Washington File: USTR Lists Barriers to U.S. Trade, Focusing on Agriculture

<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:

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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.

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