Washington File: USTR Lists Barriers to U.S. Trade, Focusing on Agriculture
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<a href=usinfo.state.gov>Washington File01 April 2003
(Annual report also emphasizes intellectual property, transparency) (4550)
An Office of the U.S. Trade Representative (USTR) report demonstrates the cost of a wide range of barriers to imports of agricultural products from the United States and of piracy of U.S.-produced music, movies and software.
The annual report on foreign trade barriers, released April 1, lists what USTR views as unfair non-tariff barriers on agriculture imposed by the European Union (EU), Russia, China, Mexico, Australia, Japan, Taiwan and Venezuela, a USTR press release says.
Barriers in Russia contributed to a $500 million drop in U.S. poultry exports in 2002, for example, USTR said. An EU moratorium on licensing biotechnology products since 1998 has led to lost U.S. export opportunities worth $200 million a year, the agency said.
A "dramatic increase" in trade barriers to agriculture was reported for Mexico over the past year. USTR reiterated that the United States would not renegotiate market access issues in the North American Free Trade Agreement (NAFTA) settled many years ago.
The report also cites continued high levels of copyright and patent piracy in Europe, Asia and Latin America. U.S. losses from copyright piracy reached $777 million in 2002 in Brazil alone, it said. If not resolved, a U.S. trade official said during a teleconference, the dispute could some day reduce Generalized System of Preferences (GSP) trade benefits for Brazil, now the third largest GSP beneficiary.
"The lack of effective IP [intellectual property] rights enforcement remains a major challenge" in China, USTR said in its press release. "If significant improvements are to be achieved on this front, China will have to devote considerable resources and political will to this problem."
The press release briefly describes some unfair trade barriers encountered in Africa, Brazil, Canada, China, the EU, India, Japan, South Korea, Mexico, Russia and Ukraine.
Covering practices by 56 trade partners, the report precedes by a month a statutory deadline for identifying those countries' practices best suited for action under the Special 301 provision of U.S. trade law against inadequate intellectual property protection. In 2002 the United States imposed retaliatory tariffs under Special 301 on imports from Ukraine, for example.
Following are abbreviations used in the text:
-- AGOA: African Growth and Opportunity Act
-- CWB: Canadian Wheat Board
-- EC: European Commission
-- EU: European Union
-- FTAs: free trade agreements
-- IP: intellectual property including copyrights, patents and
trademarks
-- NAFTA: North American Free Trade Agreement
-- NTBs: non-tariff barriers
-- NTE: National Trade Estimate
-- SPS: sanitary and phytosanitary
-- TRQs: tariff rate-quotas (much higher tariffs imposed on imports
above the quota)
-- TRIPS: WTO Agreement on Trade-Related Intellectual Property Rights
-- USTR: Office of the U.S. Trade Representative
-- WTO: World Trade Organization
Following is the text of the press release:
(begin text)
OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C.
20508
April 1, 2003
USTR Releases 2003 Inventory of Trade Barriers
WASHINGTON -- The Office of the United States Trade Representative
today released its 2003 annual report documenting foreign trade
barriers to U.S. exports. The National Trade Estimate (NTE) Report on
Foreign Trade Barriers also highlights instances when U.S. trading
partners reduced or eliminated trade barriers.
"Bringing down barriers to trade promotes growth and prosperity, for
the United States and for the world," said U.S. Trade Representative
Robert B. Zoellick. "American workers, businesses, and farmers expect
a level playing field abroad. The Bush Administration is committed to
identifying unfair barriers to U.S. exports and to working
aggressively with our trading partners to eliminate those barriers."
The expansion of free trade over the past 50 years has helped to
create sustained global economic growth. Trade expansion has
contributed to this increase in prosperity by helping nations take
advantage of comparative economic strengths; supporting productive,
higher paying jobs in export sectors; offering more value and choice
to consumers and business; and encouraging foreign investment in the
U.S. and other economies. In the developing world, countries that
opened their borders to trade have grown far faster than those that
remained closed.
The NTE includes a list of unfair trade practices and barriers to
American exports of goods, services, and farm products. In addition to
limiting commercial opportunities for U.S. businesses, these barriers
undermine the substantial potential gains from trade among developing
countries. The NTE covers 56 major trading partners in each region of
the world and profiles policies restricting market access. This year's
report highlights the continuing use of non-tariff barriers (NTBs) --
unscientific sanitary and phytosanitary standards (SPS), burdensome
customs procedures, government monopolies, and opaque regulations --
for protectionist purposes. The report also focuses on deficiencies in
intellectual property (IP) rights protection and barriers to U.S.
agricultural exports. The NTE notes many examples where countries have
reduced or eliminated trade barriers described in earlier reports.
The persistence of trade barriers affirms the need for the United
States to remain actively engaged in promoting and enforcing trade
liberalization at all levels: Globally, in the ongoing World Trade
Organization (WTO) negotiations; regionally, through the Free Trade
Area of the Americas negotiations; and bilaterally, through free trade
agreements (FTAs) with trading partners such as Chile, Singapore,
Morocco, Australia, the five members of the Central American Common
Market, and the five members of the Southern African Customs Union.
This report helps build domestic support for these negotiations by
highlighting the potential commercial opportunities that
liberalization would create.
As required by the Omnibus Trade and Competitiveness Act of 1988, USTR
prepares the NTE Report in close consultation with other U.S.
Government agencies, based on the Administration's monitoring program
and information provided from the public and private sector trade
advisory committees. This year, as in the past, the USTR solicited
public comments and, in response, received 64 submissions. U.S.
Embassies also participated actively in the preparation of the report
and provided critical input based on the experience of U.S. exporters
abroad. In addition, these barriers are the subject of consultation
with the Congress throughout the year.
The full text of the trade barriers report will be available at
www.ustr.gov . (Note: this address
is not linked to the index on the main ustr website, you must enter
address as listed above.) Bound copies of the report will be available
from USTR's Office of Public Affairs beginning April 8, 2003.
Highlights of the 2003 report:
The Effect of Non-Tariff Barriers on U.S. Agricultural Trade
U.S. farmers and agricultural firms rely heavily on export markets to
sustain prices and revenues. These markets have accounted for up to 30
percent of U.S. farm income over the past 30 years and are projected
to remain at this level in the near future. Agricultural exports also
have significant linkages to the non-farm economy, particularly
through their effects on employment and off-farm business activity.
U.S. agricultural producers are among the most competitive in the
world, and the United States has been a net exporter of agricultural
products since the late 1950s. Yet U.S. agricultural exports would be
even greater without the NTBs that are used against them. Since the EU
imposed a moratorium on imports of agricultural biotech products in
1998, for example, U.S corn [maize] exports to the EU have declined by
55 percent. U.S. poultry exports to Russia have decreased by almost 45
percent since import restrictions on U.S. poultry have gone into
effect. Russia is the top U.S. export market for poultry, and the
import restrictions helped contribute to a $500 million decline in
U.S. poultry exports to the world last year.
Other examples of NTBs include unfair treatment of U.S. agricultural
exports under Chinese tariff-rate quotas (TRQs) on imports of wheat,
corn, rice, cotton, barley, oilseed and vegetable oils; Mexican
anti-dumping duties on beef, rice, swine, and apples, an illegitimate
tax on beverages containing high fructose corn syrup, and restrictions
on fruit and dry beans; Australian SPS measures on imports of pork,
poultry, and fruit; Japanese import restrictions on apples, rice,
wheat, lettuce, and citrus, and stated plans to impose a safeguard
measure on beef imports; Taiwanese import restrictions on rice; and
Venezuelan restrictions on imports of fruits, cereals, oilseed
products, meats and dairy products.
USTR, in cooperation with other U.S. government agencies and the U.S.
agricultural community, has been working to remove these NTBs and
maximize opportunities for exports. The past July, for example, the
first California grapes arrived in Australia after a decades-long ban.
And in November, through negotiations with the European Commission, we
averted a situation that could have restricted more than $400 million
worth of grain exports to Europe. The United States will continue to
aggressively work to remove NTBs through bilateral negotiations, as
well as in other forums.
Intellectual Property: Focusing on Enforcement
The United States is concerned about high levels of IP piracy in Asia,
Central and Eastern Europe, and Latin America due to a global lack of
IP protections and enforcement. The situation is caused by inadequate
legal protections, a lack of either resources or will to enforce
existing laws, and often, a poor understanding of the importance of IP
protection to development. Once a country recognizes the harm that
piracy causes to its own economy, a willingness to improve laws and
commit the resources necessary to enforce them can follow.
Advances in technology mean that pirates have new ways to undermine IP
rights. In particular, we are concerned about the increased rate of
piracy of optical media-music, video and software CDs, CD-ROMs, and
now DVDs -- as well as the use of the Internet as a global
distribution network for pirated products. In addition, we are
concerned with increasing rates of trademark counterfeiting that
decrease revenues for U.S. companies and pose health and safety
threats to consumers who unwittingly purchase unsafe products such as
medicines, car parts, and distilled spirits.
The United States is committed to promoting IP protection and we are
making progress on a number of fronts, including in our FTAs. Recently
completed FTAs with Singapore and Chile -- as well as the ongoing
negotiations with Morocco, Central America, and Australia -- offer
opportunities to update the TRIPS Agreement standard to reflect
technological changes and to insist that important trading partners
make serious efforts to enforce IP rights.
Enforcing Trade Agreements
Active monitoring of compliance with trade agreements together with
vigorous enforcement helps ensure that these agreements yield the
benefits bargained for in ensuring market access for Americans,
advancing the rule of law internationally, and creating a fair, open,
and predictable trading environment. Past examples of enforcement
successes include rulings against Japan's unjustified testing burdens
on U.S. fruit and nut exports, against Mexico's unfair anti-dumping
duties on U.S. exports of high fructose corn syrup, and the European
Communities' discriminatory banana regime. Recently, the United States
obtained favorable dispute rulings against Canada's prohibited export
subsidies on dairy products and India's restrictions on U.S. exports
of auto assemblies, and the United States also reached an agreement
with Argentina resolving many of the issues raised in our dispute over
aspects of its intellectual property regime. Ongoing enforcement
actions involve Japanese restrictions on imports of apples, the
European Communities' provisional safeguard on steel, Venezuela's
import licensing practices, Canada's Wheat Board practices and
Mexico's telecommunications regime.
Africa
The sub-Saharan African countries profiled in this year's NTE report
are Cameroon, Ethiopia, Ghana, Kenya, Nigeria, Tanzania, and Zimbabwe.
With the exception of Zimbabwe, each is eligible for benefits under
the African Growth and Opportunity Act (AGOA) and is working to
maximize their benefits under AGOA by undertaking reforms to improve
their investment climate and to address infrastructure bottlenecks.
Issues that continue to hamper U.S. exporters in certain countries are
corruption, onerous customs procedures, and ineffective enforcement of
IP rights.
The United States is concerned that Nigeria has reversed a trend
toward eliminating NTBs and instead is imposing new import bans on
products such as certain textiles, frozen poultry, wheat flour,
cassava, millet, and sorghum, in addition to existing bans on used
clothing, bagged cement, gypsum, mosquito repellent coils, and kaolin.
Brazil
Brazil has substantially liberalized its trading regime, but continues
to impose very high information technology tariffs of 30 percent,
which, combined with other taxes, doubles the cost of personal
computers. In addition, in April 2002, the Brazilian government
approved a new tax law that dramatically increased the duty on
imported advertising materials and discriminates against foreign
producers. Brazil also prohibits importation of a number of products,
including various used goods, including machinery, refurbished medical
equipment, automobiles, clothing, and other consumer products. These
restrictions increase costs to Brazilian consumers and, in the case of
used machinery and other capital goods, reduce economic growth.
For pharmaceuticals, continuing delays in addressing the backlog of
both pipeline and regular patent applications resulted in only two
non-pipeline patents being issued in 2002, out of 18,000 regularly
filed pending pharmaceutical applications. Simultaneously,
unauthorized copies of pharmaceutical products have received sanitary
registrations relying on undisclosed tests and other confidential
data, in violation of TRIPS Article 39.3.
Brazil represents over half of the market for sound recordings in
Latin America and is one of the world's largest markets for videos.
Yet enforcement of copyright law in Brazil remains ineffective, with
U.S. losses from copyright piracy reaching $777 million in 2002.
Enforcement efforts in 2002 resulted in many prosecutions, but the
deterrent effect of these prosecutions is minimal because the number
of convictions for IP rights violations remains low.
Canada
Canada is the number one U.S. trading partner, but a number of
outstanding issues hamper this mutually beneficial relationship.
The Canadian Wheat Board (CWB), despite reorganization, continues to
enjoy government-sanctioned monopoly status and other privileges that
restrict foreign competition. The United States committed last year to
using all effective tools available to end the CWB's monopoly on the
purchase, sale and distribution of its wheat around the world. On
March 4, 2003, the U.S. Department of Commerce issued a preliminary
determination in its countervailing duty investigation, announcing a
3.94 percent duty to be applied provisionally while dumping and
countervailing duty investigations continue. On March 6, 2003, USTR
announced it would seek the formation of a WTO dispute settlement
panel to examine Canada's wheat trading practices and the CWB. The
United States is aggressively pursuing reform of state trading
enterprises through the adoption of new rules in the ongoing WTO
agriculture negotiations.
Last year's NTE report highlighted the fact that Canada had not taken
the necessary steps to bring its dairy export subsidy program into
compliance with the WTO. Subsequent WTO decisions in July 2002 and
December 2002 affirmed prior findings. Canada has indicated it will
comply with the Appellate Body's findings and is in the process of
re-regulating dairy product exports on a provincial basis. The 1996
U.S.-Canada Softwood Lumber Agreement, which mitigated the effects of
lumber subsidies in several Canadian provinces, expired on March 31,
2001. Upon expiration of the Agreement, the U.S. lumber industry filed
antidumping and countervailing duty petitions against Canadian
softwood lumber. On March 22, 2002, the U.S. Department of Commerce
announced its final antidumping and countervailing duties. Amended
final antidumping rates ranging from 2.18 percent to 12.44 percent and
an amended final countervailing duty rate of 18.79 percent.
Canada is challenging the underlying Commerce Department and
International Trade Commission (ITC) investigations in the WTO and
under the North American Free Trade Agreement (NAFTA). On November 1,
2002, the WTO Dispute Settlement Body adopted a panel report favorable
to the United States on two key issues. The report concluded that
Canadian provinces' sale of timber from public lands can constitute a
subsidy under the WTO Subsidies Agreement and that U.S. laws governing
reviews of countervailing duty orders are consistent with the WTO
Subsidies Agreement.
Negotiations in early 2003 to find a durable solution progressed
significantly and narrowed differences in several areas. The United
States continues to encourage Canadian provinces to implement
market-based pricing for sales of timber from public lands. In the
absence of an agreement on basic reforms, the United States will
continue to enforce U.S. trade laws to address subsidized and dumped
Canadian lumber.
China
China's successful transition to a market-based economy depends on
faithful implementation of the commitments it made in acceding to the
WTO on December 11, 2001. Although the task is incomplete, China has
taken significant steps to reform its economy and fulfill its
international commitments. The tariff reductions and legislative and
regulatory changes introduced in connection with China's WTO accession
have, without question, improved market access for U.S. exports. The
United States is hopeful that China's new leadership team, led by
President Hu Jintao, will build on the progress made during China's
first full year of WTO membership and work to dismantle barriers to
U.S. exports that remain.
Some of the remaining barriers are due to incomplete or delayed
implementation of WTO commitments. Other barriers, however, will
continue to exist notwithstanding China's new obligations.
In 2002, significant barriers to U.S. agricultural exports to China
were encountered on many fronts, including China's regulation of
agricultural goods made with biotechnology, the administration of
China's TRQ system for bulk agricultural commodities, and the
application of SPS measures and inspection requirements. The United
States and China were able to make progress toward resolving some of
these issues, particularly with regard to biotechnology. Other
problems remain unresolved, however, the most troublesome being
China's inadequate implementation of its TRQ commitments.
The lack of effective IP rights enforcement remains a major challenge.
If significant improvements are to be achieved on this front, China
will have to devote considerable resources and political will to this
problem.
Another area of cross-cutting concern involves China's uneven
implementation of its commitment to greater transparency in the
adoption and operation of new laws and regulations. Although China has
improved opportunities for public comment on some draft laws and
regulations, and has provided appropriate WTO enquiry points, China's
overall effort has suffered from uncertainty and a lack of uniformity.
The United States is committed to seeking improvements in this area.
Many services sectors also face market access challenges in China,
principally due to transparency problems and the use of prudential
requirements that exceed international norms. Progress was made in
2002 toward resolving these concerns, but much work remains to be
done.
The U.S. Government is also concerned about the WTO-consistency of a
variety of other Chinese practices, including the use of
discriminatory value-added tax policies in the semiconductor and
fertilizer industries, standard-setting without regard to scientific
basis, cumbersome licensing procedures, and other measures.
European Union
Though the enormously important economic relationship between the
United States and Europe is generally solid, several EU policies
continue to pose significant barriers to U.S. economic interests.
Among the most notable barriers are unscientific bans on U.S. beef
from livestock treated with hormones and U.S. poultry treated to
minimize bacteria risks. The EU ban on U.S. beef has continued for
more than a dozen years despite a WTO ruling that the ban is
inconsistent with multilateral trade rules. Other major barriers
include various non-transparent and restrictive EU regulations and
standards.
Since 1998, when several EU member states imposed a de facto
moratorium, Europe has lacked a functioning approval process for
agricultural biotechnology products. As a result, more than $200
million in U.S. corn [maize] exports have been lost each year. The
United States believes that the moratoriums are a violation of WTO
rules as well as EU law -- and that they set a harmful example for the
developing countries that stand to gain most from new agricultural
technologies. Further, in July 2001, the EC issued new regulatory
proposals: 1) governing biotech foods and animal feed made from
agricultural biotech products; and 2) imposing a traceability and
labeling scheme which would create complicated and extensive
documentation requirements for agricultural biotechnology products --
from the farm to the retailer -- and a labeling regime based on
consumer preference rather than science. The expansive scope of these
proposals has the potential to adversely impact a broad range of U.S.
exports. Resuming biotech approvals remains a high priority for the
United States. We continue to monitor closely these biotech issues and
consider all options.
A systemic lack of transparency in the development and application of
EU regulations increasingly confronts U.S. exporters with barriers in
many sectors. Ongoing EU consideration of new regulation of chemicals,
for example, is of particular concern to U.S. industry. These barriers
often are compounded by a lack of meaningful opportunity for non-EU
stakeholders to provide input on draft EU regulations. To address
these concerns, the United States continues to promote enhanced
transparency in the EU regulatory system and greater US-EU regulatory
cooperation.
India
India continues to maintain a broad range of trade restrictions. In
particular, the multi-tiered tariff and tax structure have kept U.S.
exports to India flat for over five years. Lack of transparency, as
well as complex, broad and discretionary governmental powers, all
combine to impede trade. Serious deficiencies in IP rights protection
continue to persist.
Japan
Over-regulation, insufficient transparency in the development of
regulations, structural rigidity, and market access barriers continue
to limit opportunities for U.S. companies trading with and operating
in Japan, our third largest trading partner. The NTE report
underscores our continuing concern with these obstacles.
Competition in Japan's telecommunications sector, for example, remains
stifled by the lack of an independent regulator, lack of strong
dominant carrier regulation, and excessively high interconnection
rates.
Japan also continues to maintain significant barriers to its
agricultural market. Japanese restrictions on U.S. apples remain a
serious concern. The United States requested a WTO panel to adjudicate
this dispute in May 2002, and a final report is expected from the
panel in the second quarter of 2003. The United States is also
concerned over Japan's stated intention to implement its beef
safeguard in a highly inappropriate manner. Japan has increasingly
employed standards and other administrative requirements to limit
agricultural imports and has shown a growing tendency to deviate from
scientific principles in setting new import policies that deny or
restrict the entry of a wide range of U.S. meat, poultry, vegetables,
and fruit products. Even with products such as rice -- for which Japan
made specific commitments -- gaining meaningful access to Japanese
consumers is hampered by a burdensome bureaucracy and protectionist
regulations.
Finally, the U.S. share of Japan's massive public works market has
consistently remained below 1 percent. Practices that prevent the full
involvement of U.S. firms include failure to address rampant
bid-rigging and use of discriminatory qualification and evaluation
criteria.
Korea
Korea's continued progress in advancing economic reform and pursuing
more open, market-oriented economic policies is key to attracting
foreign investment and achieving sustained economic growth. The United
States is hopeful that the Roh Administration will build on progress
achieved by the previous administration by placing a high priority on
reducing the significant remaining barriers to U.S. exports.
Korea imposes high duties and maintains NTBs on many agricultural and
fishery products. Of key concern to the United States are levels of
domestic support, quantitative restrictions, and TRQs that have
affected U.S. exports such as rice, beef, and oranges.
The United States has longstanding concerns about the Korean
Government's excessive influence and involvement in many sectors,
particularly telecommunications. A new telecom standard -- which Korea
intends to make mandatory -- raises serious concerns regarding
adherence to WTO commitments as well as willingness to proactively
protect IP rights. The United States also continues to express strong
concerns about instances of possible Korean subsidization of
semiconductor production and exports.
Despite some positive steps in the auto sector over the past year,
Korea's high taxes -- both general and auto-related -- continue to
severely restrict U.S. companies' access to the Korean market. While
Korean automobile exports to the United States set records in 2002,
Korea only imported 16,119 vehicles from all foreign sources,
representing just over 1 percent of its market.
The lack of transparency in rule making and the inconsistency of
Korea's regulatory system continue to be the principal problems cited
by U.S. investors and exporters. These transparency-related barriers
affect a wide range of sectors, most notably pharmaceuticals, where
U.S. companies appear to have been inappropriately targeted in an
effort to implement domestic health-care reforms.
Mexico
As a result of the changes wrought by NAFTA, U.S. exports to Mexico
have doubled and Mexico has become our second largest trading partner.
Despite this welcome increase in trade, Mexico continues to restrict
access to particular U.S. goods and services.
The most significant development over the past year has been a
dramatic increase in the number of new Mexican barriers against
agricultural imports from its NAFTA partners. These barriers include
dumping orders, safeguards, the illegitimate use of SPS measures, and
unsubstantiated questions about compliance with customs procedures.
Mexico also renewed an illegitimate 20 percent consumption tax on
certain beverages sweetened with ingredients other than cane sugar,
including high fructose corn syrup.
A number of organizations in Mexico are blaming NAFTA for the
competitive pressures that some sectors of Mexico's agricultural
sector are facing, and a few are calling for renegotiation. In
reality, trade growth in agricultural products has been remarkably
balanced since NAFTA was implemented, with U.S. exports increasing by
100.4 percent from 1993 to 2002, and imports increasing by 103
percent. The United States will continue to work with Mexico through
NAFTA to complete implementation of its commitments and provide
maximum benefits for both countries. The United States will not,
however, agree to renegotiate long-settled provisions.
Mexico continues to maintain measures that prevent competition in its
international telecommunications services market. This market remains
dominated by a single company with a government mandate to set high
wholesale prices for calls to Mexico and block competitive
alternatives. The WTO is expected to rule this year on a U.S.
challenge to these measures.
Russia
Russia has undertaken a comprehensive economic reform program, which
includes the ongoing negotiation of Russia's terms of accession to the
WTO. Despite reforms under way, Russia continues to maintain a number
of policies that pose unfair barriers to U.S. economic interests. The
most significant of these remains a recurring series of barriers to
U.S. poultry exports, which, along with recently announced TRQs on
pork and beef, threaten to seriously restrict U.S. meat exports to
Russia. Other barriers include an inadequate enforcement regime with
respect to IP, Russia's import licensing system, standards and
certification procedures, SPS measures, and services and investment
restrictions.
Ukraine
Although there has been progress in fighting the rampant CD piracy
that resulted in the imposition of sanctions last year, Ukraine still
has not enacted an adequate Optical Disc Media licensing law as
required by the Joint Action Plan negotiated between the United States
and Ukraine in June 2000. We continue to urge the Ukrainian government
to make the necessary amendments to its current Optical Disc law to
address our piracy concerns.
(end text)
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Department of State. Web site: usinfo.state.gov)
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Oil Slides as Nigeria Strike Called Off
Reuters
Tuesday April 1, 4:01 pm ET
NEW YORK (Reuters) - Oil prices fell 4 percent on Tuesday as Nigerian unions called off a planned general strike, raising hopes that oil production halted there by recent ethnic clashes might soon restart.
The move eased fears of further disruption to world oil supplies with Iraq's crude exports halted since near the start of a 13-day U.S.-led invasion.
U.S. light crude slid $1.26 a barrel to $29.78 while London benchmark Brent futures fell 82 cents to $26.36 a barrel. Oil prices are more that $10 a barrel below 12-year highs hit in late February.
Prices fell as Nigeria's biggest union called off a planned three-day strike. "News of the agreement on the Nigerian strike has given the market some breathing room," one London oil trader said.
Recent tribal clashes have shut nearly 40 percent of Nigeria's 2.2 million barrels per day (bpd) of crude production for more than a week. The West African country is one of the top six oil suppliers to the United States and U.S. refiners need Nigeria's high-quality crude to build up gasoline stocks for summer.
Oil companies Shell (London:SHEL.L - News; Amsterdam:RD.AS - News) and ChevronTexaco (NYSE:CVX - News) have said they will not resume operations from Forcados and Escravos in the western Niger Delta region until they can be sure of their staff's safety.
SADDAM SPECULATION
Jitters spurred by the Nigerian and Iraqi supply disruptions have helped support oil prices in recent days since the market fell 25 percent just before the war when dealers took the view that Baghdad would not resist for long.
Tuesday's falls gained pace after Iraq's Information Minister delivered a television message from President Saddam Hussein, fueling speculation that the Iraqi leader may be dead.
"People interpreted the fact that Saddam Hussein did not deliver his own message as 'He is no longer with us,"' said a New York trader.
Prices have come under further pressure from signs that world oil supplies are sufficient to meet lower seasonal demand in the second quarter.
"What's driving prices right now is the offset between supply security fears, balanced against expectations of softer demand, which you normally get at this time of the year," said Kevin Norrish, energy analyst at Barclays Capital.
The Organization of the Petroleum Exporting Countries has compensated for lost Iraqi and Nigerian crude with increased supplies. Top world exporter Saudi Arabia in March hit its highest production level for 21 years.
"As far as the war is concerned, we have lost Iraqi supplies but clearly OPEC (News - Websites)is still managing so far to make up for that," Norrish said.
GASOLINE
Global energy demand on the 77 million bpd world market normally drops about 2 million bpd in the second quarter when warmer weather sets in the United States and Europe.
Demand then picks up again when gasoline consumption for motorists rises during the summer holidays.
Nigeria's high-quality crude, ideal for gasoline production, is missed because it is a popular feedstock among U.S. refiners.
Gasoline stocks in the United States are running well below year-ago levels as the world's biggest consumer of motor fuel gears up for peak demand.
"Looking at where U.S. gasoline inventories are and where prices are, lots will depend now on how soon Venezuela will get its gasoline production back to normal," Barclays' Norrish said.
Venezuela, struggling to get output back on stream after a crippling opposition strike, has said it will this week restart gasoline exports to the United States and expects all refining and exports to return to normal within four to six weeks.
The strike had contributed to extremely tight oil inventories in the West even before the war in Iraq.
Analysts polled by Reuters predict that U.S. government data due on Wednesday will show a large crude stock rise after a week of heavy imports.