and representatives from the private sector. In establishing this initiative in 2001, the United States and Japan created four working groups – on telecommunications, information technology, energy, and medical devices/pharmaceuticals. A cross-sectoral group also considered economy-wide issues such as regulatory reform, competition policy and corporate restructuring. The United States makes yearly recommendations as a basis for bilateral discussions, and then a report is prepared detailing areas where Japan has made progress.

In June 2006, the United States and Japan issued the Fifth Report to the Leaders on the U.S.-Japan Regulatory Reform and Competition Policy Initiative. The report reviews measures that Japan is taking in key sectors, such as telecommunications, information technology, intellectual property, energy, medical devices, pharmaceuticals, financial services, agriculture, competition policy, transparency, legal reform, commercial law revision and distribution. This report noted Japan’s progress in several key areas. The United States is continuing to seek additional reform to reduce regulatory barriers and streamline government practices and issued new detailed recommendations to Japan in December 2006.

Improving access to Japan's auto market continues to be a top priority in 2007. In 1995, the United States and Japan reached an Automotive Agreement intended to eliminate market-access barriers and expand sales opportunities for U.S. auto and auto-parts exports in Japan. This agreement expired at the end of 2000. Prior to its expiration, the United States noted that progress had been made under the agreement, particularly in the areas of vehicle standards, certification and the deregulation of the auto parts after-market. However, the United States expressed serious concern that the overall market-opening objectives had not been achieved. In particular, sales of U.S.-made vehicles to Japan have fallen dramatically since 1995 and sales of U.S.-made auto parts to Japanese firms and their transplants in the U.S. have also decreased. After months of discussions in 2001, the United States and Japan established the U.S.-Japan Automotive Consultative Group to assess trends in the automotive industry and market-access and regulatory reform issues in Japan. The Group is co-chaired by the Commerce Department and USTR and the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure and Transport. The Administration has indicated that it will seek to address crosscutting issues, such as transparency, investment and corporate restructuring that affect the automotive sector as part of the Economic Partnership. Despite the work in this forum, the United States remains concerned about falling sales, the lack of transparency and regulatory and other barriers to U.S. automobile and auto-parts manufacturers.

In addition, U.S. auto and other manufacturers are increasingly concerned by Japan’s weak yen policy, which has given its exporters a huge cost and competitive advantage in the U.S. market to the disadvantage of several U.S. industries. In a January, 2005 Working Paper, the U.S. Federal Reserve reported that:

Since the early 1990s, the monetary authorities of the major industrialized countries, with one notable exception, have greatly curtailed their foreign-exchange interventions. That exception has been Japan, where the Ministry of Finance has continued to intervene frequently – and at times massively – in foreign exchange markets.

There are several international agreements that preclude or limit the use of currency intervention for trade-distorting purposes. Exchange rates, like all prices, should reflect economic fundamentals and be determined by market forces. Given the relative strength of the Japanese economy and the massive current account surplus, a stronger yen would more accurately reflect economic fundamentals. The U.S. government should closely watch this situation and take steps to ensure that only market forces determine yen-dollar rates.

In August 2003, Japan imposed an import ban on U.S. beef as a result of a single case of Bovine Spongiform Encephalopathy (BSE) reported in the United States. Japan partially lifted the ban in December 2005. One month later, in January, 2006, the beef ban was reimposed after a single U.S. exporter shipped non-qualifying beef. The United States immediately recognized the breach of the agreement and put additional systems in place to guarantee no repeat offenders. On July 27, 2006, Japan partially reopened its market to U.S. beef, allowing imports of U.S. beef from animals aged 20 months or younger. The United States continues to urge Japan to remove all its barriers to beef. Before the ban, Japan had been the largest export market for U.S. beef.

In its annual consultations under the 1992 U.S.-Japan Computer Agreement, the United States continues to urge Japan to improve its implementation of that agreement, which was intended to increase the sales of U.S. computers to Japan's public sector. Japan has insisted that the 1992 agreement does not guarantee any market share and that its government purchases are conducted in a fair, transparent manner. The most recent bilateral review was held in 2001.

In annual consultations under the 1994 and 1995 bilateral insurance agreements, the United States continued to urge Japan to eliminate tax, regulatory, supervisory and other advantages enjoyed by Japan Post over private insurance companies.

In December 2006, Japan’s Diet approved changes to its Money Lending Business Law. Several of the changes are positive, including provisions to improve internal governance, raise the standard for capitalization, and take appropriate steps to enhance borrower protections against abusive practices. Industry is concerned, however, with two sets of issues:

The legislation requires a major reduction in the maximum interest ceiling – from 29.2 percent to 18 percent – and a limitation on all unsecured lending to a third of a borrower’s income. Both provisions will be effective from 2010. Such restrictions could exclude over 60 percent of the currently eligible consumer finance market from receiving safe and secure credit from regulated lenders.

The legislation also failed to fix disclosure requirements in the existing law that have been found to be unworkable for revolving credit. The failure to fix this issue perpetuates substantial legal uncertainty for lenders.

ECAT looks forward to further reform of this law to address these issues.

U.S. officials will also continue to monitor trade and enforce key agreements with Japan in insurance, telecommunications, semiconductors, and other sectors. In March, 2002, the United States also requested WTO dispute consultations with Japan over sanitary and phytosanitary restrictions imposed on imports of apples. The WTO Appellate Body found in November, 2003, that Japan’s measures on apples violated its WTO commitments, as they were imposed without sufficient scientific evidence. While Japan amended its rules, the United States requested a WTO panel to review the rules because they do not appear to be compliant. The WTO panel agreed, and Japan announced in August, 2005, that it would eliminate certain restrictive practices. As discussed in sections II.3 and III.1, the United States and Japan are involved in other WTO disputes, particularly over several U.S. trade remedy issues.

The United States and Japan ratified a bilateral tax treaty in 2004.

Japan concluded its first bilateral FTA, with Singapore, in 2001, and its second FTA, with Mexico, in 2004. Suggestions have also been made by Members of Congress and others for the United States and Japan to consider negotiating a bilateral FTA.

Singapore

Singapore is the United States’ 15th largest trading partner. Bilateral goods trade between the United States and Singapore has increased from $17.8 billion in 1990 to $42.5 billion in 2006. U.S. goods exports to Singapore equaled $24.7 billion in 2006. U.S. imports from Singapore totaled $17.8 billion in 2006, representing an increase from the $15.3 billion in imports in 2005. In 2005, U.S. services exports to Singapore equaled $57.5 billion and U.S. imports for Singapore services totaled $3.7 billion. In 2005, U.S. foreign direct investment in Singapore totaled $48 billion and Singapore’s investment in the United States equaled $2.4 billion.

Singapore is also a member of APEC and ASEAN and has FTAs with Japan and New Zealand. Singapore also has completed FTAs with Australia and the four-member European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland); it also has begun FTA negotiations with Canada that have not yet been completed. Singapore maintains no external tariffs on goods.

Major Provisions of the U.S.-Singapore Free Trade Agreement

Negotiations of the U.S.-Singapore FTA were completed in 2003 and the FTA entered into force on January 1, 2004. The primary provisions of the U.S.-Singapore FTA include 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 market access 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 Singapore to strong protections for intellectual property rights, with patent and trade-secret protections stronger than in 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 also has 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 III.2, that should not be repeated in future agreements.
Government procurement: Singapore is already a member of the WTO Government Procurement Agreement. The FTA government procurement chapter expands upon Singapore’s existing framework by including 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, since Singapore already maintains no external tariffs.
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).
Customs procedures: The FTA 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 Singapore 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.

Opportunities Created

The U.S.-Singapore FTA represents an important agreement, eliminating services and investment barriers and providing new opportunities for U.S. companies and their workers. Trade and investment have expanded since the entry-into-force of the FTA, including a substantial increase in U.S. goods exports.

ECAT Position: ECAT strongly supports full implementation of the U.S.-Singapore FTA and continued work to improve the trade and investment relationship between the United States and Singapore.

India

The economic growth that India has enjoyed since it embarked on economic reforms in 1991 continues. India’s population has now surpassed one billion, and projections suggest that by 2016 its population will exceed that of Europe and the rest of the industrial world, excluding Russia. Nevertheless, India’s adult literacy rate in 2004 was only 59.5 percent and India has an estimated 300 million people living in abject poverty and 300 million more people living on the edge of poverty. There remain continuing concerns over bureaucratic controls and basic infrastructure needs, including roads, ports, power and drinking water. To realize its potential, India needs to continue to accelerate the pace of economic reform and further opens its markets to foreign participation.

U.S.-Indian trade and investment flows continue to grow at a significant pace. U.S.-India goods trade expanded to $31.9 billion in 2006, from $18 billion in 2001. U.S. goods exports equaled $10.1 billion in 2006, increasing more than 26 percent over 2005 U.S. exports of $8 billion. U.S. imports from India totaled $21.8 billion, up from $18.8 billion in 2005. The United States is India’s largest trading partner. U.S. services exports to India equaled $5.2 billion in 2005, representing a nearly 373 percent increase from U.S. services exports of $1.1 billion in 1994. U.S. services imports from India grew 557 percent in the last 10 years, from $761 million in 1994 to over $5 billion in 2005. Services imports from India increased 78.5 percent between 2004 and 2005 alone. U.S. foreign direct investment in India totaled $8.5 billion in 2005.

In addition to the U.S.-India bilateral trade and investment relations discussed below, India is also playing an important role in the WTO Doha Development Agenda negotiations, joining with the United States in advocating liberalized services trade, although India has not yet fully embraced ambitious outcomes in all key areas, especially agriculture.

In August, 2001, the United States and India began to implement the agreement reached in 2000 to establish a formal trade policy dialogue with consultations at regular intervals. At the same time, the United States expanded benefits under the Generalized System of Preferences for India, providing duty-free treatment to an additional 42 tariff lines (mostly jewelry), covering some $543 million in exports.

As discussed in section III.6, in September 2001, the United States lifted the remaining sanctions that it imposed on India in 1998 as a result of its nuclear tests. To that end, the United States and India fulfilled a commitment made by President Bush and former Prime Minister Vajpayee to boost high-technology trade by agreeing on a set of principles with respect to dual-use items that require export licenses. The principles provide for a review to ensure that all parties follow licensing requirements for dual-use goods and technologies and describe ways to deal with export control violations. The Hi-Tech Commerce Agreement was signed in February 5, 2003. As also discussed in Section III.6, the United States and India reached a new civil nuclear cooperation agreement in March 2006 under which the United States would provide nuclear power generation assistance to India. Congress approved this agreement in December, 2006.

To revitalize the existing U.S.-India Economic Dialogue, the United States and India established the United States-India Trade Policy Forum in July, 2005, to promote improved trade relations and dialogue between the two countries, with a goal of doubling trade in three years. Several other initiatives were launched concurrently: the Information and Communications Technology Working Group (ICTWG), the U.S.-India CEO Forum, and the U.S.-India Agriculture Knowledge Initiative (AKI), and a separate Energy Dialogue. As well, the High Technology Cooperation Group (HTCG) was revitalized.

The U.S.-India CEO Forum has identified six major areas for cooperation: physical infrastructure development, energy security, human resource development, technology exchange, trade and industry promotion and intellectual property protection. In March, 2006, the Forum made numerous recommendations in these areas. Particular areas of interest of U.S. business include:

Enhancing the procurement process for Indian infrastructure projects;
Liberalizing the Indian banking, insurance, retail and telecommunications sectors;
Liberalizing print, broadcast and cable media in India; and
Eliminating licensing requirements for certain information-sector products and services.

In addition, the CEO Forum has made several specific recommendations to revitalize India’s food processing sector by: (1) opening India’s food-processing sector to participants of all sizes to create opportunities for additional U.S. investment; (2) providing for unlimited movement of domestic and imported agricultural products across district and state boundaries; (3) liberalizing import policies and tariffs for agriculture and food items, especially those which serve as inputs into further processed products; and (4) eliminating policies that discriminate against foreign investors in the food and agricultural sector, such as the discriminatory special excise duty on carbonated drinks, discriminatory value-added taxes on soybean oil, and non-science based standards for imports of products derived from biotechnology.

The United States remains concerned about high Indian tariffs in several sectors, barriers to foreign participation in India’s financial services and non-financial services markets, its non-transparent and discriminatory government procurement market, and investment barriers, including equity caps and the lack of a secure legal and regulatory framework.

India also remains on the United States' Special 301 "Priority Watch List" for its inadequate intellectual property regime and its failure to come into compliance with its TRIPS commitments. ECAT supports the recommendations of the Indian film and music industries that India pass optical media legislation to regulate the proliferation of optical disc plants. ECAT is also concerned by the underreporting of cable TV subscribers, which represents a problem for broadcasters.

ECAT welcomes the conclusion of an “open skies” agreement between the United States and India in 2005, which promotes enormous benefits to consumers and support for continued growth of aviation and aerospace industries, as explained in more detail in section IV.2. India will also need to expand its civil aviation infrastructure to expand economic opportunities.

Australia

Australia is already the United States’ 24th largest trading partner and its 15th largest goods export market, accounting for $17.8 billion in U.S. goods exports in 2006. Australia’s goods exports to the United States equaled $8.2 billion in 2006. The vast majority of U.S. exports to Australia has been composed primarily of manufactured goods (over 90 percent of total exports), as opposed to agricultural products. In 2005, U.S.-Australia services exports equaled $7.4 billion, with U.S. services imports from Australia amounting to $4.6 billion.

The United States and Australia concluded FTA negotiations in 2004. The FTA entered into force on January 1, 2005.

Major Provisions of the U.S.-Australia Free Trade Agreement

Among the primary provisions of the U.S.-Australia FTA are the following:

Agriculture: Provides that all U.S. agricultural exports to Australia will be duty-free immediately upon entry into force of the FTA. Such exports currently total more than $400 million. The United States and Australia also agreed to work to address sanitary and phytosanitary concerns through a new bilateral mechanism for scientific cooperation. Australia also agreed to work with the United States in the WTO negotiations to develop export competition disciplines to address concerns about Australia’s state-trading enterprises.
Manufactured Goods:? Provides that immediately upon entry into force of the FTA, more than 99 percent of U.S. manufactured goods will be duty-free, which manufacturers estimate could result in an additional $2 billion in exports to Australia each year. Tariffs on qualifying textile and apparel goods will phase out over 10 years.
Services: Expands access to Australia’s services markets, including in such key areas as telecommunications, distribution, express delivery, computer and related services, audiovisual and entertainment and construction.
Investment: Exempts new investments in Australia from Australia’s investment screening mechanism and increases the threshold for review with respect to acquisitions of existing investments to A$800 million. While expanding opportunities and access for investment in Australia, the FTA does not include an investor-state dispute settlement mechanism, as discussed further below.
Intellectual Property Rights: Includes state-of-art protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity.
Information Technology: Includes commitments to non-discrimination and national treatment of digital products, and no imposition of customs duties on products delivered electronically.
Government Procurement: Expands the ability of U.S. companies to bid on Australian government contracts, covering 80 percent of purchases by Australia’s central government. Also requires transparent, predictable and fair tendering procedures.
Transparency: Includes state-of-the-art transparency standards, including with respect to regulatory and customs matters.
Labor and environment: Requires the parties to enforce effectively 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: Provides that 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.

Opportunities Created

By eliminating virtually all agricultural and manufacturing tariffs between the countries on the first day of implementation, the U.S.-Australia FTA is among the most front-loaded of FTAs that the United States has concluded. As a result, it will provide immediately upon implementation concrete benefits to U.S. farmers, manufacturers and their employees, and the U.S. economy. Key manufacturing sectors that will benefit include autos and auto parts, chemicals, construction equipment, electrical machinery, fabricated metal products, information technology goods, medical and scientific equipment, and paper and wood products. In agriculture, the FTA will substantially expand access for U.S. farmers and producers of soybeans and oilseeds, fruits, vegetables and certain processed foods. U.S. service providers and investors will also enjoy expanded access in a number of important sectors.

Nevertheless, ECAT regrets that the agreement did not achieve all key objectives. First, it is not comprehensive, by failing to provide any increased access to the U.S. sugar market for Australian sugar exports. This represents a significant deviation from a policy of no exclusions and has already resulted in requests by other sectors to be excluded from the next round of FTAs and the FTAA.

The FTA also fails to include investor-state dispute settlement provisions, rendering the investment chapter effectively unenforceable except through a state-to-state process that is too often politicized. Obviously, U.S. investors will still have recourse to Australia’s legal system, with its respected judiciary, but the specific provisions in the FTA on investment will not, as in other FTAs, be enforceable by the investors. Australia’s refusal to accept this provision, particularly after it was just included in Australia’s FTA with Singapore, puts U.S. companies at a competitive disadvantage. The FTA contemplates that the availability of an investor-state dispute settlement mechanism can be revisited. The investment chapter also fails to provide any protections for investment agreements, which represent a substantial form of U.S. investment abroad.

As well, the FTA makes progress, but fails to reduce fully, the barriers created by Australia’s investment screening mechanism. This is particularly a problem in the area of financial services where Australia retains a significant ability to prevent the U.S. acquisition of a local company. Finally, the FTA’s provisions on market access for textiles and apparel are particularly limited, adopting not only a yarn-forward requirement, but also failing to eliminate tariffs immediately.

ECAT Position: ECAT strongly supports full implementation of the U.S.-Australia FTA and continued work to improve the trade and investment relationship between the United States and Australia.

Indonesia

The United States has had a significant economic stake in Indonesia. Before the onset of the Asian financial crisis and the increase in political unrest in Indonesia, it was a regional economic power with an economy twice as large as Singapore’s. Indonesia was among America’s top 25 trading partners, accounting for $6 billion in U.S. exports and $7.6 billion in U.S. foreign direct investment in 1996. U.S. investment in Indonesia has been primarily in the oil and gas sector. Following the financial crisis and serious political unrest that brought down the corrupt regime of former President Suharto, Indonesia has faced the difficult challenge of rebuilding its government and economy. On March 29, 2007, Indonesia’s House passed the 2007 Investment Law to replace its 1967 Foreign Investment Law. Based on preliminary reviews, the new law seeks to expand foreign investment access by opening access to several sectors and simplifies administrative processes, yet retains unnecessary and oftentimes difficult-to-achieve requirements for significant domestic participation in foreign ventures.

In 2006, U.S. goods exports to Indonesia equaled $3.07 billion, marginally above the level reached in 2005. Indonesia’s goods exports to the United States totaled $13.4 billion in 2006, up almost 12 percent from Indonesia’s exports of $12 billion in 2005. In 2005, U.S. services exports to Indonesia equaled $1.2 billion, and U.S. services imports totaled $348 million.

U.S. and Indonesian officials met several times to address issues in the U.S.-Indonesian commercial relationship, including through the bilateral Trade and Investment Framework Agreement. Among the key issues are intellectual property, Indonesia’s ban of U.S. poultry and barriers in the automotive and other sectors.

The United States remains concerned about continued piracy of U.S. software, books, videos, pharmaceuticals, and apparel trademarks in Indonesia. The Indonesian government remains on the Special 301 “Priority Watch List” for its inadequate intellectual property regime and failure to bring its laws into conformity with the WTO TRIPS Agreement. To help resolve these shortcomings, the U.S. Government provided Indonesia with an IPR Action Plan in May, 2002. In July, 2003, the Indonesian government took some initial steps by approving a copyright law focusing on activities that seek to bypass technological protection measures, penalties in relation to corporate end-user piracy and regulations on optical-disc production; however, the legislation fails to provide adequate enforcement.

The United States is also concerned with Indonesia’s presidential decree, issued in 2000, updating its government procurement code, including through providing special preferences for domestic sourcing. Indonesia is not a member of the WTO’s Government Procurement Agreement.

The United States continues to monitor Indonesia’s efforts to revive its national automotive industrial policy. The United States successfully challenged the WTO consistency of Indonesia’s barriers to trade in automotive products. Indonesia modified its auto policies to bring them into conformity with the WTO panel decision, and the United States does not want Indonesia to reimpose barriers to auto trade. Tariffs on SUVs, sedans and motorcycles remain high.

As discussed in section II.2, ECAT is also seeking the elimination of Indonesia’s differential export taxes (DETs), which effectively operate as export subsidies for further value-added agricultural products such as refined palm oil and biodiesel. As well, U.S. companies remain concerned about Indonesia’s services and other barriers.

Vietnam

U.S. trade and investment with Vietnam has grown substantially since the resumption of economic relations between the two countries. U.S.-Vietnamese goods trade has increased from $223.3 million in 1994 to $9.7 billion in 2006. Major U.S. exports to Vietnam include industrial machinery, fertilizers, and semiconductors and major imports include crude oil, footwear, shrimp, and coffee.

As discussed in section II.2, Vietnam completed negotiations to join the WTO in 2006 and formally became the 150th WTO member on January 11, 2007. In December, 2006, Congress passed legislation authorizing permanent normal trade relations with Vietnam, thereby graduating Vietnam from the Jackson-Vanik provisions of Title IV of the Trade Act of 1974, which had governed the U.S.-Vietnam trading relationship. The President extended PNTR to Vietnam on December 29, 2006.

The Administration announced, however, in September 2006 that it would monitor imports of textile and apparel products from Vietnam and self-initiate antidumping actions where appropriate. ECAT is very concerned over the implementation of this program and seeks to ensure that it does not undermine the very economic opportunities that Vietnam’s WTO accession created for the United States and Vietnam. Major concerns have been raised about this program in terms of its consistency with the United States’ own laws and WTO obligations, as well as with regard to the methodology of its implementation. ECAT is also concerned by Vietnam’s export-licensing program for textile and apparel products that may undermine Vietnam’s ability to benefit fully from its WTO membership.

ECAT is concerned too by Vietnam’s discriminatory government procurement rules, particularly relating to Vietnam’s procurement of information technology products, as provided for by Decision 169/2006/QD-TTg of July 17, 2006. ECAT has led industry efforts to seek reform of this Decision and its implementing circulars, seeking the elimination of provisions that would undermine the Vietnam’s WTO commitments regarding state-owned enterprises, as well as provisions that would unnecessarily discriminate against non-Vietnamese information technology (IT) companies or result in inefficient and more costly procurements for the Government of Vietnam.

In the area of intellectual property, while Vietnam has made considerable progress in updating its laws and regulations, enforcement remains lax. U.S. broadcasters are concerned by widespread and growing piracy of broadcast signals by unauthorized operators including by the Vietnam Television Technology Investment and Development Company (VTC), which is controlled under the auspices of the Ministry of Posts and Telematics (MPT), through its “experimental” digital terrestrial pay-TV platform. This state-sponsored and state-sanctioned piracy of broadcast signals is inconsistent with Vietnam’s WTO’s commitments. In addition, Vietnam needs to adopt optical disc legislation and improve enforcement to address its rampant optical disc piracy.

Vietnam also continues to maintain investment restrictions and other barriers, such as a discriminatory and time-consuming investment-licensing process. As well, Vietnam’s distribution, allocation and licensing processes are inefficient and non-transparent transparent. By improving these processes, Vietnam will be better able to benefit from its WTO accession. As of now not clear on process and slow to allocate. Allocating will enhance us investment in the country.Vietnam also faces widespread corruption throughout all aspects of business operations, a problem admitted to by the Government of Vietnam. ECAT supports U.S. and Vietnamese efforts to address these and other trade- and investment-distorting measures.