Memorandum on Trade Agreements Resulting from the Uruguay Round of Multilateral Trade Negotiations
Memorandum for the United States Trade Representative
Subject: Trade Agreements Resulting from the Uruguay Round of Multilateral Trade Negotiations
I have today sent the attached letters to the Speaker of the U.S. House of Representatives and the President of the Senate.
You are authorized and directed to publish this memorandum and its attachments in the Federal Register.
WILLIAM J. CLINTON
THE WHITE HOUSE
WASHINGTON
December 15, 1993
The Honorable Al Gore
President of the Senate
Office of the Vice President
S212 Capitol Building
Washington, D.C. 20510
Dear Mr. President:
I believe that we have created a unique opportunity to build an international trading system that will ensure the orderly and equitable expansion of world trade and contribute to the prosperity of the United States in coming generations. After seven long years the conclusion of the Uruguay Round of multilateral trade negotiations is at hand. The Round will result in the largest, most comprehensive set of trade agreements in history. With the conclusion of the Round, we will have successfully achieved the objectives that Congress set for the United States in the negotiations.
In accordance with section 1103(a)(1) of the Omnibus Trade and Competitiveness Act of 1988, as amended ("Act"), I am pleased to notify the House of Representatives and the Senate of my intent to enter into the trade agreements resulting from the Uruguay Round of multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade. These agreements are listed and identified below and are more fully described in an attachment to this letter.
The United States can and must compete in the global economy. In many areas of economic activity we are already world leaders and we are taking measures at home to strengthen further our ability to compete. In section 1101 of the Act the Congress set as the first overall U.S. negotiating objective for the Uruguay Round more open, equitable and reciprocal market access. I am particularly pleased to advise you that the Uruguay Round results will provide an unprecedented level of new market access opportunities for U.S. goods and services exports. In the attachment to this letter is a summary description of the agreements on market access for goods and services that we have achieved in the Round. Of special note are the number of areas where we and our major trading partners have each agreed to reduce tariffs on goods to zero. The schedules of commitments reflecting market access in services cover a wide range of service sectors that are of great interest to our exporting community.
The Agreement on Agriculture will achieve, as Congress directed, more open and fair conditions of trade in agricultural commodities by establishing specific commitments to reduce foreign export subsidies, tariffs and non-tariff barriers and internal supports.
The Agreement on Textiles and Clothing provides for trade in textiles and apparel to be fully integrated into the GATT for the first time. As a result, trade in textiles will be subject to the same disciplines as other sectors. This transition will take place gradually over an extended period. At the same time, the agreement provides an improved safeguards mechanism. It also requires apparel exporting countries to lower specific tariff and non-tariff barriers, providing new market opportunities for U.S. exporters of textile and apparel goods. The agreement contributes to the achievement of the U.S. negotiating objectives of expanding the coverage of the GATT while getting developing countries to provide reciprocal benefits.
In fulfillment of the second overall U.S. negotiating objective, the reduction or elimination of barriers and other trade-distorting policies and practices, the Uruguay Round package includes a number of agreements to reduce or eliminate non-tariff barriers to trade. These agreements, which are described in the attachment, address Safeguards, Antidumping, subsidies and Countervailing Measures, Trade-Related Investment Measures, Import Licensing Procedures, Customs Valuation, Preshipment Inspection, Rules of origin, Technical Barriers to Trade, and sanitary and Phytosanitary measures. The agreements strengthen existing GATT rules and, for the first time in the GATT, discipline non-tariff barriers in the areas of investment, rules of origin and preshipment inspection. The agreements preserve the ability of the United States to impose measures necessary to protect the health and safety of our citizens and our environment and to enforce vigorously our laws on unfair trade practices.
The Agreement on Government Procurement will provide new opportunities for U.S. exporters as a result of the decision to expand the coverage of the agreement to government procurement of services and construction; we will, however, only extend the full benefits of the agreement to those countries that provide satisfactory coverage of their own procurement. Negotiations on improvements in the Agreement on Trade in Civil Aircraft and on a Multilateral steel Agreement are continuing. These agreements should provide for more effective disciplines and reduce or eliminate trade-distorting policies and practices in two industries of importance to our economy. I will fully consult with the Congress throughout these negotiations, and plan to enter into these agreements if the negotiations produce results that are acceptable to the United States.
As a result of the Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS), we will now have for the first time internationally agreed rules covering areas of trade of enormous importance to the United States. These agreements represent a major step forward in establishing a more effective system of international trading disciplines and procedures. GATS contains legally enforceable provisions dealing with both cross-border trade and investment in services and sectoral annexes on financial services, labor movement, telecommunications and aviation services. More than 50 countries have submitted schedules of commitments on market access for services. The TRIPS agreement provides for the establishment of standards for the protection of a full range of intellectual property rights and for the enforcement of those standards both internationally and at the border.
The Uruguay Round has produced a number of other agreements that will create a more effective system of international trading disciplines and procedures.
The understanding on Rules and Procedures Governing the settlement of Disputes will provide for a more effective and expeditious dispute resolution mechanism and procedures which will enable better enforcement of United States rights. Congress identified the establishment of such a system as the first principal U.S. trade negotiating objective for the Round. The procedures complement U.S. laws for dealing with foreign unfair trade practices such as section 301 of the Trade Act of 1974.
The Agreement Establishing the World Trade Organization will facilitate the implementation of the trade agreements reached in the Uruguay Round by bringing them under one institutional umbrella, requiring full participation of all countries in the new trading system and providing a permanent forum to address new issues facing the international trading system. The WTO text recognizes the importance of protecting the environment while expanding world trade; negotiators have also agreed to develop a work program on trade and the environment and will recommend an appropriate institutional structure to carry out this work program. Creation of the WTO will contribute to the achievement of the second principal U.S. negotiating objective of improving the operation of the GATT and multilateral trade agreements.
The U.S. objective of improving the operation of the GATT is also furthered by a number of understandings, decisions and declarations regarding the GATT and its operations. The Trade Policy Review Mechanism will enhance surveillance of members trade policies. The Understandings Concerning Interpretation of specific Articles of the General Agreement on Tariffs and Trade 1994 (GATT 1994) concern the Interpretation of Articles II:1(b), XVII, XXIV, XXVIII and XXXV, and Balance-of-Payments Provisions. There is also an Understanding in respect of waivers of Obligations Under the General Agreement on Tariffs and Trade 1994.
The ministerial Decisions and Declarations state the views and objectives of Uruguay Round participants on a number of issues relating to the operation of the global trading system, provide for the continuation of the improvements to the dispute settlement system that became effective in 1989 and deal with other matters concerning the dispute settlement system. The Ministerial Decisions and Declarations that are now proposed for adoption are described in the attachment. At this time, implementing legislation does not appear to be necessary for these instruments.
I will continue to consult closely with the Congress as we conclude the Round. There are a few areas of significance that we were unable to resolve at this time. In order to ensure more open, equitable and reciprocal market access, in certain agreements we have made U.S. obligations contingent on receiving satisfactory commitments from other countries, and we will continue to work to ensure that the best possible agreement for the United States is achieved. I will not enter into any agreement unless I am satisfied that U.S. interest are protected. With regard to entertainment issues, we were unable to overcome our differences with our major trading partners, and we agreed to disagree. We will continue to negotiate, however, and until we reach a satisfactory agreement, we think we can best advance the interests of our entertainment industry by reserving all our legal rights to respond to policies that discriminate in these areas.
In accordance with the procedures in the Act, the United States will not enter into the agreements outlined above until April 15, 1994. After the agreements have been signed, they will be submitted for Congressional approval, together with whatever legislation and administrative actions may be necessary or appropriate to implement the agreements in the United States. The agreements will not take effect with respect to the United States, and will have no domestic legal force, until the Congress has approved them and enacted any appropriate implementing legislation.
Sincerely,
William Clinton
Editorial note: An identical letter was sent to the Honorable Thomas S. Foley, Speaker of the House of Representatives.
EXECUTIVE SUMMARY
RESULTS OF THE GATT URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS
TABLE OF CONTENTS
Page
1. Market Access for Goods 2
2. Agriculture 3
3. Textiles and Clothing 5
4. Safeguards 7
5. Antidumping 8
6. Subsidies and Countervailing Measures 10
7. Trade-Related Investment Measures 12
8. Import Licensing Procedures 13
9. Customs Valuation 14
10. Preshipment Inspection 15
11. Rules of Origin 16
12. Technical Barriers to Trade 17
13. Sanitary and Phytosanitary Measures 18
14. Services 19
15. Trade-Related Intellectual Property Rights 22
16. Dispute Settlement 24
17. World Trade Organization 26
18. GATT Articles 28
19. Trade Policy Review Mechanism 29
20. Ministerial Decisions and Declarations 30
21. Government Procurement 32
1. MARKET ACCESS FOR GOODS
U.S. Objectives The primary objective of the United States in the Uruguay Round industrial market access negotiations was to open the markets of our major trading partners to U.S. exports through the reduction and/or elimination of tariffs and non tariff measures. The United States also sought to obtain commercially meaningful increases in access to markets of developing countries and to obligate these countries to make substantial tariff bindings.
Results
The United States achieved substantially all of its major objectives in the industrial goods market access negotiations. As a result, increased market access opportunities will be available to U.S. exporters of industrial goods. The tariff agreements reached during the negotiations will be reflected in the tariff schedules of the participants. We intend to pursue further market access commitments prior to the February 15, 1994 deadline for submission of final schedules.
Key Provisions
Key provisions of the market access for goods agreement include:
— The elimination of tariffs in major industrial markets, and significantly reduced or eliminated tariffs in many developing markets, in the following areas:
— Construction Equipment — Agricultural Equipment — Medical Equipment — Steel — Beer — Distilled spirits — Pharmaceuticals — Paper — Toys — Furniture
— Deep cuts ranging from 50 - 100 percent on important electronics items (e.g., semiconductors, computer parts, semiconductor manufacturing equipment) by major U.S. trading partners;
— Harmonization of tariffs by developed and major developing countries in the chemical sector at very low rates (0, 5.5 and 6.5 percent); and
— Significantly increased access to markets which represent approximately 85 percent of world trade in terms of reduced tariffs on specific items of key interest to U.S. exporters.
In general, most tariff reductions will be implemented in equal annual increments over 5 years. Some tariffs, particularly in sectors where duties will fall to zero, such as pharmaceuticals, will be eliminated when the agreement enters into force. Other tariffs, particularly in sensitive sectors, including some sensitive sectors for the United States, will be phased-in over a period of up to ten years. The agreement is scheduled to go into force on July 1, 1995.
As part of the United States offer, many non-controversial duty suspensions introduced in the 102nd Congress, as well as many introduced in the 103rd Congress, were made permanent. Implementation of these reductions will occur on entry into force of the Agreement.
The final result on wood and certain non-ferrous metals is subject to further negotiation. Based on concessions granted thus far, the United States intends to pursue duty elimination in these sectors.
The schedule for finalizing the results of the market access negotiations requires governments to submit draft final schedules on or before February 15, 1994, and final schedules by March 31, 1994. A process of verification and rectification is required. Additionally, the United States intends to encourage other partners that have not yet done so to improve existing offers to match the U.S. contribution.
2. AGRICULTURE
U.S. Objectives
The principal U.S. negotiating objective in agriculture was to achieve more open and fair conditions of trade in agricultural commodities. Specific objectives included:
— strengthening and clarifying rules for agricultural trade, including introducing disciplines on trade-distorting import and export practices and resolving questions pertaining to export subsidies;
— reducing and eliminating constraints to market access such as tariffs, quotas and other non tariff import barriers;
— reducing or eliminating the subsidization of agricultural production; and
— increasing U.S. agricultural exports.
Results
The Uruguay Round agreement on agriculture strengthens long-term rules for agricultural trade and assures the reduction of specific policies that distort agricultural trade. U.S. agricultural exports will benefit significantly from the reductions in export subsidies and the market openings provided by the agriculture agreement.
The United States was successful in its effort to develop meaningful rules and explicit reduction commitments in each area of the negotiations: export subsidies, domestic subsidies and market access. For the first time, agricultural export subsidies and trade-distorting domestic farm subsidies are subject to explicit multilateral disciplines, and must be bound and reduced. In the area of market access, the United States was successful in achieving the principle of comprehensive tariffication which will lead to the removal of import quotas and all other non-tariff import barriers. Under tariffication, protection provided by non-tariff import barriers is replaced by a tariff and minimum or current access commitments are required. For the first time, all agricultural tariffs (including the new tariffs resulting from tariffication) are bound and reduced.
Key Provisions
Time frame: Reduction commitments will be phased in during an implementation period of 6 years for developed countries and 10 years for developing countries. Negotiations for continuing the reform process, including further reduction commitments, begin in the fifth year of the implementation period.
Export subsidies: At the end of the implementation period, budgetary outlays for export subsidies must be reduced by 36 percent and quantities exported with export subsidies cut by 21 percent from a 1986-90 base period. The starting point for the reductions may be a more recent time period if certain conditions are met. The reduction commitments are applied to specific products or product groups, e.q., wheat and wheat flour, coarse grains, oil seeds, skim milk powder, sugar, etc.
Market access: Non-tariff import barriers such as variable levies, import bans, voluntary export restraints and import quotas, including those under Section 22 of the Agricultural Adjustment Act, are subject to the tariffication requirement. For products subject to tariffication, current access opportunities must be maintained and minimum access commitments may be required. Generally, a tariff-rate quota is used to fulfill these obligations. Minimum access commitments are required when imports are below 5 percent of domestic consumption levels. If import barriers are immediately replaced by a tariff, imports under minimum access are 3 percent of domestic consumption initially, growing to 5 percent over the implementation period. Otherwise, special rules relating to minimum access requirements are contained in the text which two countries plan to use for rice. Special quantity and price-based safeguards are available for products subject to tariffication. Existing tariffs and new tariffs resulting from tariffication will be reduced by 36 percent on average (24 percent for developing countries with a minimum reduction of 15 percent for each tariff line item (10 percent for developing countries). All tariffs will be bound.
Internal support: Trade-distorting farm subsidies must be bound and reduced by 20 percent from 1986-88 base period levels, allowing credit for farm support reductions undertaken since 1986. A measure of total support across all commodities will be used to implement the reduction commitment. Direct payments that are linked to production-limiting programs will not be subject to the reduction commitment if certain conditions are met. Domestic support programs meeting criteria designed to insure that the programs have no or minimal trade distorting or production effects ("green box") also are exempted from reduction commitments. Due to the farm support reductions contained in the 1985 and 1990 Farm Bills, the United States has already met the 20 percent requirement and will not need to make additional changes to farm programs to comply with the Uruguay Round commitments.
Rules: Internal support measures and export subsidies that fully conform to reduction commitments and other criteria will not be subject to challenge for nine years on grounds such as serious prejudice in third country markets or non-violation nullification and impairment. However, subsidized imports will continue to be subject to U.S. countervailing duty procedures, except for domestic support meeting the "green box" criteria, which will be exempt from countervailing duty actions for nine years.
3. TEXTILES AND CLOTHING
U.S. Objectives
The negotiating mandate for textiles and clothing was to formulate modalities that would permit the eventual integration of the textile and clothing sector into the GATT on the basis of strengthened rules and disciplines. The United States sought to negotiate an integration package that would be implemented gradually, provide protection in the event of damaging surges during the transition period, provide stability for trade in the sector, and open foreign markets to textile and clothing trade for the benefit of U.S. producers and workers.
Results
The Uruguay Round Agreement on Textiles and Clothing contains an agreed schedule for the gradual phase-out of quotas established pursuant to the Multi fiber Arrangement (MFA) over a ten-year transition period, after which textile and clothing trade will be fully integrated into the GATT and subject to the same disciplines as other sectors. The Agreement provides for expanded trade, improved market access and improved safeguard mechanisms.
Key Provisions
Safeguards: During the transition period, the agreement provides an improved safeguards mechanism (compared to safeguards in the MFA) for setting quotas on uncontrolled trade and to protect the market against damaging surges in imports. In the safeguards text, the agreement firmly embeds the concept of cumulative damage to domestic industry and permits an importing country to set quotas on countries that are contributing to that damage. In addition, the agreement contains stronger terms than the MFA for dealing with quota circumvention, such as illegal transshipments through countries not subject to quotas.
Product Integration: The agreement also provides for expanding trade during the transition, in that products adding up to a certain percentage of a country's imports must be integrated into the GATT. Product integration and an increase of current quota growth rates will both occur in three stages. Each importing country can choose the products at each stage, and therefore can consider the particular sensitivity of each product proposed. The transitional textile safeguard mechanism will not apply to products that are integrated, and any quotas on such products will be eliminated.
Improved Market Access: The agreement sets out that all countries, developed and developing alike, must achieve improved market access in textiles and clothing "through such measures as tariff reductions and bindings, and reduction or elimination of non-tariff barriers". Substantial gains have been achieved in the market access negotiations relating to textiles and clothing. Specifically, many countries have agreed to comprehensive bindings in the sector at reasonable tariff rates. This means no tariff can be increased beyond the bound level, without compensation. Substantial results have been achieved in obtaining the elimination or disciplining of non-tariff measures, such as discretionary licensing systems or import bans, affecting trade in the sector.
Remedies: The agreement has provisions for remedies against violations of market access commitments. First, tariff concessions on textile and clothing products may be withdrawn on items of specific interest to a given country. Second, the agreement provides a process to deny quota growth rate increases to countries that have not fulfilled their commitments on market access. Either of these provisions could be invoked if, during the period leading up to final signature, key countries such as India fail to improve the terms of the agreement for the United States.
Tariffs: United States tariff cuts on textile and clothing products have been of concern to the U.S. industry. Tariff concessions in this negotiation have been kept to a minimum, and particular product sensitivities have received consideration. As compared to the U.S. offer on all industrial products to reduce tariffs by 34 percent, the U.S. offer proposes to reduce textile and clothing tariffs by approximately 12 percent overall.
Disciplines: All GATT contracting parties will be subject to the disciplines of the Agreement on Textiles and Clothing, whether or not they were signatories to the MFA. China, although a member of the MFA, will not be permitted to sign this agreement until it becomes a member of the GATT, and, until then, will not be the beneficiary of any quota liberalization by the United States.
Finally, the agreement establishes the Textile Monitoring Body (TMB) to supervise implementation of the agreement. This replaces the Textile Surveillance Body (TSB). Any disputes related to implementation will be heard by the TMB.
4. SAFEGUARDS
U.S. Objectives
The principal of negotiation objectives of the United States regarding safeguards were:
— to improve and expand rules and procedures covering safeguard measures;
— to ensure that safeguard measures are transparent, temporary, degressive and subject to review and termination when no longer necessary; and
— to require notification and monitoring of import relief actions for domestic industries.
Results
The agreement incorporates many concepts long included in U.S. safeguards law -- Section 201 of the Trade Act of 1974 -- ensuring that all countries will use comparable rules and procedures (consistent with U.S. domestic legislation and procedures) when taking safeguard actions.
Key Provisions
The agreement provides for suspending the automatic right to retaliate for the first three years of a safeguard measure; thus providing an incentive for countries to use GATT safeguard rules when import-related, serious injury problems occur.
The agreement requires that existing Voluntary Restraint Agreements (VRA) be phased out within four years, but allows each country one "grandfathered" exception under extraordinary circumstances (e.g., the EC-Japan auto VRA) which can continue until 1999.
Other provisions relating to safeguards actions include:
— an 8 year maximum duration for an action;
— a requirement for a transparent, public process for making injury determinations, including:
— a public hearing or comparable opportunity to present views and challenge those of others, and— a published report, giving detailed analysis of the reasons for the decision;
— degressivity (the requirement that any action taken be steadily liberalized over its lifetime);
— criteria for injury determinations clearly defined;
— a provision to discourage repeated application of safeguard measures on the same product; and
— recognition of the right to take special safeguard measures for perishable products such as agricultural and horticultural goods.
5. ANTIDUMPING
U.S. Objectives
The principal negotiating objective of the United States regarding anti dumping was to improve GATT provisions to define, deter, discourage the persistent use of, and otherwise discipline dumping practices, including dumping practices not adequately covered by the 1979 Antidumping Code. In the anti dumping negotiations, the United States sought increased disciplines on injurious dumping and improved transparency and due process in antidumping proceedings. The United States also sought to ensure that the anti dumping rules continue to provide an effective tool to combat injurious dumping.
Results
The new agreement achieves U.S. objectives. Furthermore, it balances the interests of U.S. industries that use U.S. antidumping laws to combat unfair trade practices in the domestic market and those of U.S. exporters that are subject to unfair administrative practices in foreign anti dumping investigations.
Key Provisions
Transparency: The transparency and due process requirements proposed by the United States were accepted in their entirety. For example, the agreement requires investigating authorities to provide public notice and written explanations of their actions. These new requirements should benefit U.S. exporters by improving the fairness of other countries' anti dumping regimes.
Diversionary dumping: The new agreement does not limit U.S. discretion to discipline diversionary dumping. There is no explicit reference to anti-circumvention in the text of the agreement. However, a ministerial declaration accompanying the agreement recognizes the problem of circumvention and the need to develop uniform anti-circumvention rules in the future. Thus, the agreement does not inhibit the application of current U.S. anti-circumvention provisions.
Effect on U.S. Laws: Although the new agreement will require some changes in existing U.S. anti dumping law, these changes will not weaken U.S. trade laws. To the contrary, the new agreement incorporates important aspects of U.S. anti dumping practice not previously recognized under the 1979 Antidumping Code. These fundamental aspects of U.S. anti dumping practice are now immune from GATT challenge.
— For example, the agreement expressly authorizes the International Trade Commission's "cumulation" practice of collectively assessing injury due to imports from several different countries and the Department of Commerce's practice of disregarding below costs sales, if they are substantial, in determining fair value for export sales.
Methodology: In comparison to the 1979 Antidumping Code, the new agreement defines in much greater detail the methodology investigating authorities may apply in conducting antidumping investigations. These methodological definitions will add valued predictability to all anti dumping practices.
— For example, the agreement defines "de minim is margins" and "negligible imports" for purposes of terminating investigations. These definitions will protect U.S. exporters from harassing investigations and provide guidance to domestic industries when deciding which countries to include in a petition.
Dispute Settlement: In accordance with U.S. negotiating objectives, disputes between GATT members on dumping matters will be settled by binding dispute settlement. Dispute settlement panels will apply an explicit standard of review when reviewing agency determinations. The addition of an explicit standard of review is, without doubt, the most important aspect of the new anti dumping agreement. It will enable the United States to continue enforcing U.S. antidumping laws, and, at the same time, give U.S. exporters a useful tool to correct impermissible actions by foreign anti dumping authorities.
— The standard of review acknowledges that there may be more than one permissible interpretation of the agreement or facts and requires panels to defer to permissible interpretations by GATT members.
6. SUBSIDIES AND COUNTERVAILING MEASURES
U.S. Objectives
U.S. negotiating objectives in the subsidies negotiations were to:
— clarify and strengthen multilateral subsidy rules and disciplines,
— extend the application of disciplines to unfair practices not adequately covered by existing rules (e.q., resource input subsidies and export targeting practices), maintain the effectiveness of the U.S. countervailing duty law, and
— elevate the level of obligations imposed upon developing countries, at least in those areas where they are globally competitive. Many other countries, while interested in clarifying multilateral subsidy rules, were also intent on restricting the application of countervailing duty remedies and in protecting certain forms of subsidies from any type of trade action.
Results
The new agreement strikes a balance between these various interests, establishing clearer rules and stronger disciplines in the subsidies area while also making certain subsidies non-actionable, provided they are subject to conditions designed to limit distortive effects.
Key Provisions
Definition of Subsidy: The Agreement creates three categories of subsidies and remedies: (1) prohibited subsidies; (2) permissible subsidies which are actionable multilaterally and countervailable unilaterally if they cause adverse trade effects; and (3) permissible subsidies which are non-actionable and non-countervailable if they are structured according to criteria intended to limit their potential for distortion. The Agreement, for the first time in GATT, defines a subsidy (on the basis of a "financial contribution" which confers a benefit) and the conditions which must exist in order for a subsidy to be actionable (i.e., U.S. rules on "specificity").
Prohibited Subsidies: The Agreement prohibits export subsidies, including de facto export subsidies, and subsidies contingent upon the use of local content. It also makes operational the rules for demonstrating when the use of subsidies by a country has adversely affected another country's trade interests through price or volume/market share effects (i.e., "serious prejudice"), and creates an obligation to withdraw the subsidy or remove the adverse effects when such effects are identified. The Agreement
establishes a presumption of serious prejudice in situations where the total ad valor em subsidization of a product exceeds 5 percent (calculated on the basis of the cost to the subsidizing government of granting the subsidies), or when subsidies are provided for debt forgiveness or to cover a firm's or an industry's operating losses.
Non-actionable Subsidies: Subject to specific, limiting criteria, the Agreement makes the following types of subsidies non-actionable: (1) certain government assistance for industrial research and pre-competitive development activity, (2) certain government assistance for regional development, and (3) certain government assistance to adapt existing plant and equipment to new environmental requirements.
Government assistance for industrial research and development is non-actionable if the assistance for "industrial research" is limited to 75 percent of eligible research costs and the assistance for "pre-competitive development activity" (equivalent to applied research and development activities essentially through the creation of the first, non-commercial prototype) is limited to 50 percent of eligible costs.
In addition, government assistance for regional development is non-actionable to the extent that the assistance is provided within regions that are determined to be disadvantaged on the basis of neutral and objective criteria and the assistance is not targeted to a specific industry or group of recipients within eligible regions. Finally, government assistance to meet environmental requirements is non-actionable to the extent that it is limited to a one-time measure equivalent to 20 percent of the costs of adapting existing facilities to new standards and does not cover any manufacturing cost savings which may be achieved.
Both the non-actionable subsidy provisions and the provisions establishing a rebuttable presumption of serious prejudice will expire automatically 5 years after the entry into force of the agreement, unless it is decided to continue them in current or modified form.
Other provisions: The Agreement makes CVD rules more precise, and in many cases reflects U.S. practice and methodologies. For example, for the first time, GATT rules will explicitly recognize U.S. "benefit-to-the-recipient" calculation methodologies in order to determine the "benefit conferred" by subsidies in CVD cases.
The Agreement imposes multilateral subsidy disciplines on developing countries although subject to certain derogations A framework has been established for the gradual elimination of export subsidies and local content subsidies maintained by developing countries. Moreover, export subsidies used in a given product sector must be phased out over 8 years (for least developed countries) or 2 years (for other developing countries) whenever the country's share of world trade in that sector reaches 3.25 percent during 2 consecutive years.
7. TRADE-RELATED INVESTMENT MEASURES
U.S. Objectives
The principal trade negotiating objective of the United States regarding trade-related investment measures (TRIMS) was to reduce or eliminate the trade distortive effects of certain trade-related investment measures.
Results
The Agreement prohibits local content and trade balancing requirements. This prohibition will apply whether the measures are mandatory or are required in return for an incentive/advantage. A transition period of 5 years will be afforded for developing countries to eliminate existing prohibited measures, but only if they notify the GATT regarding each specific measure. Only two years is provided for developed countries. (Investment issues are also dealt with in the General Agreement on Trade in Services.)
Key Provisions
Prohibition of TRIMS: The TRIMS agreement reinforces GATT obligations by providing (1) that no party shall apply TRIMS that are inconsistent with the GATT and (2) an illustrative list of prohibited measures, specifically identifying local content requirements and trade balancing requirements as falling within this prohibition. These measures are prohibited whether they are mandatory conditions on investment or are required in return for an incentive/advantage.
Notification and Transition: A transition period of 5 years is provided for developing countries (2 years for developed countries) to eliminate prohibited TRIMS. The transition period is 7 years for the least developed countries. To be eligible for the transition period, parties must notify the GATT regarding each specific measure.
Competitive Disadvantage: The Agreement includes a provision that permits countries to place a TRIM on a new firm for the duration of the relevant transition period where necessary to avoid disadvantaging existing investments that are subject to a TRIM. This is a point that is of particular importance to U.S. firms that are currently burdened by TRIMS.
Investment and Competition Policy: Not later than 5 years after entry into force there will be a review of the operation of the Agreement. As part of this review, the WTO Council for Trade in Goods will consider whether the Agreement should be complimented with provisions on investment policy and competition policy.
8. IMPORT LICENSING PROCEDURES
U.S. Objectives
The objectives of the United States regarding the Agreement on Import Licensing Procedures were to tighten the definitions and disciplines in the Agreement with regard to automatic and non-automatic licensing and to provide for a number of procedural improvements.
Results
The Agreement more precisely defines automatic and non-automatic licensing.
Key Provisions
Licensing Requirements: For signatories maintaining licensing requirements and procedures, changes in license application procedures for both automatic and non-automatic licenses must be published at least 21 days prior to implementation of the change in procedure. The time period available to importers for submission of license applications must be at least 21 days, with provisions for extensions in certain cases.
Non-Automatic Licenses: Non-automatic licensing procedures must intensify the measures they are designed to implement and cannot be more administratively burdensome than absolutely necessary. The processing of individual applications for non-automatic licenses must be completed within a period of 30 days, and within 60 days if all applications are considered simultaneously.
New Procedures: Signatories that institute new licensing procedures or change existing procedures must notify the Import Licensing Committee of the action within 60 days and include information covering:
— products subject to licensing, — points of contact for information on licensing, — the administrative body for submission of applications for licensing, — where licensing procedures are published, — whether the procedure is automatic or non-automatic, — the administrative purpose of automatic licensing, — the measure being implemented through non-automatic licensing, and — the expected duration of the procedure, if known.
If a signatory adopts new licensing procedures or changes existing licensing procedures and does not report those changes to the Committee, another signatory may report the actions.
9. CUSTOMS VALUATION
U.S. Objectives
The objectives of the United States concerning the Customs Valuation Code (Code) were to improve the capabilities of and clarify the rights and obligations of customs administrations in investigating and taking action against fraudulent customs declarations, to ensure that bilateral agreements reached did not undermine or weaken the existing obligations of the Code and to try to increase the membership of developing countries in the Code.
Results
The negotiations resulted in three amendments to the Code which will :
— further clarify the rights and obligations of both importing and exporting countries in cases of suspected fraud;
— instruct the Customs Valuation Committee to accord sympathetic consideration to requests to retain officially established minimum values under paragraph 3 of the Protocol to the Agreement on Implementation of Article VII of the GATT; and
— encourage developing countries, with the assistance of the Brussels-based Customs Cooperation Council, to undertake studies in areas of concern relating to the valuation of goods imported by sole agents, sole distributors and sole concessionaires.
10. PRESHIPMENT INSPECTION
U.S. Objectives
The principal objectives of the United States in negotiating the Agreement on preshipment inspection were to regulate the activities of Preshipment Inspection ("PSI") companies and to reduce or eliminate the impediments to international trade for U.S. exporters resulting from the use of such companies by developing countries to supplement or replace national customs services. A third objective was to set up a dispute settlement mechanism to resolve disputes quickly between PSI companies and exporters.
Results and Key Provisions
The Agreement provides that user countries ensure:
— that the activities of PSI companies be carried out on a non-discriminatory basis for all exporters;
— that quantity and quality inspections are in accordance with the purchase agreement or with international standards;
— that price verification activities be conducted according to prescribed guidelines which include providing the exporter with opportunities to explain his price;
— that inspection operations be performed in a transparent manner and exporters be immediately informed of all procedural requirements necessary to obtain a clean report of findings;
— that PSI companies maintain procedures that treat all business information not in the public domain as confidential;
— that procedures be maintained to preclude conflict-of-interest relationships between a PSI company and other entities;
— that unreasonable delays be avoided; and a guideline of five working days tip established for PS companies to provide a clean report of findings or a detailed explanation of why not;
— that, if requested by the exporter, a preliminary verification of price be undertaken by the PSI company based only on the contract and the pro forma invoice; and
— that PSI companies set up an appeals procedure to make decisions concerning grievances raised by exporters.
In addition, the Agreement establishes a review procedure to expedite the resolution of grievances or disputes that cannot be resolved bilaterally. The review will be administered by an "independent entity," under the joint supervision of the International Chamber of Commerce and the International Federation of Inspection Agencies, which will establish panels to review disputes. The decision of the panel will be binding on the parties to the dispute.
11. RULES OF ORIGIN
U.S. Objectives
The U.S. objective in pursuing an Agreement on Rules of Origin was to develop a multilateral and harmonized set of rules for the determination of the origin of goods that would afford greater predictability for U.S. exporters, importers and manufacturers in the international trading environment.
Results
The Agreement establishes a three-year work program to harmonize rules of origin among the GATT contracting parties. The results of this work program will be annexed as an integral part of the Agreement. The Agreement establishes a GATT Committee on Rules of Origin and a Customs Cooperation Council Technical Committee on Rules of Origin. These committees are to develop, within three years, detailed definitions on which to base harmonized rules of origin.
Key Provisions
Disciplines: The Agreement sets out the disciplines that the contracting parties intend to be applied as a result of the achievement of harmonized rules of origin. Some of these disciplines are:
— rules of origin applied to imports and exports shall not be more stringent than rules of origin applied to domestic goods;
— rules of Origin shall be administered in a consistent, uniform, impartial and reasonable manner;
— requests for assessment of origin of a good shall be issued not later than 150 days of a request, and such assessments shall remain valid for three years;
— changes in rules of origin, or new rules of origin, shall not be applied retroactively; and
— any information provided on a confidential basis for the purpose of application of rules of origin is to be treated as strictly confidential by the authorities concerned.
Transition Rules: The Agreement provides for similar disciplines to be observed during the three year work program to harmonize non-preferential rules of origin. That work program is likely to begin in the Spring of 1994. During this transition period, criteria used to establish origin must precisely and specifically define the requirements to be met. These rules of origin are not to be used to influence trade or to create distortions or restrictions of trade. In addition, contracting parties are required to publish changes to their rules of origin at least sixty days before such changes come into effect.
12. TECHNICAL BARRIERS TO TRADE
U. S. Objectives
The principal negotiating objective of the United States was to improve the 1979 Agreement on Technical Barriers to Trade (TBT) and expand country participation in the TBT.
Results
The new Agreement improves the rules respecting standards, technical regulations and conformity assessment procedures. Furthermore, every country that is a Member of the new World Trade Organization will be required to adhere to the new TBT Agreement.
Key Provisions
Standards and Technical Regulations: The new TBT ensures that each country has the right to establish and maintain standards and technical regulations for the protection of human, animal and plant life and health and of the environment and for prevention against deceptive practices. The Agreement provides that each country may determine its appropriate level of protection and ensures that the encouragement to use international standards will not result in downward harmonization. Standards and regulations may specify product characteristics and related processes and production methods. At the same time, it ensures that product standards and related procedures do not create unnecessary obstacles to trade.
Conformity Assessment Procedures: The Agreement covers the range of conformity assessment procedures (e.g., registration, inspection, laboratory accreditation) used to determine conformance to a technical regulation or standard. Disciplines concerning the acceptance of results of conformity assessment procedures by another country have also been improved. Finally, it enhances the ability of a foreign-based laboratory or firm to gain recognition under another country's laboratory accreditation, inspection or quality system registration scheme.
Other Rules: The Agreement guarantees the transparency of product standards creation and related procedures by requiring advance notice and opportunity for comment. The Agreement establishes a Committee on Technical Barriers to Trade that provides a framework for avoiding and resolving disputes.
13. SANITARY AND PHYTOSNITARY MEASURES
U.S. Objectives
A principal negotiating objective of the United States was the elimination of unjustified sanitary and phytosanitary restrictions on agricultural trade, without impairing the right of the United States or the states to establish and apply appropriate measures to protect public health and control plant and animal pests and diseases.
Results
The Agreement on the Application of Sanitary and Phytosanitary ("S&P") Measures establishes rules and disciplines for the development and application of S&P measures -- i.e., measures taken to protect human, animal or plant life or health in the areas of food safety and agriculture. These new rules and disciplines will guard against the use of unjustified S&P measures against U.S. agricultural exports. At the same time, U.S. animal and plant health measures and food safety requirements are protected.
Key Provisions
S&P measures include a wide range of health protection measures, for example, quarantine procedures, food processing and production measures, meat slaughter and inspection rules, and procedures for approval of food additives or for the establishment of pesticide tolerances.
The S&P agreement clearly recognizes and acknowledges the sovereign right of each country to establish laws, regulations and requirements necessary to protect life and health, but specifies rules and disciplines intended to prevent a contracting party from using S&P measures as disguised barriers to trade.
The agreement requires that a government's S&P measures be based on scientific principles and sufficient scientific evidence (while explicitly permitting governments to act on a provisional basis where relevant scientific evidence is insufficient). A government may determine whatever level of health protection it deems appropriate for its population, but must avoid arbitrary or unjustifiable distinctions in the levels it deems appropriate if this would discriminate between imported products and domestic products or create a disguised barrier to trade.
The agreement generally requires the use of international standards as a basis for S&P measures, but each government remains free to adopt an S&P measure more stringent than the relevant international standard where the more stringent measure is based on available scientific evidence and risk assessment as provided in the Agreement or where it is the consequence of the level of protection that the government has determined is appropriate.
The agreement also ensures increased transparency in the process of establishing S&P measures by requiring advance notice and opportunity for comment and national inquiry points.
14. SERVICES
U.S. objectives
The principal trade negotiating objectives of the United States regarding trade in services were:
— to reduce or to eliminate barriers to, or other distortions of, international trade in services, including barriers that deny national treatment and restrictions on establishment and operation in such markets;
— to develop internationally agreed rules, including dispute settlement procedures, which will reduce or eliminate such barriers or distortions, and help ensure fair, equitable opportunities for foreign markets; and
— to pursue these objectives while taking into account legitimate U.S. domestic objectives including, but not limited to, the protection of legitimate health or safety, essential security, environmental, consumer or employment opportunity interests and the law and regulations in those areas.
Results
The General Agreement on Trade in Services (GATS) is the first multilateral, legally enforceable agreement covering trade and investment in the services sectors. The GATS also provides a specific legal basis for future negotiations aimed at eliminating barriers that discriminate against foreign services providers and deny them market access.
Key Provisions
Framework: The principal elements of the GATS framework agreement include most-favored-nation (MFN) treatment, national treatment, market access, transparency and the free flow of payments and transfers. The rules embodied in the framework are augmented by sectoral annexes dealing with issues affecting financial services, movement of personnel, enhanced telecommunications services and aviation services.
Schedules: Complementing the framework rules and annexes are binding commitments to market access and national treatment in services sectors that countries schedule as a result of bilateral negotiations. In order to fulfill the market access and national treatment provisions of the GATS, each government has submitted a schedule of market access commitments in services which will become effective upon entry into force of the GATS. Countries are also permitted to take one-time exemptions from the most-favored-nation provision in the GATS.
Schedules of commitments include horizontal measures such as commitments regarding movement of personnel and service providers. The schedules also include commitments in specific sectors, such as: professional services (accounting, architecture, engineering), other business services (computer services, rental and leasing, advertising, market research, consulting, security services), communications (value-added telecommunications, couriers, audio-visual services), construction, distribution (wholesale and retail trade, franchising), educational services, environmental services, financial services (banking, securities, insurance), health services and tourism services. Maritime and civil aviation commitments were also scheduled by a small number of countries.
National Treatment: The GATS contains a strong national treatment provision that requires a country to accord to services and services suppliers of other countries treatment no less favorable than that accorded to its own services and services suppliers. It specifically requires GATS countries to ensure that their laws and regulations do not tilt competitive conditions in the domestic market against foreign firms in scheduled services sectors, i.e., those listed in its schedule of commitments.
Market Access: The GATS also includes a market access provision which incorporates disciplines on six types of discriminatory measures that governments frequently impose to limit competition or new entry in their markets. These laws and regulations -- such as restrictions on the number of firms allowed in the market, economic "needs tests" and mandatory local incorporation rules -- are often used to bar or restrict market access by foreign firms. A country must either eliminate these barriers in any sector that it includes in its schedule of commitments or negotiate with its trading partners for their limited retention.
Additional Provisions: For services companies who benefit from sectoral commitments, the framework also guarantees the free flow of current payments and transfers. The provision on transparency requires prompt publication of all relevant measures covered by the agreement. The GATS allows countries to enter into free trade arrangements with other countries and to establish mutual recognition agreements for licensing, qualifications or standards. Disputes over barriers to trade in services will be settled under the new strengthened rules of the Dispute Settlement Understanding.
The GATS also recognizes the right to regulate or introduce new regulations. Exceptions to the GATS are provided for national security, safety, human, animal and plant life or health, prevention of fraudulent practices, protection of privacy, and measures taken pursuant to tax laws.
Subject to negotiations, specific laws or regulatory practices may be exempted from MFN treatment, by listing them in an annex provided for that purpose. This mechanism allows countries to preserve their ability to use unilateral measures as a means of encouraging trade liberalization.
Future Negotiations: Given the breadth and complexity of the services sector, the GATS provides for the progressive liberalization of trade in services. Successive rounds may be commenced at five-year intervals to allow improvements in market access and national treatment commitments and to allow liberalization of MFN exemptions. The GATS also sets out terms for the negotiation of several framework provisions which currently contain no substantive disciplines such as subsidies ! government procurement, and emergency safeguard actions. In addition, Ministerial Decisions related to the GATS will establish work programs in several areas such as trade and the environment, long distance basic telephone services, maritime transport services and reduction of barriers to trade in professional services.
15. TRADE-RELATED INTELLECTUAL PROPERTY RIGHTS
U.S. Objectives
The principle negotiating objectives of the United States with respect to trade-related intellectual property rights (TRIPS) were to:
— implement adequate standards for the protection of copyrights, patents, trademarks, semiconductor chip layout designs, trade secrets and to prohibit unfair competition,
— establish effective enforcement procedures internally and at the border, and
— implement effective dispute settlement procedures that improve on existing GATT procedures.
Results
The TRIPS agreement establishes improved standards for the protection of a full range of intellectual property rights and the enforcement of those standards both internally and at the border. The intellectual property rights covered by the agreement are: copyrights, patents, trademarks, industrial designs, trade secrets, integrated circuits (semiconductor chips) and geographical indications.
The TRIPS text is covered by the Dispute Settlement Understanding, thus ensuring application of the improved dispute settlement procedures, including the possibility of imposing trade sanctions, such as increasing tariffs, if another Member violates TRIPS obligations.
The TRIPS agreement achieves improved standards of protection in the areas of key interest to the United States. In the area of protection of geographic indications, the U.S. wine industry and trademark owners are safeguarded and we will simply make permanent existing regulations.
The agreement also includes strong enforcement provisions that are critical to obtaining effective enforcement of the agreed standards. Members must also enforce copyrights and trademarks at their borders against counterfeiting and piracy.
Key Provisions
Copyrights: The text resolves some key trade problems for U.S. software, motion picture and recording interests by:
— protecting computer programs as literary works and databases as compilations under copyright;
— imposing an obligation on Members to grant owners of computer programs and sound recordings the right to authorize or prohibit the rental of their products;
— establishing a term of 50 years for the protection of sound recordings as well as requiring Members to provide protection for existing sound recordings; and
— setting a minimum term of 50 years for the protection of motion pictures and other works where companies may be the author
The Agreement also obligates Members to comply with the provisions of the Berne Convention, the preeminent international copyright treaty, with the exception of that Convention's requirements on moral rights.
Patents: The Agreement resolves long-standing trade irritants for U.S. patent interests, especially pharmaceutical and agricultural chemical companies. Key benefits provided under the Agreement are:
— product and process patents for virtually all types of inventions, including pharmaceuticals and agricultural chemicals;
— meaningful limitations on the ability to impose compulsory licensing;
— a patent term of 20 years from the date the application is filed; and
— prompt implementation of procedures to permit the filing of patent applications covering pharmaceuticals and agricultural chemicals upon the entry into force of the agreement.
Trademarks: The Agreement:
— requires Parties to register service marks in addition to trademarks;
— enhances protection for internationally well-known marks;
— prohibits the mandatory linking of trademarks;
— prohibits the compulsory licensing of marks.
Other Protections: The Agreement also provides rules for protecting:
— trade secrets which enable owners to prevent unauthorized use or disclosure of confidential information;
— integrated circuits that eliminate the deficiencies of the Washington Treaty;
— industrial designs consistent with existing U.S. laws; and
— non-generic geographical indications used to identify wines and spirits.
Finally, the Agreement contains obligations to provide effective enforcement for these intellectual property rights, both internally and at the border (including safeguards to prevent abuses), and specific provisions on injunctions damages and obtaining evidence.
16. DISPUTE SETTLEMENT
U.S. Objectives
In the negotiations on dispute settlement, the United States sought to improve, strengthen and increase the transparency of the GATT dispute settlement procedures and to ensure that all of the Uruguay Round Agreements were subject to a single effective dispute settlement system. The principal negotiating objectives of the United States with respect to dispute settlement were:
— to provide for more effective and expeditious dispute settlement mechanisms and procedures; and
— to ensure that such mechanisms within the GATT and Uruguay Round agreements provide for more effective and expeditious resolution of disputes and enable better enforcement of U.S. rights.
Results
The Dispute Settlement Understanding (DSU) creates new procedures for settlement of disputes arising under any of the Uruguay Round agreements. It significantly improves the existing system by providing strict time limits for each step in the dispute settlement process. The effectiveness of the system is also improved through provisions guaranteeing a right to a panel, adoption of panel reports unless there is a consensus to reject the report, appellate review of the legal aspects of a report on request, time limits on when a Member must bring its laws into conformity with panel rulings and recommendations and authorization of retaliation in the event that a Member has not brought its laws into conformity with its obligations within that set period of time. There will be a single system that will apply the strengthened rules and procedures to all disputes with only minor exceptions. A single panel will now be able to address all issues raised under any of the covered agreements. Public access to information about disputes is increased.
Key Provisions
The dispute settlement process can be completed within 16 months from the request for consultations even if there is recourse to the DSU appellate body. If a Member does not implement the panel's recommendations within the established time frame, the complaining party can seek authorization of retaliation. Such retaliation can consist of increases in bound tariffs or other actions. This may be authorized even if there is a violation of the TRIPS or GATS agreement.
The DSU includes improvements in providing access to information in the dispute settlement process. It contains a requirement that parties to a dispute provide non-confidential summaries of their panel submissions that can be provided to the public, and recognition that a party can disclose its submissions and positions to the public at any time that it choose. It expressly authorizes panels to form expert review groups to provide advice on scientific or other technical issues of fact.
The DSU requires Members to use the dispute settlement mechanism when they seek redress of a violation of one of the agreements or nullification or impairment of the benefits of the agreements. U.S. law currently requires recourse to GATT dispute settlement in cases involving a trade agreement, prior to taking other actions.
The automatic nature of the new procedures will vastly improve the enforcement of the substantive provisions in each of the agreements. Other countries will not be able to block the adoption of panel reports. Members will have to implement obligations promptly and the United States will be able to take authorized trade action if Members fail to act.
If Members of the DSU do not comply with their obligations at the end of the dispute settlement process, trade action under section 301 of the Trade Act of 1974 will be legitimized and there will be no risk of counter-retaliation.
17. WORLD TRADE ORGANIZATION
U.S. Objectives
The principal trade negotiating objectives of the United States regarding the improvement of GATT and multilateral trade negotiation agreements were
— to enhance the status of the GATT;
— to improve the operation and extend the coverage of the GATT and such agreements and arrangements to products, sectors, and conditions of trade not adequately covered; and
— to expand country participation in particular agreements or arrangements, where appropriate.
Results
The Agreement Establishing the World Trade Organization (WTO) facilitates the implementation of trade agreements in the diverse areas of trade in goods, trade in services and the protection of trade-related intellectual property rights.
The WTO would encompass the current GATT structure and extend it to new disciplines that have not been adequately covered in the past. By bringing together disciplines on government practices affecting trade in goods and services and the protection of intellectual property rights under one institutional umbrella, the WTO Agreement also facilitates the "cross-retaliation" mechanism of the integrated dispute settlement understanding.
In addition, the WTO will help to resolve the "free rider" problem in the world trading system. The WTO system is available only to countries that are contracting parties to the GATT, agree to adhere to all of the Uruguay Round agreements, and submit schedules of market access commitments for industrial goods, agricultural goods and services. This will eliminate the shortcomings of the current system in which, for example, only a handful of countries have voluntarily adhered to disciplines on subsidies under the 1979 Tokyo, Round agreement.
The WTO Agreement establishes a number of institutional rules (described below) that will be applied with respect to all of the Uruguay Round agreements. The agreement will establish an international organization with a stature commensurate with that of the Bretton Woods financial institutions, the World Bank and International Monetary Fund. The organization would not be different in character from that of the existing GATT Secretariat, however, nor is it expected to be a larger, more costly, Organization.
Key Provisions
Trade and Environment: The WTo Agreement includes in its preamble language recognizing the importance of environmental concerns. This addresses a key interest among U.S. environmental and conservation groups, which have often expressed concern that our international trade agreements have failed to take environmental issues into account. WTO negotiators have also agreed to develop a work program on trade and environment to ensure the responsiveness of the multilateral trading system to environmental objectives.
Decision-making: The United States was successful in its effort to retain the practice of general decision-making by consensus followed under the GATT since 1947. Consensus is defined as being achieved "if no Member, present at the meeting where the decision is taken, formally objects to the proposed decision." This will continue to enable the United States to prevent the application to us of a decision that we perceive to be contrary to our interest.
Amendments: Similarly, the agreement permits amendments but ensures that an amendment of the substantive rights and obligations will not be binding on the United States without its acceptance of the amendment. In contrast, amendments to purely procedural provisions of the Uruguay Round agreements will be binding on all Members in order to avoid the destabilizing effect that would result if different Members were subject to different procedural rules.
Waivers: The agreement allows the Members to grant waivers of substantive provisions in the various Uruguay Round agreements, but only in exceptional circumstances and, in the case of an obligation subject to phased-in implementation (such as those in the TRIPS agreement) that has not yet been fulfilled by the requesting Member, only by consensus. Also, the waiver provision substantially increases the threshold for obtaining waivers from two-thirds of Members present to three-quarters of all Members. Any waivers granted are subject to specific conditions, including a date on which the waiver will terminate.
Interpretations: The WTO Agreement clarifies that the reports of dispute settlement panels do not constitute "authoritative" interpretations of the relevant agreements. Only the Members themselves (acting through the Ministerial Conference or General Council) could adopt such an interpretation. The agreement also states that interpretations should not be used in a manner that would undermine the amendment provisions.
Non-application: The agreement does not permit sector non-application. Thus, for example, India is precluded from not applying the TRIPS agreement to the United States. With respect to Members of the WTO that accede to the WTO but are not "original Members" (generally, are not GATT contracting parties), a Member can invoke "global" non-application. Thus, with respect to the People's Republic of China and possibly other acceding Members, the United States can choose not to apply the GATT and the Uruguay Round agreements to that country as a whole.
Definitive application: In joining the WTO Agreement, a Member agrees to the definitive application of the obligations of the Uruguay Round multilateral trade agreements. (Accession to the Plurilateral Trade Agreements, such as the Agreement on Government Procurement, is limited to those Members that affirmatively accept these agreements.) Annex 1 to the WTO Agreement eliminates the Protocol of Provisional Application and corresponding provisions in Protocols of Accession to the GATT that had the effect of "grand fathering" certain existing legislation of contracting parties that are inconsistent with the GATT. However, Annex 1 includes a clause that protects from GATT challenge U.S. maritime laws relating to Cabot age ("Jones Act").
18. GATT ARTICLES
U.S. Objectives
The mandate of the GATT Articles negotiating group was to discuss improvements to any GATT provision not being negotiated elsewhere, as members felt necessary. The United States had several priorities in the negotiations:
— to tighten GATT exemptions invoked by developing countries with balance-of-payments difficulties (Article XVIII, Section B);
— to clarify GATT disciplines and reporting obligations which apply to state trading enterprises (Article XVII); and
— to strengthen the obligations pertaining to preferential trading arrangements (Article XXIV).
Results and Key Provisions
The balance-of-payments reform (BOP) text increases disciplines and transparency over the use of BOP measures. The text provides that when a country is experiencing serious balance of payments problems, it will impose the least trade distortive trade measures (import surcharges instead of quantitative restrictions for the shortest period of time possible. It contains a commitment for the least developed countries to announce a plan for the liberalization of such measures. It also provides for more rigorous GATT surveillance of BOP-related trade restrictions and guarantees full rights for GATT members to use GATT dispute settlement procedures to challenge any matter arising from the application of BOP measures.
The state trading text affirms the obligation of GATT contracting parties to ensure that their state trading enterprises -- government-operated import/export monopolies and marketing boards, or private companies that receive special or exclusive privileges from their governments to engage in trading activities -- operate in accordance with GATT rules. The text also provides for improved reporting: it establishes a working party to formulate an illustrative list of the activities of state trading enterprises and to examine state trading notifications.
The text on preferential trading arrangements clarifies the GATT rules that pertain to regional arrangements (customs unions and free trade arrangements) and defines the state/local relationship in regard to GATT obligations.
The understanding on the interpretation of Article II:1(b) of the GATT clarifies that "other duties or charges" levied on bound tariff items shall be recorded in each Member's schedule of tariff concessions.
The understanding in respect of waivers of obligations under the GATT will ensure that existing waivers are time-limited, and that future waivers are subject to greater conditions and disciplines. Also, a separate understanding will clarify the rights and obligations of GATT members that seek to modify or withdraw tariff concessions in the future.
Under Article XXXV, parties would be able to engage in tariff negotiations without prejudicing their right to invoke non-application of the GATT (1994) or the WTO.
19. TRADE POLICY REVIEW MECHANISM
U.S. Objectives
The United States sought to clarify the role of the GATT in the world economy and to ensure greater transparency in application of GATT members' trade measures.
Results and Key Provisions
The Final Act confirms an April 1989 agreement by Ministers establishing the Trade Policy Review Mechanism (TPRM), which would examine, on a regular basis, national trade policies and other economic policies having a bearing on the international trading environment.
The text makes permanent an agreement to conduct annual reviews of the operation of the trading system. The text reconfirms existing notification requirements and calls for the establishment of a central registry of notifications that are made under various agreements (e.q., standards, subsidies).
20. MINISTERIAL DECISIONS AND DECLARATIONS
The Ministerial Decisions and Declarations state the views and objectives of the Uruguay Round participants on a number of issues relating to the operation of the global trading system, provide for the continuation of the improvements to the dispute settlement system that became effective in 1989 and deal with other matters concerning the operation of the dispute settlement system. The Ministerial Decisions and Declarations that are now proposed for adoption are the following:
Decision On Measures in Favor of Least-Developed Countries: providing an additional period of one year for least developed developing countries to submit their market access schedules, establishing review process to evaluate measures taken in favor of least developed countries, and providing for special consideration of import relief and other measures.
Declaration on the Contribution of the WTO To Achieving Greater Coherence In Global Economic policymaking: setting forth a statement of aspirations concerning the WTO, its interaction with international financial institutions, and its role in global economic policy making.
Decision on Notification Procedures: reaffirming the general notification obligation, creating a central registry of notifications, and providing for review of notification obligations and procedures.
Customs Valuation
Decision Regarding Cases where Customs Administrations have Reasons to Doubt the Truth or Accuracy of the Declared Value: providing working principles for use by customs administrations where truth or accuracy of the declared value of goods is in doubt.
Texts Relating to Minimum Values and Imports by Sole Agents. Sole Distributors and Sole Concessionaires: referring texts for consideration and possible adoption by Committee on Customs Valuation.
Technical Barriers to Trade
Proposed Understanding on WTO-ISO Standards Information System: recommending that the WTO Secretariat reach an understanding with the ISO to establish an information system.
Decision on Review of the ISO/IEC Information Centre Publication: providing for an annual opportunity to discuss matters relating to the code of good practice.
Decision on Measures Concerning The Possible Negative Effects of the Reform Program On Least-Developed and Net Food-Importing Developing Countries: concerning food-aid programs and other measures to ensure that least-developed and net food-importing countries can obtain assistance in meeting food needs.
General Agreement on Trade in Services
Decision on Institutional Arrangements for the GATS: setting forth recommendations for subsidiary bodies to be authorized by the Council for Trade in Services.
Decision on Certain Dispute Settlement Procedures for the GATS: setting forth special and additional dispute settlement procedures.
Decision concerning Paragraph (b) of Article XIV of the GATS: authorizing formation of a Working Party to examine possible modification to Article XIV of the Agreement to examine further the relationship between the environment and trade in services.
Decision on Negotiations on Basic Telecommunications: setting forth terms of reference for future negotiations on the basic telecommunications sector.
Understanding on Commitments in Financial Services: setting forth alternative approach to scheduling of specific commitments in the financial services sector.
Decision on Financial Services: allowing for suspension of MFN exemptions for six-month period following entry into force of the Agreement to facilitate adjustment of schedules.
Decision concerning Professional Services: recommending creation of a Working Party on professional services to examine technical standards and licensing requirements in the professional services sector.
Decision on Movement of Natural Persons: setting forth terms of reference for future negotiations regarding movement of natural persons and their relationship to trade in services.
Decision on Maritime Transport Services: setting forth terms of reference for future negotiations regarding maritime transport services.
Decision on Implementation of Article XXIV:2 of the Agreement on Government Procurement: setting forth procedures for notification of a country's intention to accede to the Agreement and the accession process.
Decision on the Application and Review of the understanding on Rules and Procedures Governing the Settlement of Disputes: providing for the continued application of the Understanding until the WTO Agreement enters into effect, and providing for a review of the Dispute Settlement Understanding to be completed four years after the date of entry into force.
Decision on Improvements to the GATT Dispute Settlement Rules and Procedures: providing for the continued application of 1989 improvements to dispute settlement rules and procedures until date of entry into force of the WTO Agreement.
Agreement on Implementation of Article VI of GATT 1994
Statement on Anti-Circumvention: referring the issue of circumvention of anti dumping duty measures to the Committee on Anti-Dumping Practices.
Statement on Standard of Review for Dispute Settlement Panels: providing for a review of Article 17.6 of the Agreement three years after entering into force.
Statement on Dispute Settlement pursuant to the Agreement on Implementation of Article VI of GATT 1994 or Part V of the Agreement on Subsidies and Countervailing Measures 1994: recognizing the need for consistent resolution of disputes arising from anti dumping and countervailing duty measures.
21. GOVERNMENT PROCUREMENT
U.S. Objectives
In the negotiations on Government Procurement, the U.S. government objectives were to expand coverage of the agreement to open significant export opportunities in new areas of procurement, including telecommunications and heavy electrical equipment, sub central (state and municipal) procurement, services and construction. In addition, the United States sought better enforcement of the Code by requiring signatories to establish an effective bid protest system and tighten other disciplines.
Results
The United States has concluded a new Agreement on Government Procurement to replace the existing agreement. This new Agreement expands coverage to significant new areas of procurement and improves the disciplines applicable to government procurement. In addition to the current members of the Agreement (European Community, Japan, Canada, the Nordic countries, Hong Kong, Switzerland, Austria and Israel), Korea has agreed to join.
In contrast to the existing agreement, which covers only central government procurement of goods, the new Agreement includes procurement of services and construction and some coverage of sub central governments and government-owned utilities. The United States and EC, in particular, have agreed to seek expansion of their bilateral coverage packages to sub central and government-owned utilities by April 15, 1994. At the same time, the new Agreement contains provisions that will improve enforcement of the Agreement's disciplines, as well as provisions anticipating future changes in procurement practices, such as streamlining procurement and electronic contracting.
Key Provisions
Effective Date: The new Agreement will go into force on January 1, 1996 with respect to all signatories, except for Hong Kong and Korea, for which the Agreement will be effective by no later than January 1, 1997.
Publication: Central government entities must publish a notice of each procurement in a readily available centralized publication. State and local government entities and government-owned utilities may publish once a year a notice regarding a qualification system or a forecast of anticipated procurements, which serves as an invitation to participate in all related procurements over the forthcoming year. These entities must follow up by transmitting specific information on such procurements to all those firms that have responded to the notice but can limit invitations to tender (i.e., an RFP) to selected firms from a list of qualified firms.
Bid Deadlines: Although the general rule on bid deadlines remains 40 days, under certain circumstances, deadlines can be reduced to not less than ten days.
Development of Technical Specifications: Entities at all levels of government are encouraged to establish technical specifications in terms of performance rather than design and on the basis of accepted international or national standards, where appropriate. They must not be formulated or communicated on a discriminatory basis.
Quality of Life Restrictions: Government entities can claim exemptions for recycled products and other "quality of life" restrictions under the Agreement, as long as they are not "a means of arbitrary or unjustifiable discrimination."
Notification of Losing Bidders: Entities at all levels must "promptly" inform bidders of decisions; on contract award, either orally or in writing, if requested.
Bid Protest: In a significant improvement over the existing agreement, Government entities at all levels must provide non-discriminatory, timely, transparent and effective procedures enabling suppliers and service providers to challenge alleged breaches of the procedural provisions of the Agreement. A challenge must be heard by an impartial and independent review body with no interest in the outcome of the procurement and whose members are secure from external influence during the term of appointment. In addition, in the event the review body is not a court, the Agreement requires the body to apply court-like procedures. Finally, the procedures must provide for the possibility of procurement suspension while a challenge is being heard and compensation for the loss or damages, including costs for tender preparation or protest, or reversal after an award decision has been made.
Offsets: The Agreement prohibits the use of offsets as a condition for award unless a derogation is specified in a country's schedule. This is a substantial improvement over the existing Code, which authorizes offsets.
Dispute Settlement: The Agreement provides that the provisions of the Dispute Settlement Understanding will apply with a few exceptions. In recognition of the special nature of procurement, the Agreement urges that the dispute resolution panel make every effort to reduce the time frames set forth in the Understanding for reaching decisions. The Agreement limits the Dispute Settlement Body, which is charged with establishing panels, making recommendations and authorizing suspension of concessions, to signatories to the Agreement. Finally, the Agreement expands potential remedies in the event that the normal remedy of withdrawing the inconsistent measures is not possible.
Coverage
The Agreement will govern procurement by central government entities of goods and services above a threshold of 130,000 SDRs (approximately $182,00) and of construct:ion services above a threshold of 5 million SDRs (approximately S6-5 million). The United States has agreed to cover procurement by all executive agencies subject to the Federal Acquisition Regulations. The United States has specifically excluded from coverage procurement subject to small and minority preference programs. In addition, the United States has not offered procurement of a number of sensitive services sectors, such as transportation, research and development and management and operation of Federal research centers and laboratories.
The new Agreement also envisions coverage of procurement by sub central government entities and government-owned utilities and corporations. In negotiating coverage in these areas, the United States gave priority to access to procurement by government-owned telecommunications and heavy electrical generating utilities. For Korea, Israel and Hong Kong, which offered access to those sectors and others like ports, airports, and rails, the United States agreed to cover procurement by 24 states, including the five largest states, and the federally-owned utilities. The United States offer of states' procurement was based on voluntary commitments by the states and excluded federally-funded mass transit and highway projects.
With the EC, the United States agreed to pursue an expansion of coverage to sub central governments and government-owned utilities by April 15, 1994. We expect that this expanded package can be extended to the Nordic countries, Switzerland and Austria as well. With regard to Japan, the United States did not offer access to these categories of procurement in light of Japan's refusal to lower its threshold for construction services, which is three times higher than that agreed by most other parties. We also declined to apply these categories to Canada because it was not prepared to cover its provincial hydro-electric crown corporations.
William J. Clinton, Memorandum on Trade Agreements Resulting from the Uruguay Round of Multilateral Trade Negotiations Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/327745