12:17 PM Nov 12, 1996

US UNILATERALISM, MULTILATERALISM CO-EXIST

Geneva 12 Nov (Chakravarthi Raghavan) -- The United States continues to wield "unilateralism" as a trade policy instrument, the US administration has shown restraints in using the instruments available and has had recourse to the WTO's Dispute Settlement Understanding and accepted the WTO rulings.

This is the message that the WTO secretariat has projected in its report on the United States trade policy for the WTO trade policy review Monday and Tuesday at the WTO.

In a statement to the WTO Trade Policy Review Body, the US Deputy Trade Representative, Jeffrey Lang, stressed his country's commitment to open markets and the rules of the WTO, the use of the WTO's dispute settlement mechanisms to resolve trade disputes with its partners and the strong US commitment to make the WTO "the centrepiece of multilateral open market disciplines."

While the United States is a original signatory of the WTO agreement, and its annexed multilateral and plurilateral agreements (except for the International Dairy Agreement), the US commitments are implemented through its domestic law by the Uruguay Round Agreements Act (URAA).

The URAA makes clear that inside the United States, in the event of a conflict between the WTO and its agreements and the URAA, the latter is to prevail.

The US has on its statute book, the US S.301, Special 301, and Super 301 laws -- symbols of US unilateralism for the rest of the world.

And whether it actually uses these laws to impose trade sanctions or not -- the WTO secretariat report tries to make out that the US administration has in fact been very sparing to have recourse to them -- the fact of their existence, and the "chilling" trade insecurity it has on trading partners, is somewhat glossed over in the report.

The US Special 301 provisions dealing with intellectual property protection abroad, and which provides for a range of remedies and threats, and the start of investigations, to "persuade" other nations to yield to the US demands and views.

These range from putting countries on "Priority Foreign Country list", a "Priority Watch list", a "Watch list" and a "Special-Mention" category, each triggering a particular course of investigation or threat of such investigation and possible actions.

And that law specifically affirms that the US could start investigations and actions on the ground that a foreign country is denying "adequate and effective protection" of IPRs, even if the country concerned is fully complying with its WTO obligations in this regard.

Countries designated or covered under various categories of this provision include Argentina, China and India, EU, Greece, Indonesia, Japan, Korea and Turkey.

There are other similar trade instruments available in terms of ensuring non-discrimination to US enterprises in public procurement abroad (even if the country concerned is not a party to the WTO plurilateral agreement on government procurement and thus has no such obligation), for telecommunications equipment procurement.

This is apart from the trade policy measures taken under socalled "national security clause" -- the long standing trade embargo against Cuba, intensified recently through the Helms-Burton law to penalise those investing and trading with Cuba, as well as the legislation to deal with those investing in Iran and Libya among others.

The US is a strong user of anti-dumping and counter-vailing (ad/cv) measures -- viewed by some as a necessary instrument to ensure "fair trade", but by others as a selective protectionist instrument and one capable of, and used as, a trade harassment against competitive imports.

After peaking at 99 cases filed in 1992, the number of AD/CV measures filed declined to 42 and 43 cases in 1993 and 1994, and 14 in 1995.

While the number of anti-dumping cases filed have varied, the share of affirmative determinations in total cases filed remained stable over time. No determination had been made on most of the cases filed during 1995. During 1995, 12 anti-dumping cases were revoked.

A total of 292 anti-dumping measures and 62 countervailing duties were in force as of 31 December 1995. Trading partners most affected were the EU (or its member States) and Japan, followed by China and Korea.

In 1991, about 1.8 percent of US imports were subject to AD/CV orders, while in 1993,less than 0.1 percent of imports were subject to new filings.

Though actual import flows subject to orders are a small percentage of total merchandise trade, such actions have costs for the economy (apart from the effects on the trading partners).

According to an estimate by the US International Trade Commission, in 1991, the removal of outstanding AD/CV orders would have yielded a welfare gain of $1.6 billion or 0.03 percent of US GDP in that year.

The report brings out the high cost of compliance for foreign suppliers with technical standards and the direct costs of testing and getting certification from US laboratories.

An indication of this cost to foreign suppliers is the total revenues of first directly engaged in testing, and this is estimated to have been approximately $10.5 billion in 1992.

In some cases, the testing companies or agencies give preference to US manufactured products in their tests:

* pressure equipment imported into the US need a "U" or "B" stamp of the American Society of Mechanical Engineers, and this stamp is available only when pressure vessels are made with US materials (a privately administered local content requirement!)

* over the counter drug approval procedures used by the Federal Food and Drug Administration require a drug ingredient to have a US market history, which effectively means US drugs.

In the agriculture sector, the US tariff equivalents (to various import restrictions and measures) in the Uruguay Round schedule have been substantially higher than earlier published by the US ITC. The US administration has explained these away as due to the fact that the ITC had used inaccurate price comparisons.

As in the other industrial countries, the process of tariffication increased substantially the protection on above-quota limit imports.

The simple average of tariffs for agriculture and livestock production increased from a 5.7 to 8.6 percent (the tariff ranging from zero to 350%), for food products from a 6.6 to 8.8 percent (in the range of 0-147.3%), for beverages an average of 7.2% (in a range of 0-51%) and for tobacco products from 14.6 to 104.4 percent (in a 4.4 to 350 percent range).

The US has also reserved the right to use the Special Safeguard provisions, if import prices drop below the average of the 1985-1988 import prices. In 24 such cases action was taken. The action is automatic, and imposed by Customs, and may even apply to very small quantities -- such as on 8 kg of cheese from Ecuador and 2kg of mixtures with over 10% sugar from Canada.

In the Textiles and Clothing sector, under the integration schemes, none of the products included in the first phase of integration were previously covered by quotas; and most were mainly those imported from the developed countries and/or Mexico.

A substantial share of imports from countries currently subject to QRs are classified for integration in phase 4 - for which import quotas are to be removed on 1 January 2005.

As a result of the changes in the rules of origin applied to this sector, finishing of textile fabrics in a source does not confer origin -- whereas previous rules allowed two finishing operations to confer origin. Similarly, trimmings, accessories etc are taken to originate in the source from which the fabric originates, and not the place of manufacture.

For clothing, the place of assembly is treated as the place of origin. But for knitwear assembled from separate parts, the place of knitting is the origin. Under previous rules, garments assembled in one country from parts cut in another were generally considered the product of the country in which the cutting occurred.

The US has also been a strong user of the transitional safeguards, issuing "calls" on exporters of developing countries and applying safeguards almost from day 1.