Copyright 2000 Federal News Service, Inc.
Federal News Service
April 5, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 15917 words
HEADLINE:
PREPARED TESTIMONY OF AMBASSADOR CHARLENE BARSHEFSKY UNITED STATES TRADE
REPRESENTATIVE
BEFORE THE HOUSE APPROPRIATIONS
COMMITTEE SUBCOMMITTEE ON COMMERCE, JUSTICE, STATE AND JUDICIARY
SUBJECT - USTR AGENDA AND BUDGET REQUEST
BODY:
Mr. Chairman and Members of the Subcommittee, thank you for this
opportunity to testify on the President's Fiscal Year 2001 budget request for
the Office of the U.S. Trade Representative.
I regard it as a great
privilege to present this request. And I believe this hearing is especially
important to us, as this year the President is requesting an increase of
$4.1 million and 25 full-time career positions for the USTR.
This would be relatively minor for almost any other agency, but will be of
decisive significance for us as we open a new century in trade policy.
We are, by preference and tradition, a small and lean agency. Each of
our career negotiators has great responsibility and feels that responsibility
keenly. We neither envision, nor wish to see, any change in that historic
identity. But as I look ahead to the responsibilities the next Administration
will inherit, USTR risks an inability to discharge its statutory
responsibilities with only the 178 positions we now have authorized. My
testimony will explain this by reviewing our agenda in detail. But let me begin
with a few illustrative points. When I joined the USTR in 1993, Mr. Chairman,
the value of America's two-way trade was approximately $1.3
trillion. In 1998, our two-way trade total topped $2 trillion
for the first time, and this year, it may reach $2.5 trillion.
In 1993, the world trading system embodied by the General Agreement on Trade and
Tariffs had a limited set of essentially unenforceable rules that applied
differently to different members. Today's WTO is a comprehensive set of rules
which are enforceable and apply to every single member; its coverage now extends
to agriculture, services, high-tech fields and other issues; and it has a strong
dispute settlement mechanism which we have used in 49 cases to preserve and
enforce our rights. At the same time, the WTO has agreed to open a new set of
negotiations on agriculture and services, and we are also carrying on
negotiations toward the accession of 30 prospective new members. Our network of
trade agreements has grown by nearly 300 and covers each part of the world.
Together with this, we have opened the first major discussions on the links
between trade policy, environmental and labor issues, and launched new regional
trade initiatives in Africa, Asia, Europe, Latin America and the Middle East.
TRADE PHILOSOPHY AND NEGOTIATING RECORD
To more fully illustrate
this, let me now turn to a detailed review of our mission, our negotiating
record over the past seven years and our agenda for the future.
USTR's
mission of opening markets, expanding trade, and enforcing trade laws and trade
agreements reflects trade principles dating to the era of Franklin Roosevelt,
under which ten Administrations have worked toward an open world economy under
the rule of law. The Clinton Administration's policies have been fully in accord
with these principles, seeking in the President's words to negotiate agreements
that help us create "more growth and more trade, with better protection for
working people and more sensible environmental policies."
This work has
extended to every part of the world and every major issue related to trade.
Since 1993, we have concluded nearly 300 separate trade agreements, covering all
of our major trading partners: these include 38 market-opening agreements with
Japan, 17 with the European Union, 20 with Canada, 13 with South Korea, 20 with
the ASEAN states, and 17 with China; 22 Bilateral Investment Treaties; and
numerous sectoral agreements with key trade partners. We have addressed the
major trade issues of concern to Americans, including a special focus on high
technology, fundamental improvement in world intellectual property standards,
and opening the first major discussions on the links between trade policy,
environmental and labor issues. And looking ahead, we have launched major trade
initiatives in Africa, Asia, Europe, Latin America and the Middle East.
Especially notable among these achievements are six agreements of
historic importance, which together have reshaped the world trade environment.
These are the North American Free Trade Agreement, which has helped our exports
to Canada and Mexico grow by $122 billion since 1992; the
Uruguay Round, which created the World Trade Organization and began the work of
bringing agriculture and services fully into the trading system; the global
agreements on Information Technology, Basic Telecommunications and Financial
Services, which together have a scope greater than the Uruguay Round itself; the
WTO's commitment to duty- free cyberspace; and most recently our bilateral
agreement with China on WTO accession, which will dramatically open the world's
largest nation to American exports.
RESULTS SINCE 1993
These
policy achievements, in turn, helped catalyze a 55% expansion of American goods
and services exports since 1992, to a record level of $958.5
billion last year. This strong export performance is especially important, as
export-related jobs typically pay 13-16% above the average U.S. wage. Together
with domestic policy measures such as the improvement of fiscal discipline since
1993 and increased investment in education, by opening markets, advancing the
rule of law, and promoting competition, our trade policy has contributed to a
record of: Growth: The U.S. economy has grown by $2.1 trillion
or 28.7%, from $7.2 trillion in 1992 to $9.3
trillion in 1999. To put this figure in context, only two countries in the world
apart from the United States have a GDP totaling $2 trillion or
greater. Jobs: U.S. employment has grown by nearly 21 million jobs, as
unemployment levels dropped from 7.3% to 4.1% This is the lowest unemployment
rate since January 1970. Rising Living Standards: American living standards are
rising, as hourly wages for nonsupervisory workers are up by 6.2%. At the same
time, openness to imports has helped to keep inflation low, broaden choice and
improve consumer prices especially for basic household necessities. This is
especially important for the poorest families. Investment and Industrial Growth:
Since the mid-1990s, U,S. non- residential business investment has risen by
10.4% per year. Since 1992, U.S. industrial growth is up 40.5%, including growth
in manufacturing production of nearly $400 billion. By
comparison, Germany's total industrial growth in the same period was only 6.3%
and Japan's 3.6%.
- Shared Benefit: Americans have broadly benefitted
from our expansion, with poverty rates falling to the lowest level measured
since 1979, and unemployment at record lows for African-Americans and Hispanics.
A final, and very important, point to note is that in the past seven
years, the United States' share of world foreign direct investment has sharply
increased, with foreign countries investing well over $500
billion in America between 1994 and 1998. Many had expressed fears that a more
open world would promote investment in countries with lower wages or weaker
labor and environmental standards. In fact, it appears that the United States -
with our high standards - remains a very attractive investment destination.
NEXT STEPS
Our responsibility is to build upon these
achievements as we look ahead to America's place in the world economy of the 21
st century. Expansion of trade will remain crucial to growth and technological
progress for our nation and rising living standards for our people, and a strong
trade policy will in turn be essential to expand trade and advance the
principles of fairness, transparency and opportunity which allow us to succeed.
In this work, critical goals include: Continue our progress toward open and fair
world markets, through leadership in the World Trade Organization on the
accession of new members and the newly begun negotiations on agriculture and
services; and broad, substantial initiatives with all our major trading partners
in each region of the world; Continue an active bilateral agenda, to solve trade
problems and enhance exports; Advance the rule of law and defend U.S. rights by
ensuring full compliance with trade agreements and strongly enforcing our trade
laws; Encourage the full participation of all economies, including economies in
transition and developing nations, in the world trading system on an equitable
basis; Ensure that the trading system helps lay the foundation for the 21
st-century economy by offering maximum incentives for scientific and
technological progress; - Ensure that trade policy complements and supports our
efforts to protect the world environment and promote core labor standards
overseas; and Advance basic American values including transparency and
accessibility to citizens and involvement of civil society in the institutions
of international trade.
With the United States better prepared for
economic leadership than at any other time, and than any other nation, we look
forward to a successful and productive year, bringing further advances in our
nation's economic strength and standard of living in the years ahead. A detailed
look at our record and priorities follows.
I. GROWTH AND RISING LIVING
STANDARDS
Each element in our trade policy contributes to the broader
goal of an open world trading environment governed by the rule of law, which is
crucial to our country's prospects for growth and rising living standards in the
new century. We pursue this goal through multilateral negotiations at the WTO,
and through bilateral, regional and sectoral negotiations.
THE WORLD
TRADE ORGANIZATION
A strong, healthy trading system is crucial to
America's economic and security interests. The efficiency of our industries and
the high living standards of our families reflect both the gains we receive from
open markets abroad and our own open-market policies at home, as well as from
the framework of rules we have designed to ensure that American products receive
fair and predictable treatment around the world.
Work at the trading
system has thus been central to the Administration's trade policies. Here, in
ratifying the Uruguay Round Agreements which created the WTO on January 1, 1995,
Congress took a step of immense significance: helping to expand the rule of law,
through a system applicable to all members; creating a strong dispute settlement
mechanism, strengthening our ability to enforce our trading partners'
commitments; broadening those commitments both to further open industrial
markets and to cover areas covered only partially or not at all, including
agriculture, services, and intellectual property; and lowering barriers to
create new opportunities for our industries and workers.
This was a step
of great significance for all countries which participate in the WTO, but
America, as the world' s largest exporter and importer, has benefitted perhaps
most of all from this work. And since then our work at the WTO has been central
to some of our most important strategic trade policy goals.
Since 1995
Our recent Five-Year Report to Congress contains a detailed and comprehensive
review of the work of the WTO since 1995. More briefly, for the purposes of this
hearing, let me note that the WTO has been crucial to strategic American goals
including:
Building the 21st-Century Economy - The WTO has been at the
leading edge of our strategy to capitalize on American technological leadership
as we build the economy of the 21st century. Through landmark agreements on
Information Technology Products, Basic Telecommunications, and Financial
Services, as well as the electronic commerce "duty-free cyberspace" commitment
WTO members made in 1998, we have opened markets and preserved freedoms in areas
where the United States is the world's most competitive nation, helping to spur
investment, reduce costs to consumers and foster technological advance. These
are discussed in more detail in the "21st Century Economy" section below.
End of the Cold War - Ten years after the fall of the Berlin Wall, the
transition economies those nations in Asia and Central and Eastern Europe making
the transition from communist central planning regimes to market economics -
have made remarkable progress. This owes a great deal to the WTO's role in
promoting economic reform and integration into world markets. As we help these
countries integrate into rules- based world trade, we both support internal
reform and strengthen peace by giving their people better economic prospects,
and their governments greater interests in world prosperity and stability.
Those nations which have completed the transition - for example, Poland,
Hungary and the Czech Republic - have found that the WTO's principles of
transparency, open markets and rule of law are also those which help economic
reform succeed. Since 1995, six more transition economies have had the same
experience: Slovenia, Bulgaria, Mongolia, the Kyrgyz Republic, Latvia, and
Estonia. The work is likely to accelerate this year, as Georgia is soon to enter
and the accessions of Albania and Croatia are near completion. We also have made
significant progress with Armenia, Lithuania and Moldova; and held fruitful
discussions with Russia and Ukraine. And (as is discussed in more detail below)
in 1999 we completed an historic bilateral agreement on WTO accession with
China.
This work extends well beyond the transition economies, of
course. In the Middle East,for example, Jordan has completed its negotiations to
enter the WTO. We have made significant progress with Oman, and held important
discussions with Saudi Arabia. In Asia, we have completed our negotiations with
Taiwan. And we also have made significant progress with Vanuatu in the Pacific.
Promoting Development and Economic Opportunity in the Poorest Countries
- Our work at the WTO is also of crucial importance to the promotion of economic
growth and sustainable development in the world's poorest nations. We have
worked intensively, for example, with African and CBI nations to ensure that
they can participate fully in the trading system, and to offer these nations new
opportunities for market access.
World Economic Stability: The WTO also
has strengthened the world's ability to address economic crises. During the
Asian financial crisis, for example, the respect WTO members showed for open
market commitments helped to prevent a cycle of protection and retaliation
similar to that of the Depression era, ensuring affected countries the access to
markets they needed for recovery, and minimizing damage to American farmers and
manufacturing exporters.
Next Steps
The coming year marks an
important turning point for the multilateral trading system. Three areas in
particular will be central to our agenda.
First of all, we are
developing the negotiating agenda of the future. Per the existing commitment
made in the Uruguay Round, WTO members have agreed on the opening of formal
negotiations on agriculture and services. These are the sectors in which world
markets remain most distorted and closed, and in which the opening of trade will
mean perhaps most to future prospects for rising living standards, technological
progress, and sustainable development across the globe. And we have set
ambitious goals in each.
In agriculture, the WTO Agreement on
Agriculture, with binding commitments on market access, export subsidies and
domestic support, provides the basis on which to pursue further agricultural
reform. We are now working with other countries to ensure negotiations in Geneva
focus on substantive reform proposals such as eliminating export subsidies;
reducing tariffs; expanding market access opportunities for products subject to
tariff rate quotas (TRQs), including better disciplines on the administration of
those TRQs; reducing trade- distorting domestic support levels; and ensuring
that the operation of agricultural state trading entities are more
market-oriented. We also want to ensure access for biotechnology products by
ensuring that regulatory regimes are open, transparent, science-based and
subject to due process.
In services, we are developing negotiating
proposals for a wide range of sectors where our companies have strong commercial
interests, including energy services, environmental services, audiovisual
services, express delivery, financial services, telecommunications, professional
services, private education and training, private healthcare, travel and
tourism, and other sectors of great importance to the American economy and in
particular its high-tech sectors. Broadly speaking, our objectives are to
further remove restrictions on services trade and ensure non-discriminatory
treatment. We also need to ensure that the commitments we obtain accurately
reflect our companies' rapidly changing range of commercial activities, and
reflect the many different means U.S. service providers use to meet the needs of
their foreign customers, in particular as electronic commerce and the Internet
develop and change international commerce.
Beyond these mandated
negotiations, we have pressing needs to address market access concerns in
non-agricultural products, electronic commerce, issues related to trade and the
environment, trade and labor, trade facilitation, transparency in government
procurement, and other topics as well. Thus, while there are a number of
different options for proceeding with trade liberalization beyond agriculture
and services, we are working to build consensus for a new Round.
To
build such a consensus will not be a simple task. However, the outlines can be
drawn, if WTO members prove willing to focus more fully on the shared benefits
of success, and find the balance that allows us to move ahead. As the President
has said, we will keep working toward consensus. We are willing to be flexible
as our discussions continue. But success depends on flexibility on the part of
our trading partners as well.
Second, we are focusing intensely on
implementation of agreements. With the WTO now five years old, the
transformation from the General Agreement on Tariffs and Trade is nearly
complete, as commitments and concessions agreed in the Uruguay Round on such
areas as Intellectual Property Rights Protection, Customs Valuation,
Trade-Related Investment Measures and Industrial Subsidies near full
implementation. As noted in the next section, we are monitoring WTO members'
implementation of these commitments closely, and will not hesitate to use our
dispute settlement rights when necessary to ensure compliance.
Third, we
are working towards institutional reform of the WTO. Our agenda here will center
on the need for greater transparency - both externally, in terms of citizen
access, and internally, in terms of the ability of all WTO members to
participate fully in the work of the system. This is also discussed in more
detail later in this testimony.
REGIONAL AND BILATERAL AGENDA
Together with and complementing our focus on the World Trade
Organization has been a bilateral and regional agenda covering each part of the
world and our major trading partners.
ASIA-PACIFIC
Nearly a
third of all U.S. trade is with the Asia-Pacific region. Here we have some of
our most significant opportunities, and also some of our most complex trade
policy challenges. In response, we have pursued a strategy with the following
major goals: Opening the Chinese market and normalizing trade ties with China;
Market-opening and deregulation in Japan; Intense bilateral negotiations with
our trading partners in South Korea and the Association of Southeast Asian
Nations (ASEAN); Normalizing economic ties with the region's other transitional
economies, including Mongolia, Cambodia, Laos and Vietnam; Reducing trade
barriers and strengthening our trade dialogue with India; and Developing a broad
commitment to open regional markets through the Asia Pacific Economic
Cooperation Forum (APEC).
A review of our progress and future goals in
each area is as follows.
China
This year, our top trade policy
priority is the completion of China's WTO accession, and the approval of
permanent Normal Trade Relation (NTR) status for China.
Since 1992, our
trade policy goals have been to open China's markets to American exports,
support Chinese domestic economic reform, and integrate China into the Pacific
and world economies. We have used a variety of means to achieve these goals,
including commercially meaningful agreements in such fields as agriculture,
textiles and intellectual property that open opportunities and strengthen
guarantees of fair trade for Americans.
This culminated last November in
our historic bilateral agreement on China's accession to the WTO. When
implemented, this agreement will open the Chinese economy to the world more
fully than at any time: reducing and eliminating barriers to the American
exports and strengthening guarantees of fair trade for American businesses and
working people. It is an agreement, as the President has stressed, in the
fundamental American economic and national security interest, and also in the
interest of reform in China.
Our bilateral agreement is comprehensive.
It covers tariff and non- tariff barriers to U.S. exports of industrial goods,
agricultural products and services. Specific rules address import surges, anti-
dumping and subsidies practices and requirements for export performance, local
content, offsets, and technology transfer. Market opening will begin from day
one once China completes its accession. The phase-in of China's commitments will
be limited to five years in almost all cases, and in many cases to one to three
years. These commitments are specific and enforceable through WTO dispute
settlement, U.S. trade laws, and other special mechanisms.
The full
benefits of this agreement, of course, will require extensive monitoring and
enforcement. With permanent NTR in place, WTO accession will substantially
strengthen our enforcement capability with respect to China, for example through
WTO dispute settlement, our ability to work with 134 other WTO members instead
of acting alone, multilateral monitoring, and our own trade laws. We also are
preparing for the largest monitoring and enforcement effort ever given to any
trade agreement, as part of President Clinton's request for new enforcement and
compliance resources at the USTR, the Commerce Department, USDA and other
branches of government with enforcement responsibilities. This effort will cover
China's obligations in the WTO and also import issues such as dumping and
countervailing duties.
By contrast to these historic commitments, WTO
accession for China requires no changes whatsoever in our current market access
policies toward China, and preserves our right to withdraw market access for
China in the event of a national security emergency. Likewise, we amend neither
our laws controlling the export of sensitive technology, nor our trade laws. But
we must grant China permanent NTR or risk losing the full benefits of the
agreement we negotiated, including broad market access, special import
protections, and rights to enforce China's commitments through WTO dispute
settlement.
All WTO members, including ourselves, pledge to give one
another permanent NTR to enjoy the benefits available in one another's markets.
If Congress were to refuse to grant permanent NTR, our Asian, Latin, Canadian
and European competitors will reap these benefits but American farmers,
businesses and workers would be left behind.
Japan
With Japan,
our largest Asian trading partner and the world's second- largest economy, we
have worked throughout the Administration to promote reform, market-opening and
deregulation that will both create opportunities for Americans and help to
restore health to the Japanese economy. Thus, the Clinton Administration's
comprehensive approach to economic relations with Japan, established under the
United States- Japan Framework Agreement at the beginning of the Administration
in 1993, addresses sector-specific barriers and underlying structural obstacles
in the Japanese market, as well as macroeconomic issues.
Since 1993, the
United States has concluded 38 market-opening agreements with Japan in such
sectors as telecommunications, medical technology, autos, agricultural products
and insurance. The Administration has placed top priority on monitoring Japan's
implementation and enforcing U.S. rights under these agreements.
In
1997, the Administration complemented this approach with the launch of the U.S.-
Japan Enhanced Initiative on Deregulation and Competition Policy to address the
regulatory obstacles that impede market access in key sectors of the Japanese
economy. The initiative has made substantial progress in deregulating and
opening to competition the telecommunications, housing, energy, financial
services, pharmaceuticals and medical devices sectors. This year, we are working
toward further progress under this Initiative. We have made progress in a number
of areas, including housing, energy and distribution. However, due to lack of
progress in the field of telecommunications were unable to conclude the package
in March. We will continue to work on these issues in the months ahead, as we
prepare for this year's G-8 meeting in Okinawa.
The Administration's
multifaceted approach to Japan, has resulted in a 20% increase in U.S. exports
to Japan. Between 1993 and 1997, before the onset of Japan's recession, U.S.
exports to Japan increased by more than a third, with exports in those sectors
covered by bilateral agreements growing two and a half times as fast as overall
exports to Japan. Japan was also the largest purchaser of U.S. private services
exports in 1998 (latest data available), accounting for 12.5% of total U.S.
private services exports. These gains are particularly significant given Japan's
continued economic recession.
The United States and Japan reached two
major new trade agreements in 1999. First, in May 1999, the United States and
Japan announced a package of new Japanese deregulation measures that
substantially expands on the progress made in the first year of the Enhanced
Initiative. Second, we concluded a new bilateral telecommunications procurement
agreement in July 1999 that ensures open, non- discriminatory, and transparent
procurement by the four successor Nippon Telegraph and Telephone (NTT)
companies, which together are the largest purchaser of telecommunications
equipment in Japan.
Finally, in order to explore the underlying causes
of the 1998 steel surge, the United States and Japan initiated a bilateral
dialogue on steel. While import levels have fallen recently, the Administration
remains concerned with structural issues in Japan, such as possible obstacles to
competition and restructuring in Japan's steel market, which may have
contributed to the oversupply of steel.
This work will continue in the
year 2000, as we place a high priority on greater access for U.S. goods and
services, promoting deregulation and structural reform, and advocating greater
use of pro-competitive policies throughout the Japanese economy. We will
continue to utilize bilateral consultations, WTO negotiations and dispute
settlement, and the Asia-Pacific Economic Cooperation forum (APEC) to achieve
our market opening objectives.
Other Asia-Pacific Trading Partners and
APEC
Over the past seven years, the Clinton Administration has worked to
build a broadly more open regional Asia-Pacific trading environment, through
regional negotiations beginning with the historic Asia-Pacific Economic
Cooperation forum (APEC) Leaders Meeting in Seattle in 1993; the opening of
markets in Korea, ASEAN, India, Australia and other major trade partners; work
toward full normalization of trade relations with the three nations and 100
million people of Indochina; strengthened rule of law region-wide, with a
special focus on intellectual property; and economic liberalization in the
aftermath of the 1997-99 Asian financial crisis.
Specific
accomplishments here include the landmark Information Technology Agreement begun
in APEC and adopted by the WTO in 1997; 13 bilateral agreements to open markets
to beef, automobiles, pharmaceuticals and other products in South Korea; 20
bilateral agreements with the members of the Association of Southeast Asian
Nations (ASEAN); normalization of economic relations with Mongolia; completion
of Bilateral Commercial Agreements with Cambodia and Laos (with NTR still
pending for Laos and granted for Cambodia) and our negotiation of an agreement
in principle on market access in Vietnam last year.
The APEC Leaders
Meeting also inaugurated a program of regional discussions on trade
liberalization. This has included sectoral initiatives as well as a broader
commitment under the Bogor Declaration of 1994 to "free and open trade in the
region" by 2010 for developed countries and 2020 for developing countries;
programs on trade facilitation, electronic commerce, and other issues; and the
building of consensus on tariff liberalization in 15 other industrial sectors.
These efforts have been complicated by the unprecedented economic crisis
which struck Asia between 1997-1999. The region has begun its recovery, with all
countries in the region beginning to register positive growth in 1999. This
rapid recovery was in no small part due to the structural reforms undertaken in
many of the economies most affected by the crisis, as well as the region's
abiding commitment to retain open market policies as agreed in the WTO and
national policies as well. This enabled trade in the region to expand in 1999,
and avoided a destructive spiral of protectionism such as that which damaged the
world economy in the 1930s.
As the region emerges from this crisis, it
is crucial that economic and structural reform proceeds. Our trade policies will
generally support this goal. We will work to ensure that APEC continues making
specific and concrete strides toward achieving its goal of open markets in the
region, and just as importantly, to continue to play a leading role in the
global trading system, by acting as a catalyst for multilateral trade
liberalization. We also will continue working with our individual trading
partners, and closely monitor the trade and investment reforms set out in the
International Financial Institutions (IFI) stabilization programs in the region.
Effective implementation of these reforms are not only central to continued
recovery in a number of Asia Pacific economies, but have implications for a
number of areas critical to regional trade, such as improved market access,
transparency, economic deregulation, attracting investment efficiently, and
allocating public and private resources based on market disciplines.
WESTERN HEMISPHERE
The 1990s marked a revolutionary shift in the
Western Hemisphere's trade debates. As nations throughout the Americas
strengthened consensus on democratic government and open markets, we
fundamentally strengthened our trade relationships with our closest neighbors,
to a point at which 45% of our trade is now with this region. More broadly, and
perhaps even more significantly, the region's success in democratizing
government and building commitment to market-based economies has helped replace
old and sterile debates with a new consensus for hemispheric unity and shared
prosperity.
North American Free Trade Agreement
At the outset of
the Clinton Administration, we completed negotiation of, and secured
Congressional approval for, the North American Free Trade Agreement (NAFTA).
This created the world's largest and most comprehensive free trade area; it is
also the first agreement to mandate cooperation to protect the environment and
workers' rights, and provide sanctions for ineffective enforcement of labor and
environmental commitments.
Since the NAFTA, trade among the three
signatories has expanded by more than 85%, including goods export growth of
$76 billion to Canada, and $46 billion to
Mexico. Since 1998, Mexico has been our second largest trading partner after
Canada. And as this agreement has gone into effect, we have made additional
gains in our relationships with Canada and Mexico, including agreements on
softwood lumber, magazines and agricultural market access for cattle, wheat and
other products in Canada.
The work continues, as we attach a high
priority to full and effective implementation of the NAFTA. We maintain
oversight and management of the Agreement through a comprehensive trilateral
work program involving more than 25 different committees, working groups and
their subsidiary bodies. The Department of Labor and the Environmental
Protection Agency respectively coordinate the work of implementing NAFTA's side
agreements on labor and the environment. Overall direction to NAFTA
implementation is provided by the annual NAFTA Commission.
And we
continue, of course, to pursue active bilateral agendas with both our NAFTA
partners. This will include implementation of our bilateral agreements on
agriculture, lumber, tourism and sport fishing, and magazines with Canada; in
Mexico, enforcing intellectual property rights and building a cooperative
enforcement program; greater access for U.S. telecommunications service
providers; addressing the dispute over the NAFTA transition to more open trade
in sugar; pursuing greater market access for U.S. high fructose corn syrup
exporters; effectively addressing barriers to U.S. agricultural exports as they
may arise; and ensuring that Mexico's customs valuation procedures are not
unfair impediments to trade or inconsistent with the WTO.
Caribbean
Basin
With respect to our neighbors in the Caribbean and Central
America, we strongly support legislation to enhance the Caribbean Basin
Initiative or CBI, by extending its scope and product coverage.
For
fifteen years, CBI has been fundamental to growth, economic diversification, and
strengthening trade ties with Central America and the Caribbean island nations.
It has made a substantial contribution in particular to the Central American
peace process, with all the benefits that has brought to the region's people and
ourselves as well. CBI has also helped to make the beneficiary nations the
destination for $19 billion in American exports. Its
enhancement is of fundamental importance to help Caribbean countries maintain
their competitiveness and growth, and continue strengthening this relationship.
South America and Other Bilateral
Likewise, we have pursued a
strong market-opening policy throughout the hemisphere, ranging from agreements
to strengthen intellectual property region-wide, open markets to autos in
Brazil, and promote the rapid development of electronic commerce.
We
have made an especial priority in recent years of ensuring implementation of
Uruguay Round commitments throughout the hemisphere, working for example with
Peru and several Central American nations to achieve rapid implementation plans
for their obligations under the WTO Customs Valuation Agreement. We have also
emphasized the importance of strong intellectual property standards to the
development of high-tech industry, with results including, for example,
substantial improvement of IPR law and enforcement in Paraguay and Panama, which
traditionally have been major transit and distribution points for pirated goods
in the hemisphere. This year, priorities include work with Brazil and Argentina
to ensure that Mercosur's auto policy does not conflict with the WTO rules; and
obtaining Senate ratification of Bilateral Investment Treaties with Nicaragua,
Honduras, El Salvador and Bolivia.
Free Trade Area of the Americas
Most broadly, at the Summits of the Americas in Miami and Santiago, we
embarked upon a historic mission, launching negotiations - including every
hemispheric democracy - to create a Free Trade Area of the Americas (FTAA). This
would eliminate tariffs and non-tariff barriers to trade in goods and services
throughout the Hemisphere and establish a single set of rules for fair trade in
the region, and fulfill a two- century old dream of a hemisphere united by
shared commitment to democracy, shared prosperity and mutual benefit.
This commitment has already led to the implementation of specific
business facilitation measures, easing trade with all our major hemispheric
partners. Despite economic stress in the aftermath of the financial crisis, the
negotiations are on schedule, as evident in the unanimous decision of the 34
trade ministers at the Toronto Ministerial meeting of the Free Trade Area of the
Americas in November 1999 to adopt an ambitious negotiating agenda for the next
15 months and the first negotiating sessions on the formal agreement text at the
beginning of this year. The region also joined at Toronto in seeking the global
elimination of agricultural export subsidies in the agricultural trade
negotiations occurring in the WTO.
With the Third Summit of the Americas
scheduled for April 2001 in Quebec, Canada, we expect an intense year of
negotiations. Our agenda concentrates in four areas: negotiating draft texts of
the chapters of the Agreement by April 2001; carrying out a continuing program
of business facilitation; addressing the views and concerns of civil society;
and deepening our region's understanding of the implications and benefits of
electronic commerce for our societies.
Among the most prominent issues
raised by elements of civil society is that of ensuring that our trade
liberalization and environmental protection policies are mutually supportive.
Thus,the Administration has initiated its environmental review of the FTAA. This
will help inform both the public and negotiators of the environmental
considerations we must take into account as we formulate our negotiating
positions. As we implement the principles of the Declaration on Environment and
Trade, we also will work with other stakeholders to address concerns including
issues of worker rights, transparency, and consumer protection.
AFRICA
The past seven years have been one of the most innovative and productive
periods in the history of our trade relationship with Sub- Saharan Africa. While
at present, our trade relationship with the continent is relatively small (with
two-way goods trade totalling $19.6 billion last year, and a
market share of less than 8%), sub- Saharan Africa, with a population of
approximately 640 million people, over 10% of the world's population, represents
a market of great potential for the United States.
As many countries in
Africa institutionalized new democratic governments and economic reforms aimed
at creating more competitive, market-oriented economies, President Clinton
opened a strategic initiative which helps promote these reforms, strengthens our
ties to Africa's leading reformers and promotes regional economic integration.
This will ultimately help create a new and far deeper American economic
partnership with Africa. This has included initiatives at the USTR to create an
Office of African Affairs, and to expand the Generalized System of Preferences
by over 1700 tariff lines for the least developed nations.
In 1999, this
initiative led to our first Trade and Investment Framework Agreements (TIFAs)
with African partners. TIFAs with South Africa and Ghana established permanent
mechanisms for addressing trade and investment issues and for identifying and
eliminating or reducing barriers to trade and investment. We signed a third TIFA
with Nigeria in February of 2000, and hope to build on this success through a
similar agreement with the West African Economic and Monetary Union (WAEMU). The
TIFAs will be used to address market access barriers to U.S. trade and
investment and to identify means to expand and diversify trade between the
United States and sub-Saharan Africa.
Our principal policy goal for the
year 2000 is passage of the African Growth and Opportunity Act (AGOA). The Act
has received bi-partisan Congressional support, and should see final action
soon. Enactment of AGOA would provide increased market access for products from
reforming sub-Saharan African countries, institutionalize an annual U.S.-Sub-
Saharan Africa Trade and Economic Cooperation Forum, and encourage the
establishment of funds and guarantees to support private sector and
infrastructure development in Africa.
We hope to see the Subcommittee's
strong support for this historic step.
Other U.S. Government agencies
are working under the Partnership initiative or other programs to provide debt
forgiveness, technical assistance and expanded opportunities for transportation
and energy services, Internet and electronic commerce capacity, support for
combatting HIV/AIDS and other diseases, and promotion of enhanced business and
economic relations. These programs complement each other by helping to create an
environment for trade and investment-based economic growth. This in mm will
contribute to sustainable development, help promote more stable and democratic
governments and will make countries better able to combat serious cross-border
threats such as infectious diseases, environmental degradation, narcotics
trafficking, and terrorism.
The United States also will continue to
intensify its efforts to assist sub-Saharan African countries to increase
institutional capacity to participate more fully in the multilateral trading
system, as part of a general commitment to ensure that the least developed
countries have both greater access to markets and more ability to take advantage
of the opportunities the WTO offers. We are working directly with a number of
African partners in this, for example in our joint submission with Nigeria,
Lesotho, Senegal, Zambia and Bangladesh of a proposal to revitalize the
capacity-building and technical assistance efforts of the WTO and other
international institutions. This new approach will begin with the Integrated
Framework, which requires cooperation between the IBRD, IMF, UNCTAD, UNDP and
donor countries. We also are sponsoring regional workshops on WTO issues, with
one to be held shortly in Nigeria.
MIDDLE EAST AND NORTH AFRICA
In the Middle East, the advances in the peace process, together with a
broad regional momentum towards reform have enabled us to develop an innovative
set of duty-free programs to help stimulate investment, growth and regional
economic integration. By opening regional markets, and helping to spur greater
trade and investment among the Middle Eastern nations, trade policy will help to
give participants in the peace process greater concrete stakes in its long-term
success.
The foundation of our work is our existing Free Trade Agreement
with Israel, under which bilateral trade has quintupled to over
$17 billion since 1985. We are, of course, working to further
strengthen this relationship as we address bilateral intellectual property,
agricultural market access, and telecommunications issues; and we are seeking
opportunities to extend the area of prosperity and open trade it has created.
In 1996, for example, the Administration strengthened the trade and
peace process by extending duty-free treatment under the U.S.-Israel FTA to
products from the West Bank and Gaza Strip. Under this arrangement, the United
States has received assurances from the Palestinian Authority of reciprocal
duty-free treatment of U.S. products entering those areas.
We also in
1998 initiated a "Qualifying Industrial Zone" program, with the cooperation of
the late King Hussein of Jordan and then-Israeli Trade Minister Natan Sharansky.
Under this program, several specific Israeli-Jordanian industrial projects
employing nearly 10,000 people now receive duty-free treatment in the United
States. In the coming year, we intend to build on this under the umbrella of the
Middle East Peace Process by extending the Qualified Industrial Zone (QIZ)
program in Jordan to the Aqaba-Eilat area, and by working to enlist Egyptian
cooperation in establishing QIZs.
At the same time, we will continue to
deepen our bilateral relationships with countries in the region, such as Egypt,
Jordan, Turkey and Morocco through our established Trade and Investment
Councils. The U.S. Government aims in 2000 to complete a Trade and Investment
Framework Agreement (TIFA) with Tunisia and begin TIFA negotiations with Algeria
in the next year. And we are promoting WTO accession for a number of Middle
Eastern nations, supporting Jordan's successful accession to the WTO in 1999,
significant progress with Oman, as well as negotiations with Saudi Arabia and
soon Lebanon. In each case, the Administration will seek to ensure that the
trade regimes of these economies are consistent with WTO requirements, and that
commitments are implemented upon accession.
EUROPE
Our largest
single economic relationship is that with the European Union. In it, we have
substantial disputes to overcome, but also major opportunities that we and the
EU members recognize. These are particularly significant, in that they raise
issues relating to new technologies and services which we will confront
worldwide in the years to come. At the same time, our trade policies in Central
and Eastern Europe take advantage of the historic opportunity created by the end
of the Cold War, to enlarge and stabilize the Atlantic area of democracy and
peace.
European Union
Our trade relationship with Western Europe
is of fundamental importance to America's economic and national security
interests. It is the second largest regional trade and largest investment
relationship we have anywhere in the world: bilateral goods and services trade
likely reached $500 billion last year; 44% of our foreign
direct investment is in the EU; and likewise 59% of the EU's FDI is in America.
In this relationship we have opportunities to find new areas in which we can
open markets and create export opportunities. At the same time, we have very
substantial disputes with the EU, in which we vigorously assert American rights
and interests.
Our work with the EU since 1993 has addressed both of
these areas. In our disputes, we used all means at our disposal to protect our
rights and interests. We have, for example, used WTO dispute settlement,
including retaliation as authorized by panel decisions, to enforce our rights in
agricultural disputes over bananas and beef hormones. We also have strongly
asserted American interests in cases of discriminatory regulation such as those
relating to hushkits. In these cases and in others, we will remain steadfast in
ensuring that the EU meets its commitments. By the same token, we also have
responded strongly when the EU has challenged U.S. measures or practices, such
as its WTO dispute against the Foreign Sales Corporation (FSC) provisions of
U.S. tax law. This is a matter of high priority for us. We need to find a
constructive solution to the Appellate Body's recent decision against certain
provisions of the FSC. We respect our WTO obligations, and will seek a solution
that ensures that U.S. firms and workers are not at a competitive disadvantage
with their European counterparts.
Notwithstanding our disputes, we have
also found common ground and shared interest on a broad range of interests. We
have negotiated 17 specific trade agreements with the EU, in areas from
government procurement to electronic commerce, regulatory policy and other
issues. These have enabled us to capitalize on areas of common interest, notably
through our conclusion of a Mutual Recognition Agreement (MRA) which improves
market access, reduces costs and shortens the time required to market many U.S.
products in the EU, while maintaining our current high levels of health, safety
and environmental standards. Product sectors covered by the US-EU MRA now
represent over $50 billion in annual two-way trade. The MRA
will eliminate duplicative testing and certification for products in the
following sectors: telecommunications and information technology equipment;
network and electromagnetic compatibility (EMC) for electrical products;
electrical safety for electrical and electronic products; good manufacturing
practices (GMP) for pharmaceutical products; product evaluation for certain
medical devices; and safety of recreational craft. Altogether, this work has
helped spark a $44 billion increase in goods exports to the EU
between 1992 and 1999, and a $32 billion increase in exports of
services between 1992 and 1998.
We took this work further at the U.S.-EU
Summit of May 1998, launching the U.S.-EU Transatlantic Economic Partnership
(TEP), which is designed to reduce barriers to bilateral U.S.-EU trade and to
improve U.S.-EU cooperation on a range of trade issues. The TEP has enabled us
to address seven broad areas, including technical standards; agriculture;
intellectual property; government procurement; services; electronic commerce;
and shared values in fields such as trade-related labor and environmental
issues. In the year 2000, we and the EU intend to bring as many TEP activities
to fruition as possible. We will aim in particular for early results in areas
involving transatlantic regulatory cooperation, including such specific steps as
a mutual recognition agreement on marine safety equipment; a pathbreaking series
of mutual recognition arrangements for insurance, architect services and
engineering services; and full implementation of a pilot project to highlight
areas of congruence and difference in how U.S. and EU authorities regulate
bioengineered products.
Central Europe and the New Independent States
A central focus of Administration trade policy since 1993 has been
support for efforts by new democracies to make a successful transition away from
communist central planning practices. Thus, we have sought to develop strong,
healthy trade and investment relations with the countries of Central Europe and
Eurasia, and encourage them to join the WTO.
In pursuit of these goals,
we have negotiated trade agreements and investment treaties throughout Central
Europe and Eurasia. These agreements - Bilateral Investment Treaties with such
nations as Albania, the Baltic States, Georgia, Romania and others; agreements
on intellectual property with Bulgaria, Hungary, Latvia, Lithuania and others;
Bilateral Commercial Agreements and other measures - have led countries of the
region to take key steps in liberalizing their trade regimes and removing
barriers to investment. In addition, the Administration has encouraged these
countries to join the WTO, thus deepening economic reform and supporting the
development of markets and the rule of law.
Since 1993, eight countries
in the region have become members of the WTO and another 14 states - including
Russia and Ukraine - applied for WTO membership. Cases such as
that of Bulgaria show how important this has been for lasting reform. More
recently, Estonia, the Kyrgyz Republic and Latvia have entered the WTO. Albania,
Croatia and Georgia are expected to join in 2000. We strongly support this, and
have worked with the governments of these new democracies to help them enter
rapidly and on commercially meaningful terms.
We also have supported the
efforts many of these nations have made to join the European Union. However, we
also have insisted that EU accession take into account our concrete trade
interests. As a priority in 2000, we are thus pursuing consultations with the
ten Central European countries in accession negotiations with the EU, seeking to
address the problem of tariff differentials faced by U.S. exporters vis-a-vis EU
exporters to those countries.
The Administration also will work with
Congress to achieve passage of the "Southeast Europe Trade Preference Act"
(SETPA). This bill, creating trade and export opportunities for countries in the
Balkans committed to peace and reform, is an integral part of the commitments
made by the United States at the Sarajevo Summit in July 1999 to help bring
stability and economic development to Southeast Europe.
II. BUILDING THE
21st CENTURY ECONOMY
Given America's leading position in the high-tech
industries, and the importance of a strong high-tech sector to our national
competitiveness, the Clinton Administration has made a special focus of
protecting the results of our research and development, and opening markets for
the high-tech sector through a program of strengthening respect for intellectual
property, opening markets across the spectrum of high-tech industries, helping
countries develop pro-competitive regulations in fields like telecommunications,
and facilitating technological advance in new fields through initiatives on
emerging fields such as electronic commerce and biotechnology.
Major
specific achievements include:
Intellectual Property Rights - Respect
for intellectual property rights is central to technological innovation.
Creative and innovative products that rely on intellectual property protection,
such as computer programs and motion pictures, are typically very costly to
develop but relatively cheap to copy. Our use of the "Special 301" law and the
Uruguay Round's TRIPS agreement has helped fundamentally to improve intellectual
property standards worldwide. Today, the vast majority of our trading partners
have passed modem intellectual property laws and are improving their enforcement
of these laws.
We are now monitoring WTO members' implementation of
their TRIPS Agreement obligations and will enforce these commitments in the most
effective way. We also are implementing campaigns against worldwide piracy of
new optical media technologies, and against end-user piracy of software. These
issues are integral parts of our regional negotiating agenda in Asia, Latin
America, Europe, Africa and the Middle East, together with development of
compliance plans, technical assistance and other measures.
At the same
time, we are ensuring that trade policy remains sufficiently flexible to respond
to public health crises such as HIV/AIDS. In 1999, we developed an arrangement
to ensure more direct interaction between USTR and HHS on health-related
intellectual property issues. When a foreign government expresses concern that
U.S. trade law related to intellectual property significantly impedes its
ability to address a health crisis, USTR will seek substantive information from
HHS on the health conditions prevailing in that country. This enables the
Administration to respond fully and appropriately to public health crises,
within the context of the TRIPS Agreement.
Sectoral Market-Opening - We
also have an active sectoral high-tech agenda. This opened with a series of
bilateral high-tech agreements with Japan, covering semiconductors, cellular
phones, medical technology and other products, and moving on to such areas as
basic telecommunications, wireless cable, direct-to-home satellite services and
cable TV, medical equipment and pharmaceuticals, financial services, energy and
other fields. This led to major achievements and goals including:
Semiconductors: Beginning with implementation of the 1991 U.S.-Japan
Semiconductor Agreement and its successor agreements in 1996 and 1999, we have
helped to raise the foreign share of the Japanese market, which had averaged
16.7% in 1992, to over 30% since the first quarter of 1997. Moreover, the
European Union and Korea's elimination of semiconductor tariffs to become
participants in the 1996 agreement fulfilled longstanding U.S. goals, paving the
way for the Information Technology Agreement which substantially eliminated
semiconductor and most other information industry tariffs worldwide. Information
Technology Agreement: Using the Semiconductor Agreement as a base, we reached a
landmark multilateral agreement in the Information Technology Agreement (ITA) of
1997. By 2000 for the majority of countries, the ITA will eliminate all tariffs
on $600 billion worth of goods: 95% of the world production of
semiconductors, computers, telecom equipment, integrated circuits and other
goods associated with the Information Superhighway. This is a step important for
its vast size - these products make up about one in every thirty dollars of
world GDP - and its potential to promote economic growth and freedom of
information. We are now seeking consensus on an expansion of this agreement -
the "ITA II" - to include even more products, and to address problems related to
trade in the sector, including standards and non-tariff measures. Agreement on
Basic Telecommunications Services. This Agreement, which came into force in
February, 1998, opened up 95% of the world telecommunications market to
competition, promoting pro-competitive regulatory principles in all participants
and covering the vast majority of nearly $1 trillion in
telecommunications trade. In just two years, the ability of dominant carriers in
foreign countries to keep rates artificially high and depress demand for
telecommunications services and electronic commerce has been significantly
eroded, helping to bring down rates dramatically, to levels as low as 10 to 20
cents per minute, for calls between the United States and countries such as
Japan and Mexico. And as a result of the broader market access and increased
investor stability provided by WTO commitments, new investment in undersea fiber
optic cables may result in a fifty-fold increase in capacity by the end of 2001,
compared to mid-1999. The rapid expansion of the Internet into more and more
parts of the world, at higher capacities and faster speeds, is due in
significant measure to the market-opening path on which this agreement has
placed the world's trading nations. Agreement on Financial Services: This
Agreement was concluded in December 1997 and came into effect in March, 1999.
Covering nearly $60 trillion in banking, insurance and
securities transactions each year, it has already helped U.S. service suppliers
expand commercial operations and find new market opportunities across a wide
spectrum of developed country and emerging markets, through both investment in
foreign banking institutions, brokerage and insurance sectors and cross-border
trade. Growth potential for competitive U.S. financial services suppliers is
high, including helping emerging markets modernize their financial services
systems and improving their infrastructure for trade in goods and services.
Global Electronic Commerce - In accordance with the President's Global
Electronic Commerce initiative, the Administration seeks to preserve electronic
transmissions over the Internet as duty-free.
At the Second WTO
Ministerial Conference, in May of 1998, we won agreement on this
duty-free-cyberspace initiative, and we will push for its further extension,
with a goal of making it permanent at the earliest possible time.
We
also have begun a longer-term work program, whose goals include ensuring that
our trading partners avoid measures that unduly restrict development of
electronic commerce; ensuring that WTO rules do not discriminate against new
technologies and methods of trade; according proper application of WTO rules to
trade in digital products; and ensuring full protection of intellectual property
rights on the Net. In addition, the United States has initiated a
capacity-building program, the Internet for Economic Development Initiative, to
help developing countries improve their ability to use the Internet.
Likewise, in our negotiations toward the Free Trade Area of the
Americas, at APEC and in the Transatlantic Economic Partnership, we have created
special committees to advise us on ways to ensure all participants can take
maximum advantage of electronic commerce.
Biotechnology - American
agriculture and medicine are among the chief sources of innovation in this
emerging field. These technologies have remarkable potential, for example, to
reduce the use of pesticides and ease pressure on land, water and other natural
resources. USTR thus seeks to ensure that farmers and ranchers can use safe,
scientifically proven techniques to make agriculture both more productive and
friendly to the environment, without fear of encountering trade discrimination.
However, such advances also raise consumer concerns which must be met through
fair, transparent, timely and science-based regulatory policies that ensure the
strongest protection for public health and the environment in the United States
and worldwide. This is a priority for us in the Transatlantic Economic
Partnership negotiations and in developing our agenda for future WTO
negotiations.
III. ENFORCING THE RULE OF LAW
All of our
negotiations and agreements since 1993, and each of the initiatives now
underway, are predicated on full implementation of commitments. This ensures
confidence in trade policy, and allows both the United States and our trading
partners to gain the full benefit of our agreements. The Administration has
respected our own commitments in this regard, and we expect the same of our
trading partners.
As our network of agreements has grown, and
commitments broadened at the WTO, we have therefore devoted more attention and
resources than ever before to monitoring and enforcement. We use these to reach
our goals through a variety of means, including: We assert U.S. rights through
the World Trade Organization, including the stronger dispute settlement
mechanism created in the Uruguay Round, and the WTO Committees and Bodies
charged with monitoring implementation and surveillance of agreements and
disciplines. We vigorously monitor and enforce our bilateral agreements. We
invoke U.S. trade laws, including Section 301, Section 1377, and Title VII of
the 1988 Trade Act, in conjunction with bilateral and WTO mechanisms to promote
compliance.
- We provide technical assistance to trading partners,
especially in developing countries, to implement key agreements like the
Agreement on Basic Telecommunications and TRIPS. Through NAFTA's trilateral work
program and use of NAFTA's dispute settlement mechanism, we seek to promote
America's interests under that Agreement, as well as using its labor and
environmental side agreements to promote fairness for workers and effective
environmental protection. Through the Special 301 law, we identify priorities
for intellectual property enforcement each year; The Generalized System of
Preferences also contains conditions for beneficiary countries, including
respect for intellectual property rights and core labor standards, which we have
used with respect to a number of developing countries.
In the course of
these monitoring efforts, the United States focuses in particular on foreign
practices that could pose serious problems to U.S. interests and the
international trading system if they were to proliferate in many markets.
Therefore, the Administration has adopted a strategic enforcement plan - aimed
not only at challenging existing barriers but also at preventing the future
adoption of similar barriers around the world. This has enabled us to succeed in
more than 100 enforcement actions over the past seven years, using the
combination of formal dispute settlement and U.S. trade laws to enforce the
agreements we have negotiated.
Domestic Law - With respect to our
domestic laws, we have aggressively used Section 301 of the Trade Act of 1974,
"Special 301" for intellectual property rights enforcement, "Super 301" for
dealing with barriers that affect U.S. exports with the greatest potential for
growth, Section 1377 of the Omnibus Trade and Competitiveness Act of 1988 for
telecommunications issues, and Title VII of the 1988 Act for enforcement of
procurement agreements.
WTO Dispute Settlement - At the WTO, the United
States has been the world's most frequent user of dispute settlement procedures.
In the last 5 years, we have filed 49 complaints at the WTO, thus far settling
favorably 10 cases and winning 13 others through WTO panels and the Appellate
Body. We have won favorable settlements and panel victories in virtually all
sectors, including manufacturing, intellectual property, agriculture and
services.
The accomplishments of the WTO dispute settlement mechanism in
the last five years particularly stand out when compared to the record of the
prior mechanism under the GATT. Under the GATT, panel proceedings took years,
the defending party could simply block any unfavorable judgment, and the GATT
panel process did not cover some of the agreements. Under the WTO, there are
strict timetables for panel proceedings, the defending party cannot block
results unfavorable to it, and there is one comprehensive dispute settlement
process covering all of the Uruguay Round agreements.
The first five
years have demonstrated that a WTO Member cannot violate its obligations without
consequences. Moreover, if a WTO Member violates its intellectual property or
trade in services obligations, another Member can be authorized to retaliate
against the goods of the violating Member. The Administration has demonstrated
its commitment to enforce this in practice by imposing retaliatory trade
measures against the European Union for its failure to comply with WTO rulings
on bananas and on beef from cattle treated with hormones.
To carry out
this work as effectively as possible, in particular with the prospect of
enforcing our bilateral agreement with China on WTO accession, we have added new
personnel to carry out a larger enforcement workload, without compromising our
efforts to negotiate further market access in key markets. Specifically, we have
created an Enforcement unit headed by an Assistant U.S. Trade Representative,
and in FY 1998 Congress provided us with funds to hire seven new attorneys to
handle the added volume of work at the WTO and elsewhere. We also work closely
with the Departments of Commerce, Agriculture, State, Treasury, the Customs
Service and other agencies involved in enforcement of trade laws and agreements.
President Clinton's FY 2001 budget request will give the USTR, together with
these other agencies, critical additional resources for enforcement.
IV.
QUALITY OF LIFE
The Clinton Administration has sought to ensure that the
trading system fully addresses the concerns of citizens, by helping to raise the
quality of life as it also raises living standards. This includes high standards
of environmental protection, the observance of core labor standards, and high
levels of consumer protection. Our record at home over the past thirty years has
shown clearly that as we open trade and promote economic growth, we also can
ensure strong and rising standards of protection for our air and water,
strengthen observance of core labor standards, and protect consumers. That is a
principle we advance in the world economy as well.
Trade and Environment
Our commitment was made clear at the outset of the Administration, with
the creation and effective implementation of the North American Agreement on
Environmental Cooperation in conjunction with the NAFTA.
Cooperative
activities under this agreement have improved environmental protection in a
number of different areas - for example, in conservation of North American
birds; creation of a North American Pollutant Release Inventory; development of
regional action plans for the phase-out or sound management of toxic substances,
including DDT, chlordane, PCBs and mercury; and creation of a trilateral working
group that has improved the enforcement of environmental protection laws. We
also benefitted from the US-Mexico agreement which established the Border
Environment Cooperative Commission (BECC), and from the North American
Development Bank (NADBank) created in conjunction with NAFTA. While much work
remains ahead, the BECC has fifteen environmental infrastructure projects under
construction today, funded in part by the North American Development Bank,
including the first wastewater treatment plants in Juarez.
We also have
led at the WTO. Our work in the Uruguay Round ensured that the WTO cites
sustainable development as a fundamental goal of the system, explicitly
recognizes the right of all its members to set levels of environmental
protection and consumer safety, including at even higher levels than common
international standards, and created the WTO's Committee on Trade and the
Environment. This focus on environmental issues has continued ever since, with
discussions in the Committee on Trade and the Environment; last year's convening
of a first-ever WTO High Level Symposium on Trade and Environment in Geneva; and
the encouragement of closer collaboration between the WTO and the UN
Environmental Program, which reached a cooperation framework agreement in
December of 1999.
In the future, as President Clinton emphasized in
November 1999, in issuing the White House Policy Declaration on Environment and
Trade, our efforts to expand trade are consistent with our strong commitment to
promoting environmental protection world wide. Our participation in the work of
the WTO, as well as in other fora, will be guided by the principles in the
declaration. We also will implement the November 1999 Executive Order on
Environmental Reviews of Trade Agreements. In this connection, the Office of the
U.S. Trade Representative and the Council on Environmental Quality, in
consultation with other agencies, are developing guidelines for the
implementation of the order.
In this work, cooperation with our trading
partners on trade and environment issues is essential, given the importance of
these issues in attaining a more sustainable and prosperous global economy. We
will continue this through our active participation in the Free Trade Area of
the Americas negotiation, APEC, the Transatlantic Economic Partnership, the
relevant committees of the WTO (such as the Committee on Trade and Environment),
and other multilateral and regional fora. In these efforts we will continue to
emphasize the importance of ensuring that trade rules are supportive of high
environmental standards, and we will pursue opportunities where trade
liberalization can yield direct environmental benefits as well as trade
benefits. For example, we will continue to work to address the problem of
fishery subsidies that contribute to over-fishing, as well as agricultural
export subsidies and barriers to trade in environmental goods and services.
Trade and Labor
Our trade policy also has complemented and
supported efforts to ensure respect for internationally recognized core labor
standards.
In the year ahead, the Administration will continue the
effort to focus the WTO's attention on the relationship between trade and labor.
At the Singapore WTO Ministerial Conference in 1996, the WTO for the first time
recognized the importance of labor standards and cooperative work with the
International Labor Organization, while clearly separating protectionist trade
policies that would, among other things, harm development prospects in poorer
countries. We wish to build on this to ensure that the trading system works more
effectively with the International Labor Organization, with businesses and with
citizen activists to help ensure observance of internationally agreed core labor
standards - banning forced labor and exploitive child labor, guaranteeing the
freedom to associate and bargain collectively and eliminating discrimination in
the workplace.
Thus, and in conformity with our statutory mandate under
the Uruguay Round Agreements Act, we have proposed closer collaboration between
the WTO and the International Labor Organization and the establishment of a
Working Group on Trade and Labor at the WTO. We also have raised labor standards
in country policy reviews under the Trade Policy Review Mechanism, which examine
each WTO member's trade regime and offers other members an opportunity to raise
questions.
We also are enforcing provisions of existing U.S. law that
provide for withdrawal of U.S. trade preferences in the case of clear violations
of worker rights, notably through enforcement of the provisions in the recently
reauthorized Generalized System of Preferences, which make benefits conditional
on respect for core labor standards. One example is the case of Pakistan, where
we partially removed GSP trade preferences from Pakistan over child labor
concerns. In addition, we also worked through the Labor Department and the ILO
to assist countries in developing long-term solutions to the problem, by
addressing specific Pakistani industries. As a result, in the soccer ball
industry more than 6,000 former child workers have been provided with
educational opportunities. A similar project has been initiated in the carpet
industry, targeting approximately 10,000 children who are working or at risk of
working. We also have used GSP to achieve substantial progress on labor issues
in Swaziland, Honduras and several other countries.
Several specific
agreements also have offered us new ways to address labor issues. For example,
the North American Agreement on Labor Cooperation under NAFTA has generated our
largest cooperative effort on labor anywhere in the world. It covers
occupational safety and health, employment and training, industrial relations,
worker rights and child labor and gender issues, and allows citizens to draw
attention to labor practices and improve working conditions. This has
contributed to important tangible benefits. For example, a labor tribunal
reversed itself and granted a union registration in the Maxi- Switch case; a
secret ballot union representation vote was conducted for the first time in
Mexico in the GE case, and by government employees in the Fisheries Ministry.
Mexico's Federal Government intervened in a positive effort to resolve the very
contentious Han Young case; and the Mexican Supreme Court struck down state and
federal restrictions on union organizing as unconstitutional. Mexico also has
taken other steps to advance the rights of workers, including promulgating new
safety and health regulations and increasing significantly funding for
enforcement of worker rights, including in child labor.
A similar recent
case is our textile agreement with Cambodia, which includes provisions
encouraging improved enforcement of its labor laws in the apparel sector, in
exchange for certain increases in textile market access.
Trade and
Consumer Concerns
Likewise, trade policy contributes substantially to
consumer policy goals. Our openmarket policy at home brings fundamental consumer
benefits, including the creation of competition which dampens inflation and
leads to better prices, quality and choice. This openness to imports is
important for all American families, but most of all the poorest among us.To
build upon these fundamental principles of trade policy, and to ensure that they
fully harmonize with high standards of consumer protection, we have engaged
consumer groups and representatives in broad policy discussions. A principal
venue for this is USTR's participation in the Transatlantic Consumer Dialogue
(TACD). Created a year ago to give advice to the United States and the EU on the
Transatlantic Economic Partnership, the dialogue comprises approximately 65
consumer groups from 16 countries. On both sides of the Atlantic, the groups
have long track records of achievement in the consumer protection and safety
fields.
In its short history, the group has met three times, focusing on
three issue areas: food safety, electronic commerce and trade. Both the EU and
the United States have benefitted from the dialogue on these complex issues and
from the policy resolutions put forward as consensus positions of the consumer
groups. In addition to this interaction, the U.S. Government drew important
lessons from its meetings with the U.S. TACD Steering Group. At four such
meetings last year, the group discussed policy positions, attendance at the
U.S.- EU Summit, and the government's responses to policy recommendations.
At the last TACD meeting, held in Washington in February 2000, consumer
organizations noted government progress in areas such as access to essential
medicines in developing countries, eco-labeling, fair-trade labeling and
regulatory cooperation. A continued priority will be ensuring that trade rules
address consumer concerns including maintaining the highest standards of public
health and safety.
V.
V.
TRANSPARENT AND ACCESSIBLE
INSTITUTIONS
Finally, U.S. trade policy has sought to advance basic
American concepts of good governance, by making the institutions of trade more
transparent, accessible and responsive to citizens, including, as the President
has said, new voices becoming more interested in trade policy as trade grows and
contributes more to our economy.
One principal forum here is the WTO,
where we are seeking agreements on more rapid release of documents, ensuring
that citizens and citizen organizations can file amicus briefs in dispute
settlement proceedings, and that dispute settlement proceedings be open to
public observers. In the interim, President Clinton has made a standing offer to
open any dispute panel involving the United States to the public, if our dispute
partner agrees.
Absent such changes, public confidence in the system
will erode. Last year, and most recently at our US-EU Summit in December, we
proposed that we and the EU, as the largest users of WTO dispute settlement,
immediately agree in our transatlantic disputes to open the panel hearings to
public observers. We hope that the EU will accept this proposal promptly.
Likewise, we are working to improve the WTO's internal processes to
ensure that all members, including the smallest and least developed, can fully
participate. Since 1986, when the Uruguay Round opened, the WTO has grown by
over 50%, from 90 to 135 members, with more to follow this year. It is also more
diverse, including the world's most advanced and poorest countries, and each
point of the spectrum in between. Each member brings different priorities and
interests, adding to the complexity of negotiations. Over time we should develop
a more effective means of ensuring both participation and efficient
consensus-building. Director General Moore has begun consultations with WTO
members toward this end. However, as we address the issue, we must be careful
not to alter the principle of consensus for decision- making in the WTO. And we
also must ensure that such procedural discussions do not distract us from taking
immediate action on core policy issues.
A second forum is the FTAA
negotiations, in which two years ago we created a Civil Society Committee to
give business associations, labor unions, environmental groups, student
associations, consumer representatives and others a formal means of conveying
concerns and ideas to all of the governments involved in the talks. This
Committee has received 69 submissions from all over the hemisphere, including
from labor organizations, environmental groups, Chambers of Commerce,
professional associations, academics and individual citizens. These submissions
were reviewed by the FTAA Ministers in Toronto, contributing to our overall
development of policy for the FTAA. The Committee will remain a feature of the
FTAA talks as they proceed in the coming year.
And we have worked
throughout the Administration to increase the participation of small businesses
in trade policy. Especially as electronic commerce grows, trade offers these
firms substantial new opportunities. Thus, we are seeking opportunities to
ensure that the issues of greatest importance to these businesses are integrated
into trade policy formulation and multilateral and regional trade negotiations.
One example is the development of the APEC Working Group on Small and
Medium-sized Enterprises. We also proposed last year that the WTO recognize the
unique needs and contributions of SMEs to the international trading system. In
2000, the Administration plans to work with Industry Sector Advisory Committee
for SMEs to find new ways to help inform smaller and minority firms about on the
WTO and to create an opportunity for their more active engagement in
multilateral trade negotiations.
FY 2001 BUDGET REQUEST
This is
the background against which the President has requested an increase of
$4.1 million and 25 full-time employees. While this may be a
larger budget increase than in year's past, it represents a close examination of
the resources we now have, our ability to meet the growing workloads we face in
the year ahead, and the appropriate response to what the Congress and the
American public expects from us in the future.
To illustrate our
situation, let me describe the level of staff resources we have deployed this
year. For FY 2000, USTR's staffing authorization is 178 FTEs. We are organized
into 25 offices, with a mean average of 7 FTEs per office. Yet several USTR
offices have only 2 to 4 permanent professionals, including offices for China
(4), Japan (4), Agriculture (3), Environment (3), Africa (2) and Economic
Affairs (2). Each of these offices needs more staff, given the burgeoning
workload both from negotiations and enforcement of existing agreements. But
given the equally great demands on all our offices, we cannot afford to shift
staff from ongoing work from the office itself or from other organizational
units in the agency.
During the last year, we have also re-examined the
resources we get from other Federal agencies in the form of personnel details
for periods of 1 to 2 years. We have worked hard to maintain the level of
support we have traditionally received from other agencies, and despite staff
reductions in many agencies, have been able to sustain the number of personnel
details at about 35. The detailees we receive from other agencies generally
serve at USTR for only one year, which - especially for enforcement - limits the
long-term contribution they can make. Thus we conclude that many of the new
positions we need in FY 2001 should be permanent to give USTR the expertise and
institutional memory needed to become most effective.
Let me now review
the specific areas for which the President has requested additional resources.
These fall into three areas: first, professional negotiators; second, compliance
and enforcement; third, security and other administrative issues.
Professional Negotiating Positions
WTO: First, we are requesting
three new negotiating positions for our work at the World Trade Organization.
Two of these would be in Washington, and one in our Geneva office. These would
enable us to meet the needs of a growing workload at the WTO, including
negotiations which the WTO has formally agreed to open on agriculture and
services, and our work to broaden these talks into a formal new Round of
multilateral negotiations; our negotiations with 30 countries seeking accession
to the World Trade Organization (WTO); and the implementation of Uruguay Round
commitments in such areas as intellectual property rights protections, customs
evaluation, trade- related investment measures and industrial subsidies. USTR
faces challenges in FY 2001 in ensuring that all WTO members observe the rules
of the multilateral trading system.
Agriculture: Agricultural trade
reform will be one of the central tasks of the coming years. With the opening of
the "built-in agenda" talks at the WTO, and our opportunities to open markets in
bilateral and regional talks while setting precedents and building consensus for
the WTO initiative, it is essential that we have the expertise and staff level
to take advantage of this opportunity. We are therefore requesting two new
full-time agricultural negotiators in our Office of Agriculture.
China:
Our top trade policy priority this year is the completion of China's WTO
accession, and the approval by the Congress of permanent Normal Trade Relations
status for China. In the future, its enforcement, together with implementation
of the bilateral agricultural agreement we concluded in April of 1999, will
consume an enormous amount of USTR staff resources. We now have only four
professional employees in our China office, and will need another trade
professional to address these important workloads.
Japan: Japan remains
our largest trading partner in Asia. In the last seven years, we have concluded
38 bilateral agreements with Japan, including three agreements in 1999 involving
deregulation, telecommunications procurement and measures to reform Japan's
structural and regulatory policies. In FY 2001, we will need another Trade
Specialist in our Japan office to assist in monitoring and implementing these
agreements, particularly the May 1999 package of new deregulation measures that
expanded market-opening opportunities under the 1997 bilateral Deregulation
initiative.
Western Hemisphere: This year, we have begun the formal
negotiations on the text of a Free Trade Area of the Americas agreement, (FTAA)
through which 34 nations in the Western Hemisphere agreed to create a free trade
zone for the 800 million people in the Hemisphere with negotiations scheduled to
conclude by the year 2005. This is an effort of immense historic consequence, as
it will help us to cement a regional consensus on open markets and democratic
partnership, open markets that already take 45% of all U.S. exports, and also
set precedents for our work on agriculture, services and other issues at the
WTO. Twenty of these nations are Central American and Caribbean countries;
together these nations make up our seventh largest export market, and their
economic development is crucial not only to our direct economic interest, but to
our mutual efforts to address regional issues of drug trafficking, migration and
the rule of law. Thus, to address these needs, our FY 2001 budget, we have
requested one additional FTE in the Western Hemisphere office.
Africa:
Our FY 2001 request also seeks funding for a new Trade Specialist to implement
the trade provisions of the President's Partnership for Economic Growth &
Opportunity in Africa Initiative, which includes negotiations of trade with
sub-Saharan Africa. This is an especially challenging area, given the early
stage of development of our trade relationship with African nations, the large
number of African countries, and the growing role Africa plays in the WTO.
Congress is now considering one of our principal policy goals this year is
passage of the Trade and Development Act of 1999, which would provide market
access for products from subSaharan African countries, and would encourage the
establishment of funds and guarantees to support private sector and
infrastructure development in Africa. The new Trade Specialist would increase
the number of trade professionals in our Africa office to three, and give us a
base level of support to meet a growing volume of work under the Partnership
Initiative and the new Act.
Environment: Environmental considerations
play a major and growing role in development of trade policy. We are committed
to taking environmental considerations into account throughout the course of
trade negotiations and the implementation of trade agreements. In this
connection, under the President's 1999 Executive Order on Environmental Review
of Trade Agreements, USTR has the responsibility to conduct environmental
reviews of trade agreements that may have significant environmental impacts,
including multilateral rounds and free trade agreements. We simply cannot
respond adequately to this new work with the existing permanent trade
professionals in the Environment office. We thus are recommending one new
permanent staff member in our Environment office to assist in implementing the
Executive Order and in addressing environment-related issues in ongoing
negotiations stemming from the WTO built-in agenda, FTAA negotiations, TEP
negotiations and bilateral or other regional negotiations.
Labor: We are
also requesting a permanent Labor Specialist to handle the growing volume of
issues that arise from the need to protect and enhance worker rights through the
trading system. For example, we are required to provide for withdrawal of U.S.
trade preferences under the recently reauthorized Generalized System of
Preferences (GSP), which makes benefits conditional on respect for core labor
standards. The Caribbean Basin Initiative also includes labor conditionalities.
Similarly, the North American Agreement on Labor Cooperation under NAFTA covers
occupational safety and health, employment and training, industrial relations,
worker rights and child labor and gender issues, allowing citizens to draw
attention to labor practices and improve working conditions. Currently, however,
we have no full time dedicated staff member responsible for labor and human
rights. Our FY 2001 budget request seeks to establish a new position to provide
core coverage for this growing area.
Finally, the request for
negotiating professionals will also help us involve stakeholders more closely in
forming trade policy and resolving trade issues. Analysis of the allocation of
USTR resources under our FY 1999 Government Performance and Results Act plan
shows that USTR spends far too little time on outreach and consultations with
the private sector, advisory committees, State and local governments, and
nongovernment organizations. One especially important case is that of consumer
groups. While we participate in consumer- oriented organizations like the
Transatlantic Consumer Dialogue, we can do substantially more. Thus, our FY 2001
budget request would raise the level resources expended on consumer and
stakeholder consultations, by dedicating part of the time of all of the
requested trade professionals to consultation and outreach efforts.
Trade Compliance
The largest single portion of the President's
request for additional resources at USTR centers on monitoring, compliance and
enforcement of agreements.
Our existing Monitoring and Enforcement unit
has only 7 attorneys and 3 support staff, and the number of professionals in
other USTR organizational units who contribute to compliance work is fewer than
the number in the Monitoring and Enforcement unit. A notable example is the
Office of Economic Affairs, which in addition to its other duties must carry out
in-depth research to quantify and prove economic damage in many of our dispute
settlement cases, and has only two professional staff.
At the same time,
our volume of potential disputes is growing rapidly, as we insist on
implementation of the nearly 300 trade agreements concluded in the last seven
years; and the cases we take up are often extremely complex, addressing such
topics as protection of intellectual property rights and nontariff barriers like
product standards. Last month's report by the General Accounting Office,
entitled "Strategy Needed to Better Monitor and Enforce Trade Agreements," notes
that the vast array of trade agreements in the 1990's has "caused dramatic
increases to the trade agreement monitoring and enforcement workloads." GAO also
recognizes that USTR's ability to monitor and enforce trade agreements is
limited because it sometimes lacks sufficient numbers of experienced staff with
the proper expertise.
We agree with these observations, and are deeply
concerned that without substantially greater resources, we will have to restrict
the number of cases that we handle, and deny requests from the private sector to
initiate disputes based on clear failures by our trading partners to live up to
their commitments.
Therefore, within USTR's total $29.6
million and 203 FTE budget request for FY 2001, we are seeking
$1.3 million and 13 FTEs as part of the President's Trade
Compliance initiative. These would include three new positions in Office of
General Counsel; two in our office of Economic Affairs; one at the USTR office
in Geneva; and seven in our geographic and sectoral offices, including one for
agriculture, two for China, one for our WTO office, one for AsiaPacific, one for
industry, and one for services and intellectual property.
This broad
distribution will ensure that compliance resources are integrated at each phase
of the monitoring and enforcement process, with strengthened monitoring of
country compliance through new geographic and sectoral trade specialists,
improved research capabilities in our economic office to quantify the effects of
noncompliance, and a sufficient number of trade enforcement litigators to
present and defend cases before WTO or NAFTA dispute bodies.
Security
and Other Budget Issues
Security: Finally, we are requesting one FTE to
create a Security Officer at USTR to plan and manage USTR's internal security
programs, including computer, facility, personnel and document security
activities.
Other Budget Needs in FY 2001: In addition to the request
for 25 new positions, our FY 2001 budget proposes a number of forward-looking
initiatives that would provide immediate benefits in FY 2001 and lasting
improvements and management savings for years to come.
For example, our
budget seeks $60,000 to upgrade the firewall that protects
USTR's computer system, and $25,000 to improve password
security when USTR employees dial into our computer network from remote
locations. We are also requesting $85,000 to automate the way
that USTR staff send classified cables to the State Department, a use of
technology which we believe will save valuable time of trade professionals,
speed the delivery of crucial information to the State Department, and reduce
overtime costs for support staff. Our budget also proposes
$50,000 for greater use of video-conferencing sessions, as a
substitute for employee travel, which we believe will reduce the number of trips
and the cost of travel. For FY 2001, we are requesting $340,000
to begin a phased replacement of hardware used in our computer system so that
USTR can better plan for future upgrades, without having return to the Congress
with million dollar requests in a single budget year. We believe these are
modest investments that will improve efficiency, strengthen security and yield
long term budget savings.
Our budget request also seeks funding to meet
the cost of legislated employee pay raises and general inflation in FY 2001,
without which funding we would have to leave several positions vacant for most
of the fiscal year. The justifications for these initiatives and for the
inflation adjustments are contained in the budget documents that have been
forwarded separately to the Committee.
CONCLUSION
In conclusion,
Mr. Chairman, the amount of new work that USTR faces in FY 2001 is staggering.
The President's budget request, therefore, is essential if we are to meet the
American public's expectation of a trade negotiating agenda which does all it
can to promote growth and rising living standards; to respond to the end of the
Cold War; to build the economy of the new century; and to help us ensure that
trade policy does all it can to complement and support environmental protection
and respect for core labor standards.
This is an agenda which will fit
the legacy postwar American trade policy has given us. Over the years, our
country has led the world in promoting the rule of law. We have created new
opportunities here at home and worldwide, contributing to a record of growth and
employment with few parallels in history. And we have helped to build a more
prosperous and stable world. In the new century, we must do no less.
END
LOAD-DATE: April 6, 2000 
