TRADE POLICY REVIEW Report by the Secretariat UNITED STATES

RESTRICTED WORLD TRADE

ORGANIZATION WT/TPR/S/200 5 May 2008

(08-2085)

Trade Policy Review Body

TRADE POLICY REVIEW

Report by the Secretariat

UNITED STATES

This report, prepared for the ninth Trade Policy Review of the United States, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the United States on its trade policies and practices. Any technical questions arising from this report may be addressed to Mr. Angelo Silvy (tel. 022 739 5249), Mr. Karsten Steinfatt (tel. 022 739 6759) and Mr. Raymundo Valdés (tel. 022 739 5346). Document WT/TPR/G/200 contains the policy statement submitted by the United States.

Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the United States.

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CONTENTS Page

SUMMARY OBSERVATIONS vii

(1) ECONOMIC ENVIRONMENT vii

(2) TRADE AND INVESTMENT POLICY FRAMEWORK vii

(3) MARKET ACCESS FOR GOODS viii

(4) EXPORT MEASURES ix

(5) OTHER MEASURES AFFECTING TRADE x

(6) SECTORAL POLICIES x

I. RECENT ECONOMIC DEVELOPMENTS 1

(1) OVERVIEW 1

(2) OUTPUT AND EMPLOYMENT 1

(3) MONETARY AND EXCHANGE RATE POLICIES 4

(4) FISCAL POLICY 6

(5) BALANCE OF PAYMENTS 7

(6) DEVELOPMENTS ON TRADE AND INVESTMENT 9 (i) Merchandise trade 9 (ii) Trade in services 9 (iii) Foreign direct investment 10

(7) OUTLOOK 11

II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 12

(1) OVERVIEW 12

(2) INSTITUTIONAL AND POLICY FRAMEWORK 12

(3) FOREIGN INVESTMENT REGIME 14 (i) National treatment 14 (ii) Reporting and review requirements 14 (iii) International investment arrangements 16

(4) INTERNATIONAL RELATIONS 17 (i) World Trade Organization 17 (ii) Preferential and other arrangements 18 (iii) Unilateral preferences 19 (iv) Aid for trade 21

III. TRADE POLICIES AND PRACTICES BY MEASURE 23

(1) OVERVIEW 23

(2) MEASURES DIRECTLY AFFECTING IMPORTS 25 (i) Customs procedures 25 (ii) Customs valuation 29 (iii) Rules of origin 30 (iv) Tariffs 31 (v) Other charges affecting imports 34 (vi) Anti-dumping and countervailing measures 35 (vii) Safeguards 43

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Page

(viii) Quantitative restrictions and licensing 44 (ix) Technical regulations, conformity assessment, and standards 46 (x) Sanitary and phytosanitary measures 50

(3) MEASURES DIRECTLY AFFECTING EXPORTS 54 (i) Documentation 54 (ii) Export restrictions and controls 55 (iii) Export taxes, charges and levies 58 (iv) Export assistance 58 (v) Section 301 and related actions 60

(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE 61 (i) Legal framework for business 61 (ii) Other government support 62 (iii) Competition policy 64 (iv) Government procurement 67 (v) Trade-related intellectual property rights 73

IV. TRADE POLICIES BY SECTOR 79

(1) OVERVIEW 79

(2) AGRICULTURE 81 (i) Introduction 81 (ii) Border measures 82 (iii) Domestic programmes 83 (iv) Export subsidies, credit, insurance, and guarantees 87 (v) Food labelling 88

(3) MINING AND ENERGY 89 (i) Main features 89 (ii) Legal and policy framework 91 (iii) Selected issues 92

(4) MANUFACTURING 94

(5) SERVICES 97 (i) Introduction 97 (ii) Telecommunications and related services 97 (iii) Financial services 104 (iv) Air transport services 114 (v) Maritime transport 117 (vi) Professional and business services 122

REFERENCES 129

APPENDIX TABLES 139

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TABLES

Page I. RECENT ECONOMIC DEVELOPMENTS I.1 Selected macroeconomic indicators, 2002-07 2 I.2 Selected monetary and exchange rate indicators, 2002-07 5 I.3 Selected fiscal indicators, FY2002-07 6 I.4 Current and capital accounts, 2002-07 8 II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES II.1 Bilateral investment agreements, January 2008 16 III. TRADE POLICIES AND PRACTICES BY MEASURE III.1 Requirements for the advance transmission of electronic cargo information 26 III.2 Structure of tariff schedule in the United States 32 III.3 Anti-dumping investigations and measures imposed, 1980-07 39 III.4 Anti-dumping measures by country and product, 2002-07 39 III.5 Countervailing duty investigations and measures imposed, 1980-07 42 III.6 Ex-Im bank loan, guarantee, and insurance activities, 2000-06 59 III.7 Federal programmes notified to the WTO, fiscal years 2003 and 2004 62 III.8 Summary of intellectual property protection in the United States corresponding 74 to TRIPS obligations, 2008 IV. TRADE POLICIES BY SECTOR IV.1 Commitment levels and actual expenditure, 1999-05 83 IV.2 Direct government payments, 2002-07 84 IV.3 Selected energy tax incentives, early 2007 92

APPENDIX TABLES

I. RECENT ECONOMIC DEVELOPMENTS AI.1 Merchandise exports and re-exports by groups of products, 2000-06 141 AI.2 Merchandise imports by groups of products, 2000-06 143 AI.3 Merchandise exports and re-exports by trading partner, 2000-06 145 AI.4 Merchandise imports by trading partner, 2000-06 146 AI.5 Cross-border trade in services, 2002-06 147 AI.6 Major indicators of U.S. inbound and outbound direct investment by selected country and sector, 2006 148 II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES AII.1 Selected notifications to the WTO, October 2005-February 2008 149 AII.2 Status of dispute-related WTO matters involving the United States, October 2005-December 2007 151 AII.3 Overview of U.S. preferential trade agreements, early 2008 154

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Page III. TRADE POLICIES AND PRACTICES BY MEASURE AIII.1 General overview of U.S. preferential rules of origin 156 AIII.2 Summary analysis of the MFN tariff, 2007 158 AIII.3 Tariffs according to U.S. preferential agreements, 2006 160 AIII.4 Anti-dumping investigation initiations, 1 July 2005-31 December 2007 165 AIII.5 In-State government procurement preferences 167 IV. TRADE POLICIES BY SECTOR AIV.1 Products covered by tariff quotas 171

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SUMMARY OBSERVATIONS

1. The openness and transparency of the U.S. trade regime have been key contributing factors to the efficiency that characterizes the U.S. economy as a whole. Since its last Review in 2006, the United States has taken further steps to liberalize its trade regime, although mostly on a preferential basis. In the face of the economic uncertainty prevalent in early 2008, U.S. welfare would be best promoted by exploiting the adjustment capacity of the U.S. economy and continuing to reduce barriers to market access and other distorting measures, including those that result from high levels of assistance in agriculture and energy. Moreover, ongoing efforts to incorporate additional security considerations into U.S. trade and investment policies should be pursued within the framework of the risk-based approach that seems to have served the United States well. Further reforms undertaken on a MFN basis would also lessen distortions in global markets and strengthen the multilateral trading system, as the United States is both the world's largest single economy and trader.

(1) ECONOMIC ENVIRONMENT

2. After a prolonged period of expansion, the short-run growth prospects of the U.S. economy deteriorated appreciably from late 2007. During most of the period under review the performance of the U.S. economy remained robust, with average growth of nearly 3% a year. However, in late 2007, GDP growth slowed down considerably reflecting the negative effects of the housing downturn and credit turmoil. These problems have triggered a vigorous monetary policy response by the Federal Reserve that has significantly lowered short-term interest rates. Although inflation remained relatively subdued during the period under review, an upward tendency became perceptible in late 2007, mainly a consequence of higher oil and food prices. Thus, in early 2008 policymakers faced the dual challenge of restoring growth while curbing rising inflationary pressures.

3. The federal fiscal deficit contracted steadily between 2004 and 2007, to some 1.2% of GDP in FY2007. However, as a result of the economic slowdown in late 2007 and the fiscal measures adopted to address it, the deficit is likely to increase in 2008. In the longer run, further reform in the fiscal area is likely to be needed to ensure fiscal sustainability, particularly with respect to entitlement programmes.

4. During the period under review, both U.S. imports and exports continued to expand, on average, faster than GDP. As a share of GDP, the deficit in the U.S. current account of the balance of payments fell from just over 6% in 2005 and 2006 to some 5.3% in 2007. The willingness of foreigners to invest in the United States has been vital in generating the large inflows of external capital required to finance the current account deficit. However, the sustainability of the deficit cannot be taken for granted, and as such carries certain downside risks including an increase in protectionist sentiment. The U.S. current account deficit reflects a savings-investment gap; thus, to the extent that this requires a policy response, trade restrictive measures are not appropriate. The United States may require to raise its savings rate while maintaining its traditional openness, which allows U.S. producers and consumers to access goods, services, and capital from abroad at the best conditions. Reducing the current account deficit is also likely to require expanding U.S. exports, which would be facilitated by a more liberal trading system and stronger demand growth outside the United States.

(2) TRADE AND INVESTMENT POLICY FRAMEWORK

5. The United States considers that the expansion of international trade is vital to its national security and economic growth. Support for the multilateral trading system is at the core of U.S. trade policy, and the Administration remains committed to a comprehensive Doha agreement. In this

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context, the United States has made numerous proposals in a wide range of negotiating areas. It has fulfilled its notification obligations, except for preferential rules of origin, agricultural tariff quotas, and government procurement statistics. The United States has made progress in implementing several WTO rulings calling for changes to U.S. legislation, but rulings relating to intellectual property rights and anti-dumping have not yet been fully implemented.

6. While the United States considers that a comprehensive multilateral agreement offers the best chance to create expanded trade and development opportunities around the world, it believes that bilateral and regional trade liberalization can also provide significant benefits. Consistent with this, the United States has continued to enter into free-trade agreements (FTAs). In early 2008, it had FTAs with 14 countries, up from seven during its last Review, and three at the start of the current Administration in early 2001; FTAs with another six countries had been completed but were not yet in force. The United States grants unilateral preferences to developing countries under several schemes, which may be conditional on adherence to criteria that the U.S. authorities consider promote sound policies and allow beneficiaries to expand trade and investment.

7. Trade promotion authority, which the Administration views as an important tool for achieving U.S. trade objectives, expired on 1 July 2007. In May 2007, the Administration and congressional leaders agreed to a trade policy "template", which has been described as providing a "clear and reasonable path forward" for congressional consideration of pending FTAs, and as "open[ing] the way for bipartisan work on Trade Promotion Authority". The template contains provisions on labour, environment, intellectual property, investment, government procurement, and port security.

8. The United States has long maintained a policy of national treatment of foreign direct investment, subject to sector-specific

considerations, prudential concerns, and national security. In 2007 Congress amended the process by which the Executive reviews the national security implications of certain foreign direct investments. It is critical to ensure that these changes do not undermine predictability for foreign investors.

(3) MARKET ACCESS FOR GOODS

9. The United States accords MFN tariff treatment to all WTO Members except Cuba. All except two tariff lines are bound, generally at low rates, which lends predictability to the U.S. trade regime. The simple average applied MFN tariff was 4.8% in 2007, virtually the same as in 2004 (4.9%). The applied MFN rate for agriculture (WTO definition) fell from 9.7% in 2004 to 8.9% in 2007, reflecting the rise in commodity prices and the resulting decline in the ad valorem equivalent rates. At 4%, the 2007 average applied MFN rate for non-agricultural products remained unchanged. Around 2% of all lines are subject to tariff quotas; high out-of-quota tariffs are one of the main forms of import protection for certain agricultural products.

10. In addition to tariffs, imports are subject to ad valorem harbour maintenance and merchandise processing fees; the second is not applied on imports from some preferential partners. A customs bond must be posted for each importation of merchandise into the United States. Initial production volumes of small domestic wine and beer producers benefit from either a reduced federal excise tax rate or an excise tax credit. This benefit is not available for imported products.

11. Security considerations have continued to drive significant changes relating to customs procedures. The SAFE Port Act of 2006 codified and expanded existing cargo and supply-chain security programmes, and established additional filing requirements for importers. Under the Act, from mid 2012, all containers must be scanned prior to being loaded on a U.S.-bound vessel. However, the Act recognizes that this requirement could have a significant impact on trade, and offers

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the possibility of delaying the implementation for specific ports.

12. Non-tariff import restrictions are maintained largely for non-commercial purposes. This includes a ban on imports of marine mammal products, shrimp, and tuna from countries found not to be in compliance with U.S. environmental provisions.

13. Anti-dumping (AD) measures remain a key trade policy instrument for the United States. At end 2007, the United States maintained some 232 AD measures, down from 274 reported in its last Review, affecting imports from 39 trading partners. During 2005-07, the United States initiated some 33 investigations and applied 19 provisional measures, but imposed only 11 final duties. The number of AD investigation initiations decreased in 2005 and 2006, but increased in 2007. Applied AD duties can be substantial, up to 280%, and thus significantly affect U.S. domestic prices. As most AD measures are imposed on intermediate goods like steel and chemical products, they increase costs for downstream producers and consumers. Although temporary, the average "length" on an AD measure is 11 years. The percentage of U.S. imports directly affected by AD measures in force has been small, some 0.3% of merchandise imports over 1980-2005, and the number of AD orders issued since 2005 has been lower than in earlier years. Nevertheless, it would be important to ensure that AD measures do not retard adjustment to changing overall conditions in international markets.

14. At end 2007, the United States maintained no safeguard measures, but 31 countervailing (CV) orders were in place involving 13 trading partners. The Continued Dumping and Subsidy Offset Act of 2000 (the Byrd Amendment) was repealed in 2005, but AD and CV duties assessed before October 2007 continue to be distributed to U.S. producers who supported the petition for investigation. Total disbursements were estimated at approximately US$1.9 billion from the entry in force of the Byrd Amendment to end 2007.

15. There have been no major changes at the federal level since the last Review of the United States in the institutional framework governing the development of technical regulations, conformity assessment procedures, or sanitary and phytosanitary measures. During the review period, the United States notified, for the first time since the creation of the WTO, technical regulations and conformity assessment procedures proposed by sub-federal agencies. A new approval process for first-time imports of fruits and vegetables subject to designated phytosanitary measures became effective in August 2007. It replaces the approval process based on the promulgation of regulation, which is otherwise applicable to all first-time imports of plants, animals, and their products. The new process is expected to accelerate import approval times, which can be as long as three years.

(4) EXPORT MEASURES

16. Export taxes are barred under the U.S. Constitution. However, the United States maintains export restrictions and controls for national security or foreign policy purposes, or to address shortages of scarce materials. Exports controls can result from U.S. domestic policy decisions or U.S. participation in non-binding export control regimes, as well as in the context of United Nations embargoes. U.S. entities are required to apply for an export licence in certain cases when they intend to transfer controlled technologies to foreign nationals in the United States. Two WTO Members, Cuba and Myanmar, are subject to economic sanctions.

17. The United States provides insurance and export financing through its official export credit agency. The fiscal cost entailed by these programmes, which carry the full faith and credit of the U.S. Government, has decreased significantly in recent years. In addition, a duty drawback programme is in place. In May 2006, the United States repealed the "grandfathering" provisions that allowed U.S. firms to exclude certain "foreign trade" income from their taxable income for

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certain transactions, after the WTO had found them to be prohibited subsidies.

(5) OTHER MEASURES AFFECTING TRADE

18. Apart from export assistance, domestic producers benefit from federal and sub-federal tax exemptions, financial outlays, and credit programmes. In its latest notification to the WTO, covering fiscal years 2003 and 2004, the United States lists around 430 programmes providing subsidies, of which 42 at the federal level and the rest at the sub-federal level. Agriculture and energy are by far the largest recipients of notified federal support. U.S. domestic support, although not targeted at trade, may affect global markets as the United States is among the world's largest producers and consumers of numerous products.

19. The United States uses competition policy to promote efficiency and enhance consumer welfare. Federal antitrust legislation covers all sectors and interstate and foreign commerce, subject to some exceptions. Competition policy enforcement has continued to focus on the activities of international cartels, anti-competitive mergers and non-merger enforcement. A review of competition policy procedures presented to Congress in 2007 recommended, among other things, simplifying and unifying merger clearing procedures and harmonizing the work of state and federal antitrust agencies, particularly with respect to mergers.

20. U.S. policy with respect to market access for government procurement is to grant national treatment based on the principle of reciprocity. The United States participates in the WTO plurilateral Agreement on Government Procurement (GPA). For procurement not covered by the GPA or other international agreements, the United States maintains a number of domestic purchasing requirements, such as those under the Buy American Act. U.S. procurement policy also seeks to increase the participation of small and other businesses through set-aside

programmes. In some states, sub-federal regulations grant preferences to local suppliers, and impose local-content requirements under certain conditions. Although these measures could assist the targeted groups, they could also raise the cost of government procurement.

21. The United States is an important producer and exporter of goods and services that embody knowledge and other intellectual developments. The United States employs a variety of mechanisms to promote increased IPR protection and enforcement, including through its engagement in WTO activities and negotiations, FTAs, bilateral intellectual property agreements and bilateral investment treaties.

(6) SECTORAL POLICIES

22. The United States is one of the world's largest producers, exporters, and importers of agricultural products. As measured by the OECD, overall support to agriculture, including through border measures and government payments, accounted for 11% of gross farm receipts in 2006, down five percentage points from 2004. This decline largely reflects higher commodity prices. Certain commodities, including sugar and milk, continue to receive high levels of assistance. Moreover, payments under some commodity programmes (e.g., marketing assistance loans) provide incentives for resource use that may be inconsistent with market signals and may affect trade when supported output finds its way into world markets. Certain aspects of domestic support programmes were challenged under multilateral rules during the period under review. The expiration of the 2002 Farm Act, and the current environment of high commodity prices, offers a favourable juncture to introduce policy changes aimed at further improving the market orientation of the agriculture sector to the benefit of both consumers and taxpayers.

23. The United States is a major producer and consumer of minerals and energy.

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U.S. energy policy places emphasis on domestic energy production and the provision of tax and other incentives for the supply of alternative and renewable fuels. Assistance for domestic ethanol production includes tax incentives and import duties; these measures could have a significant impact on global production patterns. The Energy Policy Act of 2005 contains provisions to address shortcomings in the regulatory framework governing electricity markets. In computing fuel economy standards, NAFTA-produced automobiles are treated differently from other vehicles.

24. The United States is the world's leading producer of manufactured goods. Multifactor productivity and output in the sector have expanded in absolute terms but the sector's share in total U.S. value added and employment has declined. Manufacturing tariffs are generally low, but high tariffs have sheltered a few industries, such as textiles, clothing, and footwear and leather, from international competition.

25. The U.S. telecommunications market, the world's largest by revenue, is open to foreign participation and is highly competitive. During the period under review, certain unbundling requirements were eliminated to level the regulatory playing field between broadband internet access providers. A comprehensive intercarrier compensation reform plan is under consideration. The United States maintains several media ownership restrictions, with the objective of promoting competition, diversity, and "localism" in media production. The relaxation of one of these restrictions was approved in late 2007, and rules have been adopted to facilitate entry into the video services market.

26. During the period under review, there have been no major changes in U.S. legislation with respect to financial services. However, the sector has been considerably affected by the sub-prime mortgage turmoil, suggesting the need for improvements in financial supervision. In this respect, changes to

existing regulations are under consideration to restrict certain mortgage practices, and to consolidate and strengthen supervision.

27. Initial entry into the U.S. market through the establishment or acquisition of a nationally chartered bank subsidiary by a foreign person is permitted in all states. U.S. bank subsidiaries of foreign banks are granted national treatment. However, foreign-owned banks, unlike domestic banks, are required to establish an insured banking subsidiary to accept or maintain domestic retail deposits of less than US$100,000. Branches and agencies of foreign banks have similar powers to banks but agencies may not accept deposits from U.S. citizens or residents. At the state level, there are limitations to the acquisition or establishment of a state-chartered bank, and for the establishment of branches or agencies.

28. Regulation of insurance services is primarily at the state level. Insurance companies, agents, and brokers must be licensed under the law of the State in which the risk they intend to insure is located, but U.S. states have taken steps to facilitate multi-state operations. Foreigners may acquire an insurance company licensed in all states, incorporate subsidiaries in 47 states, or operate as branches in 36 states and the District of Columbia. A federal tax on insurance policies covering U.S. risks is imposed at a rate of 1% of gross premiums on all reinsurance but at 4% of gross premiums with respect to non-life insurance when the insurer is not subject to U.S. net income tax on the premiums.

29. No significant policy or legislative changes have taken place with respect to maritime transport since 2006. The Jones Act reserves cargo service between two points in the United States for ships that are registered and built in the United States and owned by a U.S. corporation, and on which 75% of the employees are U.S. citizens. Domestic passenger services are subject to similar requirements. However, waivers may be granted and foreign companies may establish shipping companies in the United States under certain conditions. In contrast, the U.S.

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international maritime transport market is generally open to foreign competition although some cargo preferences are in place. Cargo preference laws are estimated to have redirected significant volumes of cargo to U.S. ships although in practice the lion's share of international maritime transport still takes place in foreign vessels.

30. The profitability of U.S. airlines has improved, and by end 2007 all major U.S. airlines had emerged form bankruptcy protection. Foreign ownership in U.S. carriers is limited by statute to 25% of the voting shares. The provision of domestic air services is permitted only by U.S. carriers. The Fly America Act generally requires government-financed transportation to be on U.S.-flag air carriers, but foreign participation is possible under international agreements. The United States has bilateral aviation agreements with 97 countries, of which 79 are open skies

agreements. The U.S.-EU Air Transport Agreement, provisionally applied since 30 March 2008, introduced a number of significant liberalization measures. All public-use U.S. airports with commercial services are currently owned by state or local governments. A law was passed in 1996 establishing an Airport Privatization Pilot Program; one airport participated but subsequently returned to public ownership.

31. There have there no major changes in professional services regulation in the past few years. States have responsibility for the regulation, licensing, and oversight of the professions practiced within their jurisdictions. The absence of a national regulatory regime creates different market access conditions among the states. Foreign market access in some states is affected by local presence, domicile, nationality, or legal form of entry requirements.

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I. RECENT ECONOMIC DEVELOPMENTS

(1) OVERVIEW

1. After a prolonged period of expansion, the short-run growth prospects of the U.S. economy deteriorated appreciably from late 2007. During most of the period under review the performance of the U.S. economy remained robust, with average growth of nearly 3% a year. However, in late 2007, GDP growth slowed down considerably reflecting the negative effects of the housing downturn and credit turmoil. These problems have triggered a vigorous monetary policy response by the Federal Reserve that has significantly lowered short-term interest rates. Although inflation remained relatively subdued during the period under review, an upward tendency became perceptible in late 2007, mainly a consequence of higher oil and food prices. Thus, in early 2008 policymakers faced the dual challenge of restoring growth while curbing rising inflationary pressures.

2. The federal fiscal deficit contracted steadily between 2004 and 2007, to some 1.2% of GDP in FY2007. However, as a result of the economic slowdown in late 2007 and the fiscal measures adopted to address it, the deficit is likely to increase in 2008. In the longer run, further reform in the fiscal area is likely to be needed to ensure fiscal sustainability, particularly with respect to entitlement programmes.

3. During the period under review, both U.S. imports and exports continued to expand, on average, faster than GDP. As a share of GDP, the deficit in the U.S. current account of the balance of payments fell from just over 6% in 2005 and 2006 to some 5.3% in 2007. The willingness of foreigners to invest in the United States has been vital in generating the large inflows of external capital required to finance the current account deficit. However, the sustainability of the deficit cannot be taken for granted, and as such carries certain downside risks including an increase in protectionist sentiment. The U.S. current account deficit reflects a savings-investment gap; thus, to the extent that this requires a policy response, trade restrictive measures are not appropriate. The United States may require to raise its savings rate while maintaining its traditional openness, which allows U.S. producers and consumers to access goods, services, and capital from abroad at the best conditions. Reducing the current account deficit is also likely to require expanding U.S. exports, which would be facilitated by a more liberal trading system and stronger demand growth outside the United States.

(2) OUTPUT AND EMPLOYMENT

4. During most of the period under review (mid 2005-end 2007), the performance of the U.S. economy remained robust, with average growth of some 3% a year between 2005 and 2007. However, economic growth slowed somewhat in late 2006 and early 2007, affected to a large extent by plummeting residential investment. Growth picked up in the second and third quarters of 2007 but weakened in the fourth quarter due to slower consumer expenditure and a moderation in non-residential investment (Table I.1). Economic growth appears to have slowed since the beginning of 20081; the Congressional Budget Office (CBO) considers that there is a strong possibility of at least a few quarters of very slow growth, and that, although the economy may avoid a recession in 2008, the risk of a recession has risen.2

5. The CBO has also observed that the system of automatic stabilizers built into the federal budget may help to mitigate any economic downturn. It has also been noted, by the OECD, that, historically, the U.S. economy has proved relatively resilient to domestic and external shocks, as a

1 Federal Reserve Board (2008). 2 CBO (2008).

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result of the effects of past regulatory reforms that created a competitive environment and contributed to efficiency gains over the past decade.3

6. Private consumption growth outpaced GDP expansion during 2006 and early 2007, supported by a steady labour market, disposable income growth, and higher equity prices.4 Starting in the second quarter of 2007, private consumption growth weakened, affected by turmoil in the housing market5 Federal Government spending growth moderated in 2005 and 2006, fell in the first quarter of 2007, mainly due to a decline in defence expenditure, but picked up in the rest of 2007. Imports of goods and services expanded above GDP growth during 2005 and 2006, but increased less than GDP in 2007. Exports of goods and services have generally been growing faster than GDP since 2004. The increase in the third quarter of 2007 was the largest since the fourth quarter of 1996.6 The contribution of net exports to GDP growth was 1.32 percentage points in the third quarter of 2007 and 1.38 in the fourth quarter.

Table I.1 Selected macroeconomic indicators, 2002-07 (US$ billion and per cent, annualized values, except as indicated)

2002 2003 2004 2005 2006 2007 II 2007 III 2007 IV 2007

GDP (US$ billion) 10,469.6 10,960.8 11,685.9 12,433.9 13,194.7 13,841.3 13,768.8 13,970.5 14,074.2 Change (per cent)

Real GDP 1.5 2.7 3.8 3.0 2.8 2.2 3.8 4.9 0.6Private consumption 2.7 2.8 3.6 3.2 3.1 2.9 1.4 2.8 2.3 Durable goods 7.1 5.8 6.3 4.9 3.8 4.7 1.7 4.5 2.0 Non-durable goods 2.5 3.2 3.5 3.6 3.6 2.4 -0.5 2.2 1.2 Services 1.9 1.9 3.2 2.7 2.7 2.8 2.3 2.8 2.8Gross private fixed investment -2.6 3.6 9.7 5.6 2.7 -4.9 4.6 5.0 -14.6 Fixed investment -5.2 3.4 7.3 6.9 2.4 -2.9 3.2 -0.7 -4.0 Non-residential -9.2 1.0 5.8 7.1 6.6 4.7 11.0 9.3 6.0 Structures -17.1 -4.1 1.3 0.5 8.4 12.9 26.2 16.4 12.4 Equipment and software -6.2 2.8 7.4 9.6 5.9 1.3 4.7 6.2 3.1 Residential 4.8 8.4 10.0 6.6 -4.6 -17.0 -11.8 -20.5 -25.2 Change in private inventories

(contribution to growth) 0.4 0.0 0.4 -0.2 0.1 -0.7 0.2 0.9 -1.8

Public consumption and investment 4.4 2.5 1.4 0.7 1.8 2.0 4.1 3.8 2.0 Federal 7.0 6.8 4.2 1.5 2.2 1.7 6.0 7.1 0.5 National defense 7.4 8.7 5.8 1.5 1.9 2.8 8.5 10.1 -0.5 Non-defense 6.3 3.4 1.1 1.3 2.8 -0.4 0.9 1.1 2.8 State and local 3.1 0.2 -0.2 0.3 1.6 2.2 3.0 1.9 2.8Exports of goods and services -2.3 1.3 9.7 6.9 8.4 8.1 7.5 19.1 6.5Imports of goods and services 3.4 4.1 11.3 5.9 5.9 1.9 -2.7 4.4 -1.4Industrial production ( period average) 0.0 1.1 2.5 3.2 3.9 2.1 3.5 3.6 -1.0

Table I.1 (cont'd)

3 OECD (2007c). 4 IMF (2007b). 5 Noting that the subprime mortgage turmoil has eroded consumer confidence, the IMF points out that

some of the risks from the current turmoil stem from the possibility of further denting broader consumer confidence, which could cause a disproportionate impact on consumption (IMF, 2007b).

6 BEA (2007c).


2002 2003 2004 2005 2006 2007 II 2007 III 2007 IV 2007

Saving and investment Per cent of GDP Gross national saving 14.3 13.3 13.8 13.9 14.1 13.3 13.8 13.3 12.5Private 14.9 14.9 14.7 13.5 13.6 13.0 13.2 13.0 12.3Public -0.7 -1.6 -1.2 -0.4 0.5 0.3 0.6 0.3 0.2Net national saving 1.9 1.1 1.5 1.0 1.9 1.2 1.7 1.2 0.4Personal savings rate (% disp. income) 2.4 2.1 2.1 0.5 0.4 0.3 0.3 0.6 0.0Gross domestic investment 18.4 18.4 19.4 19.9 20.0 18.7 18.9 18.8 18.2 Private 15.1 15.2 16.2 16.7 16.7 15.4 15.5 15.5 14.8 Public 3.3 3.2 3.2 3.2 3.3 3.3 3.4 3.3 3.4 Net domestic investment 0.1 6.2 7.1 7.0 7.8 6.6 6.6 6.8 6.1 Net foreign investment -4.4 -4.8 -5.5 -6.1 -6.2 .. .. .. ..Prices Change (per cent same period the previous year) CPI (end-of-period) 2.4 1.9 3.3 3.4 2.5 4.1 2.7 2.8 4.1CPI (period average) 1.6 2.3 2.7 3.4 3.2 2.8 5.2 1.0 5.6GDP deflator (implicit) 1.7 2.1 2.9 3.2 2.7 4.2 2.6 1.0 2.6Employment Per cent Unemployment rate 5.8 6.0 5.5 5.1 4.6 4.6 4.5 4.7 4.8Productivity/labour costs Change (per cent from previous period) Labor productivity (non-farm) 4.1 3.7 2.8 1.9 1.6 1.8 2.6 6.3 1.9Labor productivity: manufacturing 6.9 6.2 2.3 4.7 4.3 3.7 3.4 4.1 2.3Unit labour costs (non-farm) -0.5 0.3 0.9 2.0 2.9 3.1 -1.3 -2.7 2.6

.. Not available. Note: Quarterly per cent changes are annualized. Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, various issues; and

Bureau of Labor Statistics online information. Available at: http://www.bls.gov.

7. Since the previous U.S. review there has been the sharp decline in residential investment, following several years of buoyancy. Residential investment detracted from growth in 2006 and in 2007, reflecting a decline in housing demand and a reduction in property prices, which triggered the turmoil in the sub-prime mortgage market. On the other hand, non-residential investment, particularly in structures has been expanding generally faster than GDP. In 2007, there was a slight downturn in inventory investment, which made a negative contribution to GDP.

8. The savings-investment gap remained large during the review period. The personal savings rate has remained low, at below 1%, despite measures adopted in 2005 aimed at raising the personal saving rate, such as lowering tax rates on dividends and capital gains. Gross national savings as a whole remained broadly stable during the period, but current levels (13.5% of GDP in the third quarter of 2007) are well below those of the beginning of the decade. The savings-investment gap widened in 2005 and 2007, before contracting some in 2007, but at 5.3% of GDP in the third quarter, it remained substantial.

9. The current account deficit continues to reflect a global imbalance, with counterpart imbalances found in surplus countries. In the context of the Multilateral Consultation on Global Imbalances in the IMF's International Monetary and Financial Committee (IMFC), the United States, along with other countries, presented individual country policy plans to tackle global imbalances, which, for the United States, included: further fiscal consolidation over the medium term, including eliminating the unified federal budget deficit by 2012, reforming the budget process to contain spending growth; entitlement reform to strengthen long-term fiscal sustainability; further tax


incentives to support private saving; enhancing energy efficiency; improving capital market competitiveness; and pro-growth investment policies.7

10. Despite the moderate slowdown in activity, employment has continued to increase, and the unemployment rate declined from 5.1% in 2005 to 4.8% in the fourth quarter of 2007. Labour productivity continued to expand during the period, although less rapidly than in previous years (Table I.1); however, productivity increased less than unit labour costs.

(3) MONETARY AND EXCHANGE RATE POLICIES

11. The Federal Reserve is responsible for setting monetary policy in the United States, in accordance with the Federal Reserve Act of 1913, which specifies that, in conducting monetary policy, the Federal Reserve System and the Federal Open Market Committee (FOMC) should seek "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."8 The Federal Reserve uses open market operations, the discount rate, and reserve requirements to influence the demand for and supply of balances, and in this way alters the federal funds rate, which is the pivot interest rate. The Federal Reserve does not set a specific inflation target.

12. During the period under review, monetary policy initially tightened to contain inflationary pressures. The FOMC increased the target for the federal funds rates four times in the first half of 2006, increasing the target for the federal funds rate from 4.25% at the beginning of the year to 5.25%. In the second half of 2006 and the first half of 2007, the FOMC left interest rates unchanged, as available economic information pointed to a relatively favourable outlook for both economic growth and inflation.9

13. Monetary policy became more accommodative in the wake of the credit turmoil associated with subprime mortgages, and the federal funds rate was lowered three times during the second half of 2007, to end the year at 4.25%.10 The federal funds rate was further reduced by 75 basis points in early January 2008, to 3.5%, and again in late January, to 3%11. A further reduction to 2.25% took place in March 200812. The Federal Reserve's interventions were intended to help forestall some of the adverse effects from the disruptions in financial markets caused by the sub-prime mortgage turmoil and to promote moderate growth.13 They were also intended to help support credit levels and contain defaults.14 On announcing the first January 2008 reduction, the FOMC noted that is had taken

7 IMF (2007a). 8 Federal Reserve Board online information. Viewed at: http://www.federalreserve.gov/pf/pf.htm. 9 Federal Reserve Board, (2007). 10 Subprime mortgages are residential loans that do not conform to the criteria for prime mortgages,

and have a lower expected probability of full repayment. The share of subprime loans increased substantially in 2005-06, and represent, according to IMF estimates, some 12-15% of outstanding U.S. mortgages. Subprime loans carry higher interest rates than prime loans, and may be subject to rate resets after an initial period of lower rates. (IMF, 2007b).

11 Board of Governors of the Federal Reserve System, Press Release, 30 January 2008. Viewed at: http://www.federalreserve.gov/newsevents/press/monetary/20080130a.htm

12 Board of Governors of the Federal Reserve System, Press Release, 18 March 2008. Viewed at: http://www.federalreserve.gov/newsevents/press/monetary/20080318a.htm.

13 Federal Reserve System, 12 CFR Part 201,[Regulation A], Extensions of Credit by Federal Reserve Banks, Federal Register, 27 September 2007 (Vol. 72, No. 187)][Rules and Regulations] pp. 54813-54815.

14 The Federal Reserve notes that over 17% of subprime adjustable-rate mortgages were in serious delinquency at the end of September 2007, over three times the rate of mid-2005. See: Federal Reserve online information: Loan modifications and foreclosure prevention. Testimony of Governor Randall S. Kroszner Before the Committee on Financial Services, U.S. House of Representatives, 6 December 2007. Viewed at: http://www.federalreserve. gov/newsevents/testimony/kroszner20071206a.htm.


this action in view of a weakening of the economic outlook and increasing downside risks to growth.15 The decrease in the federal funds rate has led to lower nominal market interest rates and laid the foundations for a faster rate of expansion of the monetary aggregate M2 (Table I.2).

14. In a further measure to address the subprime mortgage turmoil, in April, July, and September 2007, the Federal Reserve along with the other federal financial agencies and the Conference of State Bank Supervisors (CSBS) issued statements encouraging federally regulated institutions to work with residential borrowers at risk of default to reach arrangements to avoid unnecessary foreclosures.16 In December 2007, the Federal Reserve, together with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank (SNB) announced measures designed to address pressures in short-term funding markets, mainly through the establishment of a temporary Term Auction Facility in the United States to provide liquidity when interbank markets are under stress, and through the establishment of foreign exchange swap lines with the ECB and SNB. The first two auctions of US$20 billion each took place in December 2007.

15. The dollar continued to depreciate in nominal and real terms during the review period, as it has since 2002 following a seven-year period of appreciation. The depreciation over 2005-07 was despite increasing interest rates up to mid 2007 (Table I.2) and an interest rate (positive) differential with respect to the euro and the yen.

Table I.2 Selected monetary and exchange rate indicators, 2000-07

2002 2003 2004 2005 2006 2007 II 2007 III 2007 IV 2007

M1 (seasonally adjusted annual growth rate) 3.4 6.3 5.4 -0.1 -0.8 -0.2 -0.9 -3.4 -1,9M2 (seasonally adjusted annual growth rate) 6.5 4.3 5.5 4.1 5.4 6.1 5.2 5.8 4.7Interest rates (per cent) Federal funds rate (effective)a 1.67 1.13 1.35 3.22 4.97 5.02 5.25 4.94 4.24Prime lending rate 4.67 4.12 4.34 6.19 7.96 8.05 8.25 8.03 7.33Treasury bill rate (3-months, secondary market)

1.61 1.01 1.37 3.15 4.73 4.36 4.61 3.70 3.00

Treasury note rate (10-year maturity) 4.61 4.01 4.27 4.29 4.80 4.63 5.10 4.52 4.10Commercial paper (financial, 1 month) 1.68 1.12 1.41 3.27 5.00 5.07 5.25 5.04 4.51Certificates of deposit (CDs, 1 month) 1.72 1.15 1.45 3.34 5.06 5.23 5.30 5.46 5.07Exchange rate (end of period) Nominal effective exchange rate (1997=100) 126.7 119.1 113.6 110.7 108.5 103.4 104.1 101.9 99.3

Per cent change -2.0 -4.7 -4.6 -2.6 -2.0 -4.7 -2.4 -2.1 -2.5Real effective exchange rate (1997=100) 110.83 104.12 100.24 97.85 96.70 91.32 93.99 88.42 88.00

Per cent change 0.18 -6.1 -3.72 -2.4 -1.8 -5.6 -0.9 -5.9 -0.5US$ per euro 0.95 1.13 1.24 1.24 1.26 1.37 1.34 1.39 1.46US$ per £ 1.5 1.63 1.83 1.82 1.84 2.00 1.99 2.02 2.02Yen per US$ 125.22 115.94 108.15 110.11 116.31 117.76 122.69 115.04 112.45Yuan per US$ 8.28 8.28 8.28 8.19 7.97 7.61 7.63 7.52 7.37

a The federal funds rate is the cost of borrowing immediately available funds, primarily for one day. The effective rate is a

weighted average of the reported rates at which different amounts of the day's trading occurs through New York brokers. Financial commercial papers are short-term negotiable promissory notes issued by companies and sold to investors.

Source: Federal Reserve Board online information. Available at: http://www.federalreserve.gov/releases.

16. Inflation has remained subdued during most of the period under review, despite rising oil prices In the twelve months to December 2006, the CPI rose 2.5%, compared with an increase of 3.4% in the twelve months to December 2005. However, it accelerated during the fourth quarter of

15 Board of Governors of the Federal Reserve System, Press Release, 22 January 2008. Viewed at:

http://www.federalreserve.gov/newsevents/press/monetary/20080122b.htm. 16 Board of Governors of the Federal Reserve System (2007b).


2007: in January 2008, the CPI was 4.3% higher than a year earlier, triggered mainly by high advances in energy and food prices.17

(4) FISCAL POLICY

17. The results of the fiscal accounts improved in 2006 and 2007. In FY2007, the federal government deficit reached US$162 billion, or an estimated 1.2% of the GDP; this is half of the 40-year average (1967-2007) of 2.4% of GDP.18 The structural federal government deficit, which excludes cyclical economic activity, and the standardized budget balance, which includes some further adjustment, also declined, to 0.9% and 1% of GDP. Receipts rose from 18.4% of GDP in FY2006 to 18.8% of GDP in FY2007; outlays decreased as a percent of GDP, from 20.4% to 20.2%.19 The reduction in the Federal Government's fiscal deficit was accompanied by a slight fall in State and local government deficits in 2005 and 2006 (as at March 2008 no data were available for 2007). This led to a reduction in the overall Government deficit to some 3% of GDP in FY2006.

Table I.3 Selected fiscal indicators, FY2002-07

2002 2003 2004 2005 2006 2007

Fiscal balance (% of GDP) Federal government fiscal balance -1.5 -3.5 -3.6 -2.6 -1.9 -1.2State and local government fiscal balance -1.6 -1.6 -1.3 -1.2 -1.1 ..Total government balance -3.1 -5.1 -4.9 -3.8 -3.0 ..Structural federal government balance a -0.8 -2.5 -3.0 -2.3 -1.8 -0.9

Standardized budget balanceb -1.1 -2.5 -2.4 -1.9 -1.8 -1.0Public debt

Public debt (US$ billion, fiscal year) 6,198.4 6,760.0 7,354.7 7,905.3 8,451.4 9,007.8Public debt (% of GDP) 59.7 62.5 63.9 64.4 64.7 65.5

.. Not available. a The structural budget balance is defined as the actual balance less the effects of cyclical deviations from potential output. b The standardized budget balance is the cyclically adjusted balance, with adjustments, to account for discrepancies between tax

payments and liabilities, swings in capital gains taxes collections, and others. Source: Budget for FY2008; CBO and OMB online information (http//www.cbo.gov, and http://www.whitehouse.gov

/omb.); U.S. Treasury, Bureau of the Public Debt online information. Viewed at: http://www.publicdebt.treas. gov/opd/opdpenny.htm; and CBO, The Cyclically Adjusted and Standardized Budget Measures: An Update, August 2007. Viewed at: http://www.cbo.gov/ftpdocs/85xx/doc8589/08-30-Standar dizedBudget.pdf.

18. Lower fiscal deficits have not been able to stop the increasing trend in public debt observed in recent years. The share of public debt in GDP rose to almost 65.5% in FY2007 (Table I.3).20

19. A fiscal stimulus package evaluated in some US$168 billion was put in place in February 2008, through the Economic Stimulus Act of 2008 (P.L. 110-185). The Act grants tax

17 BLS, Consumer Price Index: January 2008. Viewed at: http://www.bls.gov/news.release/pdf

/cpi.pdf. 18 OMB Press Release. 11 October 2007. Joint Statement of Henry M. Paulson, Jr., Secretary of the

Treasury, and Jim Nussle, Director of the OMB, on Budget Results for Fiscal Year 2007. Viewed at: http://www.treasury.gov/press/releases/hp603.htm.

19 Office of Management and Budget online information. Viewed at:: http://www.whitehouse. gov/omb.

20 U.S. Treasury online information. Viewed at: http://www.publicdebt.treas.gov/opd/opdpenny.htm.


rebates to individual taxpayers, increases the expensing allowance for depreciable business assets, and envisages actions aimed at dealing with the subprime mortgage turmoil.21

20. The FY2008 Budget is aimed at obtaining a balanced budget by 2012. The United States also set this goal in the context of the Multilateral Consultation on Global Imbalances. The 2008 Budget proposes to hold the rate of growth for non-security discretionary spending to 1%, below the rate of inflation.22 Budget projections may need to be revised, however, to take into account any further economic slowdown and the effect of the fiscal stimulus package.

21. Tax relief continued to be provided during the review period under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), and the Working Families Tax Relief Act of 2004.23 Many provisions of these Acts will sunset on 1 January 2011 unless further legislation is enacted to make the changes permanent. In this respect, the Administration has proposed a permanent extension of the entire tax relief programme on the grounds that it would foster sustained growth. However, Congress has been implementing a pay-as-you go rule for new bills examined by both the House and the Senate. The rule prohibits Congress from considering any legislation that would cut taxes or increase entitlement spending unless the costs of those provisions are offset by increases in other taxes or reductions in other entitlements.24

22. While noting that the U.S. federal budget deficit has narrowed, the OECD has stressed that eliminating it requires increased spending discipline. On the revenue side, the OECD considers that priority should be given to reforms that would broaden the tax base by reducing tax preferences, but consideration should also be given to consumption-based indirect taxes.25 It also considers that the reform of entitlement programmes, which will come under increasing pressure from population ageing and medical cost increases, is essential to ensure fiscal sustainability in the longer run. In this respect, the IMF has noted that a sustainable correction of the deficit requires a reform of the Medicare, Medicaid, and Social Security programmes, and that early action would reduce the cost of adjustment.26

(5) BALANCE OF PAYMENTS

23. Despite a major increase in exports, the deficit in the current account of the balance of payments continued to expand throughout 2005 and 2006, reaching a record US$811.5 billion, or 6.2% of GDP in 2006 (Table I.4). In 2007, however, the deficit came down to 5.3% of GDP (US$738.6 billion).

24. Fast export growth did not prevent a deterioration of the merchandise trade balance in 2006, but the deficit declined somewhat in 2007 (Table I.4). The surplus in services was maintained in 2006 and widened in 2007, when exports expanded faster than imports. The income balance remained in surplus in 2006 and 2007, reflecting an increase in earnings on U.S. direct investment abroad. The net inflow of foreign capital into the United States and U.S. investment abroad expanded in 2006, with

21 Library of Congress online information. Viewed at: http://thomas.loc.gov/cgi-bin/query/z?c110

:H.R.5140: 22 CBO (2007). 23 EGTRRA lowered the tax rate on dividend income, starting in 2003, to 5% for those in the 10% or

15% brackets, falling to 0% in 2008; the rate was lowered to 15% for all other tax brackets. The capital gains tax on qualified gains of property or stock held for five years was reduced from 10% to 8%.

24 Horney, et al. (2007). 25 OECD (2007c). 26 IMF (2007b).


the balance remaining favourable to the United States. The net foreign indebtedness position of the United States was US$2.54 trillion, or some 19.2% of GDP in 2006, slightly less than in 2002: the authorities note that this was due mainly to currency and valuation changes.

Table I.4 Current and capital accounts, 2002-07 (US$ billion)

2002 2003 2004 2005 2006 2007 2007 II 2007 III

Current account balance -460 -522 -640 -755 -811 -739 -190 -177

Exports of goods, services and income 1,256 1,338 1,559 1,789 2,096 2,411 591 626 Exports of goods 682 713 808 895 1,023 1,149 279 297 Exports of services 292 304 350 388 423 479 117 123 Income receipts 281 321 402 505 650 782 195 204

Imports of goods, services and income -1,652 -1,790 -2,115 -2,455 -2,818 -3,045 -758 -781 Imports of goods -1,167 -1,264 -1,477 -1,682 -1,861 -1,965 -484 -512 Imports of services -231 -250 -292 -316 -343 -372 -91 -98 Income payments -254 -275 -346 -457 -614 -708 -183 -171 Net unilateral transfers abroad -64 -71 -84 -89 -90 -104 -23 -28

Balances Goods and services -424 -497 -612 -714 -759 -709 -178 -173

Goods -485 -551 -670 -787 -838 -815 -205 -201 Non-factor services 61 54 57 73 80 107 26 28

Net investment income 28 45 56 48 37 74 13 21 Official transfers -17 -12 -17 -22 -23 -41 -7 -9 Private transfers -42 -40 -47 -49 -58 -65 -16 -18 Capital account transactions, net -1 -3 -2 -4 -4 -2 -1 -1 U.S. investment abroad, net (increase) -294 -325 -905 -427 -1,055 -1,206 -466 -174 Foreign investment. in the U.S., net (increase)

798 864 1,462 1,204 1,860 1,864 623 277

Statistical discrepancy -42 -13 86 -18 -18 84 35 67 Memorandum: Current account balance as a % of GDP -4.4 -4.8 -5.5 -6.1 -6.2 -5.3 -5.5

Source: U.S. Department of Commerce, Bureau of Economic Analysis online information, at: http://www.bea.doc.gov.

25. There is a variety of views on what drives the U.S. current account deficit. The U.S. current account deficit has been linked to factors such as the fiscal imbalance, or stronger demand growth in the United States than in trading partners. A recent study suggests that the U.S. current account deficit is due partly to an autonomous rise in the quantity of saving made available to the United States by its trading partners.27 A Federal Reserve staff paper notes that historical evidence points to a low probability of disorderly external adjustment, and that U.S. external adjustment could help stabilize the global economy, cushioning declines in U.S. demand and limiting overheating in foreign economies.28 On the other hand, a study by IMF staff notes that correcting the current account imbalances will require a further depreciation of the U.S. dollar over the long run, since, even taking account of the attractiveness of U.S. financial assets, inflows are likely to diminish over time as portfolio demand is satisfied, implying a lower long-term value for the dollar.29

26. As pointed out in the WTO 2007 World Trade Report, a reduction in the U.S. current account deficit does not need to have an adverse effect on world trade if the adjustment occurs through an acceleration of U.S. merchandise export growth, with a modest adjustment on imports; there is

27 Gruber and Kamin (2005). 28 Kamin et al. (2007). 29 Balakrishnan et al.(2007). A similar result is obtained by Obstfeld, and Rogoff. (2005).


historical evidence to support this "soft-landing" scenario.30 This does not imply that there will be no costs linked to the adjustment: the speed and economic effects depend on how much of the adjustment takes place through changes in asset valuation, a reduction in absorption, or expenditure switching, and on international coordination among finance and central bank authorities to ensure a supportive policy environment. Also, the soft-landing scenario requires that the acceleration of U.S. export growth be matched by increased demand for U.S. goods from the rest of the world.

(6) DEVELOPMENTS ON TRADE AND INVESTMENT

(i) Merchandise trade

27. The depreciation of the U.S. dollar, coupled with strong growth in the rest of the world, has had a positive impact on U.S. exports during the period under review. Total exports increased by almost 15% in 2006 while imports grew by about 11%.31 Merchandise exports (including re-exports) totaled US$1.04 trillion in 2006 and imports reached US$1.92 trillion (Tables AI.1 and AI.2). Manufactures represented the main export category, with some 80% of the total in 2006; machinery and transport equipment, and computers and electronic products were the main exported manufactures, but their share declined over 2004-06. At the same time, the share of primary products grew to 15.8% in 2006, due mainly to the growing importance of mining.

28. Manufactures also represented the main import category, with just over 70% of the total in 2006. Among manufactures, strongest import growth was in iron and steel, but the main product groups were machinery and transport equipment, which accounted for 37.7% of imports. Overall, imports of primary products expanded significantly faster than imports of manufactures.

29. U.S. trade is geographically diversified. NAFTA partners continued to account for the largest share of exports in 2006, with 22.2% going to Canada and 12.9% to Mexico (Table AI.3). Brazil and Venezuela were the main non-NAFTA partners in the Americas. The European Union is the second largest export market for U.S. products; its share stayed at the same level over 2005-06. Among Asian partners, exports to China showed to strong growth both in value terms and percentages, to reach 5.3% of the total in 2006. Japan remained the main Asian market, although its share declined continuously between 2000 and 2006.

30. Canada remained the largest U.S. supplier, accounting for 16% of U.S. imports in 2006, although its share declined by one percentage point between 2004 and 2006 (Table AI.4). However, imports from China expanded strongly over 2004-06 (from 13.8% to 15.9% of total imports), almost equaling Canada's share as the U.S. main supplier.

(ii) Trade in services

31. In 2006, the surplus in cross-border services trade amounted to US$96.6 billion; the surplus increased in both 2005 and 2006, as exports grew faster than imports. The largest surpluses are in business, professional, and technical services, and in royalties and licence fees, which represent receipts and payments for intellectual property rights, followed closely by financial services, other private services, and education; the largest deficit is in insurance (Table AI.5). The fastest growing exports were in telecommunications services, financial services, insurance services, and business and professional services; transport exports, consisting of travel and passenger fares, also expanded

30 WTO (2008). 31 Based on data in the U.N. Comtrade database, which differs from U.S. balance-of-payments data.

Exports grew by over 40% between 2003-06, compared with nominal effective depreciation of some 10%.


during the period. In imports, the largest increases were in research and development and testing services, management consulting services, and computer and information services.

32. The main trading partners for U.S. services exports in 2006 were the United Kingdom (11.8% of the total), Japan (10.2%), Canada (9.7%), Mexico (5.6%), and Germany (5.1%). The main partners for imports were the United Kingdom (12%), Japan (7.8%), Canada (7.6%), Germany (6.8%), and Bermuda (4.9%).32

33. Services sold abroad by U.S. companies through their majority-owned foreign affiliates to foreigners reached US$528.5 billion in 2005, the most recent year for which data were available.33 Affiliates in Europe accounted for some 52% of the total, followed by the Asia Pacific region (24%), and Latin America (11%). The value of services sold by foreign multinationals through their U.S. majority-owned affiliates to U.S. persons was US$389 billion. In 2005, sales of services by U.S. multinationals through their majority-owned affiliates increased by 9.4% over the previous year, while foreign multinationals' sales of services through their majority-owned U.S. affiliates to U.S. persons rose by 1.9%.

(iii) Foreign direct investment

34. The United States' foreign direct investment position increased to US$1.79 trillion in 2006, in line with the 11% average annual growth in 1994-2004.34 Foreign direct investment inflows for 2006 totaled US$180.6 billion35. Net equity capital inflows were the largest contributor to this flow, with a surge of 73% in nominal terms, after declining for five consecutive years. Reinvested earnings, which remained above historical norms for a third consecutive year, contributed to the increase in the inward position; valuation adjustments and inter-company debt investment made smaller contributions. The United Kingdom remained the largest source, with an investment position of US$303.2 billion, or 17% of the total, followed by Japan with US$211 billion (12%), and Germany and the Netherlands accounting for 11% each. The largest equity capital increases by foreign investors in 2006 were in finance and insurance, chemicals, computers and electronic products, manufacturing, and machinery manufacturing.

35. U.S. direct investment abroad increased by 12% in 2006 to US$2.38 trillion; this was above the (less than 1%) increase in 2005, and in line with the average annual growth rate of 13% in 1994-2004. Foreign direct investment outflows for 2006 totaled US$235.4 billion. Reinvested earnings were the largest contributor to the increase in 2006; net equity capital investment also contributed to the increase but was the smallest recorded since 1996.36 Three host countries: the United Kingdom (U$364.1 billion, or 15% of the total), Canada (US$246.5 billion or 10%), and the Netherlands (US$215.7 billion, or 9%), accounted for over a third of the total investment position. Equity capital increases for the acquisition or establishment of new affiliates in 2006 were largest in the United Kingdom, the Netherlands, and Luxembourg. Over two-thirds of capital contributions to existing foreign affiliates were to affiliates in Europe. Among industries, the largest contributions were to affiliates in finance and insurance. The largest stocks of FDI in the United States are owned by United Kingdom, Japan, Dutch, and German interests. The highest stocks of U.S. FDI abroad continue to be in the United Kingdom and Canada (Table AI.6).

32 BEA online information. Viewed at: http://www.bea.gov/international/xls/pos_06.xls. 33 BEA (2007f). 34 BEA online information. Viewed at: http://www.bea.doc.gov/bea. 35 BEA (2007b). 36 Ibarra and Koncz (2007).


(7) OUTLOOK

36. In mid 2007, the CBO forecast GDP growth of 2.9% for 2008, accelerating to 3.2% in 2009 and 2010.37 Unemployment is expected to remain low in 2008 and 2009 at 4.7% and 4.8%, respectively, while inflation as measured by the CPI is expected to slow from 2.8% in 2007 to 2.3% in 2008, and to 2.2% in 2009 and 2010. The total budget deficit is expected to decline from 1.2% of GDP in 2007 to 1.1% in 2008, and increase slightly in 2009 and 2010, before falling again and turning into a surplus in 2012.

37. The Federal Reserve Board is expecting GDP to grow at between 1.3% and 2% in 2008, a pace appreciably below its trend rate, owing primarily to a deepening of the housing contraction and a tightening in the availability of household and business credit. Given the substantial reductions in the target federal funds rate, the Board is expecting GDP growth to accelerate further, to some 2.1%-2.7% in 2009 and 2.5%-3% in 2010. Inflation is expected to decline in 2008 (to between 2.1%-2.4%) and 2009 (1.7%-2%) from its recent levels as energy prices are forecast to level out and economic slack to contain cost and price increases. The unemployment rate is forecast to remain in the 5%-5.3% range in 2008 and 2009, before declining somewhat in 2010.38

38. In October 2007, the IMF forecast real GDP growth of 1.5% for 2008.39 Previously, it had noted that difficulties in the mortgage market were expected to extend the decline in residential investment, while lower house prices were expected to moderate private consumption.40 CPI inflation was anticipated to reach 2.3% in 2008, and unemployment to climb to 5.7%. The expected general government deficit for FY2008 was expected to increase to 2.9% of GDP and the current account deficit to around 5.5% of GDP.

37 CBO (2007). 38 Federal Reserve Board (2008). 39 IMF (2008). 40 IMF (2007c).


II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES

(1) OVERVIEW

1. Support for the multilateral trading system is at the core of U.S. trade policy. The Administration remains determined to seize the "historic opportunity" for a comprehensive multilateral agreement. The United States has met most of its WTO notification obligations; exceptions include notifications on agricultural tariff quotas and government procurement statistics. The United States has made progress in implementing several WTO rulings calling for changes to U.S. legislation but a few rulings have not been fully implemented.

2. Trade promotion authority, which the Administration views as an important tool for achieving U.S. trade objectives, expired on 1 July 2007. In May 2007, the Administration and congressional leaders agreed to a trade policy "template", which has been described as "open[ing] the way for bipartisan work on Trade Promotion Authority". The template contains provisions on labour, environment, intellectual property, investment, government procurement, and port security.

3. While the United States considers that a comprehensive multilateral agreement offers the best chance to create expanded trade and development opportunities around the world, it believes that bilateral and regional trade liberalization can also provide significant benefits. Consistent with this, the United States has continued to enter into preferential agreements. In early 2008, the United States had free-trade agreements in force with 14 countries, compared with seven during its last Review, and three at the start of the current Administration in early 2001. Free-trade agreements with another six countries had been completed but were not yet in force. The United States grants unilateral preferences to developing countries under several schemes, which may be conditional on adherence to criteria that, according to the U.S. authorities, are intended to promote sound policies and allow beneficiaries to expand trade and investment.

4. The United States has long maintained a policy of national treatment of foreign direct investment, subject to sector-specific considerations, prudential concerns, and national security. In 2007 Congress amended the process by which the Executive reviews the national security implications of certain foreign direct investments. It would be important to ensure that these changes do not undermine predictability for foreign investors.

(2) INSTITUTIONAL AND POLICY FRAMEWORK

5. There have been no major changes to the institutional framework governing trade policy formulation since the last Review of the United States. The main agency on trade policy matters in the Executive Branch is the Office of the United States Trade Representative (USTR), which is part of the Executive Office of the President. The USTR is responsible for developing and coordinating U.S. international trade policy, and overseeing negotiations with other countries. The head of the USTR is the U.S. Trade Representative, a Cabinet member who serves as the President's principal advisor, negotiator, and spokesperson on trade issues.

6. The USTR consults with other government agencies on trade policy matters through the Trade Policy Review Group and the Trade Policy Staff Committee, administered and chaired by the USTR and composed of 20 federal agencies and offices. The National Economic Council and National Security Council are also part of the interagency coordination mechanism on trade policy.

7. The USTR works in close consultation with Congress. It provides regular briefings for the Congressional Oversight Group, composed of members from several congressional committees, and


chaired by the Chairman of the House Ways and Means Committee and of the Senate's Finance Committee.

8. Input on trade policy formulation is also received from the private sector, through a policy advisory committee system consisting of the President's Advisory Committee for Trade Policy and Negotiations, administered by the USTR; four policy advisory committees; and 22 technical and sectoral advisory committees.

9. Under the Bipartisan Trade Promotion Authority Act of 2002, Congress stated that the expansion of international trade is vital to the national security and economic growth and strength of the United States.1 In addition, Congress defined the "principal trade negotiating objectives" of the United States, categorized under 17 different headings.2

10. The Administration and congressional leaders concluded a "trade policy template" in May 2007. According to the USTR, the template provides a "clear and reasonable path forward for congressional consideration of Free Trade Agreements with Peru, Colombia, Panama, and Korea [and] opens the way for bipartisan work on Trade Promotion Authority".3 The USTR indicates that the template aims to incorporate into U.S. free-trade agreements internationally recognized labour principles, a "specific list" of multilateral environmental agreements, and "certain flexibilities" regarding intellectual property protection to ensure that U.S. partners "are able to achieve an appropriate balance between fostering innovation in, and promoting access to, life-saving medicines". The template also covers investment, government procurement, and port security. In late 2007, the U.S. Congress passed, and the President signed into law, the United States – Peru Trade Promotion Agreement Implementation Act.

11. The trade promotion authority (TPA) granted to the Executive under the Bipartisan Trade Promotion Authority Act of 2002 expired on 1 July 2007. As at early 2008, it had not been renewed. Under the TPA, the USTR was required to consult closely with Congress, and Congress had to approve or reject legislation implementing a new trade agreement without amendment and within a fixed period. The Administration views TPA as an important tool for achieving U.S. trade objectives.

12. During the period under review, workers, firms, and farmers adversely affected by international trade were eligible for benefits under the Trade Adjustment Assistance (TAA) programme, authorized by the Trade Act of 1974, as amended. The TAA programmes expired in December 2007, but the Consolidated Appropriations Act of 2008 contained an appropriation to operate fully the TAA programme for workers for fiscal year 2008. The Department of Labor administers the TAA programme for workers. Benefits include income support, job training, and health coverage. According to the Government Accountability Office, the number of worker petitions filed under this programme declined from 2,992 in fiscal year 2004 to 2,456 in fiscal year 2006.4 Around one third of these were denied each year, commonly because workers were not involved in the production of "articles", a basic programme requirement. The petitions certified by the Department of Labor between fiscal years 2004 and 2006 as meeting the relevant requirements to

1 19 USC 3801. 2 Trade barriers and distortions, trade in services, foreign investment, intellectual property,

transparency, anti-corruption, improvement of the WTO and multilateral trade agreements, regulatory practices, electronic commerce, reciprocal trade in agriculture, labour and the environment, dispute settlement and enforcement, WTO extended negotiations, trade remedy laws, border taxes, textile negotiations, and worst forms of child labour (19 USC 3802).

3 USTR online information, "Trade Facts: Bipartisan Trade Deal". Viewed at: http://www.ustr.gov/ assets/Document_Library/Fact_Sheets/2007/asset_upload_file127_11319.pdf.

4 GAO (2007).


obtain benefits cover some 400,000 workers. Industries accounting for the largest number of certified petitions in 2006 were textile mill products, apparel, and electronic and other electrical equipment and components (except computer).

13. Benefits under the TAA programme for firms, which is administered by the Department of Commerce, consist of matching funds for projects to improve a manufacturer's competitiveness. The average amount awarded was US$7 million per year between fiscal years 2001 and 2006. During the same period, the mean value of annual assistance per firm was US$48,407; only one petition for assistance was rejected.

14. Under the TAA programme for farmers, the Department of Agriculture provides technical assistance and cash benefits for eligible farmers. Of the 25 petitions reviewed in fiscal year 2006, four were certified. These covered 208 producers of Concord juice grapes, snapdragons, and avocados. Cash benefits paid under the programme amounted to US$825,000 in fiscal year 2006. No petitions were certified in fiscal year 2007.

(3) FOREIGN INVESTMENT REGIME

(i) National treatment

15. The United States maintains a policy of national treatment for foreign direct investment (FDI), subject to sector-specific considerations, prudential concerns, and national security. The President may suspend or prohibit foreign acquisition of a U.S. business for national security considerations. In addition, sector-specific restrictions on FDI exist with respect to atomic energy operations, rights of way for oil pipelines, leases to develop mineral resources on on-shore federal lands, and certain fishing operations. Most other federal measures that limit FDI, or subject it to reciprocity, relate to services, notably air and maritime transport, and financial services. Restrictions on national treatment apply with respect to the eligibility for public funding for research and development; emergency loans for agricultural purposes; and loans, guarantees, and political-risk insurance for investment.5 As noted in previous Reviews of the United States, restrictive measures are also applied at the State level, in particular on real estate and financial services.

(ii) Reporting and review requirements

16. FDI into the United States is subject to reporting requirements under the International Investment and Trade in Services Survey Act. There are also reporting requirements with respect to foreign acquisitions of agricultural land.6

17. In addition, pursuant to section 721 of the Defense Production Act of 1950, formerly referred to as the "Exon Florio" provision, the United States reviews the national security implications of certain foreign direct investments. Section 721, as amended by the Foreign Investment and National Security Act of 2007 (FINSA), establishes a process by which the President may conduct national security reviews of "covered transactions", that is, mergers, acquisitions, or takeovers that could "result in foreign control of a person engaged in interstate commerce in the United States". The President has delegated authority to conduct such reviews to the Committee on Foreign Investment in the United States (CFIUS), an interagency committee within the Executive Branch that is chaired by the Secretary of the Treasury. FINSA establishes CFIUS in statute; previously, CFIUS operated pursuant to an Executive Order.

5 WTO (2004), Chapter II(5). 6 Agricultural Foreign Investment Disclosure Act.


18. In July 2007, the President signed into law FINSA, which took effect on 24 October 2007. In January 2008, the President issued an Executive Order that specifies CFIUS’ membership and authorizes the CFIUS chairperson to designate a lead agency or agencies for each transaction reviewed.7 In addition, the Secretary of the Treasury is developing regulations to further implement FINSA. The authorities note that the proposed regulations will be published in the Federal Register and will be subject to public comment before final regulations are published and become effective. The Secretary of the Treasury will also publish guidance in the Federal Register on which types of foreign mergers and acquisitions raise national security considerations.

19. Under section 721, the President may suspend or prohibit a covered transaction when there is credible evidence that the foreign entity might take action that threatens to impair national security, and no other provision of federal law provides adequate and appropriate authority to protect national security.8 The President must decide whether to take action under section 721 within 15 days of the completion of a formal CFIUS investigation. CFIUS has 45 days to complete this investigation.

20. To determine whether a formal, 45-day investigation is warranted, CFIUS conducts a review, triggered by a voluntary notification by one of the parties involved in a covered transaction, or by CFIUS' own decision or that of the President. The statutory time limit to conduct this review is 30 days. In reviewing a transaction, CFIUS must determine the effect of the transaction on national security, based on all relevant national security factors, including those added by FINSA to an illustrative list contained in section 721. Under FINSA, the term "national security" includes issues relating to "homeland security", for example its application to "critical infrastructure" as defined in the Act.9

21. FINSA automatically subjects to a 45-day CFIUS investigation all transactions that result in "foreign government control", unless certain senior-level officials determine that the transaction will not impair national security. In investigating impairment of national security, CFIUS must consider several factors, including "the adherence of the subject country to non-proliferation control regimes", "the relationship of such country with the United States, specifically on its record on cooperating in counter-terrorism efforts", and the country's export control laws and regulations.10

22. Transactions that result in control of U.S. critical infrastructure and that could impair U.S. national security are also subject to a 45-day investigation. This may be waived if senior-level officials determine that the transaction will not impair national security. In addition, CFIUS may review a previously reviewed transaction where CFIUS received false or inaccurate material information during the initial review or investigation, or if a "mitigation" agreement resulting from the initial review or investigation was "intentionally and materially breached".11

23. Between 2005 and 2007 CFIUS received 325 voluntary notices of foreign mergers or acquisitions. According to the U.S. authorities, this accounts for less than 7% of all foreign acquisitions of U.S. companies during that period. Of the 325 notices, 15 proceeded to a 45-day investigation after the conclusion of CFIUS’ 30-day review; two notices were subject to a final decision by the President, who allowed both to proceed.

24. Under FINSA, CFIUS or a lead agency designated by the Secretary of the Treasury may enter into, modify, monitor, and enforce agreements with any party to a covered transaction to mitigate the

7 Federal Register, 73 FR 4677, 25 January 2008. 8 50 USC 2170 et seq. 9 Section 2, Foreign Investment and National Security Act of 2007. 10 Section 4, Foreign Investment and National Security Act of 2007. 11 Section 2, Foreign Investment and National Security Act of 2007.


transaction's national security risk. Every mitigation agreement must be justified by a written analysis of the national security risk posed by the transaction. Between 2005 and 2007, 37 of the 325 notices to CFIUS resulted in such agreements. FINSA also creates extensive new reporting requirements from CFIUS to Congress.12

25. In addition to section 721, the United States applies industrial security regulations. These generally require a contractor to obtain facility security clearance and individual security clearance in order to perform a government contract involving access to classified sites or information. Where a contractor is determined to be under foreign ownership, control, or influence, the Department of Defense may withhold clearance unless certain steps are taken, such as the use of voting trust agreements, whereby the foreign stockholders are effectively divested of management control in the contractor.

(iii) International investment arrangements

26. Apart from the GATS, under which the United States has made commitments regarding the supply of services through commercial presence, the United States is a party to the OECD Code of Liberalization of Capital Movements13, and the OECD National Treatment Instrument, which is not legally binding.14

27. There are 40 bilateral investment treaties in force between the United States and other countries (Table II.1). The NAFTA and most free-trade agreements signed by the United States contain separate chapters on foreign investment, which are substantively identical to the provisions of U.S. bilateral investment treaties. Bilateral investment treaties and investment provisions in free-trade agreements concluded by the United States allow the parties to make exceptions to specified obligations.15

Table II.1 Bilateral investment agreements, January 2008

Country Entry into force Country Entry into force

Albania 4 January 1998 Jordan 13 June 2003 Argentina 20 October 1994 Kazakhstan 12 January 1994 Armenia 29 March 1996 Kyrgyzstan 12 January 1994 Azerbaijan 2 August 2001 Latvia 26 December 1996 Bahrain 30 May 2001 Lithuania 22 November 2001 Bangladesh 25 July 1989 Moldova 25 November 1994 Bolivia 6 June 2001 Mongolia 1 January 1997 Bulgaria 2 June 1994 Morocco 29 May 1991 Cameroon 6 April 1989 Mozambique 3 March 2005 Congo, Democratic Republic of 28 July 1989 Panama 30 May 1991 Congo, Republic of 13 August 1994 Poland 6 August 1994 Croatia 20 June 2001 Romania 15 January 1994

Table II.1 (cont'd)

12 Section 7, Foreign Investment and National Security Act of 2007. 13 The Code of Liberalization contains legally binding obligations regarding the liberalization of

specified capital movements, including foreign direct investment, subject to certain exceptions and country-specific reservations.

14 The National Treatment Instrument contains a commitment, that is not legally binding, to accord national treatment to foreign-owned or controlled firms in the post-establishment phase.

15 WTO (2004).


Country Entry into force Country Entry into force

Czech Republic 19 December 1992 Senegal 25 October 1990 Ecuador 11 May 1997 Slovakia 19 December 1992 Egypt 27 June 1992 Sri Lanka 1 May 1993 Estonia 16 February 1997 Trinidad and Tobago 26 Dec 1996 Georgia 17 August 1997 Tunisia 7 February 1993 Grenada 3 March 1989 Turkey 18 May 1990 Honduras 11 July 2001 Ukraine 16 November 1996 Jamaica 7 March 1997 Uruguay 1 November 2006

Source: WTO Secretariat, based on data from the Trade Compliance Center, U.S. Department of Commerce online information. Viewed at: http://www.tcc.mac.doc.gov.

28. In addition, the United States has concluded 32 trade and investment framework agreements.16 The agreements establish an institutional framework for consultations on bilateral trade and investment policies. Also of relevance to foreign investment are the treaties of friendship, commerce, and navigation still in force between the United States and some 40 countries; the last such treaty was concluded with Thailand in 1966.

(4) INTERNATIONAL RELATIONS

(i) World Trade Organization

29. The President's 2007 Trade Policy Agenda notes that "at the core of U.S. trade policy is a steadfast support of the rules-based multilateral trading system".17 According to the Agenda, the United States will continue to work with other WTO Members in pursuit of a successful conclusion to the DDA that opens new markets and creates meaningful new trade flows.

30. The United States is an original Member of the WTO. It participated in the post-Uruguay Round negotiations on telecommunications and financial services; its commitments in these areas were annexed to the Fourth and Fifth Protocols of the GATS. The United States is a party to the Agreement on Government Procurement and a participant in the Information Technology Agreement.

31. The United States met most of its notification obligations between 2005 and 2007. Exceptions include notifications on agricultural tariff quotas and government procurement statistics (Table AII.1). The U.S. authorities indicate that they will submit procurement statistics as soon as the overhaul of the Federal Procurement Data System is complete.

32. In the context of the DDA, the United States has made numerous contributions in a wide range of areas, including agriculture, market access for industrial goods and services, anti-dumping, subsidies, intellectual property, and trade facilitation. The United States has made several proposals regarding the WTO dispute settlement mechanism.18

33. Since the inception of the WTO, the United States has been complainant in 88 dispute settlement cases and respondent in 99. From mid 2005 to end 2007, it was a complainant in eight disputes and a respondent in ten (Table AII.2).

16 USTR online information, "Trade and Investment Framework Agreements". Viewed at:

http://www.ustr.gov/Trade_Agreements/TIFA/Section_Index.html. 17 USTR (2007b). 18 WTO documents TN/DS/W/89, 31 May 2007; TN/DS/W/86, 21 April 2006; TN/DS/W/82,

24 October 2005, and addenda.


34. The United States has taken steps to give effect to WTO Dispute Settlement Body (DSB) decisions since its last Review, but a few decisions remain to be implemented. The Continued Dumping and Subsidy Offset Act of 2000 (the Byrd Amendment), was repealed by the Deficit Reduction Act of 2005 (Chapter III(2)(vi)). Decisions relating to Section 211 of the Omnibus Appropriations Act of 1998, some aspects of the U.S. anti-dumping investigation of certain hot rolled steel products from Japan, and Section 110(5) of the U.S. Copyright Act remain to be implemented. The U.S. authorities indicated during the DSB meeting of February 2008 that the Administration was committed to working with Congress to implement the outstanding DSB decisions in these cases.

35. The United States announced in May 2007 that it was invoking procedures under GATS Article XXI to modify its schedule of commitments.19 This was in response to the DSB's decisions in the case regarding measures affecting the cross-border supply of gambling and betting services brought in 2003 by Antigua and Barbuda. Following compensation negotiations under Article XXI with Antigua and Barbuda and six other Members, the United States announced in December 2007 that it had reached agreement with Canada, the EC, and Japan. Pursuant to Article 22.2 of the Dispute Settlement Understanding, Antigua and Barbuda requested in mid 2007 authorization from the DSB to suspend the application to the United States of concessions under the GATS and the TRIPS Agreement. A WTO arbitrator decided in December 2007 that Antigua and Barbuda would be entitled to suspend WTO obligations to the United States with respect to services and intellectual property rights valued at up to US$21 million per year.20

(ii) Preferential and other arrangements

(a) Free-trade agreements

36. According to the President's 2007 Trade Policy Agenda, although a comprehensive multilateral agreement offers the best chance for expanded trade and development opportunities around the world, bilateral and regional trade liberalization can also provide significant benefits.21

37. As at early 2008, the United States had free-trade agreements in force with: Australia, Bahrain, Canada and Mexico, Chile, Israel, Jordan, Morocco, Singapore, and four of the five members of the Central American Common Market (El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic. Free-trade agreements had been completed but were not yet in force with: Costa Rica, Colombia, Oman, Panama, Peru, and Korea. These agreements share several characteristics, including with respect to coverage and the scope of tariff elimination (Table AII.3).

38. U.S. merchandise exports to free-trade agreement partners totalled US$377 billion in 2006, close to 41% of all U.S. exports.22 Although the value of exports to free-trade agreement partners has increased by around one third since 2004, as a share of total exports it has remained constant. U.S. merchandise imports from free-trade agreement partners were approximately US$568 billion in 2006, around 31% of total imports. The share of imports from free-trade agreement partners has also remained constant since 2004, although the absolute value of imports from those partners has risen by around 27%.

39. During the period under review, the only formal disputes under the free-trade agreements entered into by the United States were under the NAFTA. Chapter 19 of the NAFTA provides for bi-

19 USTR online information, "Statement on Internet Gambling". Viewed at: http://www.ustr.gov/

Document_Library/Press_Releases/2007/December/Statement_on_Internet_Gambling.html. 20 WTO document WT/DS285/ARB, 21 December 2007. 21 USTR (2007b). 22 The data in this paragraph are from USITC (2007b).


national panel reviews of anti-dumping and countervailing duty final determinations and underlying legislation. There were nine active cases under chapter 19 reviewing determinations by U.S. agencies (January 2008). Six panels challenging U.S. agency determinations were formed in each 2005 and 2006, and three in 2007.23 New cases brought against the United States since 2005 concerned primarily softwood lumber and steel products.

40. Disputes relating to the investment provisions of NAFTA Chapter 11 are settled through an investor-state arbitration process. There are two active Chapter 11 cases against the United States (February 2008).24 Several NAFTA Chapter 11 disputes have been concluded since 2005. One involved injuries to a Canadian marketer and distributor of methanol, allegedly resulting from a California ban on the use or sale in California of a gasoline additive. The tribunal released its final award in August 2005, dismissing all the claims. In July 2007, a consolidation tribunal terminated the remaining NAFTA Chapter 11 disputes submitted by Canadian softwood lumber companies. In January 2008, a tribunal dismissed the consolidated claims of more than 100 Canadian cattlemen for lack of jurisdiction. The claimants had alleged damages resulting from the decision by the United States to close the border with Canada to imports of certain Canadian cattle following the discovery of a case of bovine spongiform encephalopathy in a cow in Canada.

41. The United States is holding free-trade agreement negotiations with Malaysia (March 2008). Negotiations with Thailand and the Southern African Customs Union were suspended. According to the U.S. authorities, the United States and the United Arab Emirates have decided to deepen their economic relationship through an enhanced process of consultation under the bilateral trade and investment framework agreement.

(iii) Unilateral preferences

42. The United States grants unilateral preferential tariff treatment under the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA), the Caribbean Basin Economic Recovery Act (CBERA), and the Andean Trade Preference Act (ATPA). These preferences may be conditional on compliance with various U.S. policy objectives.

43. Under the GSP programme, the United States grants duty-free treatment on certain products from eligible developing countries.25 There are 1,510 "import sensitive" tariff-line items ineligible for GSP treatment, including certain footwear, textiles and apparel, watches, electronics, steel articles, and glass products.26 In addition, articles subject to safeguard actions or certain national security provisions may be ineligible for GSP treatment. Duty-free imports under the GSP programme amounted to US$30.8 billion in 2007, 1.6% of total U.S. imports. Angola was the leading GSP beneficiary in 2007, followed by India, Thailand, and Brazil.

44. "Competitive need limitations" require the termination of a country's GSP eligibility with respect to a specific product if U.S. imports from that country account for 50% or more of the value of total U.S. imports of that product, or exceeded a certain threshold (US$130 million in 2007) in the previous calendar year. However, the President may grant a waiver of these limitations, and the product may continue to be eligible for duty-free treatment. Waivers of competitive need limitations

23 NAFTA Secretariat online information, "NAFTA Chapter 19 Binational Panel Decisions". Viewed

at: http://www.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=380. 24 State Department online information. Viewed at: http://www.state.gov/s/l/c3741.htm. 25 19 USC 2461 et seq. 26 19 USC 2463.


are posted on-line.27 In December 2006, Congress extended the GSP programme through 31 December 2008 and modified the President's authority to revoke certain waivers of competitive need limitations.28

45. Liberia and East Timor were designated as least-developed beneficiary developing countries under GSP in 2006.29 GSP was restored to Ukraine in February 2006.30 With the entry into force of their free-trade agreements with the United States, Bahrain, Morocco, and four of the five members of the Central American Common Market (El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic no longer qualify for GSP preferences.31 Romania and Bulgaria do not qualify, following their accession to the EC in January 2007.32

46. Under the AGOA, the United States grants duty-free treatment on products benefiting from GSP and on 1,835 additional tariff-line items from eligible sub-Saharan African countries. Imports under AGOA were US$36.1 billion in 2006, a 10.4% increase with respect to 2005.33 The leading supplier of imports under AGOA in 2006 was Nigeria, which accounted for approximately 72% of the total, followed by Angola, with around 13%. Almost 95% of AGOA imports consisted of petroleum products. Apparel imports under AGOA were worth US$1.3 billion in 2006.

47. In December 2006, the President signed into law the Africa Investment Incentive Act of 2006, which extends through September 2012 duty-free treatment on imports of clothing produced in "lesser developed" AGOA beneficiaries, regardless of the origin of the fabric or yarn.34 The quantity of clothing that can benefit from this treatment each year is capped at 3.5% of U.S. annual clothing imports.35 No benefits are available if the third-country fabric or yarn is available in "commercial quantities" in AGOA countries. The Act also expands duty-free treatment to fabrics and textile products wholly formed in lesser developed AGOA beneficiaries from yarn and fabric produced by one or more lesser developed AGOA beneficiaries.

48. In 2007, the President designated Liberia and Mauritania as eligible to receive AGOA benefits.36 As at April 2007, 26 countries were eligible to receive AGOA apparel benefits.37

27 USTR online information, "CNL Waivers: Current Waivers to GSP Competitive need Limitations".

Viewed at: http://www.ustr.gov/Trade_Development/Preference_Programs/GSP/CNL_ Waivers_Current_ Waivers_to_GSP_Competitive_Need_Limitations_(CNLs).html.

28 Sections 8001 and 8002, Tax Relief and Health Care Act of 2006. 29 Federal Register, 71 FR 9425, 24 February 2006, and 72 FR 459. 30 Federal Register, 71 FR 5899, 3 February 2006. 31 Federal Register, 71 FR 43635, 1 August 2006 (Bahrain); 70 FR 76651, 27 December 2005

(Morocco); 71 FR 38509, 6 July 2006 (Guatemala); 71 FR 16971, 4 April 2006 (Honduras and Nicaragua); and 72 FR 10025, 6 March 2007 (Dominican Republic).

32 Federal Register, 72 FR 2717, 22 January 2007. 33 USITC (2007b). 34 Lesser developed beneficiary sub-Saharan African countries are defined as countries with a per

capita gross national product of less than US$1,500 a year in 1998 as measured by the World Bank. 35 19 USC 3721(c)(1)(B). 36 The following are eligible for AGOA benefits: Angola, Benin, Botswana, Burkina Faso, Burundi,

Cameroon, Cape Verde, Chad, Republic of Congo, Democratic Republic of Congo, Djibouti, Ethiopia, Gabon, the Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, Tanzania, Uganda, and Zambia.

37 Benin, Botswana, Burkina Faso, Cameroon, Cape Verde, Chad, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Swaziland, Tanzania, Uganda, and Zambia.


49. The CBERA, enhanced by the Caribbean Basin Trade Partnership Act (CBTPA), provides duty-free treatment for a wide range of products from beneficiary countries.38 CBTPA, which expires in September 2008, provides duty-free treatment for certain textile and apparel imports from beneficiary countries. The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 enhanced Haiti's benefits under CBERA. Imports under CBERA (including CBTPA) were US$9.9 billion in 2006, almost 20% less than in 2005. This marked decline reflects the termination of benefits for El Salvador, Guatemala, Honduras, and Nicaragua following the entry into force of the Dominican Republic-Central America-United States Free Trade Agreement. CBERA imports in 2006 were composed primarily of mineral fuels, methanol, and apparel products.

50. The ATPA, as amended by the Andean Trade Promotion and Drug Eradication Act expired in February 2008, but was subsequently extended through 2008. Under ATPA a wide range of products from Bolivia, Colombia, Ecuador, and Peru are eligible for duty-free treatment. No major changes have occurred with respect to this programme's coverage since the last Review of the United States. In 2006, imports under ATPA were US$13.5 billion, US$2 billion more than a year earlier.39 Ecuador became the largest source of U.S. imports under ATPA in 2006, followed by Colombia. Petroleum products accounted for 68% of imports under ATPA.

51. The waiver granted by the WTO General Council for CBERA expired on 31 December 2005; the waiver for ATPA had expired on 4 December 2001. AGOA has never been covered by a WTO waiver. The United States submitted revised waiver requests for the three programmes in March 2007.40 These were discussed in the WTO Council on Trade in Goods in 2007 but no decision has yet been made.

(iv) Aid for trade

52. In its New Strategic Framework for Foreign Assistance, announced in January 2006, the United States identifies trade capacity building as a priority objective for the promotion of economic growth.41 The guiding principles of U.S. trade capacity building are long-term sustainability of programme results, local ownership and commitment, and donor coordination.

53. The U.S. Government defines trade capacity building activities as those "designed to promote trade and/or [that] have a direct link to promoting a country's ability to conduct trade within the international trading system".42 The United States counts only the trade-related component of particular projects towards its aid for trade commitments. According to the United States, only a small portion of U.S. funding for infrastructure projects is included in the aid for trade definition.43

54. Several U.S. agencies are involved in trade capacity building. Interagency working groups within the U.S. Government seek to improve the effectiveness and coherence of U.S. trade capacity building activities; coordination of these groups is led by the USTR. The two leading agencies involved in the implementation are USAID and the Millennium Challenge Corporation (MCC). The MCC, established in 2004, provides assistance to lower and lower-middle income countries that meet

38 The following received benefits as at early 2008: Antigua and Barbuda, Aruba, Bahamas, Barbados,

Belize, British Virgin Islands, Costa Rica, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, Panama, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Trinidad and Tobago.

39 USITC (2007b). 40 WTO documents G/C/W/508/Rev.1, G/C/W/509/Rev.1, and G/C/W/510/Rev.1, 28 March 2007. 41 OECD (2007b). 42 OECD (2007b). 43 OECD (2007b).


specific governance and economic indicators. Traditionally, USAID has funded the majority of U.S. trade capacity building assistance. In fiscal year 2006, however, the MCC became the largest source, accounting for 44% of the total, compared with 34% from USAID.44 About 80% of MCC funds for trade capacity building assistance were for physical infrastructure.

55. The United States maintains a publicly available, online database of its trade capacity building activities.45 According to this database, U.S. funding for this assistance was US$1.4 billion in fiscal year 2007, up from US$637.8 million in fiscal year 2002; average annual funding was US$1.1 billion between fiscal years 2002 and 2007. Physical infrastructure accounted for around 26% of total funding for trade capacity building assistance during this period, followed by trade related agriculture, with 11%, and business services and training, human resources and labour, and financial sector development and good governance, each with around 10%. Latin America and the Caribbean were the top recipients of funding for trade capacity building assistance, accounting for approximately 30% of the total46 followed by sub-Saharan Africa (25%), the Middle East and North Africa (15%), Asia (13%), the former Soviet Republics (12%), and Central and Eastern Europe (6%).

56. According to the latest WTO/OECD Report on Trade-Related Technical Assistance and Capacity Building, U.S. commitments for trade-related technical assistance and capacity building averaged US$3 billion per year between 2003 and 2005.47 The bulk of support was for trade-related infrastructure, which accounted for approximately 72% of total U.S. commitments. Support for trade development accounted for around 22%, and support for trade policy and regulations accounted for the remaining 6%. OECD data differ from those reported in the U.S. database on trade capacity building activities primarily because OECD data encompass all U.S. funding for relevant infrastructure projects, whereas U.S. data cover only the trade-related component of such funding.

44 Langton (2007). 45 See USAID online information, "Trade Capacity Building Database". Viewed at: http://qesdb.

cdie.org/tcb/index.html. 46 The total excludes non-targeted global funding. 47 OECD and WTO (2007).


III. TRADE POLICIES AND PRACTICES BY MEASURE

(1) OVERVIEW

1. The United States accords MFN tariff treatment to all WTO Members except Cuba. All except two tariff lines are bound, generally at low rates, which lends predictability to the U.S. trade regime. The average applied MFN tariff was 4.8% in 2007, virtually the same as in 2004 (4.9%). The applied MFN rate for agriculture (WTO definition) fell from 9.7% in 2004 to 8.9% in 2007, reflecting the rise in commodity prices and the resulting decline in the ad valorem equivalent rates. At 4%, the 2007 average applied MFN rate for non-agricultural products remained unchanged. Around 2% of all lines are subject to tariff quotas; high out-of-quota tariffs are one of the main forms of import protection for certain agricultural products. Tariff preferences may be granted by the United States either unilaterally or in the context of free-trade agreements (Chapter II).

2. In addition to tariffs, imports are subject to ad valorem harbour maintenance and merchandise processing fees; the second is not applied on imports from some preferential partners. A customs bond must be posted for each importation of merchandise into the United States. Initial production volumes of small domestic wine and beer producers benefit from either a reduced federal excise tax rate or an excise tax credit. This benefit is not available for imported products.

3. Security considerations have continued to drive significant changes relating to customs procedures. The SAFE Port Act of 2006 codified and expanded existing cargo and supply-chain security programmes, and established additional filing requirements for importers. Under the Act, from mid 2012, all containers must be scanned prior to being loaded on a U.S.-bound vessel. However, the Act recognizes that this requirement could have a significant impact on trade, and offers the possibility of delaying the implementation for specific ports.

4. Non-tariff import restrictions are maintained largely for non-commercial purposes. This includes a ban on imports of marine mammal products, shrimp, and tuna from countries found not to be in compliance with U.S. environmental provisions.

5. Anti-dumping (AD) remains a key trade policy instrument for the United States. At end 2007, the United States maintained some 232 AD measures in force, affecting imports from 39 trading partners. During 2005-07, the United States initiated some 33 investigations and applied 19 provisional measures, but imposed only 11 final duties. Applied AD duties can be substantial, up to 280%, and thus affect significantly U.S. domestic prices. As most AD measures are imposed on intermediate goods like steel and chemical products, they increase costs for downstream producers and consumers. Although temporary, some 40% of the AD measures in force have in practice granted protection for over 10 years. The percentage of U.S. imports directly affected by AD measures is less than 0.1% and the number of AD orders issued since 2005 has been lower than in earlier years. Nevertheless, it would be important to ensure that AD measures do not retard adjustment to changing conditions in international markets.

6. At end 2007, the United States maintained no safeguard measures but 31 countervailing (CV) orders were in place involving 13 trading partners. Although the Continued Dumping and Subsidy Offset Act of 2000 (the Byrd Amendment) was repealed in 2005, AD and CV duties assessed before October 2007 continue to be distributed to U.S. producers who supported the petition for investigation. Total disbursements were estimated at approximately US$1.9 billion from the entry in force of the Byrd Amendment to end 2007.


7. There have been no major changes in the institutional framework governing the development of technical regulations, conformity assessment procedures, and sanitary and phytosanitary measures at the federal level since the last Review of the United States. During the review period, the United States notified, for the first time since the creation of the WTO, technical regulations and conformity assessment procedures proposed by sub-federal agencies. A new approval process for first-time imports of fruits and vegetables subject to designated phytosanitary measures became effective in August 2007. It replaces the approval process based on the promulgation of regulation, which is otherwise applicable to all first-time imports of plants, animals, and their products, and which can take up to three years.

8. Two WTO Members, Cuba and Myanmar, are subject to economic sanctions. The United States maintains export restrictions and controls for national security or foreign policy purposes, or to address shortages of scare materials. U.S. entities are required to apply for an export licence in certain cases when they intend to transfer controlled technologies to foreign nationals in the United States.

9. Other assistance to domestic producers takes the form of federal and sub-federal tax exemptions, financial outlays, and credit programmes. In its latest notification to the WTO, covering fiscal years 2003 and 2004, the United States lists around 430 programmes providing subsidies, of which 42 at the federal level and the rest at the sub-federal level. Agriculture and energy are by far the largest recipients of notified federal support. U.S. domestic support, although not targeted at trade, may affect global markets as the United States is among the world's largest producers and consumers of numerous products.

10. The United States uses competition policy to promote efficiency and enhance consumer welfare. Federal antitrust legislation covers all sectors and interstate and foreign commerce, subject to some exceptions. Competition policy enforcement has continued to focus on the activities of international cartels, anti-competitive mergers and non-merger enforcement. The Antitrust Modernization Commission presented a report to Congress in April 2007 that recommended, among other things, simplifying and unifying merger clearing procedures and harmonizing the work of state and federal antitrust agencies, particularly with respect to mergers.

11. U.S. policy with respect to market access for government procurement is to grant national treatment based on the principle of reciprocity. For procurement not covered by the GPA or other international agreements, the United States maintains a number of domestic purchasing requirements, such as those under the Buy American Act. U.S. procurement policy also seeks to increase the participation of small and other businesses through set-aside programmes. In some states, sub-federal regulations grant preferences to local suppliers, and impose local-content requirements under certain conditions. Although these measures could assist the targeted groups, they could also raise the cost of government procurement.

12. The United States is an important producer and exporter of goods and services that embody knowledge and other intellectual developments. The United States seeks to promote increased IPR protection and enforcement through a variety of mechanisms, including FTAs, bilateral intellectual property agreements and bilateral investment treaties. The United States also pursues high standards of IP protection through its engagement in WTO activities and negotiations.


(2) MEASURES DIRECTLY AFFECTING IMPORTS

(i) Customs procedures

13. Customs and Border Protection (CBP), part of the Department of Homeland Security, is in charge of administering and enforcing customs regulations. The principal mission of CBP is to prevent terrorists and terrorist weapons from entering the United States, while facilitating the flow of legitimate trade and travel.1

14. As part of its ongoing modernization programme, CBP has continued to develop the Automated Commercial Environment (ACE), a cargo processing system intended to operate as a single on-line access point to process import (and export) formalities on an account, rather than a shipment-by-shipment, basis.2 As at March 2008, there were around 15,000 ACE accounts. ACE has been deployed to all 99 U.S. land ports, and CBP intends to deploy ACE to all sea and air ports. The development of ACE is expected to be completed by end 2010, rather than by 2009, the date reported in the Secretariat report for the previous Review of the United States. According to the U.S. authorities, the delay results from increased system development and testing times. The SAFE Port Act makes participation in the single-window concept mandatory for federal agencies with import and export responsibilities, although the Office of Management and Budget may exempt certain agencies.

15. Imports of goods into the United States must be accompanied by entry documents as specified in the Customs Regulations.3

16. A customs bond must be posted for each importation of merchandise.4 An importer may apply for a single transaction customs bond which covers only one import entry, or a continuous customs bond, which remains in force for one year and covers multiple transactions at any U.S. Customs district or port. In general, the single entry bond must cover the value of the imported merchandise plus import duties, taxes, and fees. If the imported merchandise is subject to requirements imposed by agencies other than CBP, the amount of the bond must be three times this value. The minimum amount for continuous bonds is generally US$50,000 or 10% of total import duties, taxes, and fees paid in the previous 12 months, whichever is greater. According to CBP, bonds allow importers to take possession of their merchandise before all CBP formalities have been completed, thus facilitating trade.5

17. The main development affecting customs procedures since mid 2005 has been the enactment of the SAFE Port Act in October 2006.6 The Act authorizes and expands the Container Security Initiative (CSI) and the Customs-Trade Partnership Against Terrorism (C-TPAT), and establishes additional import requirements for security purposes.

(a) Advance electronic cargo information

18. Under the Trade Act of 2002, CBP must receive, by way of a CBP-approved electronic data interchange system, information pertaining to cargo before the cargo is brought into (or sent from) the

1 CBP online information "Protecting Our Borders Against Terrorism". Viewed at: http://www.cbp.

gov/xp/cgov/toolbox/about/mission/cbp.xml. 2 The ACE Secure Data Portal can be viewed at: https://ace.cbp.dhs.gov. 3 CBP (2006b). 4 CBP has the authority to require bonds under 19 USC 1623. 5 CBP online information, "Questions and Answers on CBP Bonds". Viewed at: http://www.cbp.gov/

linkhandler/cgov/toolbox/publications/trade/qa_bonds.ctt/q_and_a_bonds.doc. 6 Public Law 109-347.


United States by any mode of commercial transportation (sea, air, truck, or rail).7 The time limit for sending the cargo information to CBP depends on the mode of transportation used (Table III.1). Cargo passing through the United States that is not destined to be unloaded in a U.S. port is also subject to the requirement. For shipments arriving by sea, air, or rail, relevant cargo information must be transmitted to CBP through the appropriate Automated Manifest System (AMS); for shipments arriving by road, cargo information must be transmitted to CBP through the ACE truck manifest system.

Table III.1 Requirements for the advance transmission of electronic cargo information

Mode of transportation Transmission system Time limit for reception by CBP Parties responsible for

transmission

Sea Vessel Automated Manifest System (AMS)a

Containerized and non-exempt break bulk cargo: 24 hours prior to loading at foreign portb Bulk and exempt break bulk cargo: 24 hours prior to vessel arrival if voyage is more than 24 hours; otherwise at vessel departure

Carrier, non-vessel-operating common carrier

Air Air AMS 4 hours prior to arrival in the Unites States, or at "wheels up" from western hemisphere airports north of the equator

Carrier, importer or customs broker, freight forwarder, express consignment facility, other air carriers

Truck ACE Truck Manifest System One hour prior to arrival in the United States; 30 minutes prior to arrival for shipments that qualify under the Free and Secure Trade programmec

Carrier, importer, customs broker

Rail Rail AMS 2 hours prior to arrival in the United States Carrier a AMS is a cargo inventory control and release notification system for sea, air, and rail carriers. b A break bulk cargo carrier may apply to CBP for an exemption from the filing requirements under the 24-hour rule. c Under the Free and Secure Trade programme, qualifying road shipments from Canada and Mexico receive expedited clearance. Source: Federal Register, 68 FR 68140, 5 December 2003, and 71 FR 62922, 27 October 2006.

19. Apart from the information required under the Trade Act of 2002, the SAFE Port Act requires that certain other cargo information be transmitted electronically to CBP.8 As at early 2008 this requirement was not in effect pending the adoption of regulations. With a view to developing such regulations, CBP issued a notice of proposed rulemaking.9 According to CBP, the additional advance information it proposes to request would "significantly enhance the risk assessment process by allowing CBP to better separate higher-risk shipments from lower-risk shipments that should be afforded more rapid release decisions".10 According to the regulatory analysis conducted in the context of the notice of proposed rulemaking, CBP estimates that the annualized costs associated with the proposed filing requirement range from US$380 million to US$640 million.

7 See WTO (2006). 8 Section 203(b). 9 Federal Register, 73 FR 90, 2 January 2008. According to this document, the following would need

to be submitted 24 hours before a cargo is loaded at a foreign seaport: names and addresses of the manufacturer or supplier, consolidator, seller, buyer, and first party to receive the goods after they have been released from Customs; container stuffing location; importer-of-record and consignee numbers; and merchandise country of origin and Harmonized Tariff Schedule code. In addition, CBP proposes that carriers submit the "vessel stow plan" and certain "container status messages" 48 hours after the vessel's departure to the United States, or prior to the vessel's arrival in the United States for voyages of less than 48 hours.

10 CBP (2006a).


20. As part of its Secure Freight Initiative, CBP is considering the feasibility of establishing the Global Trade Exchange, a database operated by the private sector to enhance risk assessment of international cargo.11

(b) Container Security Initiative (CSI) and Secure Freight Initiative

21. In October 2006, the SAFE Port Act authorized the CSI, which had been operating on the basis of Executive authority since its inception in 2002. CSI involves the screening and inspection of U.S.-bound, high-risk containers at the port of departure.12 Under CSI, CBP officers are deployed to participating foreign ports, where they identify high-risk containers. Host-country officers inspect these containers using non-intrusive inspection equipment, physical inspection, or both, and CBP officers observe the inspections. According to CBP, U.S.-bound cargo inspected at a foreign CSI port will not be inspected upon arrival in the United States, unless additional information changes the initial risk assessment, or the integrity of a container seal has been compromised.

22. The SAFE Port Act lists the factors that CBP must consider in designating CSI-eligible ports.13 These include the "level of risk for the potential compromise of containers by terrorists", cargo volume with the United States, results of Coast Guard assessments, and the extent to which the host government is committed to sharing critical information with CBP. CSI was operational in 58 foreign seaports in late 2007, up from 35 in April 2005.14 Approximately 90% of U.S.-bound cargo containers originate in or are transhipped from a CSI port.

23. The SAFE Port Act requires CBP to conduct a pilot programme to scan all U.S.-bound containers at foreign seaports, rather than only those considered "high risk".15 As part of its Secure Freight Initiative, CBP was implementing such a programme at ports in Honduras, Pakistan, and the United Kingdom, and in a more limited way, in Hong Kong, China; Korea; Oman; and Singapore. These seven ports also participate in CSI. CBP must submit to Congress an evaluation of the feasibility and cost of expanding this programme to other foreign ports within 180 days of the programme's full implementation. The authorities indicate that the programme should be rolled out in all seven ports by July 2008.

24. In addition, the Implementing Recommendations of the 9/11 Commission Act of 2007 prohibits containers from being loaded on a U.S.-bound vessel unless they have been scanned using non-intrusive imaging and radiation detection equipment.16 This prohibition will enter into effect on 1 July 2012, or at an earlier date set by the Secretary of Homeland Security based on the lessons of the pilot programme mandated by the SAFE Port Act.17 The Secretary may delay the implementation for specific ports by renewable two-year periods after certifying that they meet at least two of six conditions listed in the Act. One such condition would be fulfilled if the "use of systems that are available to scan containers ... will significantly impact trade capacity and the flow of cargo".18 The CBP Commissioner has remarked that a requirement to subject all U.S.-bound containers to image

11 CBP online information, "Secure Freight Initiative at a Glance". Viewed at: http://www.usembassy.

org.uk/press_release/12oct07-secure_freight/CBP_Fact_Sheet--SFI--Secure_Freight_Initiative_at_a-glance.pdf. 12 See WTO (2006). 13 Section 205. 14 CBP online information. Viewed at: http://www.cbp.gov/xp/cgov/border_security/international_

activities/csi/csi_in_brief.xml. 15 Section 231. 16 Public Law 110-53, Section 1701. 17 Section 1701(b)(2). 18 Section 1701(b)(4)(E).


scanning and radiation detection monitoring at foreign seaports would have an "enormous" impact on trade, and would result in "lower profits and higher transportation costs for U.S. importers".19

(c) C-TPAT

25. In 2007 the SAFE Port Act authorized the C-TPAT, a voluntary programme that had been operating on the basis of Executive authority since its inception in 2002. Under C-TPAT, businesses conduct a comprehensive self-assessment of their supply chain against minimum security criteria and submit relevant information to CBP to obtain C-TPAT certification. CBP then conducts an on-site assessment to validate participation in C-TPAT, normally within a year of certification.20 CBP should revalidate C-TPAT participation at least once every four years.21 CBP has published minimum criteria for importers; sea, rail, and highway carriers (with special criteria for long-haul highway carriers from Mexico); customs brokers; marine port and terminal operators; and foreign manufacturers.22

26. Participation in C-TPAT is open to U.S. importers23; international sea, air, and rail carriers; U.S. licensed customs brokers; U.S. air freight consolidators, ocean transportation intermediaries, and non-vessel operating common carriers; U.S., Canadian, and Mexican border crossing land carriers; and U.S. port and terminal operators. Mexican and Canadian manufacturers may also participate; other foreign manufacturers may participate only if invited to do so by CBP. Invitations are extended on the basis of supply-chain factors, including specific security concerns, strategic threat posed by geographic regions, or strategic import volume. At end 2007, 608 Mexican and Canadian manufacturers were participating in C-TPAT.

27. C-TPAT participants benefit from reductions in the risk score assigned to their shipments by CBP. Therefore, their shipments face less frequent inspections than those of non-C-TPAT participants with a similar risk profile. Validated C-TPAT participants receive larger reductions in their risk scores than certified participants. The most significant reductions are reserved for C-TPAT participants whose security measures exceed the minimum security criteria and conform to "best practice". According to CBP, participants in this category are subject to "very infrequent examinations for security reasons".24

28. At end 2007, 7,915 businesses had received C-TPAT certification; of these, some 85% had been validated, and 3% had adopted security best practices.

29. CBP and the New Zealand Customs Service signed a security arrangement in July 2007, under which, participants in New Zealand's Secure Exports Scheme will receive C-TPAT benefits when exporting to the United States "once [the United States and New Zealand] have established the

19 CBP online information, Remarks by CBP Commissioner at the Center for Strategic and

International Studies, 11 July 2007. Viewed at: http://www.cbp.gov/xp/cgov/newsroom/commissioner/ speeches_statements/commish_remarks_csc.xml.

20 Section 215, SAFE Port Act. 21 Section 219, SAFE Port Act. 22 CBP online information, "New C-TPAT Minimum Security Criteria". Viewed at:

http://www.cbp.gov/xp/cgov/import/commercial_enforcement/ctpat/security_criteria/. 23 CBP defines a U.S. importer as a U.S. company (which may be a U.S. subsidiary of a foreign

company) that is authorized to import into the United States as the "importer of record" by posting a single entry or continuous entry bond.

24 CBP (undated).


compatibility of the membership levels between their supply chain programs".25 In mid 2007, the United States was developing similar security arrangements with the EC and Jordan.

(ii) Customs valuation

30. In 1996, the United States notified the WTO that its customs valuation legislation, as notified to the GATT, remained valid under the WTO Customs Valuation Agreement.26 Previously, the United States had notified the amendments to incorporate into U.S. law the provisions of the Agreement on Implementation of Article VII of the GATT.27

31. The customs valuation disciplines applied by the United States are contained in the Trade Agreements Act of 1979. In general, the customs value of imports is the transaction value, which excludes international freight, insurance, and other c.i.f. charges. Where the transaction value cannot be used, the legislation establishes five alternative valuation methods and their order of application, which reflects the hierarchy established by the WTO Customs Valuation Agreement. The U.S. authorities indicate that they do not capture the frequency of use of each valuation method, and that they do not use reference prices.

32. For purposes of applying the transaction value method in transactions involving a series of sales, CBP normally uses the price paid in the "first or earlier" sale, that is, the sale between the manufacturer and the foreign intermediary. In January 2008, CBP solicited public comments on its proposal to use the price paid in the last sale prior to the importation into the United States.28 If adopted, CBP's proposal would result in the transaction value being determined on the basis of the price paid by the buyer in the United States, rather than a foreign intermediary.

33. CBP determines the final value of imports after the importer has filed the declared value. The importer may request a written explanation of how CBP determined the final value, within 90 days. In addition, importers may challenge CBP's final value by filing a protest and application for further review within 180 days. The denial of a protest may be appealed to the U.S. Court of International Trade, whose decisions may in turn be appealed to the U.S. Court of Appeals for the Federal Circuit, and beyond that, the U.S. Supreme Court. The U.S. authorities indicate that they do not maintain data on the number of valuation protests filed with ports; as at end 2007, about 150 valuation cases were pending at the U.S. Court of International Trade.

34. The value declared by the importer must be in U.S. currency. Importers must use the exchange rates certified by the Federal Reserve Bank of New York, generally on the first business day of the calendar quarter in which the export to the United States took place.

25 CBP online information, "U.S., New Zealand Establish Joint Trade Security Arrangement", 29 June

2007. Viewed at: http://www.cbp.gov/xp/cgov/newsroom/news_releases/062007/06292007_2.xml. 26 WTO document G/VAL/N/1/USA/1, 1 April 1996. The reply by the United States to the checklist of

issues on customs valuation is contained in GATT document VAL/2/Rev.1/Add.1, 16 July 1981. 27 GATT document L/5005, 17 July 1980. 28 Federal Register, 73 FR 4254, 24 January 2008.


(iii) Rules of origin

35. The United States applies non-preferential and preferential rules of origin. The preferential rules of origin maintained under several bilateral free-trade agreements concluded after 1997 have yet to be notified to the WTO (March 2008).29 Determination of origin relies on self-certification.

36. Non-preferential rules of origin are applied for purposes of MFN treatment, government procurement, country of origin marking, and may be used for anti-dumping and countervailing measures.30 In general, an article is considered to have been produced in a country if it is wholly the growth, product, or manufacture of that country or has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.31 However, these general standards may be adapted and interpreted further by agencies other than CBP to fit the needs and purposes of the particular context in which non-preferential rules are applied.

37. Preferential rules of origin are maintained under free-trade agreements and unilateral tariff concessions (Table AIII.1). U.S. free-trade agreements, including those that have entered into force since the last Review of the United States, use the "wholly obtained" criterion. For goods that do not meet this criterion, most agreements establish specified changes of tariff classification to determine eligibility, and to a lesser extent, regional value content criteria, either separately or in combination. For some products, these rules may also establish certain production requirements.

38. In general, rules of origin under unilateral tariff concessions require goods that do not meet the wholly obtained criterion to fulfil local-content requirements to qualify for preferential tariff treatment. The value of imported inputs may be counted toward satisfying the local-content requirement if the inputs have been substantially transformed into a new and different article of commerce before being used to produce the good that is imported into the United States. This criterion is known as double substantial transformation. Special provisions apply to apparel under the African Growth and Opportunity Act, Caribbean Basin Trade Partnership Act, and Andean Trade Promotion and Drug Eradication Act. To qualify for preferential tariff treatment under these programmes, apparel must use U.S. components, regional components up to an annual cap, or for AGOA, third-country components up to an annual cap (see also Chapter II(4)(iii)).

39. Under the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR), inputs from Canada and Mexico to produce woven apparel fulfil the origin requirement, subject to a cap.32 To benefit from this provision, Canada and Mexico must provide reciprocal treatment to the United States, Central America, and the Dominican Republic. According to the U.S. authorities, this scheme benefits U.S. companies with investments in Mexico and Canada, and helps to integrate regional production.

29 The U.S. notifications on rules of origin are contained in WTO documents G/RO/N/1/Add.1, 22 June

1995; G/RO/N/6, 19 December 1995; G/RO/N/12, 1 October 1996; and G/RO/N/18, 3 November 1997. 30 The legislation on non-preferential rules of origin is contained in: 19 USC 1304 and General Note 3

to the U.S. Harmonized Tariff Schedule (MFN treatment); 19 USC 2511 et seq., 19 USC 3592, and 19 CFR 177.21 (government procurement); 19 CFR 102.0, and 19 CFR 134 (country of origin marking); and 19 CFR 102.21 (textiles and clothing). See also WTO (2006).

31 19 USC 2518. 32 Appendix 4.1-B of the CAFTA-DR.


(iv) Tariffs

(a) MFN and other trading partners

40. The general policy of the United States, embodied in Section 126 of the Trade Act of 1974, is to grant MFN tariff treatment to all its trading partners.33 The United States may adopt laws that deny MFN tariff treatment to particular countries. All WTO Members except Cuba receive MFN treatment. In addition, the United States does not grant MFN treatment to the Democratic People's Republic of Korea. Imports from these two countries are subject to the "statutory rate", which is the rate imposed by the Smoot-Hawley Tariff Act of 1930, as amended. The statutory rate is shown in column 2 of the Harmonized Tariff Schedule. Permanent MFN tariff treatment was extended to Ukraine in March 2006 and to Viet Nam in December 2006.34

41. The United States accords MFN tariff treatment on a temporary and conditional basis to: Azerbaijan, Belarus, Kazakhstan, Moldova, Russia, Tajikistan, Turkmenistan, and Uzbekistan, all of which have entered into bilateral commercial agreements with the United States.35 These countries are denied permanent, unconditional MFN tariff treatment on the basis of Title IV of the Trade Act of 1974, which requires that the U.S. President deny MFN tariff treatment to any non-market economy that was ineligible for such treatment on 3 January 1975 (when the legislation was enacted), and that denies or seriously restricts the rights of its citizens to emigrate. This provision is known as the Jackson-Vanik amendment.36

(b) Applied MFN tariffs

42. The United States levies customs duties on the basis of the f.o.b. value of imports at the point of export.

43. The Harmonized Tariff Schedule of the United States was enacted by the Omnibus Trade and Competitiveness Act of 1988 and became effective in January 1989. It is based on the Harmonized Commodity Description and Coding System (HS).37 The 2008 Harmonized Tariff Schedule reflects the fourth amendment to the HS (HS 2007). The following analysis is based on the 2007 Harmonized Tariff Schedule of the United States. Although the 2008 Harmonized Tariff Schedule was available at the time of preparing this report, ad valorem equivalents of non-ad valorem tariff rates were available only for 2007.38

44. The 2007 Harmonized Tariff Schedule comprises 10,253 tariff lines at the HS 8-digit level (Chapters 1-97) (Table III.2).39 The simple average applied MFN tariff, including the ad valorem equivalents of specific and compound rates was 4.8% in 2007, virtually the same as in 2004 (4.9%) (Table AIII.2). The average applied tariff for agriculture (WTO definition) decreased from 9.7% in

33 19 USC 2136. 34 Proclamation 7995 of 31 March 2006, Federal Register 71 FR 16969, 4 April 2006; and

Proclamation 8096 of 29 December 2006, Federal Register 72 FR 451, 4 January 2007. 35 19 USC 2434. 36 19 USC 2432. 37 The Harmonized Tariff Schedule is included in a document produced and updated regularly by the

International Trade Commission. Viewed at: http://www.usitc.gov/tata/hts/index.htm. 38 The ad valorem equivalents of non-ad valorem tariff rates were provided by the U.S. authorities in

the context of this Review. 39 The tariff lines corresponding to the in-quota and out-of-quota rates applied to the same product are

counted as one.


2004 to 8.9% in 2007. The 2007 average applied tariff for non-agricultural products was 4%, the same as in 2004. In 2007, duty-free lines represented approximately 37% of all tariff lines.

45. Excluding the non-ad valorem rates, the simple average applied MFN tariff was 4.4% in 2008. The average applied MFN tariff (excluding non-ad valorem rates) was 8.2% for agriculture (WTO definition), and 3.9% for non-agricultural products.

46. The decrease in the average applied MFN tariff rate for agriculture between 2004 and 2007 largely reflects increases in prices of agricultural products and the resulting reduction in the ad valorem equivalents (AVEs) of non-ad valorem tariff rates applied on such products. Significant reductions were recorded in the AVE rates of dairy products, sugar, and food preparations, with declines between 90 and 270 percentage points. The AVEs decreased for 525 of the 1,149 tariff lines subject to non-ad valorem rates between 2004 and 2007. However, on average non-ad valorem tariffs continue to afford higher protection than ad valorem duties. In 2007, the average AVE of non-ad valorem tariff rates was 9.2%, compared with 4.3% for ad valorem duties. Apart from agricultural products, non-ad valorem tariff rates also apply to articles of apparel and clothing, footwear and headgear, watches, and precision tools.

Table III.2 Structure of tariff schedule in the United States (Per cent)

1998 2000 2002 2004 2007

1. Total number of tariff linesa 9,997 10,001 10,297 10,304 10,253 2. Non-ad valorem tariffs (% of all tariff lines) 14.0 12.4 12.2 10.6 10.7 3. Non-ad valorem with no AVEs (% of all tariff lines) 0.0 0.0 0.0 0.0 0.0 4. Tariff quotas (% of all tariff lines) 2.0 2.0 1.9 1.9 1.9 5. Duty-free tariff lines (% of all tariff lines) 18.6 31.5 31.2 37.7 36.5 6. Dutiable lines tariff average rate (%) 7.2 8.0 7.4 7.8 7.6 7. Domestic tariff "peaks" (% of all tariff lines)b 4.9 5.3 5.6 7.1 6.9 8. International tariff "peaks" (% of all tariff lines)c 7.7 7.0 6.6 5.5 5.2 9. Bound tariff lines (% of all tariff lines)d 100.0 100.0 100.0 100.0 100.0

a Chapters 1-97, at 8-digit level, excluding in-quota tariff lines. b Domestic tariff peaks are defined as those exceeding three times the overall average applied rate. c International tariff peaks are defined as those exceeding 15%. d Two lines applying to crude petroleum are not bound. Source: WTO Secretariat calculations, based on data provided by the U.S. authorities.

47. Around 5% of all tariff lines had MFN rates exceeding 15% in 2007. The agricultural products (WTO definition) subject to the highest ad valorem or AVE rates were tobacco (350%), sour cream (177.2%), and peanuts (163.8%). Other agricultural products are subject to tariffs of between 50% and 110%, including milk and cream, butter substitutes, cheese, goose liver, sugar, cocoa powder, preparations for infant use, prepared mustard, and cotton fibres. Regarding non-agricultural products, tuna, apparel, footwear, and brooms were subject to ad valorem or AVE rates between 30% and 64% (see also Chapter IV(4)).

48. Tariff quotas cover slightly less than 2% of all tariff lines (see Chapter IV(2)).

(c) WTO bindings

49. Following the Uruguay Round, the United States bound all tariff lines in Chapters 1-97, except two lines covering crude petroleum. The average bound tariff rate is 4.7%.


50. All tariff lines have reached their final bound MFN tariff rate, except HS 3404.2000 (artificial waxes and prepared waxes), which will become free of duty in January 2009. In general, applied tariffs are at their bound rates.

51. The WTO certified U.S. Schedule of Concessions reflecting the 1996 changes in the HS became effective in March 2005.40 The United States has submitted to the WTO lists of tariff items affected by the 2002 changes to the HS. It was covered by the collective General Council waiver suspending the application of GATT binding disciplines to allow WTO Members to implement the HS 2002 changes domestically pending the incorporation of these changes into their schedules of concessions.41 This waiver expired in December 2006. It was also covered by the collective waiver regarding the HS 2007 changes until December 2007.42

(d) Preferential tariffs

52. Tariff preferences may be granted by the United States either unilaterally or in the context of bilateral or regional free-trade agreements.

53. The United States grants unilateral preferential tariff treatment to trading partners qualifying under the U.S. Generalized System of Preferences (GSP), the Caribbean Basin Economic Recovery Act (CBERA), as amended by the Caribbean Basin Trade Partnership Act (CBTPA), the Andean Trade Preference Act (ATPA), as amended by the Andean Trade Promotion and Drug Eradication Act (ATPDEA), and the African Growth and Opportunity Act (AGOA) (see Chapter II(4)(ii) and Table AIII.3). Products of the U.S. insular possessions, freely associated states, and the West Bank and Gaza Strip are also eligible for unilateral tariff preferences.43

54. The United States grants preferential tariff treatment to originating goods under the free-trade agreements with Australia, Bahrain, Canada and Mexico, Chile, Israel, Jordan, Morocco, Singapore, and four of the five members of the Central American Common Market (El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic (Chapter II and Table AIII.3).

(e) Temporary tariff suspensions

55. The U.S. Congress has occasionally inserted into larger legislative packages provisions temporarily suspending or reducing tariffs applied on specific products. For example, in August 2006 Congress enacted pension legislation that included some 300 temporary tariff suspensions or reductions. These provisions were signed into law in August 2006 as part of the Pension Protection Act of 2006. Also, the Tax Relief and Health Care Act of 2006, signed into law in December 2006, included some 500 additional temporary tariff suspensions or reductions. Both sets of temporary tariff suspensions will be effective until 31 December 2009.

56. The vast majority of products for which Members of Congress propose to eliminate or reduce tariffs temporarily are chemicals, raw materials, and other manufacturing inputs.44 In accordance with long-standing Congressional practice, proposals for temporary duty suspensions or reductions must be "non-controversial", which means that no domestic producer must object to them. In addition, lost

40 WTO document WT/LET/493, 17 May 2005. 41 WTO document WT/L/638, 6 December 2005. 42 WTO document WT/L/675, 19 December 2006. 43 See Harmonized Tariff Schedule general notes 3(a), 4, 7, 10, 11, 16, and 17 for the provisions of

these preferential programmes. 44 Jones (2007).


revenue resulting from the duty suspension or reduction must not exceed US$500,000 per product.45 Proposals for duty suspensions or reductions are reviewed by the relevant Congressional subcommittees, Executive Branch agencies, and the International Trade Commission In general, temporary duty suspensions or reductions are contained in chapter 99 of the Harmonized Tariff Schedule.

(v) Other charges affecting imports

57. Certain imports continue to be subject to a merchandise processing fee and a harbour maintenance fee; both were described in the Secretariat report for the last Review of the United States. The merchandise processing fee applies to imports valued at more than US$2,000.46 The fee is set at 0.21% of the import value; the statutory minimum and maximum are US$25 and US$485. Originating imports under the free-trade agreements concluded between the United States and Australia, Bahrain, Canada and Mexico, Chile, the Dominican Republic and Central America, Israel, and Singapore are exempt. Eligible imports from less developed countries and CBERA beneficiary countries are also exempt, as are certain products imported under the GSP. The application of the merchandise processing fee has been extended until September 2014, following the adoption of the American Jobs Creation Act of 2004.

58. According to the U.S. authorities, Congress intended the merchandise processing fee to approximate the cost to CBP of processing the entry of imported merchandise.47 They have also noted that the merchandise processing fee's statutory ceiling was introduced in part "to address GATT concerns".48 The American Jobs Creation Act of 2004 required the Secretary of the Treasury to issue recommendations concerning the possible elimination of fees collected by the Department of Homeland Security, including the merchandise processing fee.49 Such recommendations have not yet been issued. In the context of the last Review of the United States, the U.S. authorities indicated that they had no intention of eliminating the merchandise processing fee.50

59. Water-borne imports valued at more than US$2,000, and unloaded at a port receiving federal funds for maintenance are subject to a harbour maintenance fee regardless of their origin51; domestic cargo valued at more than US$1,000 is also subject to the fee. The fee, which can only be charged once for the same cargo, is set at 0.125% of the value of the cargo and is collected by Customs and Border Protection. The U.S. authorities indicate that the purpose of the harbour maintenance fee is to "have the businesses that benefit directly from the use of U.S. harbours ... bear the cost of maintenance of those harbours".52 In addition, they described the fee as "negligible".53

60. Exported cargo is exempt from the harbour maintenance fee; this follows a 1998 decision by the U.S. Supreme Court that the harbour maintenance fee bore "the indicia of a tax", and that the

45 U.S. Senate Committee on Finance, Press Release, "Grassley, Baucus Solicit Input for Miscellaneous

Tariff Bill", 25 April 2006. Viewed at: http://finance.senate.gov/press/Gpress/ 2005/prg042506. pdf. 46 19 USC 58c. 47 WTO document WT/TPR/M/126/Add.3, 22 November 2004. 48 WTO document WT/TPR/M/126/Add.3, 22 November 2004. 49 Section 892(e), American Jobs Creation Act of 2004. 50 WTO document WT/TPR/M/126/Add.3, 22 November 2004. 51 This charge, enacted as part of the Water Resources Development Act of 1986 (26 USC 4461) is

referred to as a "tax" in the Act, and as a "fee" in the regulations (19 CFR 24.24). The list of ports receiving federal funds for maintenance is contained in 19 CFR 24.24.

52 WTO document WT/TPR/M/126/Add.3, 22 November 2004. 53 WTO document WT/TPR/M/160/Add.1, 27 September 2006.


value of the export cargo – the basis on which the fee is determined – did not "correlate reliably with the federal harbour services, facilities, and benefits used or usable by the exporter".54

61. The United States applies federal excise taxes on certain imported and domestic products, including fuels, certain automobiles, heavy trucks and trailers, sporting goods, firearms and ammunition, distilled spirits, tobacco products, and paper.55

62. Beer (imported and domestic) is subject to federal excise tax at a rate of US$18 per barrel of 31 gallons.56 A reduced rate of US$7 is applied on the first 60,000 barrels of beer produced in a year by a domestic brewer with an annual production of two million barrels of beer or less. Imported beer is not eligible for the reduced rate.

63. Imported and domestic wine is subject to federal excise tax at a rate ranging from US$1.07 to US$3.40 per wine gallon.57 Small domestic producers (those with an annual production of 150,000 wine gallons or less) are eligible for a credit of US$0.90 per wine gallon on the first 100,000 wine gallons. Decreasing credit rates are available for wineries producing between 150,000 and 250,000 wine gallons per year.

64. The United States does not apply a value added tax. Sub-federal governments may impose sales taxes and additional excise taxes on imports and domestic products.

(vi) Anti-dumping and countervailing measures

65. The United States considers that effective rules on anti-dumping and subsidies are necessary to address injurious dumped and subsidized imports, and can also contribute toward sustaining support for further trade liberalization. In this respect, it has noted that, "maintaining confidence in the enforcement of agreed rules and support for further trade liberalization, addressing the harmful effects of trade distorting practices, and eliminating or reducing those practices to the extent possible are essential to the long term viability of the WTO and the economic prosperity of its Members".58

66. In the context of the WTO Negotiating Group on Rules, the United States considers trade remedies as an integral part of the current rules-based international trading system.59 The United States has also presented a number of proposals for the clarification and improvement of the AD and SCM Agreements, including proposals regarding offsets for non-dumped comparisons, also known as "zeroing".60

(a) Legislation and administration

67. The main U.S anti-dumping (AD) and countervailing duties (CVD) legislation is Title VII of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979. The Trade and Tariff Act of 1984, the Omnibus Trade and Competitiveness Act of 1988, and the Uruguay Agreements Act of

54 United States v. United States Shoe Corp., 523 US 360 (1998), 31 March 1998. Section 11116(b)(1)

of the Safe, Accountable, Flexible, Efficient Transportation Equity Act (P.L. No. 109-59) amended the harbour maintenance tax to exempt exports.

55 26 USC 4001 et seq. 56 26 USC 5051. 57 26 USC 5041. 58 WTO document TN/RL/W/27, 22 October 2002. 59 WTO document TN/RL/W/27, 22 October 2002. 60 WTO documents TN/RL/W/98, 6 May 2003, TN/RL/W/130, 20 June 2003, TN/RL/W/168,

10 December 2004, TN/RL/W/208, 5 June 2007, and other TN/RL documents.


1994 (URAA) introduced further modifications to AD and CVD legislation. The regulations that govern the way AD and CVD investigations (including reviews) are included in title 19 of the Code of Federal Regulations, parts 201, 207, 351, 353, and 355.61

68. The International Trade Administration (ITA) in the U.S. Department of Commerce (USDOC), and the United States International Trade Commission (USITC), are responsible for the administration of laws and agreements with respect to AD and CVD measures in the United States. The ITA determines the existence and margin of dumping and subsidy in AD and CVD investigations, while the USITC determines material injury to the domestic industry resulting from imports of the dumped or subsidized products. The ITA's AD/CVD Petition Counseling and Analysis Unit, established in 2004, assists U.S. companies with respect to recourse to U.S. unfair trade laws. The Unit provides assistance, inter alia, to help understand legislation and regulations and information on how to file petitions.

69. The USDOC initiates AD and CVD investigations, generally at the request of petitioners, based on written applications; it has the authority to self-initiate investigations, but seldom uses this authority. Investigation petitions must be filed simultaneously with the USDOC's ITA and the USITC. Following the investigation initiation, the USITC makes a preliminary injury determination: if this is negative, the investigation is terminated, if affirmative, the ITA issues a preliminary determination of dumping or subsidization. The investigation continues, whether the ITA's preliminary determination is affirmative or negative. If there is an affirmative determination, provisional measures may be applied. If the ITA's final determination finds a margin of dumping or a subsidy rate above the de minimis level, the USITC issues a final injury determination: if affirmative, the ITA issues an order imposing AD or CVD duties, if negative, the investigation is terminated, no order is issued, provisional measures are lifted, and cash deposits returned.

70. AD and CVD investigations may be suspended under some circumstances based on an agreement with the exporter or, in certain cases, foreign governments, to cease exports, or to eliminate the injurious effect. With respect to AD, under suspension agreements, exporters accounting for substantially all of the imports of the merchandise under investigation may agree to cease exports or accept price undertakings. In the case of non-market economies, AD suspension agreements may combine price undertakings and additional elements in order to prevent price suppression or undercutting. In CVD cases, the Government alleged to be providing the subsidy may agree to eliminate the subsidy, to completely offset the net subsidy, or to cease or limit exports of the merchandise to the United States. Any agreement entered into with a WTO Member considered to be a market economy to suspend an AD investigation may involve only price undertakings; agreements with respect to CVD investigations may also involve quantitative restrictions.

71. Administrative reviews of CVD and AD orders may be requested by interested parties every 12 months. They are conducted to determine the amount of duty to be finally assessed on imports during the review period, and to re-calculate the amount of net countervailable subsidy or dumping margin for merchandise under the outstanding CVD or AD duty order, to establish the deposit rate for ensuing periods. If no review is requested for a particular 12-month period, final duties are assessed in the amount deposited for that period.

61 19 CFR Parts 351, 353, and 355 62 FR 27295, 19 May 1997 (AD Duties, Final Rule); 19 CFR Part

351 63 FR 65347, 25 November 1998 (CV Duties, Final Rule); 19 CFR 351.222(b) 64 FR 29818, 3 June 1999 (Proposed Regulation Concerning the Revocation of AD Duty); 19 CFR 351.222(b) and 19 CFR 351.222(c) 64 FR 51236, 22 September 1999 (Amended Regulation Concerning the Revocation of AD and CV Duty Orders); 19 CFR part 351 63 FR 13516, 20 March 1998 (Procedures for Conducting Five-year ("Sunset") Reviews of AD CV Duty Orders); 19 CFR Parts 351 and 354 63 FR 24391, 4 May 1998 (AD and CV Duty Proceedings.


72. Sunset reviews are conducted under section 751(c) of the U.S. Tariff Act of 1930, as amended by the URAA, which requires that the USDOC and the USITC conduct such reviews no later than five years after an AD or CVD definitive measure is imposed, to determine whether its revocation would be likely to lead to continuation or recurrence of dumping or countervailable subsidies (USDOC) and of material injury to the industry (USITC). Sunset reviews are order-specific (country- and product-specific); suspension agreements are also subject to sunset review.62 The USDOC's Sunset Policy Bulletin (SPB) provides guidance on methodological or analytical issues for the conduct of sunset reviews not explicitly addressed by statutes and regulations.63

73. A Panel established to examine U.S. sunset review procedures found that certain aspects of these procedures were WTO inconsistent.64 As a result, the USDOC issued amended regulations65, effective 31 October 2005 which changed the "waiver'' provisions that govern treatment of interested parties who do not provide a substantive response to the USDOC's notice of initiation of a sunset review, and clarified the basis for parties' participation in a public hearing in an expedited sunset review. By introducing further and more precise requirements for companies wishing not to participate in a sunset review (affirmative waiver), they eliminate the possibility of the USDOC's order-wide likelihood determinations being based on assumptions about likelihood of continuation or recurrence of dumping or a countervailable subsidy due to the parties' waiver. Also, as a consequence of the amendments, the USDOC no longer makes company-specific likelihood findings for companies that fail to file a statement of waiver and fail to file a substantive response to the notice of initiation (deemed waiver).

74. Under sunset review procedures, orders issued after 1 January 1995 are reviewed five years after they become effective (normal reviews). The USDOC and USITC also reviewed orders in place before 1 January 1995 (transition order reviews).

75. Under Treasury Department Order No. 165 Revised, as amended, the Commissioner of Customs is entitled to require the posting of bonds or other securities considered necessary to protect the revenue or to assure compliance with any pertinent law, regulation, or instruction, including AD and CVD orders, as well as to determine the form and conditions of these bonds (Customs bonds). Bonds may be applied on a single transaction or for multiple transactions (continuous bonds).

76. In addition, Customs may require enhanced bond amounts from importers of merchandise subject to increased default risk.66 In this respect, additional bond requirements for importers of certain agriculture/aquaculture merchandise subject to anti-dumping/countervailing duty cases, also known as "Enhanced Continuous Bond Requirements" (EBR) have been challenged in the WTO and led to the establishment of a panel.67 The Panel Report rejected certain claims against the United States, namely that the U.S. laws, rules and regulations that authorize the imposition of the EBR were inconsistent as such with WTO provisions, but found the application of the EBR to shrimp from India and Thailand to be WTO inconsistent.68

62 Sunset review procedures and rules are set out in Federal Register Vol. 63, 5 June 1998, or viewed

at: ftp://ftp.usitc.gov/pub/notices/sunrules.pdf. 63 USDOC (1998). 64 WTO documents WT/DS268/AB/R, 29 November 2004 and WT/DS268/R, 16 July 2004. 65 The regulations are contained in 70 FR 62061, 28 October 2005. 66 Amendment to Bond Directive 99-3510-004. Customs and Border Protection online information

"Questions and Answers on CBP Bonds". Viewed at: http://www.cbp.gov/linkhandler/cgov/toolbox/ publications/trade/qandabonds.ctt/q_and_a_bonds.doc.

67 WTO documents WT/DS343/9, WT/DS345/8, 1 August 2007. 68 WTO document WT/DS345/R, 29 February 2008.


77. The Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), also known as the Byrd Amendment, was repealed by Title VII Subtitle F of the Deficit Reduction Act of 2005 (Repeal of Continued Dumping and Subsidy Offset). In accordance with the 2005 Act, however, all AD and CVD duties assessed on entries of goods made and filed before 1 October 2007 have continued to be distributed to members of the affected U.S. industry who supported the petition for investigation.69 Allocations have been distributed on a fiscal-year basis, in proportion to qualifying expenditures: the estimated value of disbursements was US$225 million in FY2005 and US$380.6 million in FY2006. Disbursements under the CDSOA since it came into force in FY2001, total some US$1.9 billion.70 CDSOA deposits in the Clearing Account were US$1.21 billion on 1 October 2006.71 This is considerably lower than the US$3.95 billion reported for FY2004, and the US$5.6 billion registered in FY2005, and corresponds mainly to the termination of duties collected under the AD and CVD orders on softwood lumber from Canada, which totaled some US$2.9 billion.

78. The WTO-consistency of the CDSOA was challenged by 11 WTO Members in late 2000, and in January 2003 the Appellate Body affirmed a Panel's findings that certain aspects of the CDSOA were not consistent with multilateral rules.72 In 2006, the United States stated that, through the Deficit Reduction Act of 1 February 2006, it had taken all actions necessary to implement the DSB's recommendations and rulings. The 11 complainants disagreed; the EC and Japan have notified the DSB of the list of retaliatory duties, in 2007 covering imports with a value of up to US$81.19 million for the EC and up to US$48.18 million for Japan.73

(b) Anti-dumping

79. The number of AD investigation initiations decreased sharply starting in 2004, but increased in 2007 (Table III.3). There were only seven initiations in 2006, but in 2007 29 investigations were initiated. Of the 20 investigations initiated in 2005 and 2006, 16 (80% of the total) resulted in the imposition of provisional measures. All the investigations initiated in 2006 resulted in the application of provisional measures, while the USITC made preliminary negative determinations of injury in four of the cases initiated in 2005.74 As at February 2008, only four of the 29 investigations initiated in 2007 had been subjected to provisional measures.

80. In 2005, 17 new AD duty orders were issued, while only seven were issued in 2006; in 2007, only two new AD orders were issued, and two suspension agreements on lemon juice with Argentina and Mexico signed. Final duty orders were applied in six of the 13 cases initiated in 2005; for the rest there was a USITC final negative determination. For cases initiated in 2006, two definitive AD orders had been issued, and two suspension agreements signed by February 2008.

81. At end-December 2007, final AD orders were applied to imports from 39 countries, compared to 44 countries in late 2004 (Table III.4). Over the review period, there was an increase in the orders applied on China and India, and a decrease in the number applied on EC countries. This results both

69 Title X of the Agriculture, Rural Development, Food and Drug Administration, and Related

Agencies Appropriations Act of 2001 (P.L No: 106-387). Viewed at: http://thomas.loc.gov. 70 U.S. Customs and Border Protection online information. Viewed at: http://www.cbp.gov/xp/cgov/

import/add_cvd/cont_dump/. 71 The amounts displayed in the Clearing Account represent estimated duties filed on the entry of the

imported products by the importer. 72 WTO documents WT/DS217/1, 9 January 2001; WT/DS217/R, 16 September 2002; and

WT/DS217/AB/R and WT/DS234/AB/R, 16 January 2003. 73 WTO documents WT/DS217/49, 2 May 2006; WT/DS217/50, 24 August 2006; WT/DS217/51,

24 April 2007; and WT/DS217/52, 27 August 2007. 74 For details see http://ia.ita.doc.gov/stats/inv-initiations-2000-current.html.


from the lower number of investigation initiations affecting products from these countries, as well as the revocation of duties through sunset and administrative reviews.

Table III.3 Anti-dumping investigations and measures imposed, 1980-07

1980-90 1991-01 2002 2003 2004 2005 2006 2007

Investigation initiations 418 492 35 36 26 13 7 29 Preliminary injury determinations, affirmative

336 410 15 29 25 9 7 4

Preliminary dumping determination, affirmative, of which

.. .. 15 23 25 9 7 4

provisional measure applied .. .. 12 23 25 9 7 4 Final dumping determinations 283 355 14 20 21 9 5 2 Final injury determinations, of which 183 231 12 16 16 6 2 0

duty order imposed 183 229 12 16 16 6 2 0 Suspension agreements 0 2 1 1 0 0 2 0 Sunset determinationsa n.a. 391 11 6 30 65 74 29 Revocations 69 142 7 2 33 21 15 26

.. Not available. n.a. Not applicable. a Number of AD orders continued or revoked as a result of sunset reviews. Note: Figures refer to the year in which the investigation was initiated. Source: WTO Secretariat, based on U.S. Department of Commerce; USITC; and notifications.

82. At end 2007 some 51% of all AD measures were being applied on iron and steel products; 14% on chemicals and pharmaceuticals; and 10% on agricultural and forestry products (Table III.4).

Table III.4 Anti-dumping measures by country and product, 2002-07

Year 2002 2003 2004 2005 2006 2007

Trading partner /region 266 278 273 268 256 232 Argentina 6 6 6 6 5 3 Brazil 14 15 14 14 13 10 Canada 8 9 9 6 3 2 China 43 52 55 57 58 62 EC countries (27) 64 64 57 53 50 36 India 10 10 12 13 14 14 Indonesia 6 6 5 5 6 6 Japan 30 32 29 27 23 21 Korea Rep. of 18 19 19 17 16 14 Mexico 8 8 9 10 9 8 Russia 2 3 3 4 4 8 South Africa 3 4 4 4 3 3 Chinese Taipei 17 17 17 16 16 15 Thailand 5 5 7 8 8 7 Turkey 4 4 3 3 3 3 Ukraine 6 6 6 6 6 7 Other America 5 4 4 5 5 3 Other Asia (including Australia) 12 9 10 10 10 7 Other Europe 5 5 4 4 4 3

Table III.4 (cont'd)


Year 2002 2003 2004 2005 2006 2007

Products Iron and steel products 165 170 184 166 143 117 Chemicals and their products 43 50 31 35 33 34 Plastics and rubber and their products 7 6 2 2 4 4 Agricultural products 20 20 21 24 23 24 Pulp of wood 1 1 1 1 0 0 Textiles and textile articles 4 4 5 3 3 1 Base metals and their articles 11 11 10 13 13 13 Machinery and mechanical appliances 6 6 6 6 6 6 Consumer goods, other 11 10 13 18 31 30

Source: WTO based on U.S. Department of Commerce, USITC and notifications information.

83. As at 31 December 2007, excluding suspensions, 224 definitive measures were in effect. At that date, 232 AD duty orders and suspension agreements were in effect, compared with 273 in December 2004.

84. Of the 263 AD and CVD measures in place at end 2007, 182 had been renewed after a review, that is, they had been in place for over five years. The oldest AD measure in place dates from 1973 and, at end 2007, 32 AD and 4 CVD measures had been in place for at least 20 years; 98 AD and 10 CVD measures had been in place for over 10 years. The average duration of an AD measure in place at end 2007 was some 11 years.75

85. Imports subject to AD investigations in FY2005 (last year available) totalled US$353 million, which represented 0.03% of total imports, and affirmative determinations were made on imports totalling US$297 million.76 Imports subject to AD/CVD measures (including provisional measures) represented some 0.3% (US$62 billion) of total U.S. imports over the 1980-05 period. Although the percentage of imports is relatively low, the application of AD duties may not be without cost when applied in cases of pricing that is not predatory.

86. The level of AD duties applied during the period under review varied widely. The definitive duties applied during 1 July 2005-31 December 2007 range from a low of 3.91% to a high of 280.57%; provisional duties applied over the same period range from 3% to 280.57% (Table AIII.4).

87. The United States entered into two new suspension agreements during the period under review, with Argentina and Mexico, both concerning lemon juice. At end 2007, eight suspension agreements were in place, with Argentina, Mexico, the Russian Federation, and Ukraine; three of these agreements relate to steel.77 Four of the agreements involve a price undertaking, and the other four involve export limits combined with price undertakings.

88. In 2005 and 2006, 145 administrative reviews of AD duties were completed. In 2006, Argentina requested consultations with the United States on its AD duty administrative review on certain oil country tubular goods other than drill pipe.78 The U.S. authorities noted that a settlement had been reached as at February 2008.

75 Calculated from USITC data. Viewed at: http://info.usitc.gov/oinv/sunset.nsf/0a915ada53e192cd

8525661a0073de7d/96daf5a6c0c5290985256a0a004dee7d/$FILE/orders-date-tbl.pdf. 76 USITC (2006). 77 WTO document G/ADP/N/153/USA, 13 March 2007. 78 WTO document G/ADP/D69/1, G/L/781, WT/DS346/1, 26 June 2006.


89. Under sunset review procedures, 210 AD and CVD orders were reviewed from January 2000 to December 2007, under normal procedures, of which 58 were revoked.79 Apart from "normal reviews", the USDOC and USITC have continued reviewing orders that were in place before 1 January 1995 (transition period reviews). All 309 AD and CVD definitive measures in existence on 1 January 1995 had been reviewed between July 1998 and 30 June 2001 (First Round Transition Reviews); 146 such measures were revoked. Of those not revoked, 151 definitive measures were reviewed again between January 2004 and February 2006 (Second Round Transition Reviews) and, at end 2007, 67 had been revoked. Although revocations have been frequent in the case of transitional reviews, they have been less frequent in the case of normal sunset reviews. The majority of normal sunset reviews (128 out of 210) conducted between 2000 and end 2007 resulted in a continuation of the application of duties. On the other hand, over 60% of the transitional reviews (187 out of 309) resulted in revocations. Sunset review revocations increased during 2005-07: 25 in 2005, 24 in 2006 and 64 in 2007 (compared with 24 over 2002-04).

90. The 2005-07 revocations included mainly iron and steel products (some three quarters of the total), as well as chemicals, textiles, automotive products, and sugar; they covered 24 trading partners.80 Duties were continued on iron and steel, chemicals, industrial textiles and agricultural products.81 Most revocations were due to no domestic interest in the continued application of duties. The authorities have noted that the rate of continuation of definitive measures places the United States below other major users of AD remedies.

91. Aspects of AD investigations, procedures and findings of U.S. AD measures were the subject of WTO disputes during the review period (Table AII.2). The USDOC's methodology of not granting offsets for non-dumped-sales, also known as "zeroing" (negative margins of dumping), in determining weighted average dumping margins, continued to be a source of legal disputes, with DSB cases being brought against the United States by Ecuador, the EC, Japan, Mexico, and Thailand.82 In the case by Japan, the Appellate Body upheld a Panel's finding that U.S. zeroing procedures constitute a measure that can be challenged, but reversed some of the Panel's conclusions, finding, for example that the U.S. use of zeroing procedures when calculating margins of dumping on the basis of transaction-to-transaction comparisons in original investigations, or the reliance, in sunset reviews, on margins of dumping calculated in previous proceedings through the use of zeroing, were inconsistent with the ADA.83 In the case brought by Mexico and others, the Panel ruled, in December 2007, that model zeroing in investigations "as such" is inconsistent with the ADA, but that simple zeroing in periodic reviews is not inconsistent.84

92. A mutually agreed solution to a number of disputes between the United States and Canada regarding U.S. AD and CVD investigations on softwood lumber, was reached in September 2006, through the signing of a Softwood Lumber Agreement. In March 2006 a Trade in Cement Agreement was signed between the United States and Mexico settling the longstanding case U.S.-Anti-Dumping

79 For a complete list of cases terminated by the ITA see "Sunset Review Schedule and Disposition".

Viewed at: http://www.usitc.gov/ussunset.htm; and "Five-Year ("Sunset") Review Status". 80 For detailed information on the revocations see ITA online information. Viewed at: http://ia.ita.doc.

gov/sunset/ssy2krev.html. 81 For more information on sunset reviews, see ITA online information. Viewed at: http://ia.ita.doc.

gov/sunset/ssy2krev.htm and http://ia.ita.doc.gov/sunset/ssy2kcon.htm. 82 WTO documents WT/DS335/1, 17 November 2005-WT/DS335/R, 30 January 2007 (Ecuador);

WT/DS343/1, 27 April 2006-WT/DS343/9, WT/DS345/8, 1 August 2007 (Thailand) ; G/ADP/D67/1, G/L/778, WT/DS344/1 1 June 2006-WT/DS344/6, 22 May 2007 (Mexico). G/ADP/D70/1; G/L/786, WT/DS350/1, 3 October 2006; WT/DS350/8, 4 October 2007 (EC).

83 WTO documents WT/DS322/R, 20 September 2006WT/DS322/AB/R, 9 January 2007. 84 WTO document WT/DS344/R, 20 December 2007.


Measures on Cement from Mexico. The Cement Agreement allows for increased imports of Mexican cement, encourages U.S. cement exports to Mexico, and settles outstanding litigation issues, providing for the AD order to be revoked as of 1 February 2009.85

(c) Countervailing duties

93. Between two and three CVD investigations were initiated per year during the period under review (Table III.5). In contrast to 12 orders reported in the previous Review of the United States, two final CVD orders were issued during the period. Three investigations were terminated with an ITA or USITC negative determination.86

94. Overall, there were 31 CVD orders in place at end December 2007, down from 57 in 2004, involving 13 trading partners.87 Some 60% of the CVD orders in place related to steel products.88

Table III.5 Countervailing duty investigations and measures imposed, 1980-07

1980-90 1991-01 2002 2003 2004 2005 2006 2007

Investigation initiations 240 89 4 5 3 2 3 5

Preliminary injury determinations, affirmative

210 71 3 2 3 2 3 3

Preliminary countervailing duty determination, affirmative, of which

.. .. 3 2 3 2 3 3

provisional measure applied .. .. 3 2 3 2 3 3

Final countervailing duty determinations 176 71 3 2 1 2 0 0

Final injury determinations, of which .. .. 2 2 0 2 0 0

duty order imposed 107 44 2 2 0 2 0 0

Revocations 83 93 0 0 2 4 11 7

.. Not available. Note: Figures refers to the year in which the investigation was initiated. Source: WTO based on U.S. Department of Commerce, USITC and notifications information.

95. Imports subject to CVD investigations in FY2005 totalled US$26 million, compared with US$366 million in FY2002 (last year for which information was available).89

96. CVD-related disputes during the period under review concerned exclusively cases initiated prior to 2006 (see Table AII.2). These cases involved: the U.S. "change-in-ownership" methodologies with respect to privatized companies90; a U.S. CVD investigation on dynamic random access memory semiconductors91; and the U.S. review of the CVD order on certain softwood lumber

85 WTO document G/ADP/D46/2, G/L/604/Add.1, WT/DS281/8, 21 May 2007. 86 ITA online information. Viewed at: http://ia.ita.doc.gov/stats/inv-initiations-2000-current.html. 87 The countries affected were: Argentina (2); Belgium (1); Brazil (3); Hungary (1); India (7);

Indonesia (3); Iran (2); Italy (3); Korea (5); Norway (1); South Africa (1); Thailand (1); and Turkey (2). 88 Of the 31 orders in place in late 2007, 17 were on steel and iron products; six on food products; four

on chemicals; two on paper; and one each on semiconductors and cooking ware. WTO document G/SCM/N/170/USA, 14 March 2008.

89 USITC (2006). 90 USDOC, ITA, Notice of Final Modification of Agency Practice Under Section 123 of the Uruguay

Round Agreements Act, 68 FR 37125, 23 June 2003; and WTO documents WT/DS212/RW, 17 August 2005, WT/DS212/18, 30 September 2005 and WT/DS212/19, 18 November 2005.

91 WTO documents WT/DS296/AB/R, 27 June 2005 and WT/DS296/11, 11 August 2005.


products.92 An agreement with respect to the latter was reached through the Softwood Lumber Agreement between the United States and Canada, signed in September 2006.

(vii) Safeguards

(a) Global safeguards

97. U.S. legislation on global safeguards is contained in Sections 201-204 of the U.S. Trade Act of 1974, as amended by the URAA. Under Section 201 of the Act, the USITC determines whether an article is being imported in such increased quantities that it is a substantial cause of serious injury, or threat thereof, to the U.S. industry producing a like or directly competitive article. If the USITC makes an affirmative determination, it recommends to the President relief that would address the serious injury or threat thereof, and facilitate the adjustment of the domestic industry to import competition. The President makes the final decision whether to provide relief and the form and amount of relief, within 60 days of receipt of an USITC report.

98. Under U.S. law, safeguard measures may include tariffs, quantitative restrictions, or tariff quotas, import licensing and other measures as listed in Section 203 of the Act. NAFTA partners are excluded from the application of safeguard measures, unless they individually account for a substantial share of total imports, and it is shown that they make an important contribution to serious injury.

99. The United States has not applied any safeguard measures nor initiated any safeguard investigations during the review period; no new section 201 cases have been initiated. The safeguard measures applied in the four investigations initiated between 1998 and 2001, on steel products, expired or were terminated by end 2003. A Steel Monitoring and Analysis (SIMA) system was established in 2002 to collect timely detailed statistics on steel imports. The SIMA will remain in place until 21 March 2009.93 Licensing requirements apply to all basic steel mill imports from all countries.94 The authorities have noted that, while the licensing programme was first established in conjunction with the safeguards remedy, it now operates under separate, unrelated authority.

(b) Special safeguards

100. The USITC also conducts country or region-specific safeguard investigations (special safeguards) under legislation that implements U.S. free-trade agreements, including NAFTA, CAFTA, and the FTA with Australia, Bahrain, Chile, Morocco, and Singapore. If the USITC finds, as a result of a duty reduction under an FTA, that a domestic industry is seriously injured or threatened with serious injury by increased imports, it recommends temporary relief to the President, who makes the final decision. Relief may be in the form of a rollback of a duty reduction under the agreement or suspension of further duty reductions on the imported good. No safeguard investigations were initiated nor measures of this type maintained during the period under review.

101. Under Section 421 of the Trade Act of 1974, the USITC also conducts "China safeguard investigations" in which the USITC determines, following Section 16.1 of Part I of the Protocol on the Accession of the People's Republic of China to the WTO, whether a product from China is being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products.

92 WTO document WT/DS311/1, G/L/679, G/SCM/D60/, 19 April 2004. 93 Federal Register, 11 March 2005 (Vol. 70, No. 47). 94 For the complete list of products subject to licensing, see ITA online information. Viewed at:

http://ia.ita.doc.gov/steel/ license/SMProducts_byhts.html.


If the USITC makes an affirmative determination, it proposes a remedy, and sends its report to the President, who makes the final remedy decision.

102. As at September 2007, no Section 421 investigations were active. Five section 421 investigations were initiated by the USITC between November 2002 and August 2005; in three cases affirmative determinations were made, but no duties were applied, as the President deemed this was not in the national economic interest.

103. Safeguard actions for textiles in the form of quotas may be applied by the United States (and other WTO Members) under China's WTO Accession Protocol, which contains a transitional product-safeguard mechanism for textiles and clothing that expires on 31 December 2008. The Committee for the Implementation of Textile Agreements (CITA), an interagency group chaired by the USDOC, is responsible for matters affecting textile trade policy and for supervising the implementation of all textile trade agreements, including the application of these special safeguard measures. The USDOC's Office of Textiles and Apparel (OTEXA) provides the staff support for the CITA, monitors all agreements, and provides economic analysis and data upon which the CITA relies in taking action.95 No new requests for safeguard investigations have been made since November 2005.

104. In a memorandum of understanding (MOU) concerning trade in textile and apparel products, signed on 8 November 2005, the United States and China established 21 agreed levels for 34 categories of textiles and textile products manufactured in China and exported to the United States during three one-year periods beginning 1 January 2006. In addition, China is required to use an electronic visa information system for shipments of certain textile products subject to the agreed levels and exported to the United States on or after 1 January 2006. The United States agreed not to seek consultations on any of the products covered by the MOU.96 Export limits for 2007 were adjusted pursuant to paragraph 4 of the MOU in August and November.97

(viii) Quantitative restrictions and licensing

105. The United States bans imports from certain countries for foreign policy purposes. Most imports from Cuba, the Democratic People's Republic of Korea, Iran, Myanmar, and certain areas of Sudan are subject to bans or approval requirements.98 The Office of Foreign Assets Control of the Department of the Treasury is responsible for administering these measures.

106. Most other U.S. quantitative restrictions and controls on imports are designed to safeguard consumer health, or protect public morals or the environment. These restrictions and controls are implemented through licensing requirements for fish and wildlife, plants, animals, and plant and animal products, narcotic drugs, alcoholic beverages, tobacco, firearms, explosives, and nuclear facilities, and are described in the latest U.S. reply to the questionnaire on import licensing procedures.99

95 Information available at: http://www.otexa.ita.doc.gov/cita.htm. 96 For the complete text of the MOU see USTR online information. Viewed at: http://www.ustr.gov/

assets/World_Regions/ North_Asia/China/asset_upload_file91_8344.pdf. 97 OTEXA online information Viewed at: http://otexa.ita.doc.gov/fr2006/chiestlim07C.htm,

http://otexa.ita.doc. gov/fr2006/chin13(07-07).htm, and http://otexa.ita.doc.gov/fr2006/chin14.htm. 98 Cuban Assets Control Regulations (31 CFR 515), Foreign Assets Control Regulations (31 CFR 500),

Iranian Transactions Regulations (31 CFR 560), Burmese Sanctions Regulations (31 CFR 537), and Sudanese Sanctions Regulations (31 CFR 538).

99 WTO document G/LIC/N/3/USA/5, 29 February 2008.


107. Imports of basic steel mill products are subject to automatic licensing, irrespective of their origin. This requirement, established in December 2002 as part of a safeguards measure, was extended in 2005, after public comment, under new statutory authority unrelated to the safeguard.100 According to the United States, the licensing system does not restrict the quantity or value of steel imports; rather, it is designed to provide fast and reliable statistical information on steel imports to the Government and the public. Licences are issued automatically and at no cost to persons who have pre-registered with the Department of Commerce. The registration process is free and can be completed on-line.101

108. The importation of natural gas or liquefied natural gas (LNG) is authorized unless it is determined not to be in the public interest.102 The importation of natural gas from a nation with which the United States has a free-trade agreement, and of LNG from any country, is deemed to be consistent with the public interest, and applications for such importation are granted without modification or delay. The Department of Energy is responsible for authorizing the importation of natural gas or LNG.

109. The Marine Mammal Protection Act (MMPA) prohibits the importation of marine mammals and their parts or products into the United States. However, the Secretary of Commerce may issue permits allowing imports of living marine mammals for scientific research, enhancement, or public display. Parts and products may be imported for scientific research. Under the MMPA, yellowfin tuna from the eastern tropical Pacific can only be imported if it comes from a country with an "affirmative finding".103 Four countries have such a finding: Ecuador, El Salvador, Mexico, and Spain.104 Tuna from these countries can only be labelled as "dolphin safe" if caught without the chase and encirclement of dolphins in the entire trip and without killing or seriously injuring any dolphins in the set in which the tuna was caught. A 2002 finding by the Secretary of Commerce, which would have changed the definition of dolphin-safe to cover tuna caught by the chase and encirclement of dolphins, as long as there were no observed dolphin mortalities or serious injury, was found by a federal appeals court, in April 2007, to be "arbitrary and capricious".105

110. The Pelly Amendment to the Fishermen's Protective Act of 1967 authorizes the U.S. Secretary of Commerce to certify a country as carrying out activities that diminish the effectiveness of an international fishery conservation programme.106 Certification triggers a process for the President to consider the imposition of import restrictions against that country. Although Iceland, Japan, and Norway are certified under the Pelly Amendment, the U.S. authorities indicate that they have not been subject to import restrictions.

111. The United States also prohibits imports of shrimp and shrimp products harvested with technology that may adversely affect sea turtle species.107 Exempt from the ban are products from countries that have been certified by the Department of State "as having taken certain specific measures to reduce the incidental taking of sea turtles" or as having a fishing environment that does

100 Federal Register, 70 FR 72373, 5 December 2005. 101 The registration form is available at: http://ia.ita.doc.gov/steel/license. 102 15 USC 717b. 103 The requirements to obtain an affirmative finding are contained in 50 CFR 216.24(f). 104 National Oceanic and Atmospheric Administration online information, "Tuna/Dolphin Embargo

Status Update", 21 March 2007. Viewed at: http://swr.nmfs.noaa.gov/psd/embargo2.htm. 105 United States Court of Appeals for the Ninth Circuit, Earth Island Institute v. Gutierrez, No. 04-

17018, 27 April 2007. 106 22 USC 1978. 107 16 USC 1537.


not pose a threat to sea turtles.108 Certification takes place annually. Shrimp harvested in cold-water regions is also exempt. In April 2006, the Department of State certified 39 sources as meeting the requirements for export of shrimp to the United States.109

112. Imports of certain textile and clothing products from China are subject to "agreed levels" (see section (vii) above).

113. Licences are required to import agricultural products at the in-quota tariff rate (Chapter IV(2)(ii)).

(ix) Technical regulations, conformity assessment, and standards

114. There have been no major changes, during the review period, in the legal framework governing the development of technical regulations and conformity assessment procedures at the federal level. Technical regulations and conformity assessment procedures are usually adopted administratively by federal agencies, on the basis of regulatory authority delegated by Congress. Congress normally leaves the definition of key substantive provisions to the relevant agency. However, Congress may define specific parameters for technical regulations or conformity assessment procedures, or even establish technical regulations and conformity assessment procedures legislatively.

115. Technical regulations and conformity assessment procedures may also be adopted by States. For example, the United States has notified to the WTO several proposed technical regulations at the sub-federal level in, for example, environment and public health and safety.110 States may delegate authority to establish technical regulations and conformity assessment procedures to regional, local, or municipal governments.

116. Title IV of the Trade Agreements Act of 1979, as amended, is the legal basis on which the TBT Agreement was implemented in the United States.111 In developing technical regulations and conformity assessment procedures, federal agencies must follow the rulemaking procedures of the Administrative Procedure Act.112 Most States have enacted their own administrative procedure acts.

117. The Office of the USTR is responsible for implementing of the TBT Agreement.113 The United States submitted a notification on the implementation and administration of the TBT Agreement in February 1996.114 The U.S. enquiry point and notification authority under the Agreement is housed in the National Institute of Standards and Technology (NIST) of the Department of Commerce.

118. For the purpose of WTO notifications, NIST relies on information published in the Federal Register to identify technical regulations and conformity assessment procedures proposed by federal agencies. The U.S. authorities indicate that NIST has subscribed to a private database on state

108 16 USC 1537. 109 U.S. Department of State online information, "Sea Turtle Conservation and Shrimp Imports", 2 May

2006. Viewed at: http://www.state.gov/r/pa/prs/ps/2006/65731.htm. 110 See, for example, WTO documents G/TBT/N/USA/155, 159, 203, 205, 207, 209, 210, 223, 231,

235, 245, 248, 249, 275-77, 287, 295, 296, 298-00, and 306-10. 111 19 USC 2531 et seq. 112 5 USC 551 et seq. 113 WTO document G/TBT/2/Add.2, 19 February 1996. 114 WTO document G/TBT/2/Add.2, 19 February 1996.


regulatory proposals to identify for notification technical regulations and conformity assessment procedures proposed by sub-federal agencies.115

119. The United States made 174 notifications of technical regulations to the WTO between July 2005 and October 2007.116 Around 23% were from the Environmental Protection Agency, 16% from the Food and Drug Administration, 13% from the Department of Transportation, 8% from the Department of Agriculture, 6% from the Department of Energy, and 20% from other agencies. The remaining 14% corresponded to sub-federal measures.

120. Since its last Review in 2006, the United States has notified to the WTO two mutual recognition agreements, with Iceland, Liechtenstein, and Norway. One relates to conformity assessment procedures for telecommunications equipment, electromagnetic compatibility, and recreational craft, and the other to certificates of conformity for marine equipment.117

121. Between July 2005 and July 2007, WTO Members raised concerns in the Committee on Technical Barriers to Trade regarding U.S. energy conservation standards for consumer products, requirements for digital television tuners and children's jewellery, and country of origin labelling regulations.118 Only the concern relating to country of origin labelling has been raised in a subsequent Committee meeting; none of the concerns has been followed by formal dispute settlement.

122. As part of the process for the adoption of technical regulations and conformity assessment procedures, the agency responsible must publish a notice of proposed rulemaking and provide interested persons, regardless of nationality or residency, an opportunity for comment. Executive Order 12889 requires a comment period of at least 75 days for "any proposed Federal technical regulation or any Federal sanitary or phytosanitary measure of general application".119 The comment period may be between 30 and 75 days for proposed technical regulations and conformity assessment procedures applied to perishable goods or to address "urgent" problems. Executive Order 12889 does not define urgent problems. The final technical regulation or conformity assessment procedure must be published at least 30 days prior to its effective date; a shorter period is possible if the final measure relaxes an existing measure. However, the authorities indicate that the period between the publication of a final rule and its effective date is typically much longer than 30 days.

123. Agencies may also seek general comments on an issue prior to formulating a technical regulation or conformity assessment procedure. This is done through an advance notice of proposed rulemaking. Rulemaking notices are published in the Federal Register.120

124. An agency is exempted from the notice and comment requirements if it finds that, "for good cause", such requirements are "impracticable, unnecessary, or contrary to the public interest".121 The

115 WTO document WT/TPR/M/160/Add.1, 27 September 2006. 116 WTO documents G/TBT/N/USA/124-297, excluding notifications contained in documents with the

symbols "Add" and/or "Corr". 117 WTO documents G/TBT/10.7/N/49 and G/TBT/10.7/N/50, both dated 3 March 2006. 118 WTO documents G/TBT/M/41, 12 June 2007; G/TBT/M/39, 31 July 2006; G/TBT/M/38,

23 May 2006; G/TBT/M/37, 22 December 2005; and G/TBT/M/36, 4 August 2005. With respect to country of origin labelling, see also Chapter IV(2)(v).

119 Federal Register, 58 FR 69681, 30 December 1993. 120 U.S. Government Printing Office online information, "GPO Access". Viewed at:

http://www.gpoaccess.gov/fr/index.html. 121 5 USC 553 (b). According to the authorities, one example of "good cause" for obtaining an

exemption from notice and comment might be the urgent need to remove trees from the flight path at an airport, due to the strong possibility that such trees, if not removed on an expedited basis, could cause a catastrophic accident.


use of this exception is subject to judicial review. According to the authorities, about 5% of rules were issued without notice and comment in fiscal year 2007, because many rules were deemed not to have a significant impact on international trade.

125. Executive Order 12866 of September 1993 requires the Office of Management and Budget (OMB) to review all "significant" rules by federal government agencies (excluding independent regulatory agencies) prior to their publication in the Federal Register as proposed or final rules.122 Significant rules include those that: raise novel legal or policy issues; create a serious inconsistency or interfere with an action planned or being taken by another agency; or have an annual effect on the economy of US$100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. To this end, agencies must submit to the OMB's Office of Information and Regulatory Affairs an assessment of the benefits and costs of the proposed rule and of "potentially effective and reasonably feasible" alternatives. OMB Circular A-4, issued in 2003, provides guidance to federal agencies on the development of regulatory analysis required under Executive Order 12866. According to the authorities, OMB concluded reviews of 571 significant rules during fiscal year 2007.

126. Under the Congressional Review Act, Congress may disapprove a technical regulation or conformity assessment procedure by adopting a resolution, which must be signed by the President to become effective.123 Congress has used this power only once since 1996.124 Interested persons, including foreigners, can petition for the issuance, amendment, or repeal of a technical regulation or conformity assessment procedure. Although federal agencies act on such petitions at their discretion, they must respond to all. In addition, all technical regulations or conformity assessment procedures may be judicially reviewed.

127. The United States does not maintain a catalogue of technical regulations and conformity assessment procedures. However, technical regulations, conformity assessment procedures, and other final rules are indexed and published in the consolidated Code of Federal Regulations.125

128. In the context of its previous Trade Policy Review, the United States indicated that the legislation implementing the Uruguay Round Agreements, and additional guidance to regulatory authorities, encouraged the use of relevant international standards that may be "effective and appropriate" for meeting U.S. regulatory objectives.126 The United States also indicated that it did not track the extent to which its final regulations were based on international standards.

129. The United States relies on a broad range of approaches to conformity assessment. The type of instrument used varies depending on the sector; one instrument used is supplier's self-declaration of conformity; another is third party certification. Accreditation programmes are operated by all levels of government and the private sector, and frequently rely on private-sector conformity assessment bodies. Bodies fulfilling the criteria specified by the regulator, regardless of their location, are accredited or otherwise recognized to perform conformity assessment activities.

122 Executive Order 12866-Regulatory Planning and Review, 30 September 1993. Federal Register,

58 FR 51735, 4 October 1993. 123 5 USC 801 et seq. 124 GAO (2005b). 125 U.S. Government Printing Office online information, "Code of Federal Regulations (CFR): Main

Page". Viewed at: http://www.gpoaccess.gov/cfr/index.html. 126 WTO document WT/TPR/M/160/Add.1, 27 September 2006.


130. The U.S. authorities have indicated that there are no centralized data on the extent to which U.S. regulators have recognized the equivalence of foreign technical regulations or the results of conformity assessment procedures performed abroad.127

131. The United States relies on a wide variety of strategies to ensure compliance with technical regulations, including sampling at manufacturing premises or retail outlets, consumer complaints, and inspections at the border.

132. A number of technical regulations establish requirements for the labelling or marking of goods with their country of origin (see also Chapter IV(2)(v)). Under the Tariff Act of 1930, imported items must be conspicuously and indelibly marked in English to indicate to their "ultimate purchaser" their country of origin.128 Exceptions to this requirement include articles that cannot be marked or for which the cost of marking would be "economically prohibitive". Also exempt are vegetables, fruits, nuts, berries, animals, fish, and birds.129 However, the "immediate containers" of these products must have country-of-origin labels. The American Automobile Labeling Act requires that new passenger cars, pickup trucks, vans, and sport utility vehicles have labels specifying the percentage value of their U.S. and Canadian parts content, the country where they were assembled, and the countries of origin of their engine and transmission.130 Imported textile and apparel articles must be labelled to show their country of origin in accordance with the Textile Fiber Products Identification Act and the Wool Products Labelling Act.131

133. The American National Standards Institute (ANSI) is a private, non-profit organization that brings together businesses, professional societies and trade associations, standards-development organizations, government agencies, and consumer and labour representatives.132 It accredits organizations whose standards development process meets ANSI requirements of due process and consensus. These are established in the document ANSI Essential Requirements and in various other guidance documents.133 One of the criteria for accreditation is to agree to "consider applicable international standards". There are 208 ANSI accredited standards development organizations.

134. ANSI-accredited standards development organizations may submit standards to the ANSI Board of Standards Review for approval as an American National Standard. Standards must have been developed in accordance with the criteria established in ANSI Essential Requirements. The public comment period is at least 60 days; a shorter period is acceptable if the full text of the draft standard can be published in Standards Action, a weekly ANSI online publication, or can be obtained in electronic format from a source published there.134 Substantive changes resulting from the comments require publication in Standards Action. There are some 10,000 American National Standards.135

127 WTO document WT/TPR/M/126/Add.3, 22 November 2004. 128 19 USC 1304. 129 19 CFR 134.33. 130 49 USC 32304. The regulations to implement the Act are contained in 49 CFR 583. 131 15 USC 68 and 70. 132 ANSI online information. Viewed at: http://www.ansi.org/about_ansi/overview/overview.aspx?

menuid=1. 133 ANSI (2006). 134 ANSI online information. Viewed at: http://www.ansi.org/standardsaction. 135 ANSI online information. Viewed at: http://www.ansi.org/standards_activities/domestic_programs/

overview.aspx?menuid=3.


135. ANSI adopted Annex 3 of the TBT Agreement in 1997.136 The work programme of the ANSI-accredited standards development organizations on whose behalf ANSI notified its acceptance of the code are available from each organization.137

136. Compliance with standards is voluntary, but in practice the U.S. market often provides strong incentives for imported and domestic products to meet certain standards.138

137. In July 2007, the President established the Interagency Working Group on Import Safety to conduct a comprehensive review of import safety and to identify areas for improvement. The Working Group, which has no statutory or regulatory authority of its own, has recommended several TBT-related measures to enhance the safety of imports into the United States (see Box III.1 below).

(x) Sanitary and phytosanitary measures

138. There have been no major changes in the institutional framework governing the establishment and implementation of SPS measures at the federal level since the last Review of the United States. The Animal and Plant Health Inspection Service (APHIS) of the Department of Agriculture (USDA) regulates imports of plants, animals, and their products. The USDA Food Safety and Inspection Service (FSIS) regulates most imports of meat, poultry, and some egg products. The Food and Drug Administration (FDA) regulates imports of all other foods, and imported veterinary drugs. The Environmental Protection Agency (EPA) is responsible for regulating imports of pesticides, and for setting limits on the amount of pesticides that may remain in or on imported food.

139. The establishment of SPS measures is governed at the federal level by the Federal Food, Drug, and Cosmetic Act; the Public Health Service Act; the Food Quality Protection Act; the Animal Health Protection Act; the Plant Protection Act; the Federal Insecticide, Fungicide, and Rodenticide Act; and the Toxic Substances Control Act. In general, SPS measures are subject to the same administrative rulemaking procedures as technical regulations (see section (ix)).

140. The U.S. enquiry point and national notification authority under the SPS Agreement is the International Regulations and Standards Division in the Foreign Agricultural Service of the USDA.139 This entity relies on information published in the Federal Register to identify federal measures for WTO notification. The United States made 933 notifications of SPS measures to the WTO between July 2005 and October 2007; it routinely provides addenda to indicate when final rules have been adopted. The authorities indicate that they are working closely with state authorities to ensure timely notification of appropriate sub-federal technical regulations.

141. Since the last Review of the United States, WTO Members have raised concerns in the SPS Committee regarding U.S. measures affecting imports of potted plants from the European Communities, wooden Christmas trees from China, and fruits and vegetables.140 No solution has been reported with respect to these issues. None of the concerns raised have been followed by formal dispute settlement.

142. The United States is a member of the Codex Alimentarius Commission and the World Organization for Animal Health (OIE), and a contracting party to the International Plant Protection

136 WTO document G/TBT/CS/N/83, 21 October 1997. 137 ISO/IEC (2007). 138 WTO (2006). 139 WTO documents G/SPS/ENQ/21/Add.1, 22 June 2007, and G/SPS/NNA/11/Add.1, 22 June 2007. 140 WTO documents G/SPS/R/42, 25 September 2006; G/SPS/R/43, 3 January 2007; and

G/SPS/R/37/Rev.1, 18 August 2005.


Convention (IPPC). According to the United States, U.S. SPS measures are based on international standards and guidelines "where they exist and as appropriate".141

143. The FDA has completed 17 arrangements on SPS issues with 16 foreign agencies in 12 countries. These are confidentiality agreements that cover disclosure of non-public information among signatory governments as part of cooperative law enforcement or regulatory activity.

144. SPS requirements applied on imports of plants, animals, and their products are established on the basis of the disease- or pest-risk posed by such products. In the context of the last Review of the United States, the U.S. authorities indicated that APHIS is committed to conducting pest-risk analyses in accordance with the IPPC standard for pest-risk analysis for quarantine pests (ISPM No. 11).142 Regarding sanitary requirements, the U.S. authorities indicated that APHIS bases its decisions "on the guidance set forth under the WTO-recognized international standard-setting bodies".143

145. Requests for first-time imports of plants, animals, and their products must be submitted by the chief plant protection officer or the chief veterinary officer of the exporting country to their U.S. counterpart. Requests are made with respect to particular commodities; a risk assessment may be necessary to evaluate these requests. APHIS may consider risk assessments carried out by third parties as part of its evaluation. APHIS conducts risk assessments at its own expense.

146. The U.S. authorities note that, under federal law, U.S. states are permitted to establish SPS measures, provided that these measures are consistent with federal rules and regulations, and with U.S. obligations under relevant WTO disciplines.

147. APHIS evaluates the pest-free status of an area against the criteria of the IPPC standard for the establishment of pest-free areas, which has been incorporated by reference in the relevant regulations.144 In recognizing disease-free areas, APHIS relies on the criteria defined in 9 CFR 92.1-4. APHIS publishes lists of pest-free areas, regulated pests, and of the disease status of countries or regions.145 In its regionalization assessments, APHIS takes into account the World Animal Health Organization's recognition of disease-free status to the extent that it reflects the level of protection considered appropriate by the United States.

148. Based on the results of risk assessment, APHIS may allow imports, subject to SPS requirements. These are mostly issued as regulations, and must adhere to the procedural requirements of the Administrative Procedure Act (section (ix)). There are no statutory limitations regarding the duration of the process to approve first-time imports of plants, animals, and their products into the United States. Typically, this process takes between two and three years.146

149. In general, imports of plants, animals, and their products require an import permit issued by APHIS. Permits specify the conditions under which a product can be imported into the United States; these conditions may include treatment, inspection, or certification, either at the border or in the exporting country. Users can apply for a permit and check the status of their application through an

141 WTO document WT/TPR/M/160/Add.1, 27 September 2006. 142 IPPC (2007). 143 WTO document WT/TPR/M/160/Add.1, 27 September 2006. 144 7 CFR 319.56-2. 145 APHIS (undated). APHIS online information, "Regulated Pest List". Viewed at: http://www.aphis.

usda.gov/import_ export/plants/plant_ imports/regulated_pest_list.shtml; and "Animal Disease Status" at http://www.aphis.usda.gov/import_export/animals/animal_disease_status.shtml.

146 APHIS (2007).


online system known as ePermits.147 The previous system used by APHIS to process permits (Import Authorization System) was discontinued in April 2007.

150. The USDA maintains a searchable database with the import requirements for fruits and vegetables.148 APHIS import manuals are available online.149 The EPA has issued a guidance document describing the data requirements to establish pesticide import tolerances (see below).150

151. New import regulations for fruits and vegetables became effective in August 2007.151 The regulations establish a "notice-based" approval process, which replaces the process based on the promulgation of regulation. According to APHIS, "with international trade in fruits and vegetables increasing steadily, APHIS determined that it could not keep pace with the volume of import requests by using solely a rulemaking-based review and approval process".152

152. The new process applies to fruits and vegetables that are subject to one or more of five designated phytosanitary measures. It involves the announcement of the availability of a pest-risk analysis in the Federal Register, and the establishment of a 60-day public comment period. Barring comments that disprove the findings of the pest-risk analysis, APHIS announces in the Federal Register that it will issue permits for the importation of the product in question. Products subject to the notice-based process will no longer be listed individually in the regulations. The recognition of pest-free areas will also take place through the notice-based approval process. APHIS will announce in the Federal Register the recognition of an area as free of specified pests, and provide a 60-day public comment period. After considering the comments, APHIS will announce the recognition of a pest-free area without issuing regulations. U.S. authorities expect the notice-based approach to take significantly less time than the rulemaking approach.

153. Before imports of meat, poultry, or egg products are allowed, FSIS evaluates whether a country's regulatory system for these products attains the same level of protection as the United States. If the system is deemed equivalent, U.S. regulations are amended to allow for imports. FSIS has published the process whereby it assesses the equivalence of foreign meat and poultry regulatory systems.153 The United States has recognized 34 foreign systems as equivalent to the U.S. meat, poultry, and/or egg products regulatory systems. Only meat, poultry, and egg products from facilities certified by the FSIS-recognized competent authority of the foreign country can be imported into the United States.154

154. Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act), the FDA must receive notice prior to the entry of food that is imported or offered for import into the United States.155 In addition, domestic and foreign facilities that manufacture, process, pack, and hold food for consumption in the United States must register with the FDA. The

147 USDA online information. Viewed at: https://epermits. aphis.usda.gov/epermits. 148 USDA online information, "Q56 Fresh Fruits and Vegetables Reference Database". Viewed at:

https://manuals.cphst.org/q56/Q56Main.cfm. 149 See APHIS online information. Viewed at: http://www.aphis.usda.gov/import_export/plants/

manuals/ports/index.shtml. 150 Federal Register, 71 FR 17099, 5 April 2006. 151 Federal Register, 72 FR 39482, 18 July 2007. 152 APHIS (2007). 153 USDA (2003). 154 For the list of certified facilities see FSIS online informatioin. Viewed at: http://www.fsis.usda.

gov/Regulations_&_ Policies/Eligible_Foreign_Establishments/index.asp. 155 See WTO (2006) for further details.


FDA estimates that some 420,000 food facilities are subject to the registration requirement.156 It has received 322,744 registrations, of which close to 60% correspond to facilities located abroad (July 2007).

155. All pesticides intended for use in the United States, including imported pesticides, must be registered with the EPA; in addition, imports of pesticides must be notified to the EPA. Prior to granting registration, the EPA evaluates the pesticide to ensure that it will not have unreasonable adverse effects on humans, the environment, or non-target species. As from 2006, the EPA intends to review pesticide registrations every 15 years to ensure that safety, health, and environmental standards are met. The EPA also sets limits on the amount of pesticides that may remain in or on foods ("tolerances"). Tolerances are set based on a risk assessment and are enforced by the FDA. The Federal Food, Drug, and Cosmetics Act, as amended by the Food Quality Protection Act of 1996 required that nearly 10,000 tolerances be reassessed to ensure their safety; EPA had reassessed around 99% by end 2006.157

156. Agricultural biotechnology products are regulated according to their intended use and must conform with the standards set by State and federal statutes, including the Food, Drug and Cosmetic Act; the Plant Protection Act; the Insecticide, Fungicide, and Rodenticide Act; the Toxic Substances Control Act, and State seed certification laws. There are no national requirements for varietal registration of new crops. APHIS, the EPA, and the FDA are responsible for regulating agricultural biotechnology in the United States.

157. The FDA regulates new plant varieties developed through genetic engineering. Foods from genetically engineered plants have to meet the same safety provisions as foods from plants derived conventionally. Substances added to food, including new proteins introduced through genetic engineering, are considered to be food additives subject to mandatory pre-market approval, unless they are pesticides, animal drugs, or are generally recognized as safe (GRAS) following a voluntary consultation process between the FDA and the food processor. The U.S. authorities indicate that as at early 2008, all except one new protein in foods from genetically engineered plants have been presumptively affirmed as GRAS, because they are essentially the same (in function, structure, and levels) as other proteins commonly and safely consumed in food.

158. Foods derived through genetic engineering that differ materially from their conventional counterparts, for example in composition or nutritional quality, must be labelled to indicate the difference. However, the label does not have to indicate the process by which the difference was introduced into the food. Thus, processors may voluntarily label their foods as derived through genetic engineering as long as the information is truthful and not misleading to consumers.

159. The FDA has approved certain steroid hormones to increase the rate of weight gain or improve feed efficiency in beef cattle.158

160. The FDA, in conjunction with Customs and Border Protection, undertakes port-of-entry reviews of imported food other than meat, poultry, and egg products, including through sampling and analysis "where necessary to ensure that imported food complies with the requirements of the U.S. food safety system".159 The FDA uses "import alerts" to disseminate information to its field personnel

156 FDA online information, "Compliance Information: Registration". Viewed at: http://www.cfsan.fda.gov/~furls/ffregsum.html.

157 EPA online information, "Reevaluation: Review of Registered Pesticides". Viewed at: http://www.epa.gov/oppsrrd1/reevaluation.

158 21 CFR 522, 556, and 558. 159 USTR (2007c).


about imports that violate the Federal Food, Drug, and Cosmetic Act and must therefore be refused entry into the United States. Import alerts refer to a specific commodity, a geographical area, a particular firm (manufacturer, shipper, grower, importer), or a combination thereof. Import alerts remain in place until the manufacturer, shipper, grower, or importer demonstrates to the FDA that the violation giving rise to the alert has been corrected. Import alerts are published on-line.160 There is no information available on the value of imports subject to FDA or CBP inspections at the border.

161. FSIS inspects all shipments of meat, poultry, and egg products at the border. Approximately 10% of the shipments undergo an "intensive random re-inspection", which includes product examinations, microbiological analysis for pathogens, or a test for chemical residues.161 Of the 3,890 million pounds of meat and poultry products imported in fiscal year 2006, around 12.3 million were not admitted because they failed to meet U.S. requirements.162

162. The Interagency Working Group on Import Safety has recommended several SPS-related measures to enhance the safety of imports into the United States (Box III.1). These recommendations have not yet been enacted (March 2008).

(3) MEASURES DIRECTLY AFFECTING EXPORTS

(i) Documentation

163. A Shipper's Export Declaration (SED) is used to keep a record of exports and act as a source document for official U.S. export statistics. SEDs must be prepared for shipments valued over U$500 when they are done through the U.S. Postal Service, and for shipments with a value of over US$2,500 when not using the U.S. Postal Service. SEDs must be prepared, regardless of value, for all shipments requiring an export licence or destined for countries restricted by the Export Administration Regulations. SED, are prepared by exporters or their agent and delivered to the exporting carrier, who is required to present it to the CBP at the port of export.

164. The number of documents required for exporting varies according to the product and destination. The following documents are commonly required: air waybill, bill of lading, commercial invoice, certificate of origin, export packing list, and insurance certificate. For goods subject to export restrictions, a destination control statement appears on the commercial invoice, and the ocean or air waybill of lading must indicate the carrier and all foreign parties that the item can be exported only to certain destinations. Transactions involving products subject to export restrictions and controls require approval in the form of licences from the U.S. Government.

160 FDA online information, "FIARS". Viewed at: http://www.fda.gov/ora/fiars/ora_ import_alerts.

html. 161 Committee on Ways and Means online information, "Statement of William James, DVM, MPH,

Deputy Assistant Administrator for the Office International Affairs, Food Safety and Inspection Service, Department of Agriculture, Testimony Before the Subcommittee on Oversight of the House Committee on Ways and Means", 4 October 2007. Viewed at: http://waysandmeans.house.gov/hearings.asp?formmode =view&id=6511.

162 USDA (2006a).


Box III.1: Selected recommendations of the Interagency Working Group on Import Safety In July 2007, the President established the Interagency Working Group on Import Safety to conduct a comprehensive review of import safety and to identify areas for improvement. The Working Group consists of senior Government officials and is chaired by the Secretary of Health and Human Services.

The Working Group issued a strategic framework in September 2007, and an action plan in November 2007. The strategic framework advocates a strategy that shifts the primary emphasis for import safety from intervention at the border to a model based on risk-based prevention with verification. The recommendations from the Working Group's action plan build upon the existing import-safety system and past activities by the public and private sectors; they focus on cost-effective, risk-based approaches across the entire import life cycle. The recommendations are to: • create new and strengthen existing safety standards;

• verify compliance of foreign producers with U.S. safety and security standards through certification;

• promote good importer practices;

• strengthen penalties and take strong enforcement actions to ensure accountability;

• make product safety an important principle of U.S. diplomatic relationships with foreign countries and increase the profile of relevant foreign assistance activities;

• harmonize federal government procedures and requirements for processing import shipments;

• complete single-window interface for the intra-agency, interagency, and private sector exchange of import data;

• create interactive import safety information network;

• expand laboratory capacity and develop rapid testing methods for swift identification of hazards;

• strengthen protection of intellectual property rights to enhance consumer safety;

• maximize the effectiveness of product recalls;

• maximize federal-state collaboration;

• expedite consumer notification of product recalls; and

• expand use of electronic track and trace technologies.

Source: WTO Secretariat, based on Interagency Working Group on Import Safety online information. Viewed at: http://www.importsafety.gov.

(ii) Export restrictions and controls

165. The United States maintains export restrictions and controls for national security or foreign policy purposes, or to address shortages of scarce materials. Export controls can be based on U.S. domestic legislation, policy decisions, United Nations resolutions or on U.S. participation in four non-binding export control regimes: the Wassenaar Arrangement, which deals with controls of conventional arms and dual-use exports, the Missile Technology Control Regime (MTCR), the Nuclear Suppliers Group (NSG), and the Australia Group (AG, chemical and biological non-proliferation). The United States participates in the Chemical Weapons Convention (CWC). Export controls are implemented through a licensing system; they also cover re-exports.

166. The Export Administration Act (EAA) of 1979, as amended, contains the main U.S. legal provisions on export control. The EEA authority has expired, but its provisions are carried out pursuant to Executive Order No. 13,222 of 17 August 2001 issued under the authority of the International Emergency Economic Powers Act (IEEPA), which is renewed annually. Export controls for nuclear materials, facilities, and equipment used for civil purposes are regulated by the Atomic Energy Act of 1954, as amended (AEA), and administered by the U.S. Nuclear Regulatory Commission (NRC).


167. The Bureau of Industry and Security (BIS) in the USDOC is responsible for formulating and implementing export control policy on dual-use items (items with both commercial and possible military use), software, and technology.163 The BIS issues regulations contained in the Export Administration Regulations (EAR), which set forth licensing policy and requirements for the export and re-export of dual-use items and related software and technology.164 Items that have dual uses are listed on the Commerce Control List (CCL) and are subject to general export prohibitions, unless allowed by an export licence or other authorization, which is dependent upon the item classification, the destination, the end-user, and the end-use.165 To determine whether a licence is needed an exporter must first classify the item by identifying the item's Export Control Classification Number (ECCN), according to the EAR, and then must reference the CCL. The EAR include a country chart, which lists the reasons for control of a given item, and specifies whether, based on those reasons, exports of certain items to a given country require a licence. Licences have a standard term of 24 months and authorize multiple shipments up to the maximum quantity/value authorized under the licence. Exports of defence articles and defence services from the United States are authorized by the Department of State under authority of the Arms Export Control Act.

168. Although export licences are in general individual, the BIS also issues Special Comprehensive Licenses (SCLs) in place of individual licences to exporters that routinely participate in export and/or re-export transactions involving multiple destinations. Under an SCL, exports are approved for a four-year period. In addition, the BIS maintains "catchall" controls for items not specifically listed on the CCL but shipped for a sensitive end-use or end-user, such as a nuclear weapons programme. In these cases, exporters must apply for a licence for all items shipped, regardless of their classification.

169. The BIS Office of Enforcement Analysis (OEA) screens all export licence applications to ensure export control enforcement information is considered before any final licence decision is made. An interagency committee reviews licence applications to assess diversion risks, to identify potential violations, and to determine the reliability of those receiving controlled U.S.-origin commodities or technical data. Export controls are regularly updated by the BIS to reflect geopolitical developments. During the period under review, the BIS amended the EAR to rescind Iraq's and Libya's designations as states sponsors of terrorism.

170. A licence is required for exports or re-exports to Cuba of all commodities, technology, and software subject to the EAR, with a few exceptions. The BIS generally denies applications, although applications for certain products are reviewed on a case-by-case basis. In May 2006, the BIS amended the EAR clarifying the application of License Exception Baggage (BAG) for Cuba, revised in June 2004.166

171. Controls are also placed on so called "deemed exports". U.S. entities must apply for an export licence, under the "deemed export" rule, to transfer controlled technologies to foreign nationals in the United States when transfer of this technology to the foreign national's home country would

163 USDOC, "Guiding Principles of the BIS". Viewed at: http://www.bis.doc.gov/about/bisguiding

principles. htm. 164 15 CFR, Chapter 7. Viewed at: http://www.bis.doc.gov/PoliciesAndRegulations/index.htm. 165 The CCL comprises the following categories: nuclear materials, facilities and equipment;

miscellaneous items; materials, chemicals, microorganisms and toxins; materials processing; electronics; computers; telecommunications and information security; sensors and lasers; navigation and avionics; marine; propulsion systems, space vehicles, and related equipment.

166 BIS online information. Viewed at: http://www.bis.doc.gov/.


require an export licence.167 In May 2006, the BIS announced the establishment of the Deemed Export Advisory Committee (DEAC), to review and provide recommendations to USDOC on deemed export policy. The DEAC submitted a report to the Secretary of Commerce in December 2007 with recommendations for an overall revamping of the Deemed Export regulatory regime.168

172. Modifications to the EAR may be introduced to comply with U.S. participation in multilateral arrangements. Thus, during the period under review, the BIS revised certain CCL entries to bring them into conformity with changes agreed under the Wassenaar Arrangement and the MTCR.

173. The EAA allows the monitoring and restriction of exports in short supply.169 The BIS is responsible for determining whether it is necessary to restrict the export of commodities in short supply, implementing the EAA policy. Specific procedures apply for: crude oil; petroleum products other than crude oil produced or derived from the Naval Petroleum Reserves (NPR) or that became available for export as a result of an exchange of any NPR-produced or derived commodities; unprocessed western red cedar; and horses exported by sea for slaughter. These products always require an export licence, regardless of their export destination.

174. In addition, the BIS administers export controls under the Energy Policy and Conservation Act, the Mineral Leasing Act, the Naval Petroleum Reserves Production Act, and the Outer Continental Shelf Lands Act. The Department of Energy is responsible for authorizing the exportation of natural gas or liquefied natural gas (LNG) from the United States, which is authorized unless it is determined not to be in the public interest. Exports to a nation with which the United States has a free-trade agreement are deemed to be consistent with the public interest, and applications are granted without modification or delay. The BIS makes available each year statistics on its licensing activities.170 China was the destination for the largest number of approved licences in 2006; 29% were for "deemed exports" licences to release controlled technology or source code to Chinese nationals working in U.S. companies and universities.

175. The EAA requires a detailed description of the extent of injury to U.S. industry and the extent of job displacement caused by U.S. exports of goods and technology to controlled countries, as well as a full analysis of the consequences of exports of turnkey plants and manufacturing facilities to controlled countries to produce goods for export to the United States or compete with U.S. products in export markets. In accordance with this, the BIS assesses the impact on U.S. industry and employment of output from "controlled countries" resulting, in particular, from the use of U.S. exports of turnkey plants and manufacturing facilities.171 U.S. exports to controlled countries totalled US$51 billion in 2005, or some 6% of total U.S. exports; some 1.7% of U.S. exports to controlled destinations were subject to a BIS export licence requirement.172 China is the largest single export market within the group, with roughly 82%, followed by Russia with 8% of the total. Capital goods

167 Technology is "released" for export when it is available to foreign nationals for visual inspection;

when technology is exchanged orally; or when technology is made available by practice or application under the guidance of persons with knowledge of the technology. See §734.2(b)(3) of the EAR, and BIS online information. Viewed at: http://www.bis.doc.gov/DeemedExports/DeemedExportsFAQs.html.

168 See the report and its recommendations. Viewed at: http://tac.bis.doc.gov/2007/deacreport.pdf. 169 Regulations are contained in Part 754of the EARs. BIS online information. Viewed at:

http://www.access.gpo.gov/bis/ear/pdf/754.pdf. 170 Bureau of Industry and Security (2007). 171 For these purpose, the EEA controlled countries are: Albania, Armenia, Azerbaijan, Belarus,

Cambodia, China, Cuba, Georgia, Iraq, Kazakhstan, Kyrgyzstan, Laos, Macao, Moldova, Mongolia, North Korea, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Viet Nam.

172 BIS online information. Viewed at: http://www.bis.doc.gov/News/2007/annReport06/BIS07_all. pdf.


items, including machinery and transportation equipment, represented about half of the total U.S. exports to controlled countries, especially China.

176. The Nuclear Regulatory Commission (NRC) is responsible for licensing exports of nuclear materials, facilities, and equipment used for civil purposes, pursuant to the Atomic Energy Act of 1954, as amended. In July 2005, NRC published a final rule amending its licensing regulations (contained in 10 CFR Part 110) and establishing a new category of specific licensing requirements for certain radioactive materials deemed to be of concern for potential use in a radiological dispersion device.

177. Trade sanctions may be applied by the Department of Treasury. Under the authority of, inter alia, the International Emergency Economics Powers Act (IEEPA), the Trading with the Enemy Act, and the United Nations Participation Act, the Department of Treasury's Office of Foreign Assets Control (OFAC) administers economic and trade sanctions, and may in this capacity restrict exports to countries, entities, and individuals that are subject to such sanctions. WTO Members that are subject to economic sanctions administered by OFAC are Cuba and Myanmar. The specific economic sanctions may differ depending upon the country or issue.173

(iii) Export taxes, charges, and levies

178. The U.S. Constitution's Export Clause bars Congress from imposing any tax on exports.174

179. Exported cargo is exempt from the harbour maintenance fee following a 1998 decision by the U.S. Supreme Court.175 The Court held that the harbour maintenance fee bore "the indicia of a tax", and that the value of the export cargo – the basis on which the fee is determined – did not "correlate reliably with the federal harbour services, facilities, and benefits used or usable by the exporter". Thus, the Supreme Court determined that the harbour maintenance fee, as applied to exports, violated the U.S. Constitution's Export Clause.

(iv) Export assistance

(a) Finance, insurance, and guarantees

180. The United States provides export financing through its official export credit agency, the Export-Import Bank (Ex-Im Bank).176 Ex-Im Bank is mandated to provide loans, loan guarantees, and insurance at rates and terms that are fully competitive with those supported by governments in the principal countries whose exporters compete with U.S. exporters.177 Ex-Im Bank accepts risks that the private sector is unwilling or unable to take178; however, Ex-Im Bank support is contingent upon a

173 For additional information on OFAC's economic sanctions programme, see Department of the

Treasury online information. Viewed at: http://www.treas.gov/offices/enforcement/ofac/programs/. 174 The Export Clause states: "No Tax or Duty shall be laid on Articles exported from any State".

Article I, Section 9, The United States Constitution. See United States v. International Business Machines Corp., 517 U. S. 843 (1996).

175 United States v. United States Shoe Corp., 523 US 360 (1998), 31 March 1998. Section 11116(b)(1) of the Safe, Accountable, Flexible, Efficient Transportation Equity Act (P.L. No. 109-59) amended the harbour maintenance tax to exempt exports.

176 The mission and mandates of Ex-Im Bank are codified in the Export-Import Bank Act of 1945, as amended.

177 12 USC 635, subchapter I, b (1) (A). 178 Export-Import Bank of the United States online information. Viewed at:

http://www.exim.gov/about/mission.cfm.


finding of "reasonable assurance of repayment". In December 2006, Ex-Im Bank activities were renewed until September 2011.179

181. Ex-Im Bank provides export financing through various loans, loan guarantees, and insurance programmes, including: short and medium-term export credit insurance; working capital loan guarantees to exporters; medium- and long-term loan guarantees to financial institutions lending to foreign buyers; and medium and long-term direct loans to overseas buyers. The risk premiums charged under these programmes must be set in accordance with OECD disciplines.

182. All Ex-Im Bank programmes carry the full faith and credit of the U.S. Government. This entails a cost for the Government, known as the "subsidy cost", equivalent to the net present value of expected cash inflows and outflows resulting from Ex-Im Bank's loans and other programmes. Under the Federal Credit Reform Act, Ex-Im Bank is required to estimate the subsidy cost, and to seek an appropriation from Congress to cover estimated net future losses (Table III.6).

Table III.6 Ex-Im bank loan, guarantee, and insurance activities, 2000-06 (US$ million)

Fiscal year Financed export value Amounts authorized Estimated net future losses

2000 15,548 12,637 902 2001 12,526 9,242 824 2002 12,950 10,034 714 2003 14,311 10,507 334 2004 17,834 13,321 279 2005 17,858 13,936 241 2006 16,119 12,151 191

Source: WTO document G/SCM/N/95/USA, 31 October 2003, and Export-Import Bank of the United States (2006), 2006 Annual Report. Viewed at: http://www.exim.gov/about/reports/ar/ar2006/index.html.

183. Goods and services must be shipped from the United States and meet U.S. content requirements to be eligible for Ex-Im Bank financing. Specifically, for medium- and long-term financing, support is limited to the lesser of: 85% of the value of eligible goods and services in a U.S. supply contract; or 100% of the U.S. content in eligible goods and services in that contract. Ex-Im Bank's U.S.-content requirements are not statutory requirements; rather they reflect "a concerted attempt to balance the interests of labour and industry".180 Ocean-borne cargo financed by Ex-Im Bank direct loans or long-term guarantees exceeding US$20 million or with a repayment period of more than seven years must be transported on U.S. flag vessels, unless a waiver is obtained from the U.S. Maritime Administration.181

184. Ex-Im Bank authorized US$12.1 billion in support for export activities in fiscal year 2006.182 That year, 67% of total support was provided as guarantees, 32% as export credit insurance, and less than 1% as loans. Around 42% of total Ex-Im Bank exposure was in the aircraft sector, followed by oil and gas with 13%, and power projects with 8%. The principal destinations for support were Mexico, India, Thailand, and Qatar.

179 Export-Import Bank Reauthorization Act of 2006. 180 Export-Import Bank of the United States (2007). 181 Public Resolution No. 17 of the 73rd Congress. This Public Resolution is implemented by the Ex-Im

Bank under regulations contained in 12 CFR 402.3. 182 Export-Import Bank of the United States (2006).


(b) Duty drawback, tax exemptions, and other assistance

185. The United States maintains a duty drawback programme. Customs duties and certain internal taxes and fees resulting from importation are refunded following the export of the imported product or of the article manufactured from the imported product.183 The statutory definition of duties, taxes, and fees subject to drawback includes customs duties, marking duties, and internal revenue taxes "which attach upon importation".184 It does not include the harbour maintenance fee.

186. The Tax Increase Prevention and Reconciliation Act of 2005, signed by the President in May 2006, repeals the "grandfathering" provisions that allowed U.S. firms to exclude certain "foreign trade" income from their taxable income for transactions "pursuant to a binding contract" in effect on a specified date. As reported in the Secretariat report for the last Review of the United States, these grandfathering provisions, which the WTO found to be prohibited subsidies in September 2005, were adopted as part of a set of measures to implement WTO rulings in the context of the dispute on the tax treatment of foreign sales corporations.185

(c) Promotion and marketing assistance

187. The Trade Promotion Coordinating Committee (TPCC) coordinates the export promotion activities of 19 federal agencies.186 TPCC members allocated around US$1.5 billion to promotion activities in fiscal year 2006.187 The Department of Agriculture, the Department of Commerce, and the State Department accounted for almost 85% of the total.

188. The TPCC must submit a national export strategy to Congress each year. It also publishes the Export Programs Guide, which describes some 100 export promotion programmes maintained by its members.188 The International Trade Administration of the Department of Commerce manages Export.gov, an online access point to TPCC members' information on export promotion.

189. U.S. States also maintain general programmes to promote exports. The State International Development Organizations seeks to support the activities of trade promotion agencies in 39 States.189

(v) Section 301 and related actions

190. Sections 301-309 of the Trade Act of 1974 (commonly known as Section 301) provide the United States with the authority to enforce trade agreements, resolve trade disputes and open foreign markets to U.S. goods and services. Section 301 is implemented by the USTR to investigate foreign trade practices that are considered to affect U.S. exports of goods and services or impair U.S. rights under international trade agreements. Under Section 301, the United States may impose trade sanctions on foreign countries that either violate such agreements or maintain such practices. When an investigation involves an alleged violation of a trade agreement, such as the WTO, the USTR must

183 19 USC 1313. The provisions relating to drawback of certain excise taxes are contained in 26 USC

5062. 184 19 CFR 191.3. 185 WTO document WT/DS108/RW2, 30 September 2005. 186 15 USC 4727 et seq. 187 This amount comprises the budgets of 11 TPCC members for "trade promotion" activities, as

defined by each member; no information was available on the budgets of the remaining 8 TPCC members. TPCC (2006).

188 Viewed at: http://trade.gov/media/Publications/pdf/epg_2006.pdf. 189 SIDO online information. Viewed at: http://www.sidoamerica.org/index.htm.


follow the consultation and dispute settlement procedures set out in that agreement. No new cases have been initiated under Section 301 since the previous Review of the United States.

191. The “Special 301” provisions of the Trade Act of 1974 require USTR to identify foreign countries that deny adequate and effective protection of intellectual property rights.

(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE

(i) Legal framework for business

192. Forms of legal business structure in the United States include the corporation, sole proprietorship, partnership, and limited liability company (LLC). Joint ventures, branch offices, and subsidiaries are variations of these basic business structures. The most common forms of business are sole proprietorships, partnerships, and corporations. LLCs are a relatively new business structure allowed by state statutes; participants may include individuals, corporations, other LLCs and foreign entities, and there is no maximum number of members.

193. Foreign firms may carry out activities in the United States through a branch or incorporate as a subsidiary. Branch offices or subsidiaries of foreign corporations must comply with any relevant state registration and licensing requirements.

194. Firms in the United States must comply with the applicable state registration requirements; there is no federal incorporation. Incorporation does not need to be made in the State where the business operates. Laws for incorporation of a business vary from state to state. A foreign corporation that qualifies to do business in another State is subject to taxes and annual report fees from both the State of incorporation and the qualifying State. The incorporation decision typically is between the State of operations and Delaware, which does not have an income tax for corporations that are not actually conducting a business in Delaware. In the latter case, companies are established as limited liability companies and pay a flat annual fee to the state of Delaware.

195. The U.S. Government has undertaken a number of electronic government (E-Gov) initiatives to help make federal government information and processes more efficient and transparent for businesses.190 The White House Office of Management and Budget has developed a total of 25 E-Gov initiatives and nine lines of business to improve how the Federal government provides services.191 In 2006, the United States ranked third overall out of the 155 economies analysed in the World Bank's ease of doing business index.192

196. Businesses are subject to taxation by federal and state governments. The tax mix and burden varies across states. Corporations are classified into C corporations and S corporations for tax purposes; the form of taxation between the two differs greatly. All corporations are, in principle, C corporations, which file corporate tax returns and are taxable on their worldwide income without regard to their shareholders. When profits after taxes are distributed to shareholders, they are subject to income tax on the dividends received. For this type of corporation, federal corporate income tax varies between 15% and 35% depending on the amount of taxable income.

197. A corporation can be an S corporation only if it has no more than 100 shareholders, and all of them are U.S. citizens or residents and agree to the S corporation structure. Generally, an S corporation is exempt from federal income tax, although tax is imposed at the shareholder level on

190 E-Government online Information. Viewed at: http://www.whitehouse.gov/omb/egov/index.html. 191 Examples include Business.gov, Regulations.gov, and Forms.gov. 192 World Bank online information. Viewed at: http://www.doingbusiness.org/EconomyRankings/.


the S corporation's income. S corporations are subject to tax on certain capital gains and passive income.

198. The United States has tax treaties covering 66 countries.193 Under these treaties, residents of foreign countries are taxed at a reduced rate, or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. Rates and exemptions vary among U.S. tax treaties. Generally, U.S. income tax treaties do not restrict the imposition of state level taxes.

(ii) Other government support

(a) Overall support

199. The United States submitted a full notification under Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures in November 2007.194 The notification covers fiscal years 2003 and 2004, and lists around 430 programmes providing subsidies; 42 were at the federal level and the rest at the sub-federal level (Table III.7).

Table III.7 Federal programmes notified to the WTO, fiscal years 2003 and 2004a

Sector Number of programmes

Main forms of support Total amount 2003 (US$ million)

Total amount 2004 (US$ million)

Energy development, storage and transportation

5 Grants and cooperative agreements 1,626.9 1,427.4

Other energy and fuels 8 Tax concessions 4,110 4,900 Fisheries 4 Grants (3 programmes) and loans

(1 programme) 125.6b 78b

Lumber and timber 3 Tax concessions 450 420 Medical 2 Tax concessions and sale of isotope

products 173.5 195

Metals, minerals, and extraction

5 Tax concessions (4 programmes) and guarantees (1 programme)

270c 245c

Textiles 1 Grants 2.9 2.8 Timepieces and jewellery 1 Duty-free entry for watches and watch

movements from U.S. insular possessions; direct payments to producers of watches and jewellery in these areas.

4.3 4.2

Others 4d Tax concessions (3 programmes) and grants (1 programme)

2,230 2,179.2

a Excludes subsidy programmes to agriculture, discussed in Chapter IV(2). b Excludes loans. c Excludes guarantees. d Excludes assistance provided through Ex-Im Bank, discussed in section (3)(iv). Source: WTO document G/SCM/N/123/USA, 15 November 2007.

200. Support to businesses may be granted by the federal Government, and by sub-federal governments. Instruments of support include direct payments, tax benefits, and credit programmes. Information on specific federal programmes providing assistance to business is available in the

193 The list of countries may be found in Department of the Treasury, Internal Revenue Service, U.S.

Tax Treaties Publication 901, Rev. June 2007. Viewed at: http://www.irs.gov/pub/irs-pdf/p901.pdf. 194 WTO document G/SCM/N/123/USA, 15 November 2007.


Catalog of Federal Domestic Assistance.195 For sub-federal programmes, the U.S. Chamber of Commerce has published a state-by-state listing of financial and non-financial business incentives.196

201. Average annual direct payments by the federal Government for U.S. resident businesses were US$47.4 billion between 2002 and 2006 (the latest year for which data are available).197 Housing and agriculture were the main recipients, accounting for around 90% of the total. Direct payments peaked at US$58.2 billion in 2005, and declined by 15% in 2006. The 2008 federal budget estimates that direct payments for fiscal years 2007 and 2008 will remain constant, at about US$47 billion.198 Direct payments by sub-federal governments averaged US$440 million between 2002 and 2006.

202. The largest tax benefits for corporations in fiscal year 2008, as measured by the information on "tax expenditures" contained in the federal Budget, relate to accelerated depreciation of machinery and equipment, estimated at US$44.8 billion, followed by deferral of income from U.S. controlled foreign corporations (US$12.8 billion).199 Deductions for U.S. production activities were US$11.4 billion. These deductions result from the American Jobs Creation Act of 2004, which introduced a phased-in, 9% tax deduction for certain producers. The deduction is a percentage of the lesser of "qualified production activities income" or taxable income, and is limited by wages. Eligible companies can claim a deduction of 3% in 2005-06, 6% in 2007-09, and 9% thereafter. In fiscal year 2008, tax benefits relating to general science, space, and technology were worth US$10.1 billion; those relating to energy amounted to US$4 billion.

203. States and local governments also offer a variety of tax and non-tax incentives. Annual state and local expenditures on business incentives have been estimated at US$50 billion.200 Some sub-federal incentives target particular business ventures. For example, in 2007-08 the State of New York will finance US$650 million of the cost of a computer chip facility to be built in the Albany area.201 The State of Alabama and several local governments announced tax and non-tax incentives totalling US$811 million in 2007 in connection with the construction of a steel plant near Mobile.202 The State of Georgia and several local governments agreed to provide US$410 million in incentives, including US$220 million in tax credits, exemptions, and abatements, to build an automobile assembly plant in Troup County.203

204. In September 2004, the Supreme Court announced that it had agreed to review a federal appeals court ruling that certain Ohio tax credits granted to business as an incentive to expand

195 The Catalog of Federal Domestic Assistance online information. Viewed at: http://www.cfda.gov. 196 U.S. Chamber of Commerce online information. Viewed at: http://www.uschamber.com/

research/stateguide.htm. 197 These data correspond to the "subsidies" category in the U.S. national income and product accounts.

The data are not necessarily actionable subsidies under WTO disciplines. BEA online information, "National Economic Accounts", Table 3.13. Viewed at: http://www.bea.gov/national/nipaweb/SelectTable.asp? Selected=N.

198 OMB (2007), Table 14-1. 199 The Congressional Budget Act of 1974 requires that a list be included in the Budget with the

"revenue losses attributable to provisions of the federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of liability". These revenue losses are known as tax expenditures. OMB (2007), Table 19.2.

200 Peters and Fisher (2004). 201 State of New York (2006). 202 County of Mobile, Alabama online information. Viewed at: http://www.mobilecounty.org. 203 Office of the Governor of the State of Georgia online information, "Fact Sheet: Kia to Build

Assembly Plant, Invest $1.2 Billion in Georgia", 13 March 2006. Viewed at: http://www.gov.state.ga. us/press/2006/031306_Kia_fact_sheet.pdf.


operations in the state violated the Commerce Clause of the U.S. Constitution.204 The Federal Appeals Court reached its conclusion on the grounds that the economic effect of the Ohio tax credit is to encourage further investment in-state at the expense of development in other states and that the result is to hinder free trade among the states. The Supreme Court concluded in May 2006 that the Ohio taxpayers who had objected to the credits lacked standing in federal court.205

(b) Foreign-trade zones

205. The Foreign-trade Zones Act of 1934, as amended, authorizes the establishment of foreign-trade zones in the United States.206 Foreign and domestic goods may be sent to a foreign-trade zone for any operation not prohibited by law, including storage, exhibition, and manufacturing. Foreign goods admitted into a foreign-trade zone are exempt from customs duties and certain excise taxes, but not from the merchandise processing fee. Customs duties (and all other applicable taxes and fees) are paid when goods are sent to the U.S. customs territory. In this case, the importer can pay customs duties on either the finished good or its foreign inputs. Manufacturers of goods that are subject to "inverted tariffs" (lower tariff rates on the finished product than on its foreign input) might benefit from establishing in a foreign-trade zone.

206. The U.S. authorities have indicated that there are no income tax advantages related to foreign-trade zone operations, and that zones are subject to all other federal, state, and local regulations and taxes. Local property taxes on inventory are the only exception, since they are not applied to foreign or export-bound domestic merchandise held in a foreign-trade zone.

207. The value of domestic and imported goods transferred to foreign-trade zones was US$491 billion in fiscal year 2006207, almost twice as much as in fiscal year 2003. Around 60% of the total consisted of domestic products. Imports are mostly composed of crude and petroleum oils, motor vehicles and parts, electronic products, pharmaceuticals, computers and office equipment, and textiles and apparel. Exports from foreign-trade zones (to destinations outside the United States) amounted to some US$30 billion. There are 163 active foreign-trade zones.

(iii) Competition policy

208. The United States' position on competition policy is that, in order to promote efficiency and enhance consumer welfare, antitrust laws protect competition not competitors.208 It considers that, to deter or eliminate anticompetitive restraints that impede free market competition properly, antitrust law must reflect an economically sound understanding of how competition operates.209

209. In a 2005 report on competition policy in the United States, the OECD notes that the United States has one of the least restrictive regulatory systems in the OECD.210 The report links the U.S. economy's good performance for more than a decade to regulatory reform efforts in a broad range of industries, but notes that competition policy could be improved by measures such as terminating the antitrust immunity of government enterprises and eliminating exemptions.

204 Charlotte Cuno v. DaimlerChrysler, 383 F.3d 379, amended by 386 F.3d 738 (6th Cir. 2004). See

also WTO (2006). 205 Daimler-Chrysler v. Charlotte Cuno, 126 S. Ct. 1854. 206 19 USC 81. The Trade Zones Board's regulations are contained in 15 CFR 400. The Customs and

Border Protection regulations regarding foreign-trade zones are contained in 19 CFR 146. 207 Foreign-trade Zones Board (2007). 208 USDOJ (2001). 209 Antitrust Modernization Commission (2007). 210 OECD (2005).


210. Federal U.S. antitrust legislation covers all sectors of the economy and the interstate and foreign commerce of the United States, subject to some exemptions and exceptions, and provides for enforcement actions by aggrieved private parties as well as by the Antitrust Division of the Department of Justice (DOJ, criminal and civil enforcement), and the Federal Trade Commission (FTC) (civil enforcement). The Sherman Antitrust Act, the Clayton Act, and the Federal Trade Commission Act are the main U.S. Federal antitrust laws. There is also antitrust legislation in nearly all states.

211. The Sherman Antitrust Act (15 U.S.C. sections 1-7) prohibits all contracts, combinations, and conspiracies that restrain trade among the states or with foreign countries, including price-fixing agreements, bid rigging, and agreements between competitors to allocate customers. The Sherman Act also applies to "vertical" agreements between sellers and buyers. Under the case law pursuant to Section One of the Sherman Act, horizontal conduct such as price fixing, bid rigging, and market allocation, is treated as illegal per se, while other conduct is evaluated under a "rule of reason" standard, pursuant to which a court weighs the anti-competitive effects against any efficiencies flowing from the conduct. The Sherman Act does not apply to conduct involving trade or commerce, other than imports, with foreign nations unless the conduct has a direct, substantial, and reasonably foreseeable effect on domestic or import commerce or on exports.

212. Violations of the Sherman Act may be prosecuted as civil or criminal offences by the DOJ, or challenged by the FTC as civil proceedings under the FTC Act. Cartels are prosecuted criminally. Criminal offences are punishable by fines and imprisonment; individuals may be subject to fines of up to US$1 million and up to ten years in federal prison for each offence; corporations can be fined up to US$100 million per offence.211 Fines may, however, be raised to twice the gain to the conspirators or twice the loss to the consumer. In a civil proceeding, the DOJ may obtain injunctive relief against prohibited practices. Plaintiffs may obtain treble damage relief for violations of the Sherman Act.

213. Section Seven of the Clayton Act outlaws mergers and acquisitions that may be likely to lessen competition substantially. The Clayton Act also prohibits the lease or sale of goods or commodities conditioned upon the purchaser's agreement not to use the products of a competitor, if this leads to lessening competition. Enforcement of the Clayton Act is vested generally in the FTC and the Attorney General, which may seek court orders to prevent a merger. The FTC may also issue cease and desist orders against mergers in administrative proceedings. The Act allows for the recovery of threefold the damage inflicted to the aggrieved party plus the cost of the suit (with certain exceptions). Foreign individuals or companies are granted national treatment with respect to private lawsuits and may sue for the same amount; foreign states may recover an amount equal to the damage inflicted plus the cost of the suit.

214. The Federal Trade Commission Act grants the FTC the authority to define and prohibit unfair methods of competition or deceptive acts or practices in commerce; generally, this refers to violations of the Sherman or Clayton Acts or of another antitrust law. The Wilson Tariff Act (15 U.S.C. §§ 8-11) bans private agreements to restrain lawful imports or free competition in lawful trade, or to increase the market price in the United States of any article imported or intended to be imported.

215. The Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 (Section 7A of the Clayton Act) requires that parties to certain mergers or acquisitions make pre-merger notifications to the FTC and the DOJ. Since July 2006, pre-merger notifications may be filed electronically.212

211 The Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA, P.L. No. 108-237) increased the Sherman Act fines and penalties. See WTO (2006).

212 Federal Trade Commission (2007a).


Notification requirements are based on size of transaction and value of sales and assets. Mergers or acquisitions of foreign assets or voting securities must also be reported if their nexus with the United States reaches or exceeds certain thresholds; these thresholds are revised annually.213 In FY2006, 1,768 transactions were reported under the HSR Act, a 4% increase with respect to the number of transactions (1,695) reported in FY2005.214

216. A number of statutes provide for limited immunity from antitrust laws in specified cases. Immunity applies, for example, to specified aspects of agriculture, fishing, insurance, and export activities.215 The Webb-Pomerene Act grants limited immunity from antitrust laws to associations of competing businesses solely for the purpose of engaging in collective exports of goods, provided this does not result in conduct that has anti-competitive effects in the United States or injure domestic competitors. In 2007, seven associations were registered with the FTC under the Act.216 The Export Trading Company Act of 1982, 15 U.S.C. 4011-4021, created a procedure by which, under certain circumstances, persons engaged in export trade may obtain an export trade certificate of review which provides, inter alia, for limited antitrust immunity. International ocean carriers are allowed to engage in conferences (price-fixing arrangements) by the Shipping Act of 1984 if they are not contested by the Federal Maritime Commission.

217. In 2006 and 2007, competition policy enforcement continued to focus on the activities of international cartels. Other areas addressed by the antitrust agencies include anticompetitive mergers and non-merger enforcement in key sectors such as health and energy. For FY2006, the DOJ obtained criminal fines totalling US$473.4 million, the second largest ever, representing a 40% increase over FY2005 (US$338 million), and filed 33 criminal cases, many involving multiple defendants. The DOJ continues to advocate the deterrent effect of prison sentences and the prospect of extradition, as opposed to a "fines only" approach.217

218. The outcome of antitrust cases that reach the U.S. Supreme Court continues to have a considerable impact on competition policy implementation. During the period under review, the Supreme Court decided a total of seven antitrust cases.218 In each case, the Court reached the decision requested by the United States.

219. The United States has antitrust cooperation agreements with Australia, Brazil, Canada, the EC, Germany, Israel, Japan, and Mexico.219 These agreements do not override provisions of domestic

213 In January 2007, they were at US$59.8 million (size-of-transaction or U.S. nexus),

US$239.2 million (transactions reportable without regard to size of person), US$119.6 million and US$12 million (size of person test).

214 Federal Trade Commission (2007b). 215 Under the Capper-Volstead Agricultural Producers’ Associations Act, and the Agricultural

Marketing Agreement Act of 1937 (agriculture), the Fishermen’s Collective Marketing Act (fisheries); the McCarran-Ferguson Insurance Regulation Act (insurance), and the Export Trading Company Act of 1982 and the Webb-Pomerene Export Trade Act (exports).

216 American Cotton Exporters Association; American Natural Soda Ash Corp.; American-European Soda Ash Shipping Association, Inc.; California Dried Fruit Export Association; Overseas Distribution Solutions, L.L.C.; Paperboard Export Association of the United States; and Phosphate Chemicals Export Association, Inc.

217 USDOJ (2007). 218 Texaco Inc. v. Dagher; Illinois Tool Works Inc. v. Independent Ink, Inc.; Volvo Trucks North

America, Inc. v. Reeder-Simco GMC, Inc.; Weyerhaeuser Co. v. Ross Simmons Hardwood Lumber Co., Inc.; Bell Atlantic Corp. v. Twombly; Leegin Creative Leather Products v. PSKS; and Credit Suisse First Boston Ltd. v. Billing.

219 USDOJ online information. Viewed at: http://www.usdoj.gov/atr/public/international/int_ arrangements.htm.


law that protect the confidentiality of investigative information, nor does the OECD's Recommendation concerning Co-operation between Member countries on Anticompetitive Practices affecting International Trade, to which the U.S. antitrust agencies adhere.

220. The International Antitrust Enforcement Assistance Act of 1994 (15 U.S.C. section 6211) authorizes the Government of the United States or the DOJ and the FTC to enter into bilateral antitrust mutual assistance agreements with foreign governments that authorize the agencies to share confidential information obtained in the agencies' investigations and to gather evidence on behalf of foreign antitrust authorities.220 The United States has entered into only one such agreement, with Australia. The United States also has a number of mutual legal assistance treaties, which permit the exchange of information in criminal matters and are particularly important for international cartel investigations. U.S. antitrust agencies also cooperate informally with foreign agencies, e.g. through the exchange of public information and of confidential materials submitted by parties that have granted waivers of confidentiality rights.

221. The Antitrust Modernization Commission, created in 2002 to assess the need to reform antitrust laws, presented its report to Congress in April 2007. The report concluded that there was no need to revise the antitrust laws nor were statutory changes recommended with respect to merger law. The report noted the importance of ensuring that merger enforcement policy be sensitive to the need of companies to innovate and obtain the scope and scale needed to compete effectively in domestic and global markets, while continuing to protect the interests of U.S. consumers. While noting that market power should not be presumed from a patent, copyright, or trade mark in antitrust cases, the report recommended avoiding abuse of the patent system by, in particular, ensuring the quality of patents.221 The report also recommended simplifying and unifying merger clearing procedures and harmonizing the work of state and federal antitrust agencies, particularly with respect to mergers. Other recommendations included pursuing more bilateral and multilateral antitrust cooperation agreements to promote global trade, investment, and consumer welfare.

(iv) Government procurement

(a) Introduction

222. The United States is a party to the WTO Agreement on Government Procurement (GPA). GPA thresholds in SDRs have remained unchanged since the Agreement entered into effect on 1 January 1996, but thresholds in U.S. dollar are revised every two years by the USTR.

223. Annex I of Appendix I of the Agreement contains the list of central government agencies covered by the GPA; Annexes 2 and 3 list the 37 states, the Federal and the sub-federal bodies applying the GPA. In 2004, the United States circulated proposed modifications to Appendix I of the Agreement, to reflect changes in the administrative structure of the Federal Government222; these changes were incorporated into Annex 1 and became effective on 1 October 2004. In 2006, the United States proposed the withdrawal of the Pennsylvania Avenue Development Corporation, which had been disolved; this modification was incorporated into Annex I and became effective on 26 March 2006.223

220 Changes to the scope of and international cooperation for antitrust enforcement are contained in the

U.S. Safe Web Act of 2006 (Public Law No. 109-455). 221 Antitrust Modernization Commission (2007). 222 WTO document GPA/MOD/USA/1, 15 January 2004. The changes mainly reflected the creation of

the Department of Homeland Security (DHS), which was added to the list. 223 WTO document GPA/89, 11 December 2006.


224. In the GPA Negotiations on Extension of Coverage and Elimination of Discriminatory Measures and Practices, the United States submitted a communication in December 2004 containing generic and specific requests.224 In December 2005, the United States submitted an initial offer in the context of the negotiations. A revised offer was issued in October 2006.

225. In January 2002, the United States submitted to the WTO the statistical information required under Article XIX:5 of the GPA for the years 1996-99.225 The submission for 1999 reported 56,598 contracts with a total value of more than US$205 billion.226 No new submission has been made since then.

226. Statistics on the procurement activities of the main agencies at the federal level are contained in the United States' Federal Procurement Data System (FPDS), maintained by the Office of Federal Procurement Policy (OFPP), responsible for collecting and disseminating procurement data. The OFPP also works with the General Services Administration (GSA) and other agencies to collect information on contractor performance, and disseminates information on contracting opportunities through a single point-of-entry, known as Federal Business Opportunities (FedBizOpps). The FPDS publishes an annual report of the procurement activities of some 50 federal agencies, and produces statistics on federal awards by department.227 In FY2005, the last year available as at early 2008, the total procurement of these agencies was 8.37 million transactions valued at US$424.2 billion (equivalent to 3.4% of GDP); of this total, 70.3% was Department of Defense (DOD) procurement. Among civilian agencies, the Department of Energy accounted for the highest value of procurement with 5.4% of the total. Some 77% of the transactions in FY2005 were under US$25,000 and 90% were under US$100,000. Around 47.3% of procurement corresponded to construction and services; 39.5% to supplies and equipment; and 12.7% to research and development. In value terms, 31.7% of contracts reported were awarded in FY2005 to set-aside preferential programmes, mainly to small businesses (21.1% of the total) and small disadvantaged businesses (5.7%). Procurement by U.S. agencies performed outside the United States totalled US$34.8 billion in FY2005, of which 71.2% in Asia and 19.3% in Europe.228

227. The National Governors Association and National Association of State Budget Officers produce estimates of procurement based on state spending from revenues derived from general sources not earmarked for specific items; this spending was estimated at US$585 billion for FY2006 and US$616 billion for FY2007.229

228. The value of U.S. government consumption expenditure and gross investment was US$2.52 trillion in 2006, or some 19.1% of GDP, up from 18.5% in 2004. Of this, US$932.5 billion corresponded to federal spending and US$1.59 trillion to state spending. At the federal level, defence consumption expenditure on goods and services totalled US$624.3 billion in 2006; non-defence expenditure totalled US$308.2 billion.230

(b) Institutional and legal framework

229. At the federal level, procurement is decentralized, through the various executive agencies' procurement systems. The Office of Management and Budget (OMB) oversees and coordinates

224 WTO document GPA/O/USA/1, 23 December 2004. 225 WTO documents GPA/21/Add.3, GPA/22/Add.4, GPA/29/Add.4, GPA/40/Add.4, 30 January 2002. 226 WTO document GPA/40/Add.4, 30 January 2002. 227 FPDS (2005) and (2004). 228 FPDS (2005). 229 NASBO (2007). 230 BEA (2007e).


federal procurement, and reviews proposed regulations for compliance with policy guidance, through the Office of Federal Procurement Policy (OFPP).231 The OFPP provides overall direction for government-wide procurement policies. The OFPP Administrator issues policy letters stating principles that must be followed by the agencies; such letters need to be implemented through the Federal Acquisition Regulation.

230. The United States notified to the WTO its basic procurement legislation and legislation giving effect to the GPA in 1998.232 The GPA is implemented in U.S. law at the federal level primarily through the Trade Agreements Act (TAA) of 1979, as amended, which provides authority for the President to waive discriminatory purchasing requirements (e.g. the Buy American Act), designate eligible countries, and bar procurement from non-designated countries. At the state level, the GPA is implemented through laws and regulations in each of the 37 states participating in the GPA.

231. Legislation on procurement is contained in various laws, in particular the Federal Property and Administrative Services Act of 1949 (FPASA), the Competition in Contracting Act of 1984 (CICA), the Federal Acquisition Streamlining Act of 1994 (FASA), the Clinger-Cohen Act of 1996, the Small Business Act of 1985, and the Services Acquisition Reform Act.

232. The Federal Acquisition Regulation (FAR) regulates federal government agencies' acquisitions of supplies and services with appropriated funds. The FAR system allows individual executive agencies and their sub-agencies to develop specific internal guidelines. The FAR is updated regularly through Federal Acquisition Circulars (FACs) to reflect changes in procurement procedures, the effect of trade agreements, and other changes. Proposed regulations are published in the Federal Register and are open to comments, which are considered when drafting the final rules.

233. The procurement process is guided in detail by the FAR. Federal government agencies are required to publish notices of proposed procurement opportunities in excess of US$25,000 in FedBizOpps (with some exceptions). Notices of proposed procurement must be published at least 15 days before a request for bids; prospective suppliers have at least 30 days from that date to submit bids. For procurement of commercial items and for procurement opportunities valued at or below US$100,000, shorter time-frames may be established and simplified procedures applied. When procurement falls within the scope of the GPA or a free-trade agreement, a period of not less than 40 days must be granted, unless an annual forecast has been published, in which case this may be reduced to 10 days. State governments covered by the GPA are required to publish invitations to tender in their own publications and must conform to GPA deadlines. In addition to notices of proposed procurement, some states use notices of planned procurement.

234. Under the CICA, procurement must take place through full and open competitive procedures. Executive agencies must solicit sealed bids if time permits, and awards must be made on the basis of price (with some exceptions). The CICA provides for simplified procedures for small purchases. The FASA established a new simplified acquisition threshold of US$100,000, and allowed purchases not exceeding US$3,000 from Buy American Act requirements and allowed them to be made without obtaining competitive quotations if the contracting officer determines that the purchase price is reasonable.

235. The Clinger Cohen Act of 1996, P. L. No. 104-106 establishes the use of a two-phase selection procedure for entering into a contract for the design and construction of a public building facility; under this procedure the contracting officer may pre-select the most highly qualified offers (maximum five) based on the use of solicitation evaluation factors. The Act also authorizes the use of

231 OFPP online information. Viewed at: http://www.whitehouse.gov/omb/procurement/index.html. 232 WTO document GPA/23, 15 July 1998.


simplified acquisition procedures for the acquisition of commercial items valued at US$5.5 million or less, under certain circumstances.

236. Federal regulations allow for the preparation of non-exhaustive lists of suppliers by a federal government agency, provided the agency justifies in writing the need for such a list. The GSA maintains lists of approved suppliers and their products on Federal Supply Schedules, which include both national and foreign suppliers from parties to the GPA or other international agreements. The authorities have noted that the Federal Supply Schedules are akin to a catalogue, rather than a list of qualified suppliers as used in selective tendering.

237. The list of Federal Supply Schedule Contractors is available to the public. Interested suppliers can apply for inclusion on the schedules at any time. Federal agencies, as well as states and other sub-federal bodies may maintain lists of qualified suppliers for their procurement: several of the 37 states covered by the GPA use such lists when tendering for certain types of procurement. Lists of qualified or registered suppliers are made public.

238. Contractors are required to register online in the Central Contracting Registration (CCR), the primary vendor database for the U.S. Federal Government.233 In October 2007, some 454,253 government vendors were registered, of which over 10,000 foreign firms. Foreign companies must first obtain a North Atlantic Treaty Organization Commercial and Government Entity (NCAGE) code.

239. Procurement at the sub-federal level is governed by state or other sub-federal government laws and procurement regulations. In some cases, where procurement is funded with federal money, states must comply with certain federal statutory requirements. Local governments have their own procurement agencies, as well as their own procurement policies.

(c) Access conditions

240. U.S. policy with respect to market access for government procurement is based on reciprocity. A number of domestic purchasing requirements are maintained for procurement not covered by the GPA, the WTO plurilateral Agreement on Trade in Civil Aircraft, or preferential trade agreements. Revised GPA and FTA thresholds for 2008-09 are contained in 73 Federal Register 4115, 25 January 2008. For the GPA, they were set at US$194,000 for goods and services included in Annex 1; US$528,000 for Annex 2; US$595,000 for Annex 3; and US$7,443,000 for construction services.234 The Trade Agreements Act of 1979 generally prohibits federal agencies from purchasing goods and services from countries that are not a party to the GPA or other trade agreements that cover government procurement (i.e., non-designated countries). The authorities indicated that this is aimed at encouraging other Members to join the GPA.

241. The Buy American Act of 1933 (BAA) limits the purchase of supplies and construction materials by government agencies to those defined as "domestic end-products", in accordance with a two-part test that must establish that the article is manufactured in the United States, and that the cost of domestic components exceeds 50% of the cost of all the components. The BAA does not apply to

233 FAR 4.1102, 1 October 2003. CCR online information. Viewed at: http://www.ccr.gov. 234 Notified to the WTO in WTO document GPA/W/299/Add,1, 21 December 2007. A US$250,000

threshold applies for goods and services covered by the GPA from certain entities identified in Annex III. FTA thresholds are: for supply and service contracts: US$25,000 (NAFTA Canada) for supplies; US$50,000 (Israel for supplies); US$67,826 (NAFTA Mexico, Australia, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Singapore); and for construction contracts: US$8,817,449 (NAFTA; Bahrain); US$7,443,000 (Australia, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Singapore); and US$50,000 (Israel) NAFTA Canada for Services.


services. The Trade Agreements Act of 1979 authorizes the President to grant waivers from the Buy American Act and other procurement restrictions; the President delegated this authority to the USTR.

242. Exceptions to the BAA can be granted if it is determined that domestic preference is inconsistent with the public interest, in case of U.S. non-availability of a supply or material, or for reasonableness of cost. The latter applies when the cost of the foreign (non-eligible) product, inclusive of import duty and a 6% added margin, is below the lowest domestic offer when this offer is from a large business concern; in this case the cost of the domestic offer is considered unreasonable. If the lowest domestic offer is from a small business concern, the added margin considered is 12%. For purchases by the Department of Defense the price difference must be of at least 50%. In the context of this review, the authorities noted that current data on the use of BAA exceptions is incomplete, but that the collection system is being corrected, and that better data is expected for FY2008.

243. The Trade Agreements Act of 1979 waives the application of the BAA to the end-products of designated countries, which include the parties to the GPA, bilateral agreements that cover government procurement, CBERA beneficiaries, and least developed countries. For CBERA and least developed countries, the thresholds are those of the GPA; for NAFTA countries, Australia, Bahrain, Chile, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Morocco, Nicaragua, and Singapore, the thresholds are those stipulated in the relevant agreement. Eligible products are granted non-discriminatory treatment.

244. The non-statutory Balance of Payments Program, applies provisions similar to those of the BAA to Department of Defense contracts over US$100,000 for end-products for use outside the United States.235 The Independent Agencies Appropriations Act of 2006 (P.L. No. 109-115) requires the head of each Federal agency to submit a report to Congress relating to acquisitions of articles, materials, or supplies manufactured outside the United States. Federal domestic preference requirements are also sometimes included in annual appropriation and authorization bills.

245. The provisions of the BAA are waived for civil aircraft and related articles that meet the substantial transformation test of the Act and originate in parties to the WTO Agreement on Trade in Civil Aircraft. The Department of Defense also waives the restrictions of the BAA/Balance of Payments Program for the acquisition of defence equipment produced in a "qualifying country" (with which there is a reciprocal procurement agreement or memorandum of understanding).236 The FASA exempts purchases not exceeding US$3,000 from Buy American Act requirements.

246. Procurement policy seeks to increase the participation of small businesses, veteran-owned small businesses, small disadvantaged business (SDBs), and women-owned small businesses. The USDOC determines annually the authorized SDB procurement mechanisms and application factors (percentages). The Small Business Act (P.L. 85-536) requires, in principle, each contract with an anticipated value greater than US$2,500 but less than US$100,000 to be reserved exclusively for small business concerns. The Small Business Administration (SBA) manages five main programmes

235 Federal Register Vol. 67, No. 83, 30 April 2002. Viewed at: http://www.acqnet.gov/far/FAC/

fac2001-07.pdf. 236 Australia, Belgium, Canada, Denmark, Egypt, France, Germany, Greece, Israel, Italy, Luxembourg,

the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. Products from Austria and Finland could also be exempted, on a purchase-by-purchase basis.


to promote the ability of small businesses to compete for federal procurement contracts.237 The SBA also administers two business assistance programmes for SDBs.238

247. The Veterans Benefits Act of 2003 established the Service-Disabled Veteran-Owned Small Business Concerns (SDVOSBC), a procurement programme that allows federal contracting officers to restrict competition to SDVOSBCs and award a sole source or set-aside contract where certain criteria are met. A number of other set-asides and pricing preferences are in place, such as the HUBZone Empowerment Contracting Program and the Small Business Competitiveness Demonstration Program. The goal is for procurement awarded to small businesses to represent 23% of all prime contracts.

248. The set-aside goal for SDBs is 5% of prime contracts and sub-contracts, the same as the goal for women-owned small businesses. The goal for HUBZones businesses and for SDVOSBCs is 3% of prime contracts and sub-contracts, in each case.

249. In certain cases imported supplies for use in government contracts may be exempted from customs duties. These goods are listed in sub-chapters VIII and X of Chapter 98 of the U.S. tariff schedule. Other supplies may also be granted duty-free entry; in this case, the contract price must be reduced by the amount of duty that would be payable if the supplies did not enter duty free. Supplies (excluding equipment) for government-operated vessels or aircraft may be imported duty free.239

250. Sanctions applied to certain EC Members were removed as of April 2006.240 Under Section 305(g) (1) of the Trade Agreements Act of 1979, the United States had applied sanctions, since May 1993, on Member States considered to discriminate against U.S. products and services in their government procurement practices.241

251. Each U.S. State has its own procurement access conditions. As noted, 37 States participate in the GPA; among those that do not, some restrict foreign participation in biddings, others offer preferences to in-state suppliers, or apply domestic purchase requirements (Table AIII.5). Only North Carolina, Oklahoma, Rhode Island, and Wisconsin do not grant any form of preference.

252. The U.S. Administration adopted a new reciprocity approach to sub-federal procurement in three FTAs (Colombia, Panama, and Peru). Based on this policy, government procurement of eight U.S. states and Puerto Rico were covered in the FTAs signed with Colombia, Panama, and Peru. The Administration considers that states gain when their purchases are covered under FTAs through greater opportunities for companies in that State to sell their products and services in the foreign partner's government purchasing market, and through guaranteed open competition, which can increase product choice and reduce costs.242

237 Prime Contracting Assistance; Subcontracting Assistance; Government Property Sales Assistance;

Certificate of Competency; and Service-Disabled Veteran-Owned Small Business Concerns programme. Code of Federal Regulations Title 13, Volume 1, revised 1 January 2005.

238 The 8(a) Business Development Program and the Small Disadvantaged Business Certification Program. For further information see FAR Sub-Part 19.8, at: http://www.arnet.gov/far/.

239 FAR Subpart 25.9. Viewed at: http://www.arnet.gov/far/current/pdf/FAR.book.pdf. 240 FAC 2005-09. 241 Austria, Belgium, Denmark, Finland, France, Ireland, Italy, Luxembourg, Netherlands, Sweden, and

the United Kingdom. 242 USTR (2006).


(v) Trade-related intellectual property rights

(a) Introduction

253. U.S. laws and regulations on trade-related aspects of intellectual property rights (IPRs), as well as their updates, were notified to the WTO in 1996; the notification was supplemented in 1998 (Table III.8).243 U.S. intellectual property legislation was reviewed by the TRIPS Council in 1996, and has been reviewed regularly in WTO Trade Policy Reviews.244 Updates of legislation addressing IPRs, including amendments presented in a consolidated text, have been notified subsequently.245

254. The United States is a member of the World Intellectual Property Organization (WIPO), and participates in a large number of international conventions and treaties related to IPRs.246

255. The United States seeks to promote increased IPR protection and enforcement through a variety of mechanisms. The United States has addressed IPR subject matter in the context of bilateral intellectual property agreements and memoranda of understanding, bilateral investment treaties, and trade and investment framework agreements. IPR issues have also been included in U.S. free-trade agreements in force or pending approval or implementation.247 The United States pursues high standards of IP protection through its engagement with countries seeking accession to the WTO.

256. On 17 December 2005, the United States accepted the Protocol Amending the TRIPS Agreement adopted by the General Council on 6 December 2005 (WT/L/641).248 In a Joint Communication with the EC, Japan, and Switzerland to the TRIPS Council, submitted in November 2006, the United States recalled the importance of effective IPR enforcement, in particular in terms of innovation and investment.249 In January 2007, the United States made a submission to the TRIPS Council with respect to border enforcement of IPRs.250

257. The United States is an important producer and exporter of goods and services that embody knowledge and other intellectual developments. In this respect, IP has been recognized in Congress as the backbone of U.S. economic competitiveness and the only sector where the United States has a trade surplus with every nation in the world.251 It has also been noted that over 50% of U.S. exports depend on some form of IP, and that IP assets today represent more than one third of the value of U.S.-based corporations and over 17% of GDP. The United States traditionally posts a balance-of-payments surplus in IP-related trade, as measured by royalties and licence fees. In 2006, net receipts were US$36 billion and gross receipts US$62.4 billion.252

243 WTO documents IP/N/1/USA/1, 21 January 1997, and IP/N/1/USA/U/2, 6 October 1998. 244 WTO document IP/Q/USA/1, 30 October 1996. 245 WTO documents IP/N/1/USA/C/3 and IP/N/1/USA/I/1, 9 February 2004; and IP/N/1/USA/I/2,

9 February 2004, and IP/N/1/USA/I/3, 20 February 2004. 246 WIPO online information. Available at: htpp://www.wipo.org. 247 See Chapter II and USTR online information. Viewed at: http://www.ustr.gov/Trade_Agreements/

Bilateral/Section_Index.html. 248 WTO document WT/Let/506, 22 December 2005. 249 WTO document IP/C/W/485, 2 November 2006. 250 WTO document IP/C/W/488,30 January 2007: "Enforcement of Intellectual Property Rights (Part

III of the TRIPS Agreement): Experiences of Border Enforcement: Communication by the United States". 251 110th Congress, House of Representatives Resolution 314, 17 April 2007. Viewed at:

http://thomas.loc.gov/. 252 BEA (2007).


Table III.8 Summary of intellectual property protection in the United States corresponding to TRIPS obligations, 2008

Form Main legislation Coverage Duration

Copyright and related rights

Copyright Law, Title 17 of the U.S. Code

Authors' rights in the artistic, literary and scientific domains; to enjoy copyright protection a work must be an original creation

Life of author plus 70 years for works created on or after 1 January 1978. Anonymous works, pseudonymous works, and works made for hire protected for 95 years after publication or 120 years after creation, whichever is the shortest

Geographical indications

The Lanham Act of 1946, as amended (15 U.S.C. 1051 et seq), and Federal Alcohol Administration Act of 1935

Protection against misuse of geographic signs and names of viticultural significance

Unlimited

Industrial designs

Patent Law of the United States, as incorporated in Title 35 of the U.S. Code

The ornamental design of a product is entitled to the protection afforded to designs, provided it is new

14 years from date of grant

Patents Patent Law of the United States, as incorporated in Title 35 of the U.S. Code

Any inventions that are new, useful, and non-obvious. Apply to process, machine, manufacture or composition of matter

20 years from filing date

Plant variety protection

Plant Variety Protection Act Amendments of 1994 (7 U.S.C. 2321 et seq.)

New plant varieties: not previously sold for purposes of exploitation of the variety, in the United States, more than 1 year prior to the date of filing; or in any area outside of the United States more than 4 years prior to the date of filing, or, in the case of a tree or vine, more than 6 years prior to the date of filing

20 years from the date of issue of the certificate in the United States

Topography of integrated circuits

Semiconductor Chip Protection Act of 1984

Topography of microelectronic semiconductor products provided it is original (the result of its creator's own intellectual effort) and is not staple, commonplace or familiar in the industry at the time of its creation

10 years from filing date (or, if earlier, from first use)

Trade marks The Lanham Act of 1946, as amended (15 U.S.C. 1051 et seq)

Any sign used to identify and distinguish goods or services from one enterprise from those of another enterprise

10 years from registration date; renewable indefinitely as long as the trade mark is in use in commerce that is lawfully regulated by Congress

Trade secrets Economic Espionage Act of 1996 and state laws

Any information, including a formula, pattern, compilation, program device, method, technique, or process, not generally known to the relevant portion of the public, that provides an economic benefit to its holder, and is the subject of reasonable efforts to maintain its secrecy

Indefinite

Source: World Intellectual Property Organization; U.S. Department of Commerce; notifications to the WTO.

258. The United States considers that IP and innovation are of critical importance to the enhanced productivity and growth of the U.S. economy253, and that IPRs can facilitate the commercialization of inventions and encourage public disclosure.254 In its view, the ability of innovative industries to continue to develop new products depends largely on a strong and effective IP system and the capacity to market new products effectively during the period when exclusive IPRs exist.255 One rationale advanced for advocating IPR protection is that IP encourages innovation.256 In the U.S.

253 USTR online information. Viewed at: http://www.ustr.gov/Trade_Sectors/Intellectual_Property /Section_Index.html.

254 USDO (2007). 255 USTR (2005). Executive Summary, p. 9, and (2007a), pp. 12-13. 256 USDOJ and FTC (2007).


view, IPRs do not necessarily confer market power because other products or processes may be substitutes for the patented invention or copyrighted work257; and IP laws and antitrust laws share the same fundamental goals of enhancing consumer welfare and promoting innovation.258

(b) Patents

259. Patents are granted by the United States Patent and Trademark Office (USPTO) using the first-to-invent rule; the United States is the only WTO Member to use this rule.

260. The U.S. Government has specific statutory authority in some cases to allow compulsory licensing of the subject matter of a patent, for example under the Atomic Energy Act and the Clean Air Act; however, these provisions have not been used for over 20 years. Under the Technology Transfer Commercialization Act of 2000, for Federal Government-owned inventions, a federal agency may grant an exclusive or partially exclusive licence if necessary to attract the investment needed to bring the invention to practical application.

261. The number of patent applications filed with USPTO continued to increase in the period under review. Despite efforts by the USPTO to reduce the time needed to review applications, there was a slight increase in the pendency time (average time between filing and issuance), to some 31.9 months in FY2007. In 2006, the USPTO granted a total of 184,377 patents.259 The share of patents issued by the USPTO to non-residents has remained stable in recent years, at some 48% of the total; the top ten private-sector patent recipients in 2005 comprised four U.S. corporations, five Japanese, and one Korean.260

262. Under its 21st Century Strategic Plan, a five-year plan devised in 2002, the USPTO has continued to promote the electronic processing and filing of patent applications and streamline the patent application process. In 2006, the USPTO implemented the Internet-based Electronic Filing System-Web (EFS-Web), to allow electronic patent application and document submission.261 The USPTO also issued new procedures for accelerated examination effective 25 August 2006.262 To improve patent quality, the USPTO issued rule changes in October 2007 which, when implemented, will require applicants to identify with more specificity the claimed invention to be examined. The USPTO also published Examination Guidelines to help determinations regarding the obviousness of claimed inventions.263

(c) Trade marks and geographical indications

263. In addition to federal registration, trade mark protection in the United States arises from the actual use of the mark under state laws and federal unfair competition laws. Although federal registration of a mark is not required to establish rights to the mark, nor to use it, it grants the holder

257 USDOJ and FTC (2007). U.S. law does not presume the existence of market power from the mere

presence of an IPR Abbott, (2003). 258 USDOJ and FTC (2007). 259 USPTO (2007). 260 USPTO online information: Viewed at: http://www.uspto.gov/web/offices/com/speeches/05-

03.htm. 261 USPTO (2006). 262 For details see USPTO online information. Viewed at: http://www.uspto.gov/web/patents/

accelerated/ae_stat_charts.pdf. 263 57526 Federal Register Vol. 72, No. 195, 10 October 2007, Department of Commerce, Patent and

Trademark Office [Docket No. PTO-P-2007-0031], Examination Guidelines for Determining Obviousness Under 35 U.S.C. 103 in View of the Supreme Court Decision in KSR International Co. v. Teleflex Inc.


additional rights, such as the legal presumption of ownership, validity, and the entitlement to use the mark in connection with the goods or services identified in the registration. Although it is not required that a trade mark be used commercially before an application for federal registration is filed, for domestically filed applications, use is required prior to registration. For applications filed by foreign nationals pursuant to the Paris Convention and the Madrid Protocol, use (or a statement of acceptable non-use) is not required for registration, but is required to maintain the registration. The Trademark Dilution Revision Act of 2006 (P.L. No: 109-312) revised and clarified the 1995 Federal Trademark Dilution Act, entitling an owner of a famous mark to an injunction against the use of a mark of trade name in a manner that is likely to cause dilution by blurring or tarnishment, as well as to oppose applications or cancel registrations that are likely to cause dilution with the famous mark.

264. Applications for federal trade mark registration are filed with the USPTO. A trade mark owner with an application filed with, or a registration issued by, the USPTO and who is a national of, has domicile in, or has an industrial or commercial establishment in the United States may also file an international application, pursuant to the Madrid Protocol, with the USPTO. Holders of international registrations based on U.S. registrations may request extensions of protection in other Madrid Protocol member states. The USPTO received 3,131 international applications and 12,718 requests for extension of protection or subsequent designation from the International Bureau of the Madrid Protocol in FY2006.264 Trade mark registrations totalled 188,899 in FY2006, out of 354,000 trade mark applications of which 93.8% were filed through the Trademark Electronic Application System (TEAS). There were 27,592 trade marks registered to residents of foreign countries in FY2006.

265. The United States offers protection for geographical indications (GIs) for all classes of goods and services through its trade mark system.265 The United States, together with other countries, has submitted a proposal to other WTO Members for a multilateral system for notification and registration of GIs for wines and spirits in the context of Article 23.4 of the TRIPS Agreement.266

(d) Copyright

266. The United States grants automatic protection to copyrighted works, including software, from all WTO Members as well as Berne Convention signatories, and other international copyright agreement signatories. The U.S. Copyright Office is the registry of claims to copyright, and administers the mandatory deposit provisions of the copyright law and its various compulsory licensing provisions. Registration may be made at any time within the life of the copyright. Although registration is not required for protection, copyright law provides several inducements or advantages to encourage copyright owners to make registration, such as establishing a public record of the copyright claim and allowing the copyright owner to record the registration with U.S. Customs and Border Protection (CBP) for protection against the importation of infringing copies. Copyright law permits the preregistration of certain types of works that have had a history of infringement prior to authorized commercial distribution.267 Preregistration serves as a "place-holder" for limited purposes, notably where a copyright owner needs to sue for infringement while a work is still being prepared for commercial release. During FY2006, the Copyright Office received 594,125 claims to copyright and registered 520,906 claims.268

264 USPTO (2006). 265 USPTO online information. Viewed at: http://www.uspto.gov. 266 WTO document IP/C/W/386, 8 November 2002. 267 Motion pictures, sound recordings, musical compositions, literary works being prepared for

publication in book form, computer programs (including videogames), and advertising or marketing photographs. 268 United States Copyright Office (2006).


267. The United States is a party to the Geneva Phonograms Convention and the WIPO Performances and Phonograms Treaty, but not to the Rome Convention. U.S. copyright law does not use the term "neighbouring rights" separate from copyright. Performances and phonograms are protected through the application of the Copyright Act and other laws, but public performance rights for sound recordings are limited, and generally apply only to digital transmissions other than over-the-air broadcasts transmissions within a business establishment or to business establishments for use in the ordinary course of their business, and certain retransmissions.

268. The Copyright Act provides for several types of statutory licences. Generally, interested parties are given the opportunity to negotiate the terms of the licence; a rate will be set by the authorities only if they fail to agree. The Copyright Royalty and Distribution Reform Act of 2004 and the amendments contained in the Copyright Royalty Judges Program Technical Corrections Act of 2006 replaced the Copyright Arbitration Royalty Panels with Copyright Royalty Judges (CRJs); in January 2006, three CRJs were appointed.

(e) Enforcement activities

269. The Office of the United States Trade Representative (USTR) conducts annual reviews examining the adequacy and effectiveness of IP protection in foreign countries, and their effect on market access for U.S. persons in accordance with Section 182 of the Omnibus Trade and Competitiveness Act of 1988 (Special 301). The 2007 Special 301 exercise reviewed 87 countries. USTR identified 12 trading partners on the Priority Watch List for intellectual property protection.269 In addition, 30 countries were placed on the Watch List.270 One country was designated for Section 306 monitoring to ensure compliance with the commitments of bilateral intellectual property agreements.271

270. Section 337 of the Tariff Act of 1930, declares unlawful "unfair methods of competition and unfair acts in the importation and sale of products in the United States, the threat or effect of which is to destroy or substantially injure a domestic industry, prevent the establishment of such an industry, or restrain or monopolize trade and commerce in the United States." The injury requirement does not apply to alleged infringement of a valid U.S. patent, federally registered trade mark, copyright, or mask work, or vessel hull design. Section 337 investigations are instituted by the United States International Trade Commission (USITC); administrative law judges make an initial determination of whether there is an infringement/contravention of the law, which is then subject to review by the USITC. If the USITC determines that Section 337 has been violated, it may issue exclusion orders, cease and desist orders, or both. Exclusion orders direct the CBP to bar entry into the United States of infringing goods from whatever source (general exclusion orders) or from specifically identified entities (limited exclusion orders). The President may disapprove a USITC order within 60 days.

271. Between 1 January 2005 and 30 September 2007, 88 new Section 337 investigations were instituted; all except three involved allegations of patent infringement, occasionally in combination with the infringement of other IPRs. Investigations covered products from 29 trading partners.272 In

269 Argentina, Chile, China, Egypt, India, Israel, Lebanon, Russia, Thailand, Turkey, Ukraine, and

Venezuela (USTR 2007). 270 Belarus, Belize, Bolivia, Brazil, Canada, Chinese Taipei, Colombia, Costa Rica, Dominican

Republic, Ecuador, Guatemala, Hungary, Indonesia, Italy, Jamaica, Korea, Kuwait, Lithuania, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Romania, Saudi Arabia, Tajikistan, Turkmenistan, Uzbekistan, Viet Nam.

271 USTR (2007). 272 For further information see USITC online information. Viewed at: http://info.usitc.gov/ouii/

public/337inv.nsf.


the period between 1 January 2005 and 30 September 2007, the USITC issued 24 exclusion orders, of which 17 were limited exclusion orders, and seven were general exclusions, together with cease and desist orders.273 As of 1 October 2007, there were 66 outstanding exclusion orders, compared with 61 reported in the previous U.S. Review, affecting imports of a range of products, including machinery and equipment, electrical and electronic products, some durable consumer goods, glasses, soft drinks, and cigarettes.

272. The Stop Counterfeiting in Manufactured Goods Act of 2006 (P.L. 109-181) amended the federal criminal code to revise provisions prohibiting the trafficking in counterfeit goods and services to include trafficking in labels or similar packaging of any type or nature bearing a counterfeit mark and that are intended to be used on or in connection with the goods or services for which the genuine mark is registered The Act subjects to forfeiture any article that bears or consists of a counterfeit mark and any property used to violate the prohibition against counterfeit marks.

273. The value of infringing goods seized by CBP in FY2006 reached US$155.4 million, and the number of seizures reached 14,675, a 66% increase by value with respect to FY2005. Footwear accounted for 41% of the total value of goods seized in FY2006; wearing apparel, handbags, computers, and consumer electronics also figured prominently in the seizures made by CBP during FY2006. The Department of Justice reports its enforcement activities regularly in a number of fora. A report of the DOJ's enforcement activities can be found in the National Intellectual Property Law Enforcement Coordination Council Report for 2007, published in January 2008.274

273 The orders affected imports from 23 trading partners: Australia, Brazil, Canada, China, Chinese

Taipei, France, Germany, Haiti, India, Indonesia, Ireland, Japan, Korea, Malaysia, Mexico, Netherlands, Nicaragua, Panama, Portugal, Singapore, Spain, Switzerland, and Hong Kong, China. USITC online information. Viewed at: http://info.usitc.gov/ouii/public/337inv.nsf/All?OpenView.

274 The report may be viewed at www.stopfakes.gov.


IV. TRADE POLICIES BY SECTOR

(1) OVERVIEW

1. The United States is one of the world's largest producers, exporters, and importers of agricultural products. As measured by the OECD, overall support to agriculture, including through border measures and government payments, accounted for 11% of gross farm receipts in 2006, down five percentage points from 2004. This decline largely reflects higher commodity prices. Certain commodities, including sugar and milk, continue to receive high levels of assistance. Moreover, payments under some commodity programmes (e.g., marketing assistance loans) provide incentives for resource use that may be inconsistent with market signals and may affect trade when supported output finds its way into world markets. Certain aspects of domestic support programmes were challenged under multilateral rules during the period under review. The expiration of the 2002 Farm Act, and the current environment of high commodity prices, would offer an opportunity to introduce policy changes aimed at further improving the market orientation of the agriculture sector in benefit of both consumers and taxpayers.

2. The United States is a major producer and consumer of minerals and energy. U.S. energy policy places emphasis on domestic energy production and provides tax and other incentives for the supply of alternative and renewable fuels. Assistance for domestic ethanol production includes tax incentives and import duties; these measures could have a significant impact on global production patterns. The Energy Policy Act of 2005 contains provisions to address shortcomings in the regulatory framework governing electricity markets. In computing fuel economy standards, NAFTA-produced automobiles are treated differently from other vehicles.

3. The United States is the world's leading producer of manufactured goods. Multifactor productivity and output in the sector have expanded but the sector's share in total U.S. value added and employment has declined. Manufacturing tariffs are generally low, but tariff peaks have sheltered a few industries from international competition, for example textiles, clothing, and footwear and leather.

4. The financial services sector accounts for some 8% of GDP and 12% of trade in services. During the period under review, there have been no major changes in U.S. legislation with respect to financial services. However, the sector has been considerably affected by the sub-prime mortgage turmoil (see Chapter I), suggesting the need for improvements in financial supervision. In this respect, changes to existing regulations are under consideration to restrict certain mortgage practices.

5. Initial entry into the U.S. market through the establishment or acquisition of a nationally chartered bank subsidiary by a foreign person is permitted in all states. U.S. bank subsidiaries of foreign banks are granted national treatment. However, foreign-owned banks, unlike domestic banks, are required to establish an insured banking subsidiary to accept or maintain domestic retail deposits of less than US$100,000. Branches and agencies of foreign banks have similar powers to banks but agencies may not accept deposits from U.S. citizens or residents. At the state level, there are limitations to the acquisition or establishment of a state-chartered bank, and for the establishment of branches or agencies.

6. Regulation for the insurance services sector is done primarily at the state level. Insurance companies, agents, and brokers must be licensed under the law of the state in which the risk they intend to insure is located, but U.S. states have taken steps to facilitate multi-state operations. Foreigners may acquire an insurance company licensed in any state, incorporate subsidiaries in 47 states, or operate as branches in 36 states and the District of Columbia. A federal tax on insurance


policies covering U.S. risks is imposed at a rate of 1% of gross premiums on all reinsurance but at 4% of gross premiums with respect to non-life insurance when the insurer is not subject to U.S. net income tax on the premiums.

7. The U.S. telecommunications market, the world's largest by revenue, is open to foreign participation and is highly competitive. During the period under review the Federal Communications Commission eliminated certain unbundling requirements to level the regulatory playing field between broadband internet access providers. A comprehensive intercarrier compensation reform plan is under consideration. The United States maintains several media ownership restrictions, with the objective of promoting competition, diversity, and "localism" in media production. The FCC approved a relaxation of one of these restrictions in late 2007. It has adopted rules to facilitate entry into the video services market.

8. No significant policy or legislative changes have taken place with respect to maritime transport since 2006. The Jones Act reserves cargo service between two points in the United States for ships that are registered and built in the United States and owned by a U.S. corporation, and on which 75% of the employees are U.S. citizens. Domestic passenger services are subject to similar requirements. However, waivers may be granted and foreign companies may establish shipping companies in the United States under certain conditions. In contrast, the U.S. international maritime transport market is generally open to foreign competition although some cargo preferences are in place. Cargo preference laws are estimated to have redirected significant volumes of cargo to U.S. ships although in practice the lion's share of international maritime transport is still carried out by foreign vessels.

9. No significant legislative changes have affected the air transport sector since 2006. The profitability of U.S. airlines has improved, and by end 2007 all major U.S. airlines had emerged from bankruptcy protection. Market access restrictions remain in the form of U.S. ownership and control requirements, with foreign ownership in a U.S. carrier limited by statute to 25% of the voting shares. The provision of domestic air services is permitted only by U.S. carriers. The Fly America Act generally requires government-financed transportation to be on U.S.-flag air carriers, but foreign participation is possible under international agreements. The United States has bilateral aviation agreements with 97 countries, of which 79 are open skies agreements. The U.S.-EU Air Transport Agreement, applied provisionally since 30 March 2008, introduced a number of liberalization measures. All public-use U.S. airports with commercial services are currently owned by state or local governments. A law was passed in 1996 establishing an Airport Privatization Pilot Program. So far, one airport has participated, but it was subsequently returned to public ownership.

10. There have been no major changes in professional services regulation in the past few years. States have responsibility for the regulation, licensing, and oversight of the professions practiced within their jurisdictions. The absence of a national regulatory regime creates different market access conditions among the states. Foreign market access in some states is affected by local presence, domicile, nationality, or legal form of entry requirements.


(2) AGRICULTURE

(i) Introduction

11. The United States is among the world's largest producers, exporters, and importers of agricultural products. The value of agricultural production was approximately US$292 billion in 2007.1 The value of crop production, which accounts for around 51% of the total value of agricultural production, is forecast to reach a record level in 2008 (US$176 billion), primarily as a result of higher commodity prices. Agricultural exports were US$90 billion in 2007, around 9% of total U.S. exports.2 Main exports were grains and feeds, soybeans, and red meats and their products. Agricultural imports were US$72 billion, around 4% of total imports. Main imports were vegetables, fruits, and grains and feeds.

12. The Agricultural Adjustment Act of 1938 and the Agricultural Act of 1949 constitute what is known as the "permanent" legal framework governing commodity price and income support in the United States. The U.S. Congress regularly enacts legislation that amends and suspends provisions of the permanent laws. The last such legislation was the Farm Security and Rural Investment Act of 2002 (the 2002 Farm Act), signed into law in May 2002. Additionally, Congress provides ad hoc emergency and supplementary assistance under separate legislation.

13. The 2002 Farm Act provided support for commodities harvested through 2007. For other programmes, the 2002 Farm Act provided support until September 2007, and was extended to 15 March 2008. In the absence of new farm legislation, payments for commodities harvested in 2008 will be made as provided under the permanent legal framework governing farm support. In early 2008, Congress was working on a new farm bill.

14. The OECD's Producer Support Estimate (PSE) is a broad measure of support that includes government payments to producers and price support. The average annual PSE for the United States was US$42.5 billion in 2004 and 2005.3 As a share of gross farm receipts, the PSE was 16% in both years, compared with around 30% for the OECD as a whole. Provisional data for 2006 suggest a sharp decrease in the PSE to US$29.3 billion, or 11% of gross farm receipts, the third lowest level in the OECD. Among U.S. commodities tracked by the OECD, sugar, wool, and milk received the highest single commodity transfers measured as a share of their gross farm receipts for 2004-06. Support for sugar and milk is primarily in the form of market price support whereas wool is mostly supported through output-based payments. According to the OECD, the fall expected for 2006 in the PSE is a result of higher world commodity prices rather than policy changes.

15. The Commodity Credit Corporation (CCC), a federal corporation operated by the U.S. Department of Agriculture, manages most financial transactions for federal agricultural programmes. Annual average net CCC outlays under the 2002 Farm Act (fiscal years 2002-07) were US$16.8 billion, around one billion more than the annual average for the previous six fiscal years.4 CCC outlays nearly doubled between 2004 and 2005, to US$20.2 billion, reflecting low commodity prices and higher disaster and emergency assistance. They remained at that high level in 2006. The U.S. Department of Agriculture forecasts a decline in net CCC outlays from 2007, as increased

1 Preliminary data. USDA online information, "Farm Income: Data Files". Viewed at:

http://www.ers.usda.gov/Data/FarmIncome/finfidmu.htm. 2 USDA online information, "Foreign Agricultural Trade of the United States (FATUS)". Viewed at:

http://www.ers.usda.gov/Data/FATUS. These values differ from those in Chapter I because of differences in classification.

3 OECD (2007a). 4 CCC outlays do not include crop insurance payments.


demand for corn-based ethanol production results in higher prices for corn and other crops (see also section (3) below).5

16. The United States has taken steps to comply with the Dispute Settlement Body's recommendations and rulings regarding a number of U.S. support measures for upland cotton (see section (iv) below). In this context, Brazil requested the establishment of a WTO compliance panel in August 2006.6 This panel found that certain changes to U.S. cotton programmes were insufficient to bring the measures challenged by Brazil into conformity with WTO rules.7 The United States appealed some of the panel's findings in February 2008.8 In November 2007, Canada and Brazil requested the establishment of WTO panels to examine whether past U.S. domestic support to agriculture had exceeded the applicable WTO ceiling.9 The Dispute Settlement Body established a single panel covering both requests in December 2007.

(ii) Border measures

17. The average MFN applied tariff for agriculture (WTO definition) in 2007 was 8.9% (including the ad valorem equivalents of non-ad valorem rates) (see also Chapter III(2)(iv)). This is slightly more than twice the protection afforded to the non-agricultural sector.

18. Around 195 tariff lines are subject to tariff quotas (Table AIV.1). The simple average out-of-quota MFN tariff in 2007 was around 42%; the in-quota average was 9.1%.10 Close to 91% of out-of-quota tariffs are non-ad valorem, compared with almost 28% of in-quota tariffs. The latest U.S. notification on tariff quotas covers 2003.11

19. Parts of tariff quotas are generally allocated to specific countries. This is the case for most products subject to tariff quotas, including beef, certain dairy products, peanuts and peanut butter, chocolate crumb, and tobacco (Table AIV.1). Apart from the tariff quotas specified in its WTO schedule of commitments, the United States has allocated additional tariff quotas to its preferential trading partners under free-trade agreements.

20. Access to tariff quotas is on a first come, first served basis, except for dairy products and sugar. Access for dairy is granted to "historical" importers, importers designated by the government of an exporting country, and on the basis of a lottery. One or more methods may be used, depending on the particular good. A licensing system is used to administer access.12 Any importer, including manufacturers of like products, can apply for a licence

21. Access to the tariff quota for raw sugar is granted to exporting countries, not importers. It is administered through certificates of quota eligibility.13 The Department of Agriculture issues these certificates based on allocations specified by the USTR. In-quota imports of raw sugar must be

5 USDA (2007b). 6 WTO document WT/DS267/30, 21 August 2006. 7 WTO document WT/DS267/RW, 18 December 2007. 8 WTO document WT/DS267/33, 19 February 2008. 9 WTO documents WT/DS357/12 and WT/DS357/13, 9 November 2007. 10 These averages were calculated by the WTO Secretariat based on ad valorem equivalents of non-

ad valorem rates provided by the U.S. authorities in the context of this Review. 11 WTO document G/AG/N/USA/54, 17 February 2005. 12 The licensing system is not a statutory requirement. The authority to allocate tariff quotas through

licences was delegated to the Secretary of Agriculture by Presidential Proclamation 3019 (8 June 1953). The procedures for submitting licence applications and other relevant provisions are contained in 7 CFR 6.20-6.36.

13 The regulations governing the system are contained in 15 CFR 2011.


accompanied by a certificate of quota eligibility, validated by the certifying authority in the exporting country. Certificates are issued free of charge.

22. The United States has reserved the right to apply additional tariffs on over-quota imports of products subject to tariff quotas, either if their import prices drop below a trigger price (price-based safeguards), or if quantities exceed a given threshold (volume-based safeguards), in accordance with the special safeguard provisions of the WTO Agreement on Agriculture. The United States invokes price-based safeguards automatically on a shipment-by-shipment basis.

23. In December 2007, the United States notified the WTO that it did not apply volume-based safeguards between 2003 and 2006.14 According to its notification, price-based safeguards were applied on bovine meat, dairy products, peanuts, sugar, and food preparations.

24. According to the U.S. International Trade Commission, some agricultural products, including beef, dairy, ethyl alcohol, sugar and sugar-containing products, and tobacco remain subject to high import barriers.15 For example, the Commission estimates that the removal of barriers on imports of raw and refined sugar would expand imports of these two products by 281% and 553%, and increase U.S. welfare by US$811 million. The Commission estimates that the elimination of barriers on imports of dairy products would add US$573 million to U.S. welfare; the associated increase in imports of these products would range between 88% and 380%.

(iii) Domestic programmes

25. In October 2007, the United States submitted its notification on domestic support for marketing years 2002-05.16 The total current Aggregate Measurement of Support averaged US$10.3 billion per year during this period (Table IV.1). This was well below the previous four-year annual average of US$14.6 billion, and the applicable WTO ceiling of US$19.1 billion per year. Annual average "green box" support was US$65.4 billion between marketing years 2002 and 2005, a 31% increase with respect to the average for the previous four marketing years. This increase mostly reflects higher expenditures on domestic food aid, particularly the Food Stamp programme.

Table IV.1 Commitment levels and actual expenditure, 1999-05 (US$ billion, unless indicated otherwise)

1999 2000 2001 2002 2003 2004 2005

AMS commitment 19.899 19.103 19.103 19.103 19.103 19.103 19.103

Current total AMS 16.862 16.803 14.413 9.637 6.950 11.629 12.938

AMS commitment "used" (%) 84.7 88.0 75.4 50.4 36.4 60.9 67.7

Product specific de minimis paymens 0.029 0.063 0.215 1.590 0.436 0.680 0.118

Non-product-specific de minimis payments 7.406 7.278 6.828 5.101 2.801 5.778 5.862

Blue box 0 0 0 0 0 0 0

Green box 49.749 50.057 50.672 58.321 64.062 67.425 71.829

Source: WTO documents G/AG/N/USA/43, 51, and 60.

14 WTO document G/AG/N/USA/61, 17 December 2007. 15 USITC (2007a). 16 WTO document G/AG/N/USA/60, 9 October 2007.


26. In the context of the latest U.S. notification on domestic support, WTO Members raised several issues in the Committee on Agriculture.17 These included the categorization of direct payments as "green box", and of counter-cyclical payments as non-product-specific. The United States responded that direct payments meet green box criteria, and that counter-cyclical payments are not product-specific because they are based on historical acreages and yields, and do not require specific crops to be grown.

27. Average annual direct government payments to agricultural producers were US$16.3 billion between 2003 and 2007 (Table IV.2). Estimates by the Department of Agriculture predict a fall in these payments from their peak of US$24.4 billion in 2005 to US$12 billion in 2007. The decrease is driven partly by a sharp reduction in marketing loan benefits, which cover loan deficiency payments, marketing loan gains, and certificate exchange gains. According to the Department of Agriculture, marketing loan benefits in 2007 were only available for upland cotton, wool, mohair, and pelts, due to high prices.

Table IV.2 Direct government payments, 2002-07a (US$ million)

Component accounts 2002 2003 2004 2005 2006b 2007b

Total direct payments 12,414.9 16,523.5 12,969.9 24,395.9 15,789.1 12,003.1 Production flexibility contract paymentsc 3,499.8 -280.0 -4.2 -0.9 -0.3 0

Fixed direct paymentsc 367.1 6,703.6 5,242.4 5,198.8 5,052.0 5,193.6

Counter-cyclical paymentsc 203.4 2,300.7 1,122.0 4,073.8 4,035.9 1,184.8

Loan deficiency payments 1,196.7 576.4 2,865.1 5,080.3 730.6 67.5 Marketing loan gains 459.7 198.2 131.2 368.7 188.3 6.4 Certificate exchange gains 1,178.6 556.4 475.7 1,614.0 873.3 872.8 Peanut quota buyout payments 983.0 237.6 24.7 22.3 21.2 0 Milk income loss programme payments 859.6 913.3 205.7 9.6 431.2 90.0 Tobacco transition payment programme 0 0.0 0.0 2,083.1 1,206.3 950.0 Conservation programme payments 1,965.8 2,167.3 2,319.6 2,767.5 2,974.3 3,000.0 Ad hoc and emergency programme payments 1,655.0 3,143.2 582.4 3,168.8 274.5 635.0 Miscellaneous programme payments 46.1 6.8 5.4 9.9 1.7 3.0

a Data are calendar year payments; these may differ from data for the same programmes reported on a fiscal or crop year basis. b Preliminary. c The 2002 Farm Act terminated authority for production flexibility contract payments and established authority for fixed direct

payments and counter-cyclical payments. Source: USDA online information, "Farm Income: Data Files". Viewed at: http://www.ers.usda.gov/Data/FarmIncome /finfidmu.htm.

(a) Commodity programmes

28. The main instruments of support in the 2002 Farm Act are: fixed direct payments, which are unrelated to prices and are based on historical acreage and yields; counter-cyclical payments, which are also based on historical acreage and yields but are available to historical producers of specified crops when prices fall below levels established in legislation; and marketing assistance loan benefits, which are based on current production and prices, and cover loan deficiency payments, marketing loan gains, and certificate exchange gains.18 Payments under these programmes averaged

17 WTO online information, "Spotlight on U.S. Domestic Support in Agriculture Committee",

21 November 2007. Viewed at: http://www.wto.int/english/news_e/news07_e/ag_com_21nov07_e.htm. 18 For details on how each programme functions see WTO (2006).


US$11 billion per year between 2003 and 2007, around two thirds of total direct government payments to agricultural producers during the same period (Table IV.2).

29. Five crops (corn, rice, soybean, upland cotton, and wheat), which account for around a quarter of farm cash receipts, received approximately 93% of all "commodity programme payments" between crop years 2002 and 2005.19 Corn was by far the largest recipient, with 46% of total commodity programme payments, followed by upland cotton (23.3%), wheat (10.2%), rice (8%), and soybeans (5.8%). The share of commodity programme payments in each crop's production value varies widely. For rice, commodity programme payments accounted for 63% of production value between crop years 2002 and 2005; for cotton, the share was 50%, for corn 23%, for wheat 17%, and for soybeans 4%.

30. A study by the Department of Agriculture found that farm programme payments "contain elements that provide incentives for resource use that may be inconsistent with market signals".20 According to the study, marketing assistance loans provide an incentive to plant more than would be the case in their absence. According to other studies, counter-cyclical payments may provide for the reduction of price-related revenue risk, and could also have some influence on production decisions.21 This would depend on expected market prices and farmers' level of risk aversion. These studies conclude that counter-cyclical payments may distort incentives in some situations but that any such distortions are to a lesser degree than "coupled" payments such as marketing assistance loans.

(b) Insurance programmes and emergency assistance

31. The federal Government offers subsidized insurance against losses resulting from natural disasters and price fluctuations. Farm insurance programmes are provided under the Federal Crop Insurance Act, as amended.22 Producers may select between yield or revenue insurance. Insured producers receive a payment when actual yield or revenue fall below an expected level due to an insured cause. The shortfall in revenue may be caused by low prices or low production levels. The basic level of coverage is catastrophic risk coverage, which is available for an administrative fee of US$100 per crop and per county. The premium is fully subsidized. Producers with catastrophic risk coverage who suffer losses in excess of 50% of yield receive a payment equal to 55% of the estimated market price of the insured crop. Producers may purchase higher levels of coverage, but the portion of the premium that is subsidized declines as coverage increases. The Department of Agriculture reinsures the companies that sell farm insurance, thereby covering a share of the underwriting risks and costs, and defrays some of their administrative costs.

32. The total insured liability under federal crop insurance was US$67.4 billion in 2007. The federal Government subsidizes 58% of the total premium. The total cost to the federal Government of the crop insurance programme averaged US$3 billion per year between 2003 and

19 USDA (2006b). This study defines commodity programme payments as fixed direct payments,

counter-cyclical payments, and marketing assistance loan benefits. Attributing fixed direct and counter-cyclical payments to specific commodities may over- or understate payments to current production of specific commodities, since fixed direct and counter-cyclical payments are based on historical production and may therefore be made to producers that are no longer planting those commodities.

20 USDA (2006b). 21 See, for example, Anton and Le Mouel (2004), and Westcott (2005). 22 Two major amendments have been the Federal Crop Insurance Reform Act of 1994 and

the Agricultural Risk Protection Act of 2000.


2007. The Department of Agriculture introduced an insurance programme for pasture, rangeland, and forage from the 2007 crop year.23

33. According to one study, increased participation in crop insurance programmes is correlated with additional acreage in wheat and to a lesser extent, corn.24 However, simulations conducted as part of the same study revealed that large insurance premium decreases would have very modest effects on acreage.

34. In addition to crop insurance, agricultural producers receive ad hoc and emergency programme payments. In 2007, these payments fell by approximately 80% from their high of US$3.2 billion in 2005 (Table IV.2).

(c) Marketing orders

35. The Agricultural Marketing Agreement Act of 1937 authorizes the Secretary of Agriculture to issue binding marketing orders. Marketing orders can be issued for fruit, vegetables, specialty crops, and milk. They target a specific geographic area and are binding on "handlers", i.e. individuals who receive the commodity from producers, grade, pack, transport, and make it available for sale. The process leading to the adoption of a marketing order is always initiated by producers. Twenty-eight marketing orders for fruit and vegetables were in force in late 2007.25

36. Marketing orders may set minimum product requirements such as grade, size, quality, and maturity. The Agricultural Marketing Agreement Act of 1937 requires that imported commodities meet the same or comparable grade, size, quality, and maturity requirements as those established for domestic commodities under federal marketing orders.26 Imports of the following commodities are subject to such requirements (December 2007): avocados, dates (other than for processing), hazelnuts, grapefruit, table grapes, kiwifruit, olives (other than Spanish-style), onions, oranges, Irish potatoes, raisins, tomatoes, and walnuts.

37. Marketing orders may also contain "supply management" provisions that fix output levels, specify the proportion of output to be sold in specific markets, or provide for the creation of reserve pools of covered commodities. Supply management provisions are in effect for Oregon and Washington hazelnuts, spearmint oil produced in several western states, California raisins, and tart cherries grown in seven states.27 There are also 11 regional milk marketing orders, which establish minimum prices for milk depending on its use by processors.

38. One of the supply management tools used by marketing orders are so-called "producer allotments". These set the quantity that growers may sell in a given year, normally based on historical sales. Spearmint oil produced in several western states is subject to an allotment. In the context of a proposed allotment for hops, the Department of Justice commented in 2004 that "the producer allotment system would, in effect, be a government sanctioned and enforced cartel of United States producers, where the central producer committee ... could absolutely control the quantity of domestic

23 USDA online information, "USDA Announces Availability of New Insurance Tools for Pasture,

Rangeland, and Forage". Viewed at: http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB? contentidonly=true&contentid=2006/08/0280.xml.

24 Goodwin, Vandeveer, and Deal (2004). 25 Agricultural Marketing Service online information, "List of Federal Marketing Orders". Viewed at:

http://www.ams.usda.gov/fv/moabmotab.htm. 26 Section 8(e), Agricultural Marketing Agreement Act of 1937. 27 See 7 CFR 905, 982, 985, and 989. Additional information can be viewed at: http://www.ams.usda.

gov/fv/moabmotab.htm.


hops marketed".28 The Department of Justice recommended that the Secretary of Agriculture reject the proposed order, which would "raise prices above competitive levels, thereby misallocating the economy's resources and harming consumers and society as a whole". The Department of Agriculture rejected the proposal to establish a marketing order for hops in 2005.

(d) Other support programmes

39. The Fair and Equitable Tobacco Reform Act of 2004 terminated all production quotas and other price support mechanisms for tobacco beginning with the 2005 crop year. The Act establishes a levy on manufacturers and importers of tobacco products to fund compensation payments to tobacco quota holders and producers.29 Compensation payments, which began in 2005, are based on historical quota allotments and production, and will be paid in ten annual instalments. Total expenditures under the Act are estimated at US$10 billion.30

(iv) Export subsidies, credit, insurance, and guarantees

(a) Export subsidies

40. The United States scheduled export subsidy reduction commitments under the WTO Agreement on Agriculture for 13 product groups.31 The final bound ceiling since 2000-01 on export subsidy outlays for these commodities is US$594 million per year. During the period under review, the United States made a notification on export subsidies for 2003-05.32 According to the notification, total outlays for export subsidies averaged approximately US$250 million per year between 2003 and 2005. This amount includes payments to exporters under the Upland Cotton User Marketing Certificate Program. In February 2006, the United States enacted legislation to repeal this programme at the end of the 2005 marketing year, following a WTO panel and Appellate Body finding that certain payments under the programme were prohibited export subsidies.

41. Under the Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP), the United States provides cash bonus payments to exporters of eligible commodities based on the quantity exported. The commodities eligible under the EEP are wheat, wheat flour, rice, frozen poultry, barley, barley malt, table eggs, and vegetable oil. Under the DEIP, the eligible commodities are milk powder, butterfat, and various cheeses. Both programmes are authorized through 15 March 2008. There have been no expenditures under the EEP since fiscal year 2002, and no bonuses under the DEIP since 2004.

(b) Export credits, insurance, and guarantees

42. The United States operates two main export credit guarantee programmes: the Export Credit Guarantee Program (known as GSM-102) and the Facility Guarantee Program (FGP).

28 U.S. Department of Justice, Proposed Marketing Order No. 991, Hops Produced in Washington,

Oregan, Idaho, and California, Post-Hearing Memorandum, Docket No. AO-F&V-991-A3; FV03-991-01, 18 February 2004.

29 Section 625(b), Fair and Equitable Tobacco Reform Act of 2004. The regulations governing the application of the levy are contained in Federal Register, 70 FR 7010, 10 February 2005. The regulations on the compensation payments are contained in Federal Register, 70 FR 17150, 4 April 2005.

30 USDA online information, "Announcing Preliminary Tobacco Transition Payment Program Provisions". Viewed at: http://price.house.gov/UploadedFiles/TPPP.pdf.

31 Wheat and wheat flour, coarse grains, rice, vegetable oils, butter and butter oil, skim milk powder, cheese, other milk products, bovine meat, pigmeat, poultry meat, live dairy cattle, and eggs.

32 WTO document G/AG/N/USA/62, 28 February 2008.


The Intermediate Export Credit Guarantee Program (GSM-103), and the Supplier Credit Guarantee Program were discontinued in 2005.

43. Under GSM-102, the CCC is authorized to guarantee the repayment of credit made available to finance U.S. exports of agricultural goods on credit terms of up to three years. The CCC generally guarantees 98% of the principal and a portion of the interest. It determines the eligibility of agricultural products based on market potential.33 The exporter pays a fee calculated on the basis of the repayment terms and the risk category that the Department of Agriculture assigns to the country where the bank responsible for repayment is located.34 There are seven risk categories eligible for coverage under the GSM-102 programme. According to the Department of Agriculture, this fee structure "responds to rulings by the [WTO] that export credit programs must be risk based and that fees must cover long-term program operating costs and losses".35 The fee cannot exceed the statutory cap of 1% of the guaranteed value of the transaction.36 In the context of its last Review, the United States indicated that the Administration was working with the Congress on legislation to repeal the fee cap.37

44. Under the FGP the CCC extends credit guarantees to U.S. banks for financing export sales of U.S. manufactured goods and services that improve agriculture-related facilities in emerging markets, including storage, processing, and handling facilities. The export credit guarantee for sales of manufactured goods and services is only extended to projects that are expected to benefit the export of U.S. agricultural products.

45. The annual average value of exports covered by officially supported export credit guarantees amounted to US$1.8 billion between fiscal years 2005 and 2007.38 The GSM-102 programme accounted for around 90% of this.

(v) Food labelling

46. Regulations issued under the Federal Meat Inspection Act and the Poultry Products Inspection Act require that the country of origin appear in English on the immediate containers of all meat and poultry products entering the United States.39 When imported bulk meat or poultry products are processed in the United States, the label on the processed product or its container does not need to include the country of origin.

47. Under the 2002 Farm Act, retailers must notify their customers of the country of origin of beef, lamb, pork, fish, shellfish, perishable agricultural commodities and, from September 2004, peanuts. Commodities that are ingredients in processed food are exempt. The Act specifies the criteria that commodities must meet to bear a "United States" label.

33 Foreign Agricultural Service online information, "Eligible Commodities Under the GSM 102

Program". Viewed at: http://www.fas.usda.gov/excredits/gsmcommodities.html. 34 See Foreign Agricultural Service online information, "Country Risk Category". Viewed at:

http://www.fas.usda.gov/excredits/countryrisk.html. 35 USDA (2007a). 36 7 USC 5641(b). 37 WTO document WT/TPR/M/160/Add.1, 27 September 2006. 38 Foreign Agricultural Service online information, "Monthly Summary of Export Credit Guarantee

Program Activity". Viewed at: http://www.fas.usda.gov/excredits/Monthly/ecg.html. 39 Federal Meat Inspection Act, 21 USC 601 et seq., and Poultry Products Inspection Act, 21 USC 451

et seq.


48. The Department of Agriculture issued an interim final rule for the country-of-origin labelling programme for fish and shellfish in October 2004.40 The rule became effective in April 2005. A final rule is under preparation, and was reopened for public comment in June 2007.41 The application of country-of-origin labelling on beef, lamb, pork, perishable agricultural commodities, and peanuts has been delayed twice, most recently until September 2008.42 The Department of Agriculture requested public comments on a proposed rule covering these commodities in mid 2007.43

49. Preliminary estimates by the Department of Agriculture for the direct incremental costs associated with the country-of-origin labelling requirement in the 2002 Farm Act range from US$582 million to US$3.9 billion during the first year of application. This estimate is based on the proposed rule for all "covered commodities", that is, beef, pork, lamb, farm-raised and wild fish, perishable agricultural commodities, and peanuts.44 Annual costs to the U.S. economy after a ten-year adjustment period are estimated to range from US$138 million to US$596 million. Based on the interim final rule published in October 2004, the Department of Agriculture estimates that the direct costs associated with the country-of-origin labelling requirement for farm-raised and wild fish are US$89 million for the first year of implementation; the estimated cost to the U.S. economy after a ten-year adjustment period is US$62 million annually. The benefits derived from country-of-origin labelling were found to be negligible. The Department of Agriculture also found little or no evidence that consumers are willing to pay a price premium for country-of-origin labelling or that they would increase their purchases of food bearing the U.S. origin label.

(3) MINING AND ENERGY

(i) Main features

50. The United States is among the world's largest producers of several minerals, including coal, salt, sulphur, aluminium, copper, and gold. In 2006, the total value of raw non-fuel mineral production in the United States was approximately US$64.4 billion.45 In the same year, metal mine production was around US$23.5 billion, of which 60% was copper and gold, and 36% was iron ore, molybdenum, and zinc; exports of raw and processed mineral material were US$74 billion, and imports were US$138 billion.

51. The United States is the world's largest energy producer and consumer. Energy is imported mostly in the form of petroleum. The United States has the twelfth largest proved oil reserves in the world (21.8 billion barrels in December 2005).46 Petroleum production in the United States was 6.9 million barrels per day in 200647; imports of petroleum were 10.1 million barrels per day. U.S. production of natural gas was 18.5 trillion cubic feet in 2006; exports of natural gas were 4.2 trillion cubic feet, and imports were 749 billion cubic feet.

40 Federal Register, 69 FR 59708, 5 October 2004. An interim final rule has the full force and effect of

law. However, before the interim final rule is revised or confirmed as a final rule, the agency concerned requests comments on specific aspects of it.

41 Federal Register, 72 FR 33851, 20 June 2007. 42 Section 792 of the Agriculture, Rural Development, Food and Drug Administration, and Related

Agencies Appropriations Act of 2006. 43 Federal Register, 72 FR 33917, 20 June 2007. 44 Federal Register, 68 FR 61944, 30 October 2003. 45 U.S. Geological Survey (2007). 46 Energy Information Administration (2007b). 47 Energy Information Administration (2007a).


52. Total electricity net generation was 4.1 trillion kWh in 2006.48 Fossil fuels (mostly coal) accounted for 71% of all net generation, nuclear electric power for 19%, and renewable energy for 9%. Three fourths of the net generation from renewable energy resources was derived from hydroelectric power. Electricity imports were 42 billion kWh in 2006, and exports were 25 billion kWh. Most electricity trade occurred with Canada.

53. The average retail rate of electricity for all customers in the United States was US$0.089 per kWh in 2006.49 It increased at an annual average rate of 4.3% between 2000 and 2006, reflecting higher fuel prices and, more recently, the lifting of retail price caps in some states. Average industrial rates were US$0.062 per kWh in 2006, and commercial rates were US$0.095 per kWh.

54. The federal Government has adopted measures to foster competition in wholesale electricity markets during the past three decades.50 In addition, some states began to allow retail customers to choose their power supplier during the 1990s. However, high wholesale prices in California spot markets in 2000-01 highlighted shortcomings in the regulatory framework governing electricity markets.51 For example, according to the Council of Economic Advisers, the "mix of regulations ... has not done enough to encourage companies to invest in building new [transmission] capacity".52 The Energy Policy Act of 2005 contains provisions to enhance wholesale competition in electricity. It allows the Federal Energy Regulatory Commission (FERC) to impose civil penalties for market manipulation, expands the FERC's authority to review mergers and generation facility transfers to prevent increases in the exercise of market power, and contains provisions to enhance market transparency. The Act also includes provisions to strengthen the interstate power grid. As at April 2006, 16 states and the District of Columbia allowed at least some competition at the retail level.53

55. The Tennessee Valley Authority (TVA) is a corporation owned by the Federal Government. The Tennessee Valley Authority Act of 1933 established the TVA "in the interest of the national defense, for agricultural and industrial development, and to improve navigation in the Tennessee River and to control the destructive flood waters in the Tennessee River and Mississippi River Basins".54 In addition to dams and hydropower facilities on the Tennessee River and its tributaries, the TVA has natural gas, coal, and nuclear power generation plants. As at September 2005, the TVA sold electricity to 158 retail distributors and 61 large retail customers. Its service area covers most of Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia.

56. Under an exemption in the Energy Policy Act of 1992, the TVA is not required to allow the use of its transmission lines so that other utilities can send power to TVA customers. This reduces the opportunities for TVA customers to choose their supplier. The Consolidated Appropriations Act of 2005, signed into law in December 2004, changed the TVA's management structure, and required the

48 Energy Information Administration online information, "Energy Perspectives". Viewed at:

http://www.eia.doe.gov/emeu/aer/ep/ep_frame.html. 49 Energy Information Administration online information, "Average Retail Price of Electricity to

Ultimate Customers: Total by End-Use Sector," Table 5.3. Viewed at: http://www.eia.doe.gov/ cneaf/electricity/epm/table5_3.html.

50 For an overview of legislative and regulatory efforts to support competition in wholesale electricity markets see: Federal Energy Regulatory Commission, Wholesale Competition in Regions with Organized Electric Markets, Docket Nos. RM07-19-000 and AD07-7-000, 22 June 2007.

51 Suppanz, Wise, and Kiley (2004). See also GAO (2005a). 52 Council of Economic Advisers (2004). 53 International Energy Agency (2006). 54 16 USC 831.


TVA to file financial reports with the Securities and Exchange Commission and to create an independent audit committee.

57. Foreign investment plays an important role in mining and energy. The stock of foreign direct investment in the mining industry was US$55.5 billion in 2006, up 80% from 2002 (historical cost basis).55 Approximately 32% of the total was in oil and gas extraction, and around 13% in metal ore mining. The stock of foreign direct investment in electric power generation was US$28.4 billion in 2006, up 16% from 2002.

(ii) Legal and policy framework

58. The federal Government's mining and minerals policy is to foster and encourage private enterprise in the development of a stable domestic minerals industry, and in the orderly and economic development of domestic mineral resources.56

59. The General Mining Law of 1872 governs access to hardrock minerals in federal public lands.57 It authorizes a prospector to stake a claim to land believed to contain a mineral deposit, subject to the payment of certain fees. A claim gives the holder the right to develop the minerals, and may be "patented" to transfer the ownership of the public land to the private sector. The law does not require payment of royalties. Many states have enacted laws governing mineral rights on state-owned lands. Although these laws vary considerably, many authorize royalty payments.58

60. The extent to which the General Mining Law of 1872 adequately balances mineral development with competing land uses is being debated in the United States.59 Congress imposed a mining claim patent moratorium in 1994; the U.S. authorities indicate that, except for 400 patents that were grandfathered, no new patent applications are being accepted until Congress decides what to do with the moratorium. In early 2008, there were about 380,000 mining claims located on federal lands in the western United States; most cover about 20 acres.

61. Federal oil and gas are subject to leasing under the Mineral Leasing Act. Companies seeking to lease federal lands for oil and gas exploration must pay a "bonus bid" determined through a competitive auction. Companies must pay royalties based on a percentage of the cash value of the oil and gas produced and sold. In general, royalty rates are 12.5% for onshore leases and between 12.5% and 16.7% for offshore leases.60 Under the Outer Continental Shelf Lands Act, the Secretary of the Interior has the discretion to establish higher royalty rates for offshore leases. The Department of the Interior reported that about 2,100 companies paid royalties totalling US$11.4 billion from approximately 28,980 federal and Indian mineral leases in fiscal year 2007.

55 BEA online information, "International Economic Accounts". Viewed at: http://www.bea.gov/

international/fdi_ind_0206.htm. 56 30 USC 21a. 57 30 USC 21 et seq. Hardrock minerals include most metals and non-fuel non-metals, such as gold,

silver, copper, zinc, barite, and fluorspar. 58 For a survey of state laws governing hardrock mining see Flynn (2005). 59 For a review of the arguments surrounding the claim patent system established by the General

Mining Law see Humphries (2005). 60 GAO (2007b).


62. The National Energy Policy, issued in May 2001, places emphasis on domestic energy production.61 The policy identifies major investment needs in power plants, oil refineries, and gas and electric transmission networks, and calls for measures to enhance energy efficiency and develop renewable energy. State energy policies vary considerably.

63. The Department of Energy has primary responsibility for federal energy policy, while states are responsible for their own energy policies. The FERC is an independent agency that regulates the transmission of electricity, natural gas, and oil in interstate commerce, and wholesale sales of electric energy and natural gas in interstate commerce. It acts under the authority of the Federal Power Act, the Natural Gas Act, the Public Utility Regulatory Policies Act, the Interstate Commerce Act, the Energy Policy Act of 1992, and the Energy Policy Act of 2005. The states regulate electricity and natural gas sales at the retail level.

(iii) Selected issues

64. The energy tax structure seeks to provide incentives for the supply of alternative and renewable fuels (Table IV.3). The Energy Policy Act of 2005, signed into law in August 2005, establishes tax incentives for domestic energy production and energy efficiency valued at approximately US$15 billion during 11 years.62 The Act requires a doubling of biofuel use and authorizes several federal energy research and development programmes.

Table IV.3 Selected energy tax incentives, early 2007

Product Description Revenue loss, fiscal year 2006 (US$ million)

Oil and gas Exploration firms may deduct 100% of "intangible drilling costs" in first year (70% for integrated producers); 2 year amortization of geological and geophysical expenses (5 years for integrated producers)

1,100

Fuel minerals Independent producers and royalty owners can deduct 15% of sales of oil and gas (up to 25% for marginal wells); between 10% and 20% for other fuel minerals; only up to 1,000 barrels or equivalent per day

1,000

Synthetic fuels from coal and gas produced from either geopressurized brine, Devonian shale, tight formations, or biomass

Tax credit of US$6.40 per barrel of oil equivalent or US$1.13 per 1,000 cubic feet of gas

2,700

Biomass ethanol Tax credit of US$0.51 per gallon (blenders) plus US$0.10 per gallon (small producers)

1,890

Electricity from wind, closed-loop biomass, poultry waste, solar, geothermal

Tax credit of US$0.018 per kWh 2,000

Table IV.3 (cont'd) Fuel cell, hybrid, lean burn, or other alternative fuel motor vehicle

Tax credit of US$400-40,000 per unit 283

State and local bonds for hydroelectric or biomass facilities that produce electricity

Tax exemption for interest income 100

Biodiesel (from vegetable oil or animal fat)

Producer tax credit of US0.50 per gallon (recycled) or US$1 per gallon (virgin)

122

Energy efficient appliances Manufacturer's tax credit of US$50-200 per unit 117 Source: WTO Secretariat, based on Lazzari (2006).

65. Federal policy encourages biofuel production and use, through excise tax credits for ethanol and biodiesel blenders, tax credits for small ethanol and biodiesel producers, a tax credit for

61 National Energy Policy Development Group (2001). 62 Lazzari (2006).


alternative fueling infrastructure development, and a special depreciation deduction for cellulosic ethanol facilities. The largest of the biofuel tax expenditures is the volumetric ethanol excise tax credit, which provides a US$0.51 per gallon tax credit to blenders of ethanol and gasoline. The cost of this programme in forgone tax revenue was US$2.7 billion in 2006.63

66. Imports of ethanol are subject to ad valorem MFN tariff rates of 1.9% or 2.5% (fuel ethyl alcohol under subheadings HS 2207.1060 and HS 2207.2000). An additional duty of US$0.1427 per litre (US$0.54 per gallon) is assessed for imports of ethanol from MFN sources under subheading HS 9901.0050.

67. The Energy Policy and Conservation Act established fuel economy standards for passenger automobiles and light-duty trucks.64 Compliance with the standards is measured by calculating a sales-weighted mean of the fuel economies of a given manufacturer's product line. Domestically produced and imported passenger automobiles must meet the standards separately (two-fleet rule). A vehicle is considered to be part of the domestic fleet if at least 75% of the cost of the content is of U.S., Canadian, or Mexican origin.

68. In December 2007, Congress amended the Energy Policy and Conservation Act, mandating standards for passenger automobiles and light trucks of model years 2011-2020 to ensure that the average fuel economy of the combined industry-wide fleet of passenger automobiles and light trucks in model year 2020 is at least 35 miles per gallon.65 The Department of Transportation must set these standards on the basis of a vehicle attribute such as size.

69. In December 2005, the California Air Resources Board requested a waiver of pre-emption for its greenhouse gas regulations for certain new motor vehicles from model year 2009. The Clean Air Act gives California special authority to enact air pollution standards for motor vehicles that are stricter than those of the federal Government. However, the Environmental Protection Agency (EPA) must approve a waiver before California's regulations can go into effect. The EPA announced its intention to deny California's request for a waiver in late 2007; it issued a denial document in February 2008 explaining its decision.66 In the meantime, a federal district court issued a decision upholding the adoption of California's greenhouse gas regulations by Vermont, one of 11 states that had adopted California's regulations as at mid 2007.67 The court concluded that Vermont's regulations are not pre-empted by federal fuel economy laws, and do not "impermissibly intrude upon the foreign affairs prerogatives of the President and Congress of the United States".68

70. The Energy Policy and Conservation Act authorized in 1975 the creation of a Strategic Petroleum Reserve (SPR) for the storage of up to one billion barrels of petroleum products.69 The SPR, which is managed by the Department of Energy, contained enough oil to offset 59 days of

63 GAO (2007a). 64 49 USC 32901 et seq. 65 Title I, Energy Independence and Security Act of 2007. 66 EPA online information, "California Greenhouse-Gas Waiver Request". Viewed at:

http://www.epa.gov/otaq/ca-waiver.htm. 67 California Environmental Protection Agency online information, "Frequently Asked Questions:

Climate Change Emissions Standards for Vehicles". Viewed at: http://www.arb.ca.gov/cc/factsheets/ccfaq.pdf. 68 United States District Court for the District of Vermont, Green Mountain Chrysler Plymouth Dodge

Jeep, et al. v. George Crombie, et al., No. 05-302, and The Association of International Automobile Manufacturers v. George Crombie, et al., No. 05-304, D. Vt, 12 September 2007. This decision is being appealed; opening briefs were filed in March 2008 in the U.S. Court of Appeals for the Second Circuit (No 07-4342-cv).

69 42 USC 6231 et seq.


U.S. oil imports as at 2006.70 The United States has spent about US$45.2 billion in 2005 dollars to build, maintain, fill, and manage the SPR since 1976. There is also a Northeast Heating Oil Reserve that holds 2 million barrels of heating oil. It has never been tapped.

71. The Energy Policy and Conservation Act authorizes the President to use the SPR in the event of a severe energy supply disruption. Amendments adopted in 1990 authorized the President to use part of the SPR in reaction to "a circumstance that constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration".71 Under this authority, the President authorized the sale and lending of oil from the SPR in the aftermath of hurricanes Katrina and Rita in 2005.

72. The Strategic and Critical Materials Stockpiling Act established a programme to maintain and manage certain materials for use during a national emergency.72 The Defense Logistics Agency's Defense National Stockpile Center (DNSC) manages the stockpile program. It stores 28 commodities with a market value of around US$1.4 billion at 17 U.S. locations.73 The commodities include zinc, cobalt, chromium, platinum, palladium, and industrial diamonds. DNSC has sold approximately US$6.6 billion worth of excess stockpile materials since 1993.

(4) MANUFACTURING

73. The United States is the world's leading producer of manufactured goods, accounting for about 21% of world manufacturing value added.74 After a cyclical downturn that started in late summer 2000 and deepened in 2001, manufacturing output increased by almost 18% between 2002 and 2006.75 However, the share of manufacturing in total U.S. value added declined during this period, to 12.1% in 2006, as other sectors experienced faster growth. In 2006, the largest industries in terms of manufacturing value added were: chemical products (13.8%); food and beverage and tobacco products (10.4%); computer and electronic products (9.0%); fabricated metal products (8.5%); machinery (7.9%); and motor vehicles, bodies and trailers, and parts (6.3%).76 Manufactured goods represented 80% of total U.S. merchandise exports in 2006, three percentage points less than in 2000; 70% of 2006 imports consisted of manufactures, compared with 77% in 2000. In absolute terms, however, manufacturing exports and imports increased by 24% and 40% between 2000 and 2006 (see Chapter I(6)(i)).

74. Foreign direct investment (FDI) is important in manufacturing. Assets of majority-owned non-bank U.S. affiliates in the manufacturing sector were almost US$1.1 trillion in 2005, almost one fifth of total U.S. affiliate assets.77 U.S. affiliates of foreign companies in the manufacturing sector employed some 2 million workers. Merchandise exports by these affiliates were US$97 billion and imports US$160 billion in 2005. Foreign-owned manufacturing firms had 14% more value added and plant sizes five times larger than U.S. manufacturers, on average.78 They paid 14% higher wages,

70 GAO (2006). 71 42 USC 6241. 72 50 USC 98 et seq. 73 DNSC online information. Viewed at: https://www.dnsc.dla.mil/contentview.asp?contentpage=

inside&folder=dnsc. 74 United Nations Industrial Development Organization online information. Viewed at:

http://www.unido.org/data/geostat.cfm?CC=USA. 75 International Trade Administration online information, "Industry Competitiveness and Regulatory

Analysis". Viewed at: http://ita.doc.gov/td/industry/otea/OCEA/MBU/index.html. 76 BEA online information, "Industry Economic Accounts". Viewed at: http://www.bea.gov/industry/

gpotables/gpo_action.cfm?anon=57018&table_id=19018&format_type=0. 77 Anderson (2007). 78 Jackson (2005).


and had 50% greater output per worker than the average comparable U.S.-owned manufacturer. At end 2004, the Netherlands, Switzerland, and the United Kingdom were the principal sources of FDI in manufacturing on a historical cost basis.79

75. The manufacturing sector accounts for 10% of non-farm payroll employment (September 2007).80 Manufacturing employment fell by 2.7 million between February 2001 and February 2004, which was the biggest cyclical decline in manufacturing employment since 196081; the downward trend continued in later years.

76. Multifactor productivity in manufacturing increased at an annual average rate of 2.5% between 2000 and 2005, which was higher than in the private non-farm business sector as a whole.82 It increased in 68 of 86 manufacturing industries during this period.83 Of 16 foreign economies studied by the Department of Labor, only three had greater manufacturing productivity growth than the United States between 2000 and 2006.84

77. In the context of the President's Manufacturing Initiative announced in March 2003, the Secretary of Commerce ordered a comprehensive review of the issues influencing the competitiveness of the U.S. manufacturing sector. As part of this, the Department of Commerce held 23 public roundtables to identify the challenges facing manufacturers. In January 2004 it issued a report with 57 recommendations to address these challenges.85 The Interagency Working Group on Manufacturing Competitiveness coordinates the implementation of these recommendations, which include to make permanent the research and experimentation tax credit, modernize the U.S. legal system to eliminate disincentives to invest in manufacturing, identify priorities for future federal support for advanced manufacturing technology, and combat "unfair" trade practices affecting U.S. manufacturers. The U.S. authorities indicate that 36 of the report's recommendations have already been implemented.

78. In general, tariffs on manufactured goods are low. The average applied MFN tariff for manufactures (WTO definition) was 4% in 2007. However, the U.S. International Trade Commission has identified 12 sectors that are subject to relatively high tariffs.86 The Commission estimates that U.S. welfare gains from eliminating the tariffs on these products would range from US$2 million for edible fats and oils to US$249 million for footwear and leather products.87 The increase in imports resulting from this liberalization would range from 2% to 19%.

79 BEA (2005). 80 Bureau of Labor Statistics online information, "Employment Situation", Table B-1. Viewed at:

http://www.bls.gov/news.release/empsit.toc.htm. 81 Forbes (2004). 82 Multifactor productivity measures the changes in output per unit of combined inputs. 83 Bureau of Labor Statistics online information, "Multifactor Productivity Trends For Detailed

Manufacturing Industries", Table 3. Viewed at: http://www.bls.gov/news.release/prin3.toc.htm. 84 USDOL (2007). 85 USDOC (2004). 86 These are: ball and roller bearings; ceramic wall and floor tile; costume jewellery; cutlery and

hand tools; edible fats and oils; footwear and leather products; glass and glass products; musical instruments; pens, mechanical pencils, and parts; processed fruits and vegetables; table kitchenware; and watches, clocks, and watch cases and parts. USITC (2007a).

87 In the case of ceramic tile, liberalization would lead to a welfare loss of US$2 million. Ceramic tile is considered as an input to residential and commercial buildings (investment goods) rather than a product purchased by consumers as end-users.


79. The U.S. International Trade Commission has also identified textiles and apparel as subject to relatively high import barriers.88 One study estimates U.S. welfare gains from the elimination of tariffs and remaining quantitative restrictions on imports of textiles and apparel at US$830 million and US$1.9 billion.89 The same study also considers the welfare effects of textile and apparel rules of origin contained in U.S. preferential arrangements. The study found that the elimination of origin requirements for textiles and apparel would reduce foreign demand for U.S. textiles and apparel inputs, causing a loss in U.S. welfare. According to the study, this loss would be largely offset by the elimination of compliance costs embedded in rules of origin.

80. In addition to tariffs, government assistance to the manufacturing sector includes export financing, direct payments, and tax benefits (Chapter III(3)(iv) and (4)(ii)).

81. Manufacturers spent US$158 billion for research and development (R&D) performed in the United States in 2005.90 Federal government R&D expenditures in the manufacturing sector were approximately US$15.6 billion. These expenditures cut across a broad spectrum of industries, including computers and electronic products, aerospace products and parts, chemicals, and machinery. Together these industries accounted for approximately 72% of federal funds for R&D in manufacturing.

82. The United States is currently involved in two disputes settlement cases with the EC on trade in large civil aircraft under the WTO Agreements, one as complainant and one as defendant.

83. The United States maintains programmes to assist shipyards or ship-repair facilities. The Federal Ship Financing Program provides guarantees for private-sector financing to construct, reconstruct, and recondition commercial vessels in U.S. shipyards.91 Guarantees may not cover financing for the acquisition of foreign components unless the Department of Transportation grants a waiver. No new loan guarantees were issued during fiscal year 2006. US$2.94 billion in loan guarantees were outstanding in September 2006.92

84. Under the Capital Construction Fund (CCF) programme, U.S. flag operators may defer federal taxes on certain deposits placed into a CCF to construct, reconstruct, or acquire eligible vessels built in and documented under the laws of the United States. Under the Construction Reserve Fund programme, U.S. flag operators may defer federal taxes on gains attributable to the sale or loss of a vessel, provided that the proceeds are used to construct, reconstruct, or acquire an eligible, U.S. built vessel.93 Participation in both programmes is limited to U.S. citizens.

85. U.S.-flag vessels repaired abroad are subject to a 50% duty, assessed on the cost of equipment and non-emergency repairs in foreign countries. The duty is not applied on U.S.-owned foreign-flag vessels or in the context of U.S. free-trade agreements.

88 USITC (2007a). 89 Fox, Powers and Winston (2007). 90 Wolfe (2007). 91 Title XI, Merchant Marine Act of 1936. 92 MARAD online information. Viewed at: http://www.marad.dot.gov/TitleXI/title_xi_program.html. 93 Section 511, Merchant Marine Act of 1936.


(5) SERVICES

(i) Introduction

86. The services sector is by far the largest contributor to output and employment in the U.S. economy. The private services sector accounted for 67.8% of GDP and 65.6% of total employment in 2006, or 80.2% and 83.4%, respectively, if government services are included. Private services industries have been expanding faster than GDP during the period under review and contributed 2.75 percentage points to GDP growth in 2006.94 Productivity has been growing rapidly in most service activities, particularly telecommunications, but also retail and wholesale trade and air transportation.95 Services are also playing an important role in U.S. trade: in 2006, services accounted for 29.2% of total U.S. exports and 15.6% of total imports.

87. The United States made wide-ranging sector-specific commitments under the General Agreement on Trade in Services (GATS).96 These include 11 of the 12 broadly defined service areas, or 111 of the approximately 160 services subsectors in the Services Sectoral Classification List.97 The United States' horizontal commitments include limitations regarding temporary entry and stay of natural persons, acquisition of land, taxation measures, and subsidies. The United States submitted an initial offer on services in the DDA in 2003, and a revised offer in 2005.98

(ii) Telecommunications and related services

(a) Market structure99

88. The U.S. telecommunications market is the world's largest by revenue (US$360 billion in 2005). Following a sharp decline between 2000 and 2004, telecommunication investment increased in 2005, reflecting partly the transition to fibre-based broadband technologies, higher-speed mobile, and next-generation networks.

89. There were 167.5 million residential and non-residential wireline switched access lines in service at end 2006, down from 192.4 million at end 2004.100 This decline reflects reductions in residential second lines and substitution of mobile for fixed. There were 213 million mobile telephone subscribers in the United States in December 2005, resulting in a nationwide penetration rate of approximately 71%.101 Although the number of cellular mobile subscribers has increased rapidly since 2000, penetration remains below the OECD average of 80%.

90. The United States enjoys some of the lowest prices for fixed-line telephony in the OECD.102 The price of mobile telephony is close to the OECD average; the U.S. authorities note that this estimate overstates the cost of mobile telephony in the United States, as it does not take into account

94 BEA (2007a). 95 Bureau of Labor Statistics online information. Viewed at: http://www.bls.gov/schedule/

archives/prin_nr.htm#2006. 96 GATT document, GATS/SC/90, 15 April 1994. 97 WTO document MTN.GNS/W/120, 10 July 1991. 98 The initial offer is contained in WTO document TN/S/O/USA, 9 April 2003. For the revised offer

see: http://www.ustr.gov/assets/Trade_Sectors/Services/2005_Revised_US_Services_Offer/asset_upload_file77 _7760.pdf.

99 Unless indicated otherwise, the data in this section is from OECD (2007d). 100 FCC (2007). 101 FCC (2006). 102 OECD (2007d).


the high volume of use. U.S. international calling charges are among the lowest in the OECD. The United States has relatively well developed facilities-based competition.

91. The main distribution platform for broadcasting services in the United States is cable, which in 2005 accounted for almost 60% of households equipped with television. The share of terrestrial television is 16%. Both terrestrial television and cable have lost share to direct broadcast satellite, which accounts for 25% of households equipped with television, up from 2% in 1995. The Chairman of the FCC notes that competition is needed in the market for the delivery of video programming. Cable prices have increased since 1996 while prices of other communication services have declined.103

(b) GATS commitments and legal framework

92. U.S. commitments on basic telecommunications attached to the Fourth Protocol of the GATS cover most services.104 Excluded from the commitments are one-way satellite transmissions of direct to home (DTH) and direct broadcast satellite (DBS) television services, and of digital audio services.

93. The United States has reserved an exemption under GATS Article II (MFN) to discriminate between WTO Members "due to application of reciprocity measures or through international agreements guaranteeing market access or national treatment" for DTH, DBS, and digital audio services.105 The United States also reserved the right to "allow the deduction for expenses of an advertisement carried by a foreign broadcast undertaking and directed primarily to a U.S. market only where the broadcast undertaking is located in a foreign country that allows a similar deduction for an advertisement placed with a U.S. broadcast undertaking".106 The purpose of this MFN exemption is to "encourage the allowance of advertising expenses internationally".

94. The Federal Communications Commission (FCC) is responsible for regulating interstate and international communications by radio, television, wire, satellite, and cable. Individual state commissions have the authority to regulate the rates, terms, and conditions of intra-state, non-radio-based basic telecommunications services.

Foreign ownership and international settlements policy

95. The FCC reviews foreign investment in FCC radio licences under Section 310 of the Communications Act of 1934, as amended.107 Under Section 310(a) of the Act, no radio licence may be granted to a foreign government or its representative. Under Section 310(b) of the Act, broadcast and common carrier, and aeronautical radio licences cannot be granted to or held by non-U.S. citizens, their representatives, corporations not organized under the laws of the United States, or foreign governments. Nor may licences be granted to U.S. corporations of which more than 20% of the capital stock is owned of record or voted by any of these entities. However, under Section 310(b)(4), licences may be granted to companies organized in the United States that are controlled by holding companies organized in the United States and in which foreign individuals, corporations, or governments own of record or vote more than 25% of the capital stock, unless the FCC finds that such ownership is inconsistent with the public interest.

103 Remarks of FCC Chairman Kevin J. Martin, Phoenix Center, U.S. Telecoms 2006 Symposium,

6 December 2006. Viewed at: h5ttp://www.phoenix-center.org/symposiums/2006/MartinSpeech.pdf. 104 See WTO document GATS/SC/90/Suppl.2, 11 April 1997. 105 WTO document GATS/EL/90/Suppl.2, 11 April 1997. 106 WTO document GATS/EL/90, 15 April 1994. 107 47 USC 310.


96. Following the adoption in 1997 of an "open entry" standard with respect to WTO Members, the FCC presumes that indirect ownership by entities from WTO Members of common carrier wireless licences under Section 310(b)(4) is in the public interest.108 However, the FCC reserves the right to attach conditions to or deny authorization to exceed the 25% foreign ownership benchmark if, as a result of its public interest analysis, it finds that such authorization would threaten competition in the U.S. market. In addition, the FCC accords deference to legitimate national security, law enforcement, foreign policy, and trade concerns raised by other federal agencies in its public interest analyses, although the U.S. authorities indicate that no authorization has ever been denied on the basis of these concerns. In previous Reviews of the United States, several WTO Members have noted that the explicit incorporation of the open entry standard into U.S. legislation would provide the full security of the law to suppliers from WTO Members.109

97. In the context of its open entry standard, the FCC has instituted a blanket authorization with respect to applications to supply domestic long-distance services on a facilities or resale basis. To supply international services, an individual authorization is required, but according to the U.S. authorities, the authorization process is generally pro forma, with most authorization granted automatically. The authorities note that the processing time for applications depends on the complexity of each case; processing takes from 14 days for routine authorizations to provide international services, to one year or longer for applications related to large, complex mergers or acquisitions.110

98. The international settlements policy (ISP) is one of several FCC regulatory safeguards to deter conduct by a foreign-based carrier that would harm competition in the U.S. telecommunications market.111 The ISP governs negotiations between U.S. and certain foreign carriers that have market power for the exchange of international switched traffic. It requires all rate agreements between U.S. and foreign carriers to provide for: an equal division of accounting rates between foreign and U.S. carriers112; the non-discriminatory treatment of U.S. carriers; and a share to U.S. carriers of U.S. inbound traffic proportionate to their share of U.S. outbound traffic. Since March 2004, the FCC has applied its ISP only to routes on which termination rates exceed FCC-specified benchmarks.113 In early 2008, 165 routes were exempt from the ISP.

99. In March 2006, three large operators requested that the FCC remove ISP requirements from the remaining routes subject to such requirements. FCC staff note that certain ISP requirements may no longer be necessary due to "meaningful economic competition between telecommunications service providers" and recommend the initiation of a proceeding to consider this petition.114 The request is under consideration.

108 Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Report and

Order and Order on Reconsideration, 12 FCC Rcd 23891 (1997) (“Foreign Participation Order”), Order on Reconsideration, 15 FCC Rcd 18158 (2000).

109 See, for example, WTO documents WT/TPR/M/126/Add.3, 22 November 2004, and WT/TPR/M/88/Add.1, 8 January 2002.

110 WT/TPR/M/160/Add.1, 27 September 2006. 111 For a description of other regulatory safeguards besides ISP see WTO (2006). 112 The accounting rate system refers to the pricing principles used in interconnection agreements

between international operators, to enable the revenue for international calls to be shared between the operator in the country that originates traffic and the operator in the country that delivers the traffic.

113 International Settlements Policy Reform, International Settlement Rates, Report and Order, IB Docket Nos. 02-324 and 96-261 (2004). The list of international routes that are not subject to the ISP is available at: http://www.fcc.gov/ib/pd/pf/isp_exempt.html.

114 See, for example, FCC 2006 Biennial Regulatory Review, 22 FCC Rcd 3138, 3166-67, 3175-78 (IB 2007).


Unbundling requirements and inter-carrier compensation

100. Section 251 of the Communications Act of 1934 requires that all "incumbent local exchange carriers" provide requesting carriers with "non-discriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and non-discriminatory…".115 Section 251 network elements must be priced "based on the cost (determined without reference to a rate-of-return or other rate-based proceeding) of providing the ... network element" and "may include a reasonable profit".116

101. The Communications Act left the FCC to choose the network elements to be "unbundled," specifying that the FCC must "consider, at a minimum, whether ... the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer."117 The FCC issued the results of a comprehensive re-examination of its Section 251 unbundling rules in 2003.118 The rules obtained judicial approval in June 2006, after having been modified in response to court challenges.119 According to the FCC, its unbundling framework "builds on actions by the Commission to limit unbundling to provide incentives for both incumbent carriers and new entrants to invest in the telecommunications market in a way that best allows for innovation and sustainable competition."120

102. Facilities-based common carriers that own transmission facilities and provide "enhanced services" must allow other enhanced service providers to use their transmission facilities on a non-discriminatory basis.121 In August 2005, the FCC relieved wireline broadband Internet access service providers from this "unbundling" requirement, which is separate from the unbundling obligations under Section 251 of the Communications Act. The FCC's decision responds to "the availability of Internet service from multiple broadband pipelines, including cable, wireless, satellite, and power line networks."122 According to the FCC, the decision "puts wireline broadband Internet access service,

115 47 USC 251(c). 116 47 USC 252(d)(1). See also Implementation of the Local Competition Provisions in the

Telecommunications Act of 1996, Interconnection between Local Exchange Carriers and Commercial Mobile Radio Service Providers, First Report and Order, CC Docket Nos. 96-98, 95-185 (1996).

117 47 USC 251(d)(2). 118 Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers,

Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, Deployment of Wireline Services Offering Advanced Telecommunications Capability, Report and Order and Order on Remand and Further Notice of Proposed Rulemaking, CC Docket Nos. 01-338, 96-98, 98-147 (2003).

119 Covad Communications Co. v. FCC, 450 F.3d 528 (D.C. Cir. 2006), affecting Unbundled Access to Network Elements, Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Order on Remand, WC Docket No. 04-313, CC Docket No. 01-338, 20 FCC Rcd 2533 (2005).

120 FCC online information, "FCC Adopts New Rules for Network Unbundling Obligations of Incumbent Local Phone Carriers", 15 December 2004. Viewed at: http://hraunfoss.fcc.gov/edocs_public /attachmatch/DOC-255344A1.pdf. For a description of the particular facilities subject to unbundling requirements, see WTO (2006).

121 Computer II Final Decision, 77 FCC 2d. 384, 474-75, para. 231 (1980). Enhanced services combine basic service with computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber’s transmitted information, or provide the subscriber additional, different, or restructured information, or involve subscriber interaction with stored information.

122 FCC online information, "FCC Eliminates Mandated Sharing Requirement on Incumbents' Wireline Broadband Internet Access Services", 5 August 2005. Viewed at: http://hraunfoss.fcc.gov/edocs_public /attachmatch/DOC-260433A1.pdf.


commonly delivered by digital subscriber line (DSL) technology, on an equal regulatory footing with cable modem service, currently the market leader".123

103. Inter-carrier compensation is governed by a complex system of rules that differentiate between types of carriers and services. Generally, these rules can be classified as "reciprocal compensation" rules, which govern compensation related to local traffic, and "access charge" rules, which apply to long-distance calls. The FCC, which has been considering measures to reform its intercarrier compensation regime since 2001, notes that the distinctions between types of traffic, carriers, and communication end-points create both opportunities for regulatory arbitrage, and incentives for inefficient investment and deployment decisions.124 In July 2006, the National Association of Regulatory Utility Commissioners' Task Force on Intercarrier Compensation filed with the FCC an intercarrier compensation reform plan known as the "Missoula Plan". The FCC sought comment on this and subsequent filings.125

Satellite services

104. Under the DISCO II Order adopted in November 1997, foreign operators may request that their satellites be permitted to provide service in the United States. This request may be made by filing an application for an earth station to access the foreign satellite, or by filing a Petition for Declaration Ruling for the foreign satellite to serve U.S. customers. In addition, foreign operators with satellites operating in the conventional C-band or Ku-band may request that their satellites be considered for inclusion in the Permitted Space Station List.126 Satellites on this list may be accessed by any licensed earth station operating in specific bands and consistent with the FCC's technical requirements without further regulatory approval. There are 25 foreign satellites on the Permitted Space Station List (December 2007); an additional 16 are not included on the List but are authorized to provide service in the United States.

105. In the absence of a bilateral agreement between the United States and another country, the FCC requires that foreign satellite operators wishing to provide satellite services that are excluded

123 FCC online information, "FCC Eliminates Mandated Sharing Requirement on Incumbents' Wireline Broadband Internet Access Services", 5 August 2005. Viewed at: http://hraunfoss.fcc.gov/edocs_public/ attachmatch/DOC-260433A1.pdf.

124 Regulatory arbitrage arises when entities subject to regulation rearrange their transactions to exploit a more advantageous regulatory treatment, even though such actions, in the absence of regulation, would be viewed as costly or inefficient.

125 Comment Sought on Missoula Intercarrier Compensation Reform Plan, CC Docket No. 01-92, Public Notice, 21 FCC Rcd 8524 (Wireline Comp. Bur. 2006; Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Order, 21 FCC Rcd 9772 (Wireline Comp. Bur. 2006); Comment Sought on Missoula Plan Phantom Traffic Interim Process and Call Detail Records Proposal, CC Docket No. 01-92, Public Notice, 21 FCC Rcd 13179 (Wireline Comp. Bur. 2006); Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Order, 21 FCC Rcd 13526 (Wireline Comp. Bur. 2006); Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Order, 21 FCC Rcd 14626 (Wireline Comp. Bur. 2006); Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Order, 21 FCC Rcd 14761 (Wireline Comp. Bur. 2006); Comment Sought on Amendments to the Missoula Plan Intercarrier Compensation Proposal to Incorporate a Federal Benchmark Mechanism, CC Docket No. 01-92, Public Notice, 22 FCC Rcd 3362 (Wireline Comp. Bur. 2007); Pleading Cycle Extended For Comment on Amendments to the Missoula Plan Intercarrier Compensation Proposal to Incorporate a Federal Benchmark Mechanism, CC Docket No. 01-92, Public Notice, 22 FCC Rcd 5098 (Wireline Comp. Bur. 2007).

126 The conventional C-band comprises the 3700-4200/5925-6425 MHz frequency bands; the conventional Ku-band comprises the 11.7-12.2/14.0-14.5 GHz bands. Amendment of the Commission's Regulatory Policies to Allow Non-U.S.-Licensed Space Stations to Provide Domestic and International Satellite Service in the United States, First Order on Reconsideration, IB Docket No. 96-111 (1999) (DISCO II First Reconsideration Order).


from U.S. commitments at the WTO (DTH, DBS, and digital audio services) perform an ECO-SAT analysis for the excluded service. In this analysis, the applicant must show that there are no barriers to entry in the applicant's country for U.S.-licensed satellite operators wishing to provide the excluded service.127 The United States has bilateral agreements with Argentina and Mexico. Nine satellites are allowed to provide DTH, DBS, and digital audio services in the United States.

Media ownership restrictions

106. The United States maintains several media ownership restrictions, with the objective of promoting competition, diversity, and "localism" in media production. Under the rules in effect in January 2008, the dual network rule prohibits mergers between two or more of the "top four" networks, that is, ABC, CBS, Fox, and NBC.128 Under the radio/television cross-ownership rule, an entity cannot own more than two television and six radio stations, or one television and seven radio stations in markets with at least 20 separately owned television, radio, cable, and newspaper "voices".129 There is a sliding scale for markets with fewer voices. The newspaper/broadcast cross-ownership rule bans a company from owning a daily newspaper and a broadcast station in the same market.130

107. The local television multiple ownership rule allows entities to own a maximum of two television stations in any local market, as long as one station is not a top four station, and there are at least eight independent television stations in that market.131 Under the local radio ownership rule, an entity cannot own more than eight radio stations in markets with 45 or more stations.132 There is a sliding scale for markets with less than 45 stations. At the national level, Congress enacted legislation in 2004 allowing an entity to own an unlimited number of television stations in the United States, as long as their aggregate "national audience reach" does not exceed 39%.133

108. The Telecommunications Act of 1996 requires the FCC to review its media ownership rules periodically to determine whether they are "necessary in the public interest as the result of competition".134 Congress determined in 2004 that these reviews should be held every four years, rather than every two. The FCC launched a comprehensive review of these rules in June 2006135, and adopted an order in December 2007 (not yet in effect).136 In that order the FCC approved a relaxation

127 For more on the ECO-SAT test, see DISCO II Order, paragraph 40. 128 47 CFR 73.658(g). 129 47 CFR 73.3555(c). 130 47 CFR 73.3555(c). 131 47 CFR 73.3555(a). 132 47 CFR 73.3555(a). 133 Section 629, Consolidated Appropriations Act, 2004. 134 Section 202(h). 135 2006 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules

and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 2002 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Cross-Ownership of Broadcast Stations and Newspapers, Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets, Definition of Radio Markets, Further Notice of Proposed Rulemaking, MB Docket Nos. 06-121 and 02-277, and MM Docket Nos. 01-235, 01-317, 00-244 (2006).

136 2006 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 2002 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Cross-Ownership of Broadcast Stations and Newspapers, Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets, Definition of Radio Markets, Ways to Further Section 257 Mandate and To Build on Earlier Studies, Public


of the newspaper/broadcast cross-ownership rule, leaving all other media ownership restrictions unchanged.137

Authorization to provide cable services

109. Section 621 of the Communications Act prohibits a cable operator from providing "cable service" in a particular area without obtaining an authorization or "franchise".138 Franchises are generally granted by county or municipal entities. The Communications Act bans such entities from "unreasonably" refusing to award franchises to provide cable services.139

110. In an earlier FCC proceeding, potential entrants, primarily telecommunications companies, had cited several factors relating to the local franchising process that impeded their entry into the video services market.140 According to the FCC, the efficient operation of the local franchising process is especially significant for potential new entrants with existing facilities. For example, one operator has indicated that it would have to negotiate with more than 10,000 municipalities to offer video programming throughout its service area. Another operator has noted that it takes an average of 11 months to finalize a franchise agreement. A recent study estimated that a one-year delay in reforming the process to obtain cable franchises would cost American consumers US$8.2 billion.141 Another study found that incumbent cable companies had reduced prices by up to 42% in response to the entry of a major phone company into the television services market.142

111. The FCC adopted franchising rules in December 2006.143 The new rules set a time limit for franchising negotiations, establish limits on build-out and other requirements that may be imposed by local franchising authorities, and clarify the costs, fees, and other compensation required by these authorities that may be counted toward the statutory 5% cap on franchise fees. The FCC applied certain elements of the new rules to franchises governing incumbent cable operators in October 2007.

112. According to the National Cable Television Association, in mid 2007, eight states had passed state-wide cable franchise legislation designed to obviate the need for licensing locality by locality.144

Interest Obligations of TV Broadcast Licensees, Report and Order and Order and Order on Reconsideration, MB Docket Nos. 06-121, 02-277 and 04-228, and MM Docket Nos. 01-235, 01-317, 00-244 and 99-360 (2007).

137 FCC online information, "Chairman Kevin J. Martin Proposes Revision to the Newspaper Broadcast Cross-Ownership Rule", 13 November 2007. Viewed at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/ DOC-278113A1.pdf.

138 Cable service is defined as "the one-way transmission to subscribers of video or other programming service, and subscriber interaction, if any, which is required for the selection or use of such programming" (47 USC 522(6)).

139 47 USC 541(a)(1). 140 Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended

by the Cable Television Consumer Protection and Competition Act of 1992, Notice of Proposed Rulemaking, MB Docket No. 05-311 (2005).

141 Ford and Koutsky (2006). 142 Study by Bank of America Equity Research, cited in Ford and Koutsky (2006). 143 Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended

by the Cable Television Consumer Protection and Competition Act of 1992, Report and Order and Further Notice of Proposed Rulemaking, MB Docket No. 05-311 (2006).

144 Missouri, Florida, Indiana, Georgia, Nevada, Connecticut, Ohio, and Illinois.


(iii) Financial services

(a) Recent market developments

113. The U.S. financial services sector accounted for 7.8% of GDP in 2006, about half of which was generated by banking activities, some 30% by insurance, 18% by securities trading activities, and 2% by funds, trusts, and other financial vehicles.145 The sector employed 6.1 million people in 2005, or some 4.3% of total employment.146 In 2006, exports of financial services, excluding insurance, amounted to US$42.8 billion; exports of insurance services reached US$9.3 billion. Also in 2006, imports of financial services amounted to US$14.3 billion, while imports of insurance services were US$33.8 billion. Sales of financial services, including insurance, to foreign persons by U.S. multinational corporations amounted to US$122.8 billion in 2005, while sales of financial services to U.S. persons by foreign multinational corporations were US$102.3 billion.147

114. There were 1,686 "large" commercial banks in the United States at end-June 2007, each with consolidated assets of US$300 million or more. Their total consolidated assets amounted to US$9.5 trillion, representing some three quarters of GDP; 84.7% were domestic assets.148 At end June 2007, foreign banks from 60 countries and territories operated 479 institutions in the United States: there were 219 branches, 41 agencies and 149 representative offices of foreign banks, as well as 68 U.S. commercial banks at least 25% owned by foreign entities, and three Edge corporations.149 The assets of the 479 U.S. foreign banking institutions totalled some US$2.8 trillion at end-September 2007, accounting for approximately 25% of the total assets of the U.S. commercial banking system.

115. The U.S. insurance market is the world's largest, with gross insurance premiums of US$1.17 trillion in 2006, or 31.5% of the world market; US$533.6 billion were in life and health insurance, and US$636.5 billion in property and casualty insurance.150 The United States is sixth in the world with respect to insurance premiums per capita, with US$3,924 per head in 2006; it is 14th with respect to premiums as a percentage of GDP (8.8% in 2006). Some US$65.3 billion in premiums were paid through cross-border trade to foreign-based insurers to cover risks in the United States in 2006; they consisted mostly of reinsurance. Some US$23.2 billion were paid to U.S.-owned insurers established abroad. In 2006, losses paid to U.S. firms reached US$29.3 billion, while losses paid by U.S. firms were US$10.9 billion.151

145 BEA online information, "Industry Economic Accounts". Viewed at:

http://www.bea.gov/industry/gdpbyind_data.htm. 146 BEA online information, "Industry Economic Accounts". Viewed at:

http://www.bea.gov/industry/xls/ GDPbyInd_VA_NAICS_1998-2006.xls. Some 2.9 million people were employed in banking; 2.3 million in insurance; 822,000 in securities; and 89,000 in funds, trusts and other financial activities.

147 BEA online information, and International Economic Accounts database, "U.S. International Services". Viewed at: http://www.bea.gov/scb/pdf/2007/10%20October/1007_int_srvcs_tables.pdf.

148 Federal Reserve Statistical Release, Large Commercial Banks, 30 June 2007 Viewed at: http://www.federalreserve.gov/releases/lbr/current/default.htm.

149 Federal Reserve, Structure and Call Report. Data for U.S. Offices of Foreign Entities by Type of Institution as of 30 June 2007. Viewed at: http://www.federalreserve.gov/. An Edge corporation is a subsidiary of a bank or bank holding company or financial holding company, chartered under the Edge Act of 1919, to engage in foreign banking activities.

150 Swiss Re (2007). 151 BEA, U.S. International Transactions Accounts Data. Table 3: Private Services Transactions.

Viewed at: http://www.bea.gov/international/bp_web/simple.cfm?anon=71&table_id=3&area_id=3.


116. The United States has the largest securities markets in the world. The market value of equity and options sales on U.S. exchanges was some US$25.1 trillion in mid-November 2007. Some 73.51% of the value traded in 2007 was on the New York Stock Exchange (NYSE); the NYSE Arca and the American Stock Exchange (AMEX) came second with 19.9% of the value traded and the NASDAQ third with 16.1%.152 As at November 2007, there were 2,779 listed issuers in the NYSE, of which 423 were non-U.S. issuers from 45 countries.153 The non-U.S. percentage of NYSE group volume transactions was 11.9% for the first three quarters of 2007. In April 2007, NYSE merged with the European stock exchange Euronext, based in Paris, and formed NYSE Euronext, which operates the world's largest exchange group.

117. The U.S. financial sector has been affected by the sub-prime mortgage crisis (see Chapter I), and several banks in the United States and abroad have been posting write downs and losses.154 The IMF views the crisis as the result of a macroeconomic environment with a prolonged period of low interest rates, high liquidity and low volatility, which led financial institutions to underestimate risks; lax credit and risk management practices in many financial institutions; and shortcomings in financial regulation and supervision.155 The IMF considers that this environment both fuelled a U.S. housing boom and encouraged banks and other institutions to take on excessive leverage to generate high returns, and that supervisory and regulatory frameworks could not prevent the crisis, since mortgages were not subject to appropriate disclosure and consumer protection requirements.

118. The IMF deems that the resolution of the sub-prime mortgage crisis will require action in both macroeconomic and financial market areas.156 The Federal Reserve considers that bank holding companies (BHCs) will continue to face difficult market conditions and persistent pressure on earnings, and that more asset write-downs are likely as the market continues to adjust risk premiums and valuations change. To offset this, loan quality will require close monitoring by banking institutions and supervisory agencies; liquidity positions will need to continue to be actively managed; and banking organizations will need to implement risk management improvements. Residential mortgage lending, consumer protection, bank liquidity and capital positions, consumer lending, commercial real estate, and commercial lending are key areas of supervisory focus for the Federal Reserve.157 In this respect, the Federal Reserve has acknowledged that bank management in many cases was not fully aware of the latent risks contained in various structures and financial instruments, and how those risks could manifest themselves. To counter this in the future, financial market supervisors will be enhancing their focus on the capacity of a firm as a whole to manage risk and to integrate risk assessments into the overall decision-making by senior management.

119. The authorities consider that the U.S. banking system remains in sound overall condition, having entered the period of recent financial turmoil with solid capital and strong earnings. They noted that the Federal Reserve and other banking agencies, have been working with banking organizations to identify and rectify shortcomings in risk management and to ensure that the banking

152 NYSE online information. Viewed at: http://www.nyse.com/marketinfo/mktsummary/1108407

157455.html. The Amex typically lists stocks of younger or smaller companies. The NYSE Arca, is a fully electronic stock exchange with broader eligibility requirements which allow the listing of smaller companies.

153 NYSE online information. Viewed at: http://www.nyse.com/pdfs/07nonUSIssuers.pdf. 154 See Federal Reserve online information. Viewed at: http://www.federalreserve.gov. 155 IMF (2008a). 156 IMF (2008a). 157 Testimony of Federal Reserve Board Vice Chairman Donald L. Kohn Before the Committee on

Banking, Housing, and Urban Affairs, U.S. Senate, 4 March 2008, "Condition of the U.S. banking system". Viewed at: http://www.federalreserve.gov/newsevents/testimony/kohn20080304a.htm.


system continues to be safe and sound.158 Also, financial agencies have issued statements to encourage institutions that service residential mortgages to mitigate losses while preserving homeownership to the extent possible and appropriate.

120. In December 2007, the Federal Reserve Board proposed changes to Regulation Z (Truth in Lending) to protect consumers from unfair or deceptive home mortgage lending and advertising practices. The rule, which would be adopted under the Home Ownership and Equity Protection Act (HOEPA) of 1994, would restrict a number of practices and would also require certain mortgage disclosures to be provided earlier in the transaction. Under the HOEPA, the Board has the responsibility to prohibit acts and practices in connection with mortgage loans that it finds to be unfair or deceptive.159

(b) Legislative and regulatory framework

Consolidated financial sector regulation

121. The Gramm-Leach-Bliley Act (Financial Services Modernization) of 1999 (GLBA) is the main law regulating the consolidated financial sector. The GLBA allows domestic and foreign banks to affiliate with entities engaged in other activities that are financial in nature, or incidental or complementary to a financial activity, provided certain capital and managerial standards are met. A U.S. bank may affiliate with insurance or other financial services companies by first setting up a bank holding company (BHC) under the Bank Holding Company Act; foreign banks are not required to set up holding companies. Qualifying BHCs, referred to as financial holding companies or FHCs, may control banking, securities, or insurance firms, and may engage in new financial activities subject to prior approval by the Federal Reserve and the Treasury Department.160 A U.S. bank that meets specified prudential standards may establish financial subsidiaries to engage in certain financial activities. The aggregate assets of all financial subsidiaries must not exceed 45% of the parent bank's assets or US$50 billion, whichever is less. Securities and insurance companies can become FHCs by acquiring a bank, provided they meet certain criteria. In November 2007, 654 bank holding companies had effectively become or were being treated as FHCs, including 45 foreign banks.161

122. Under the Bank Holding Company Act of 1956, BHCs and FHCs may not own non-financial corporations other than through FHC-authorized merchant banking activities. The non-financial activities of firms predominantly engaged in financial activities (at least 85% financial) were grandfathered for ten years (until 2009), with a possibility for a five-year extension; the authorities indicate that no entities were covered by these provisions as at early 2008.

123. The Federal Reserve is the umbrella regulator for financial conglomerates that include a bank. The activities of subsidiaries of FHCs are regulated by the appropriate regulator: the Office of the Comptroller of the Currency (OCC) in the case of national banks; a state banking agency and the Federal Reserve or Federal Deposit Insurance Corporation (FDIC) in the case of state-chartered

158 Testimony of Federal Reserve Board Vice Chairman Donald L. Kohn Before the Committee on

Banking, Housing, and Urban Affairs, U.S. Senate, 4 March 2008, "Condition of the U.S. banking system". Viewed at: http://www.federalreserve.gov/newsevents/testimony/kohn20080304a.htm.

159 Federal Reserve Board online information. Viewed at: http://www.federalreserve. gov/newsevents/press/bcreg/20071218a.htm.

160 The exceptions are insurance underwriting, merchant banking, insurance company portfolio investments, and real estate development and investment.

161 For the list of institutions see Federal Reserve online information. Viewed at: http://www.federal reserve.gov/generalinfo/fhc/.


banks; the Securities and Exchange Commission (SEC) in the case of securities firms; and a State insurance commission in the case of insurance companies.

124. U.S. bank subsidiaries of foreign banks are treated as domestic banks. Branches and agencies of foreign banks have similar powers to banks and are subject to similar supervision; agencies, however, may not accept deposits from U.S. citizens or residents. For a foreign bank with U.S. branches or agencies to qualify as an FHC, the GLBA provides that "well capitalized" and "well managed" standards comparable to those applied to U.S. banks be applied to foreign banks operating a branch or agency in the United States "giving due regard to the principle of national treatment and equality of competitive opportunity".162 A composite rating along with the risk management sub-component rating provide the basis to classify a BHC or FHC as "well managed. In this respect, the Federal Reserve uses the Bank Holding Company Rating System, under which each inspected BHC is assigned a composite rating based on an evaluation of its managerial and financial condition and an assessment of future potential risk to its subsidiary depository institutions. The composite component and subcomponent ratings are assigned to BHCs on the basis of a numeric scale from 5 (lowest) to 1 (highest).163 Foreign banks that elect to be treated as FHCs, whose home country supervisors have adopted risk-based capital standards consistent with the Basle Accord, and whose capital is comparable to that of a U.S. bank owned by an FHC, must maintain specified ratios. Other foreign banks are assessed individually. Bank transactions with affiliates are subject to some statutory restrictions.164 Regulation W implements these statutory restrictions.

125. The Financial Services Regulatory Relief Act of 2006 introduced changes to U.S. financial service legislation, which affect banking, securities, and insurance business. The Act authorized payment of interest on funds maintained by a depository institution at a Federal Reserve bank and authorized the Federal Reserve Board to reduce to 0% the reserves required to be maintained by a depository institution as of 1 October 2011. The current statutory requirement ranges from 3% to 14%. The Act also amended the Home Owners' Loan Act (HOLA) to prescribe conditions under which a federal savings association may convert to a national or state bank, including prior FDIC approval for each bank if more than one national or state bank results from the conversion.

Banking services

126. Banking sector supervision in the United States is the responsibility of a number of federal and state regulators. The Federal Reserve Board (FRB) shares responsibility with the OCC, the FDIC, the Office of Thrift Supervision (OTS), as well as with State regulators. The OCC charters, regulates, and supervises all federally chartered U.S. (national) banks, and supervises the federal branches and agencies of foreign banks, as well as the international activities of U.S. national banks. The FDIC insures bank deposits. State regulators are organized in the Conference of State Bank Supervisors (CSBS).165 By statute and judicial interpretation of statutes and the U.S. Constitution, federal banking statutes and the regulations and other guidance issued by federal banking regulatory agencies may pre-empt state laws that would regulate certain activities of banking institutions and their subsidiaries.

162 FRB online information. Viewed at: http://www.federalreserve.gov. 163 Board of Governors of the Federal Reserve System (2004a). 164 The restrictions are contained in sections 23A and 23B of the Federal Reserve Act, and

implemented through FRB Regulation W. Section 23A limits a Federal Reserve System member bank's covered transactions with any single affiliate to no more than 10% of the bank's capital stock and surplus, and transactions with all affiliates combined to no more than 20%. Section 23B requires that certain transactions between a bank and its affiliates occur on market terms.

165 CSBS online information. Viewed at: http://www.csbs.org/AM/Template.cfm?Section=About_Us.


127. The United States maintains a general policy of national treatment towards the U.S. branches, agencies, securities affiliates, and other operations of foreign banks. Bound commitments have been made by the United States in market access and national treatment for all subsectors included in the Annex on Financial Services in the GATS, and in line with the Understanding on Commitments in Financial Services.166

128. Foreign banks may establish a commercial presence in the U.S. market either by establishing federal- or state-licensed branches, agencies, or representative offices, or by establishing or acquiring a national or state subsidiary bank. In order to accept or maintain domestic retail deposits of less than US$100,000, a foreign bank must establish an insured banking subsidiary, except in the case of a foreign bank branch that was already engaged in insured deposit-taking activities before or on 19 December 1991). Branches of foreign banks are generally not required to commit organizational capital at the federal level and state level; they cannot benefit from federal deposit insurance. However, foreign bank branches and agencies are subject to an "asset pledge requirement" under applicable federal and state law. At the federal level, the International Banking Act of 1978 provides that branches and agencies licensed by the OCC must maintain a "capital equivalency deposit" equal to at least 5% of their third-party liabilities with a local custodian bank. Requirements under state laws vary.

129. The operations of foreign banks in the United States are mainly governed by the International Banking Act of 1978 (IBA), which provides for the granting of national treatment to foreign banks and offers them the option of establishing federally licensed branches and agencies in addition to state-licensed offices.

130. The Riegle-Neal Interstate Banking and Branching Act (RNIBBA) of 1994 allows interstate branching by merger or by de novo establishment of branches. Interstate expansion by a foreign bank through the establishment of branches by merger with a bank located outside the home state of a foreign bank is permitted on a national treatment basis. Certain size limitations apply: the merged bank may not control more than 10% of the total deposits of insured depository institutions in the United States, and there are deposit limitations at state level. However, in accordance with the RNIBBA, an interstate merger transaction may involve the acquisition of a branch of a bank without the acquisition of the bank only if the law of the State in which the branch is located permits out-of-state banks to do this. Although all states have introduced legislation to give effect to the branching by merger provisions of the RNIBBA, interstate branching by de novo establishment (opening a branch in another state instead of having to acquire an entire bank) is permitted in only 21 states, the District of Columbia, Puerto Rico, and under conditions of reciprocity.

131. Although foreign banks are generally subject to geographic and other limitations in the United States on a national treatment basis, some exceptions have been reserved in the U.S. GATS Schedule. For example, all directors of a national bank must be U.S. citizens unless the bank is an affiliate or subsidiary of a foreign bank, in which case only a majority of the board need be U.S. citizens; approximately half of the states also require all or the majority of the board of directors of depository financial institutions to be U.S. citizens. Credit union, savings bank, home loan or thrift business may not be provided through branches of corporations organized under a foreign country's law. Foreign banks cannot be members of the Federal Reserve System; foreign-owned U.S. bank subsidiaries are not subject to this measure.

132. Initial entry into the U.S. market through the establishment or acquisition of a nationally chartered bank subsidiary by a foreign person is permitted in all states. Initial entry or expansion by a

166 WTO document GATS/EL/90/Suppl.3, 26 February 1998.


foreign person (but not a domestic person) through acquisition or establishment of a state-chartered commercial bank subsidiary is prohibited or limited in 29 states. There are some other limitations at the state level: for example, branch licences for foreign banks are not available in six states, but agency licences are.167 Representative offices of foreign banks are not permitted in 18 states, and are subject to limitations in Oklahoma, while some states require the incorporation of representative offices.168 Some states also place limitations on the acquisition by a foreign person of savings banks or loan associations (Delaware, Ohio, Tennessee, and Washington).

133. The Nationwide State and Federal Supervisory Agreement of 1996 established a series of principles to promote coordination in the supervision of interstate banks. In June 2004, new recommended practices were introduced incorporating procedures and techniques used by the Federal Reserve in working with the states in supervising state-chartered banking organizations.169

134. Risk-based capital standards were first adopted in 1989 (Basel I). In November 2007, the federal banking agencies approved final rules to implement Basel II capital requirements for large, internationally active banks with at least US$250 billion in total assets or US$10 billion in foreign exposure; Basel II is optional for smaller banks.170 Before operating under the Basel II framework, banks are required to progress through three transitional periods of at least one year each, during which there will be floors on potential declines in risk-based capital requirements. A bank needs approval from its primary federal regulator to move into each of the transitional floor periods, and at the end of the third transitional floor period to move to full Basel II.171 It is estimated that Basel II regulations will be mandatory only for the 11 or 12 largest U.S. banks.172 The authorities note that some 11 large banks must follow the new approach, and estimate that 21 banks in all will apply it, including some voluntarily. Federal banking agencies were expected to issue a draft proposal in early 2008 for smaller banks not required to implement Basel II.173

135. The Financial Services Regulatory Relief Act of 2006 introduced several amendments to U.S. law with respect to banking. The Act repealed the prohibition on the reduction of the capital stock by a national bank below certain limits, and amended provisions with respect to community development investment (CDI) requirements for national banks and state member banks, raising the ceiling on aggregate CDIs from 10% to 15% of their capital stock.174

136. Lending limit regulations restrict the total amount of loans and credits that a bank may extend to a single borrower. For example, a national bank generally must limit its total outstanding loans and

167 Delaware, Georgia, Louisiana, Mississippi, Missouri, and Oklahoma. 168 Representative offices of foreign banks are not permitted in Arizona, Arkansas, Colorado, Kansas,

Kentucky, Michigan, Mississippi, Montana, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, Virginia, Wisconsin, and Wyoming.

169 Board of Governors of the Federal Reserve System, Supervision of State-Chartered Banks, SR 04-12, 30 June 2004. Viewed at: http://www.federalreserve.gov/boarddocs/srletters/2004/sr0412.htm.

170 FRB online information. Viewed at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg 20071102a1.pdf.

171 Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, Risk-Based Capital Standards: Advanced Capital Adequacy Framework-Basel II , Final Rule, 72 Federal Register 69288 (December 7, 2007).

172 Avery (2007). 173 For the final proposal see Office of the Comptroller of the Currency (2007). 174 Under 12 U.S.C. 24 (Eleventh), national banks are authorized to make community development

investments designed primarily to promote the public welfare, such as by providing housing, services, or jobs. It is the OCC's stated policy to encourage national banks to make such investments, consistent with safety and soundness. See OCC online information. Viewed at: http://www.occ.treas.gov/fr/cfrparts/12CFR24.htm.


credits to any single borrower to no more than 15% of the bank's total capital and surplus. State banking regulations also contain similar lending limits applicable to state-chartered banks.

137. Under the Federal Deposit Insurance Reform Act of 2005, the standard maximum deposit insurance coverage is US$100,000, or US$250,000 for certain retirement accounts; this will be indexed to inflation beginning in 2010.

Insurance services

138. U.S. regulation of the insurance services sector takes place primarily at the state level as provided by the McCarran-Ferguson Act of 1945 (U.S. Code Title 15, Chapter 20). Under the Act, insurance is exempt from federal antitrust statutes to the extent that it is regulated by the states. The GLB Act also reinforces the authority of states to regulate insurance activities, and specifically protects 13 areas of state insurance regulation from federal pre-emption.

139. Insurance companies, agents, and brokers must be licensed under the law of the state in which the risk they intend to insure is located, and are authorized to offer insurance services only in the state where they are licensed. In addition, in most states, insurers must obtain approval from state regulators for their premium rates. Licensing requirements differ among states and by line of insurance, although states have been moving towards adopting a more uniform approach (see below).

140. The U.S. insurance market is open to foreign direct investment through acquisition of a licensed insurance company. Market access for foreign companies may also take place through incorporation in a state as a subsidiary of a foreign insurance company, with the exception of Minnesota, Mississippi, and Tennessee. Foreign companies may also be licensed to operate as branches in 36 states and the District of Columbia; in this case, operations are limited in principle to writing premiums based on the capital deposited in each state where the company intends to do business.175 In practice this requirement is often waived, particularly if the applicant has a qualifying deposit in another state.

141. Foreign investors are liable for the full amount of their U.S. assets, and not just for their assets in a particular state. Companies must be licensed in a state to conduct insurance business within its borders and across its borders by mail, telephone, or over the Internet; there are some exceptions to residency requirement and these vary from state to state. For example, several states exempt certain large industrial placements, MAT (marine, aviation, or transport insurance) or "surplus lines" insurance. Under certain specific conditions and with some exceptions, foreign reinsurers may write insurance in the United States even when not licensed in a particular state.

142. U.S. citizenship and in-state residency requirements apply in most states to brokers and suppliers of other services auxiliary to insurance.

143. Non-U.S. licensed reinsurers must post collateral (i.e., make a trust account deposit in the United States for the whole of the operation equivalent, or submit a letter of credit for collateral), when they conduct cross-border reinsurance businesses with U.S. licensed companies in order for the U.S. licensed company to receive a credit for the reinsurance.

144. A federal tax on gross premium income is charged at 1% on all life insurance and on reinsurance, and at 4%, on non-life insurance premiums covering U.S. risks paid to companies not

175 The exceptions are Arkansas, Arizona, Connecticut, Georgia, Hawaii, Kansas, Maryland,

Minnesota, Nebraska, New Jersey, North Carolina, Tennessee, Vermont, and Wyoming.


incorporated under U.S. law, or under the laws of countries with which the United States has double taxation treaties. This national treatment exception was listed in the U.S. GATS Schedule.

145. State legislators and regulators coordinate positions through their participation in bodies such as the National Conference of Insurance Legislators (NCOIL) and the National Association of Insurance Commissioners (NAIC). The NCOIL is an organization of state legislators whose main area of public policy concern is insurance legislation and regulation.176 The NAIC is the organization of insurance regulators from the 50 states, the District of Columbia and five U.S. territories, and provides a forum for the development of uniform policy when appropriate.177

146. The NAIC plays a substantial role in the across-State standardization of regulatory requirements through the development of model laws. It has implemented the Uniform Treatment Project through which participating states agreed to license non-resident producers in good standing in their resident states, without imposing requirements additional to those asked of resident producers. To this end, the NAIC developed a Uniform Application for Individual Non-Resident Licence currently accepted in all states and the District of Columbia, and a Uniform Certificate of Authority Application. The NAIC has also been involved in other uniformity initiatives, such as the System for Electronic Rate and Form Filing, (SERFF), the Uniform Regulation through Technology (URTT), and the National Insurance Producer Registry. As of 1 January 2008, all 50 states, the District of Columbia, Puerto Rico and over 1,700 insurance companies accepted SERFF filings; 40 states, the District of Columbia and Puerto Rico were compliant will all URTT initiatives to increase the uniformity of processing and regulation across states. At the same date, all 50 states, the District of Columbia and Puerto Rico participated in the National Insurance Producer.

147. The NAIC developed a state-based system in 2002 to promote harmonization of legislation and procedures across states. The Interstate Insurance Product Regulation Compact is aimed at developing uniform standards and a central clearinghouse to provide prompt review and regulatory approval for life insurance products.178 The Compact became operational in May 2006, after 26 individual states representing half of the U.S. premium volume passed enabling legislation. The Interstate Insurance Product Regulation Commission, a public entity, was created to provide the states with a vehicle to develop uniform national product standards in life and long-term care insurance products, establish a central point of filing, and review product filings and make regulatory decisions according to uniform standards; it became operational in May 2006. At end 2007, 30 states participated in the Compact.

148. In previous U.S. Reviews, Members have argued that regulations at the state level result in unjustified burdens on insurers and prevent them from responding to customer needs in a timely manner.179 In its responses, the United States has stated that level regulation posed no barrier to trade, and that efforts were taking place towards uniformity of state regulations through the NAIC.180 Some insurance groups, such as the Insurance Information Institute, the American Insurance Association, and the American Council of Life Insurers (ACLI) are in favour of a federal charter for insurance

176 NCOIL online information. Viewed at: http://www.ncoil.org/. 177 NAIC online information. Viewed at: http://www.naic.org/index_about.htm. 178 An interstate compact is a contract between states that allows them to cooperate on multi-state or

national issues while retaining state control. Interstate compacts are mentioned in the U.S. Constitution. 179 WTO documents WT/TPR/M/126/, 15 March 2004, and WT/TPR/M/160/, 9 June 2006. 180 WTO documents WT/TPR/M/126/Add.3, 22 November 2004, and WT/TPR/M/160/Add.1,

27 September 2006.


regulation.181 The ACLI advocates the creation of an optional federal charter and has noted that uniform and efficient regulation is crucial to the continued competitiveness of life insurers.182 In May 2007, an ACLI study found that a federal charter would save life insurers and their customers some US$5.7 billion a year in compliance costs related to supervision by multiple state regulators.183

149. The GLB Act introduced uniformity or reciprocity requirements for agents and brokers among the states, requiring states to enact uniform laws and regulations or a system of reciprocal licensing by 12 November 2002, failing which a National Association of Registered Agents and Brokers (NARAB) would be created, triggering federal pre-emption of state licensing laws. As a response, all states except New Mexico, plus Guam, passed the Producer Licensing Model Act (PLMA) or other licensing laws, providing for the required reciprocity. Through NAIC's Uniform Treatment/Licensing Reciprocity project, participating states agree to license non-resident producers who are in good standing in their resident states, without imposing additional restrictions or qualifications not required of resident producers.

150. The Terrorism Risk Insurance Act of 2002 (TRIA) introduced a three-year programme, from 22 November 2002 to 31 December 2005. TRIA was extended to 31 December 2007 by the Terrorism Insurance Extension Act of 2005, and again until 31 December 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007. Under the programme, the U.S. Government pays 85% of the insured losses of an insurer resulting from acts of terrorism after an insurer pays out an individual company deductible (20% of the prior year's earned premiums in commercial lines). The Government's share of industry losses is capped at an annual aggregate maximum of US$100 billion. Also, the Government does not share in any losses if industry-wide insured losses do not first exceed US$100 million.

151. Companies licensed in a U.S. state may benefit from the TRIA; non-licensed companies that are eligible surplus line carriers listed in the Quarterly Listing of Alien Insurers of the NAIC, or have been approved for the purpose of offering property and casualty insurance by a federal agency in connection with maritime, energy, or aviation activities may also benefit. Participating insurers are required to make terrorism insurance available to policyholders. Insurers pay no premiums for TRIA reinsurance; instead, federal payments are to be collected later through surcharges assessed on all commercial policyholders. At end 2007, no federal payments had been made under the TRIA.

Securities services

152. The main U.S. laws governing securities services at the federal level are the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes-Oxley Act of 2002, and the Credit Rating Reform Act of 2006.

153. The Securities Exchange Act of 1934 grants the Securities and Exchange Commission (SEC) broad authority over the securities industry, including the power to register, regulate, and oversee brokerage firms, investment advisers, transfer agents, and clearing firms, as well as self-regulatory organizations (SROs), such as the various stock exchanges. The 1934 Act also provides the SEC with disciplinary powers over regulated entities and persons associated with them. The Financial Services Regulatory Relief Act of 2006 amended the Securities Exchange Act of 1934 and the Investment

181 Insurance Information Institute, Optional Federal Charter, October 2007. Viewed at: http://www.iii.org/media/hottopics/insurance/opt/; and ACLI, State Insurance Regulation. Viewed at: http://www.acli.com/ACLI/Issues/42.htm.

182 ACLI, State Insurance Regulation. Viewed at: http://www.acli.com/ACLI/Issues/42.htm. 183 Pottier (2007).


Advisers Act of 1940 to include savings associations (thrifts) in the definition of "bank". This means that savings associations acting as investment advisers and broker-dealers are not subject to certain SEC registration requirements.

154. Registration of securities with the SEC is required in principle, prior to their offer or sale; however, there are exceptions.184 Foreign issuers can opt to use different registration and periodic reporting forms than those used by domestic users. Foreign private issuers that prepare their financial statements according to International Financial Reporting Standards, as issued by the International Accounting Standards Board, can submit financial statements to the SEC without reconciliation to U.S. Generally Accepted Accounting Principles. Broker-dealers, whether foreign or domestic, are generally required to register with the SEC to solicit business with U.S. persons, although pursuant to Rule 15a-6, promulgated under the Securities Exchange Act of 1934, foreign broker-dealers are allowed to engage in certain, limited securities activities in the United States without registering, under certain circumstances. Clearing agencies must also register with the SEC.

155. The Investment Company Act (ICA) of 1940, as amended, grants the SEC regulatory authority over domestic and foreign investment companies, both of which must register with the SEC before selling shares to the public. A foreign investment company may not publicly offer its shares in the United States unless the SEC issues an order, on a case-by-case basis, permitting the company to register under the ICA. Domestic investment advisers are regulated by state regulators if they manage less than US$25 million and do not advise an SEC-registered investment company; otherwise, they are regulated by the SEC. Foreign investment advisers are able to register with the SEC regardless of the amount of assets under management; the registration requirement involves record maintenance, inspections, submission of reports, and payment of a fee. U.S. banks must register as investment advisers only if they advise an investment company registered with the SEC under the ICA, while foreign banks generally must register as investment advisers if they provide investment advice for compensation.185 The United States took a national treatment reservation in the GATS for this different treatment.

156. Foreign-owned dealers of U.S. government securities are granted national treatment, under the Primary Dealers Act of 1988 of as long as U.S. firms operating in the government debt markets of the foreign country are accorded "the same competitive opportunities" as domestic companies operating in those markets. The United States took an MFN exemption in its GATS Schedule for participation in issues of government-debt securities.

157. The Sarbanes-Oxley Act of 2002 (P.L. 107-204) introduced regulatory changes to reinforce the supervision of the securities industry, and a number of reforms to enhance corporate responsibility, enhance financial disclosures, and combat corporate and accounting fraud. The Act created the Public Company Accounting Oversight Board (PCAOB), under the general oversight of the SEC, to supervise the audit of public companies that are subject to U.S. securities laws, and enforce compliance with accounting and auditing standards.

158. The Commodity Exchange Act and the Commodity Futures Modernization Act of 2000 grant the Commodity Futures Trading Commission (CFTC), created by the CFTC Act of 1974, the regulatory authority over futures trading in the United States. Persons offering or selling foreign exchange-traded futures and option products to persons located in the United States must register with

184 Exemptions from the registration requirement include: private offerings to a limited number of persons or institutions; offerings of limited size; intrastate offerings; and securities of municipal, state, and federal governments. By exempting many small offerings from the registration process, the SEC seeks to foster capital formation by lowering the cost of offering securities to the public.

185 This does not include domestic branches of foreign banks, which are treated the same as U.S. banks.


the CFTC or obtain an exemption. CFTC Regulation 30.10 allows the CFTC to provide such exemptions if, among other things, the firm's home-country regulator demonstrates that it provides a comparable system of regulation and enters into an information-sharing agreement with the CFTC. Some 21 regulatory and self-regulatory authorities from 11 trading partners benefited from Regulation 30.10 relief in November 2007. Currently, 156 non-U.S. firms operate under CFTC rule 30.10 orders that have been issued to 13 self-regulatory and regulatory organizations in ten trading partners.186

(iv) Air transport services

(a) Main features

159. Over a quarter of U.S. trade by value is moved via air cargo, which is the main mode of transportation for high value and perishable goods. U.S. air traffic accounts for about one third of the world aviation market, and 17 of the world's 30 busiest airports are located in the United States. There were some 19,854 airports in 2006, of which 5,270 for public use.187

160. The profitability of U.S. airlines, which was considerably affected by the 11 September 2001 attacks, improved during the period under review. Four of the major U.S. airlines (Delta, Northwest, US Airways, and UAL Corporation (United Airlines' parent) filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in 2005, but by end 2007 they had all emerged from bankruptcy protection. The U.S. Department of Transportation reported an operating profit margin of 8.8% in the second quarter of 2007, the highest since 2000, for a group of 21 selected passenger airlines including the seven largest network, low-cost, and regional carriers in the United States. For the first time since 2000, airlines have posted five consecutive profitable quarters. The seven network carriers (Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines, and US Airways) reported a profit of US$2.4 billion in the second quarter of 2007, a 1.7% improvement over the same period in 2006.188

161. All public-use U.S. airports with commercial services are owned by state or local governments, or local authorities; this has been the case historically. Some U.S. airports are partly or totally operated through outsourcing and management contracts, including with foreign operators; this type of arrangement is common in the provision of services such as terminal and parking area operations, ground transport, building maintenance, baggage handling, and construction and engineering. The U.S. authorities consider that public ownership of airports has worked well. Under the Airport and Improvement Act of 1982, the FAA prepares an annual "National Airport Plan" for developing public airports. In terms of general location and type of development, the National Airport Plan specifies the maximum airport development necessary to provide a system of public airports adequate to anticipate and meet the needs of civil aeronautics. The authorities note that airport improvement public grants have had as a pre-condition that airlines be able to self-handle and that the use of airport facilities be non-discriminatory.

162. There are no legal barriers that prevent U.S. airports with commercial service from being privately-owned. Also, federal financial assistance is available both to private and public owners of commercial service airports. However, legal restrictions complicate financing and reduce profitability

186 Australia, Brazil, Canada, Chinese Taipei, France, Germany, Japan, Singapore, Spain, and the

United Kingdom. CFTC online information. Viewed at: http://www.cftc.gov/cftc/cftcreports.htm. 187 Department of Transportation, Bureau of Transportation Statistics. Viewed at http://www.transtats.

bts.gov. 188 Department of Transportation, Bureau of Transportation Statistics. Viewed at: http://www.

transtats.bts.gov.


as well as incentives to privately owned airports. First, U.S. state or local governments or local airport authorities can obtain funding from local and state tax revenues and may impose and use passenger facility charges to fund airport development; these sources of revenue are not available to private airport owners. Second, there are U.S. Federal government policy and statutory limits on the use of airport revenue: a federally funded public or private airport, for example, may not use proceeds from the sale of the airport for non-airport purposes; i.e., the airport revenue must be used for the capital and operating costs of the airport. Once a privately owned airport accepts federal assistance, such as grants of federal funding under the Airport Improvement Program (AIP) or transfers of federally owned land, the airport may only use airport revenue (federal and non-federal) as noted above. If airport property is sold, the proceeds of the sale are considered airport revenue, so a city cannot sell its airport to a private operator and use the proceeds for general government purposes. This is a disincentive for local governments to transfer an airport to a private operator.

163. Congress passed a law establishing an Airport Privatization Pilot Program in 1996 to produce alternative sources of capital for airport development and improve customer service. The law authorizes the FAA to grant exemptions from certain federal requirements for up to five airport privatization projects. Commercial service airports can be leased; general aviation airports can be leased or sold. For example, if a local government privatizes its airport by selling it to a private operator, the Pilot Program permits the FAA to exempt the local government from the requirement to use the proceeds of sale for airport purposes. Also, if a private operator buys or leases a public airport under the programme, the private operator would be eligible to receive federal airport grants and to collect passenger facility charges.

164. Since 1997, when FAA published procedures for applications under the Airport Privatization Pilot Program, the FAA has approved only one application for participation. Several other applications were filed but withdrawn. In 2000, Stewart International Airport, a small hub air carrier airport in Newburgh, New York, was leased to National Express Group, PLC (NEG) to manage and develop Stewart Airport. The Port Authority of New York and New Jersey, however, acquired the lease from NEG in October 2007 and Stewart Airport returned to public ownership. In October 2006, the FAA approved the preliminary application for the lease of Chicago Midway International Airport to a private operator under the Pilot Program. If approved, Chicago Midway will be the first large hub airport to participate in the programme.189

165. Congestion remains a major problem at U.S. airports: some 26.5% of all flights were delayed by 15 minutes or more in 2007 (24.5% in 2006).190 Rising passenger demand and an industry preference for smaller planes may magnify this trend in the near future. Currently, the National Airspace System (NAS) handles 750 million passengers each year, and expects this number to reach 1 billion by 2015. Suggested solutions to the problem include: changes to U.S. policy on landing fees, designed to allow airports to use pricing to encourage more efficient use of their airfields, and attract additional resources to expand capacity; prioritizing operational and capacity improvements; and setting flight caps.191 With respect to changes in the pricing policy, the FAA has launched a proposal to amend the 1996 Rates and Charges Policy to give greater flexibility for operators of

189 FAA online information. Viewed at: http://www.faa.gov/airports_airtraffic/airports/airport_

obligations/privatization/. 190 Department of Transportation online statistics. Viewed at: http://www.transtats.bts.gov/HomeDrill

Chart_Month.asp?Sel_Year=2007&Arr_Del=1&Sel_Carrier=000&Sel_Airport=000&URL_SelectYear=&URL_SelectMonth=.

191 "Aviation Congestion and the Way Forward: No More Delay". Remarks by Secretary of Transportation Mary Peters at the Aero Club of Washington, Washington, D.C., 22 January 2008. Viewed at: http://www.dot.gov/affairs/peters012208.htm.


congested airports to use landing fees to provide incentives to air carriers to use the airport at less congested times or to use alternate airports to meet regional air service needs.192

(b) Regulatory framework

166. The Office of the Secretary of Transportation (OST) at the DOT oversees the formulation of U.S. air transport policy. The Federal Aviation Administration at the DOT is responsible for safety issues, regulates U.S. commercial space aviation, and monitors U.S. and foreign air carriers operating in U.S. territory.193 Anyone who wishes to provide air transport services as a U.S. air carrier must obtain two separate authorizations from the DOT: "economic" authority from the OST and "safety" authority from the FAA. The DOT can take action under its statutory authority to preserve competition. The Air Traffic Organization (ATO), of the FAA, established in February 2004 to oversee the U.S. air traffic system, provides all air traffic services in the United States.

167. U.S. airlines must be under actual control of U.S. citizens, as stated in the U.S. Code. U.S. citizens must hold at least 75% of the voting interest. In addition, the president and at least two thirds of the board of directors and other managing officers must be U.S. citizens. However, on a case-by-case basis, the DOT has allowed foreign citizens to own up to 49% of an airline's stock by using non-voting shares above 25%, provided that actual control remains in the hands of U.S. citizens and an open-skies agreement exists between the United States and the homeland of the foreign investor.

168. Domestic air services can be provided only by U.S. carriers. Crews engaged in domestic air passenger and freight service must be U.S. nationals or resident aliens. Although, generally, only U.S. companies and U.S. citizens are eligible to lease aircraft (with crew and, typically, maintenance, and insurance) to U.S. carriers, under certain limited conditions generally stipulated in bilateral agreements, foreign air carriers are allowed to provide aircraft with crew to U.S. carriers. In general, the Fly America Act (49 U.S.C. 40118) requires that whenever there is government-financed transportation of passengers and cargo, it must take place on U.S.-flag air carriers (or a U.S. carrier code-share on a foreign airline). This restriction may be waived when the United States enters into bilateral or multilateral agreements and allows the provision of such services by foreign air carriers.

169. The FAA's Aviation Insurance Program provides products that address the needs of the U.S. domestic airline industry that are not adequately met by the commercial insurance market. The programme is currently providing war risk hull loss and passenger, crew, and third-party liability insurance (until 31 August 2008), as required by the Homeland Security Act of 2002 as amended by the Consolidated Appropriations Act 2008. The programme charges premiums and has accumulated reserves to pay claims.

170. The DOT manages programmes that provide subsidies to air carriers for service to certain small communities. The DOT administers aviation regulatory programmes, including the Essential Air Service (EAS) programme under which approximately US$100 million are spent each year for about 140 communities194; and the Small Community Air Service Development Pilot Program, which provides federal grants to small communities, and under which US$10 million was available for grant awards in FY2007. No limits are set on the amount of individual awards. In FY2007, grants ranged from US$50,000 to US$800,000 for a total of nearly US$10 million granted to 26 communities.

192 Federal Aviation Administration, Policy Regarding Airport Rates and Charges: Notice of proposed amendment [Docket No. FAA–2008–0036] RIN 2120–AF90]. FR Vol. 73, No. 12, 17 January 2008.

193 FAA online information. Viewed at: http://www.faa.gov. 194 DOT, Office of Aviation Analysis, "Essential Air Service Program". Viewed at: http://ostpxweb.

ot.gov/aviation/X-50%20Role_files/EAS.htm#Reports.


Incentives may also be granted at the state and local level, especially for airports in small and mid-size cities.

171. The United States has GATS commitments with respect to aircraft repairs and maintenance, and has scheduled MFN exemptions with regard to the sale and marketing of air transport services and the operation and regulation of CRS services.

172. The United States has bilateral aviation agreements with some 100 countries, of which 79 are open skies agreements (OSAs), as defined by the DOT.195 The DOT views OSAs as providing an environment that produces the most competitive and price-sensitive service for consumers; OSAs are also viewed as a necessary, although not the only, prerequisite for antitrust immunity to be granted to alliances with foreign airlines. The United States participates, together with Brunei, Chile, New Zealand, Samoa, Singapore, Tonga, and Cook Islands in the APEC Multilateral Open Skies Agreement, signed in May 2001. In its bilateral air-transport agreements the United States has inserted clauses on ground handling.

173. The U.S.-EU Air Transport Agreement, signed 30 April 2007, is scheduled to be applied provisionally from 30 March 2008. The agreement, which replaces bilateral agreements between the United States and EU Member States, introduced a number of liberalization measures with respect to air traffic freedoms, ownership and control, provision of aircraft with crew, and U.S. government procured transportation (see Box IV.1).

(v) Maritime transport

(a) Main features

174. In 2006, U.S. water-borne commerce amounted to some 2.59 million tonnes. Of this, 928,000 tonnes were domestic commerce, reserved for vessels built in the United States and registered under the U.S. flag. The share of foreign trade in the total volume of water-borne commerce continued to increase during the period under review, from 56% in 2001 to 60% in 2006, reflecting a rise in tanker imports and a decline in coastwise tanker trade.196 As a consequence of increased foreign trade, foreign-flag participation in U.S. water-borne trade has also grown in volume terms, reaching an estimated 60% in 2006, compared with 55% in 2001; this includes domestic water-borne transport, reserved for U.S. flag vessels. The traditional U.S. trade deficit in freight and port services reached US$19 billion in 2006.197 U.S. international maritime container traffic increased by 52% between 2001 and 2006, three times as fast as U.S. gross domestic output.198

175. The U.S.-flag fleet, at 12 million deadweight tons (dwt) and with 286 vessels, was the fifteenth largest merchant marine fleet in the world at end 2006. On an ownership basis, the U.S. fleet is the world's fifth largest, with 684 vessels (at 39.6 million dwt).199 From 2001 to end 2006, there was a 15% reduction of the U.S.-flag fleet, and older vessels were removed from service. Only 1.2% of international cargo was carried by U.S. flag vessels in 2006.

195 The list of open-skies agreements entered into by the United States may be viewed at:

http://www.state.gov/e/eeb/rls/othr/2007/22281.htm. 196 MARAD (2007c). 197 Exports totalled US$46.3 billion, while imports were US$65.3 billion. BEA online information.

Viewed at: http://www.bea.gov/bea/international/bp_web/simple.cfm?anon=240&table_id=3&area_id=3. 198 BTS online information. Viewed at: http://www.bts.gov/publications/americas_container_ports/

pdf/entire.pdf. 199 MARAD online information. Viewed at: www.marad.dot.gov/MARAD_statistics.


Box IV.1: U.S.-EU Air Transport Agreement On 30 April 2007, the United States and the European Union signed a first-stage U.S.-EU Air Transport Agreement, with provisional application from 30 March 2008. The main characteristics of the agreement are:

• U.S. airlines are granted the right to perform international air transportation from points behind the United States via the United States and intermediate points to any point(s) in any EU Member State and beyond; for all-cargo service, between the Czech Republic, France, Germany, Luxembourg, Malta, Poland, Portugal, and Slovakia and any point(s).

• EU airlines are granted the right to perform air transport services from points behind the EU Member States via these States and intermediate points to any U.S. point(s) and beyond; for all-cargo service, between the United States and any point(s); and for combination services, between any point(s) in the United States and any point(s) in any member of the European Common Aviation Area (ECAA).

• To benefit from these rights, for U.S. airlines, with some exceptions for all-cargo services, the transportation must be part of a service that includes the United States; for EU airlines, with the exception of all-cargo services and combination services between the United States and any member of the ECAA, the transportation must be part of a service that serves a Member State.

• Airlines are allowed to determine the frequency and capacity of their international air transportation services, based upon commercial considerations; neither party may unilaterally limit the volume of traffic, frequency or regularity of service, or the aircraft type operated by the airlines of the other party.

• Prices for air transportation services operated pursuant to the agreement can be established freely and may not be subject to approval, nor may they be required to be filed.

• EU airlines are granted direct access to some U.S. Government procured transportation. • Airlines of each party are allowed, under certain circumstances, to enter into arrangements for the

provision of aircraft with crew for international air transportation with airlines of the parties or of a third country.

• The agreement, in addition to recognizing the EU carrier concept, opens the possibility for EU investors to own or control airlines from Switzerland, Liechtenstein, members of the European Common Aviation Area (ECAA, apart from the 27 EU members, Norway, Iceland, Croatia, the former Yugoslav Republic of Macedonia, Albania, Bosnia and Herzegovina, and Kosovo), Kenya, and U.S. open-skies partners in Africa, without putting at risk such airlines' rights to operate in the United States.

• Annex 4 of the agreement spells out the conditions for ownership by nationals of an EU Member State of the equity of a U.S. airline, which is subject to the usual two limitations: first, ownership by all foreign nationals of more than 25% of a corporation's voting equity is prohibited; second, actual control of a U.S. airline by foreign nationals is also prohibited. Ownership of up to 49.9% of the total equity of a U.S. airline is not deemed, of itself, to constitute control of that airline. In the case of EU nationals, however, Annex 4 also specifies that ownership of 50% or more of the total equity of a U.S. airline by EU nationals is not to be presumed to constitute control of that airline, and that such ownership is to be considered on a case-by-case basis. Ownership by U.S. nationals of EU airlines shall also be subject to two limitations: first, Member States and/or their nationals must be majority owners and second, such Members States and/or their nationals must exercise effective control.

• The agreement envisages starting second-stage negotiations not later than 60 days after the provisional application date, the agenda for which will include: traffic rights liberalization; additional foreign investment opportunities; effect of environmental measures and infrastructure constraints on the exercise of traffic rights; further access to Government-financed air transportation; and provision of aircraft with crew.

• During the period of provisional application, bilateral U.S./EU Members agreements are suspended; upon entry into force of the agreement, they will be superseded by it.

Source: WTO Secretariat, based on the U.S.-EU Air Transport Agreement.


(b) Regulatory framework

176. The United States did not table an offer in the WTO Negotiations on Maritime Transport Services, suspended in June 1996. It has not tabled an offer with respect to maritime transport services in its offer on services in the Doha Development Agenda.200

177. The Maritime Administration (MARAD) of the Department of Transportation is responsible for promoting the development and maintenance of the U.S. merchant marine, ensuring that it is sufficient to carry U.S. domestic water-borne commerce and a substantial portion of its water-borne foreign commerce, and capable of serving as a naval and military auxiliary in time of war or national emergency.201 The Federal Maritime Commission (FMC) regulates ocean-borne transport, including ocean transportation intermediaries, and oversees the collective activities of shipping lines (which are not subject to U.S. antitrust laws for both U.S. and foreign operators of liner shipping services with fixed-schedules).202 The FMC is also responsible for regulating rates of government-owned or - controlled carriers, and investigates and prosecutes malpractice, including market-distorting activities.203 The FMC also operates an Alternative Dispute Resolution programme.

Water-borne trade

178. Cabotage restrictions remain in place. Section 27 of the Merchant Marine Act of 1920, commonly referred to as the Jones Act, reserves cargo service between two points in the United States (including its territories and possessions), either directly or via a foreign port, for ships that are registered and built in the United States and owned by a U.S. corporation, and on which 75% of the employees are U.S. citizens. The Jones Act does not prevent foreign companies from establishing shipping companies in the United States as long as they meet some restrictions, like the requirements with respect to U.S. employees. Under the Passenger Vessel Services Act of 1886, domestic passenger services are subject to similar requirements. MARAD estimates that the cargo preference laws generated over 10 million revenue tons of cargo and US$1.3 billion of ocean freight revenue in FY2006.204

179. Under certain circumstances, waivers to the Jones Act or the Passenger Services Act may be granted to foreign vessels and to U.S. vessels not protected by the Act.205 The Secretary of Transportation is authorized to waive the U.S. build requirements for foreign built or rebuilt small passenger vessels authorized to carry no more than 12 passengers in a specified area, provided this does not adversely affect U.S. vessel builders or the coastwise trade business of any person who employs vessels built in the United States. The Maritime Policy Improvement Act of 2002 allows for the granting of a Jones Act waiver for self-propelled tank vessels not built in the United States, provided the person requesting the waiver is a party to a binding legal contract, executed within 24 months after the date of enactment of the Act, with a U.S. shipyard for the construction in the

200 WTO document TN/S/O/USA, 9 April 2003. 201 MARAD online information. Viewed at: http://www.marad.dot.gov/welcome/mission.html. 202 FMC online information. Viewed at: http://www.fmc.gov. 203 For a description of the activities of the FMC (2006). 204 MARAD (2007a). 205 For example, Public Law 87-77 authorizes the transportation of passengers and merchandise in

Canadian vessels between ports in Alaska and the rest of the United States, and Public Law 98-563 permits the transportation of passengers between Puerto Rico and other U.S. ports by foreign-flag carriers. Also, water-borne freight shipments between the U.S. Virgin Islands and other U.S. ports may be carried by foreign-flag vessels, and trade with Guam and other U.S. Pacific territories may be carried by foreign-built U.S.-flag ships that meet the ownership and crewing requirements.


United States of a self-propelled tank vessel. Vessels benefiting from the waiver must be U.S.-owned. The waiver may not be granted to more than three vessels.

180. The Shipping Act of 1984, as amended by the Ocean Shipping Reform Act of 1998 (OSRA), allows shipping lines to enter into individual long-term service contracts with importers and exporters, without carrier groups being able to restrict them. The United States has bilateral maritime agreements in effect with Brazil, China, Russia and Viet Nam; an exchange of letters with Japan on port services has the effect of an agreement.206

181. U.S. and foreign operators of liner shipping services and marine terminal operators in the United States have exemptions to antitrust laws with respect to their operations in U.S.-foreign ocean-borne trade. Agreements among liner operators and marine terminal operators to discuss, fix, or regulate transportation rates, and other conditions of service, or cooperate on operational matters must be filed with the FMC, which reviews them to avoid anti-competitive behaviour. Under the OSRA, the FMC must ensure that common carriers' tariff rates and charges for carriage in U.S.-foreign trade are published electronically and are accessible to the public. The FMC is authorized to review the rates of government-owned and -controlled ocean common carriers to ensure that the commercial carriers with whom they compete are not unfairly disadvantaged.

182. Section 19 of the Merchant Marine Act and the Foreign Shipping Practices Act of 1988 (FSPA) empower the FMC to investigate and address conditions adversely affecting U.S. carriers in foreign trade that do not exist for foreign carriers in the United States. The FMC is also authorized to investigate and address general or specific conditions adverse to shipping in U.S.-foreign trade. In FY2006, the FMC monitored shipping practices by a number of foreign governments but no action was taken.207 Under the Shipping Act of 1984, the FMC exercises special regulatory oversight on "controlled carriers", i.e., ocean common carriers operating in U.S.-foreign trade that are owned or controlled by foreign governments. In May 2005, the FMC published an updated list that included eight controlled carriers, from Algeria, China (four), India, Singapore, and Sri Lanka.208 At end 2007, the list had not been updated.

183. The United States maintains a number of programmes to allow for the eventual use of its. commercial fleet for defence purposes. The Maritime Security Program (MSP) supports the U.S.-flag merchant marine by providing a fixed payment to U.S.-flag vessel operators. The Maritime Security Act of 2003 (MSA) creates a new MSP for FY2006-15. The MSA authorized US$1.73 billion for FY2006-15 to support the operation of 60 U.S.-flag vessels.209 Subject to annual appropriations, the programme is administered on the basis of renewable one-year contracts, provided funding is available. The Voluntary Intermodal Sealift Agreement (VISA) programme provides assured access to commercial intermodal capacity during time of war or national emergency. During 2007, 125 ships were enrolled in the VISA programme. Some 77% of the VISA capacity comprises MSP participants' vessels. VISA participants receive priority for award of DOD peacetime ocean freight contracts.210

206 MARAD (2007). 207 FMC (2006). 208 Federal Maritime Commission, Controlled Carriers Under the Shipping Act of 1984, Notice,

5 May 2005. Viewed at: http://www.fmc.gov/home/UpdatedControlledCarrierList.asp. 209 MARAD online information. Viewed at: http://www.marad.dot.gov/Programs/msp/. 210 Maritime Administration Office of Statistical and Economic Analysis.


184. The United States maintains some cargo preferences in international trade. The Cargo Preference Act of 1904 requires all items procured for or owned by U.S. military departments and defence agencies to be carried exclusively on U.S.-flag vessels. The Cargo Preference Act of 1954, as amended, requires that at least 50% of the gross tonnage of all government-generated cargo be transported on privately owned, U.S.-flag commercial vessels, to the extent such vessels are available at fair and reasonable rates.211 The Cargo Preference Act of 1954 also applies to the Strategic Petroleum Reserve (see section (3) above), which is required to use U.S.-flag tankers for at least 50% of oil transport.

185. Under the Food Security Act of 1985, the minimum U.S.-flag requirement is 75% for shipments of agricultural cargoes under certain USDA and USAID foreign assistance programmes. In 2006, 83% of food-aid preference cargoes were carried by U.S.-flag vessels.212 The Act also established the ocean freight differential (OFD) programme under which MARAD reimburses the USDA and USAID for the cost differential of using U.S.-flag ships to carry more than 50% of food-aid cargoes.213 The OFD programme funding level was US$175 million in FY2007, down from US$269 million in FY2006. The Food Security Act of 1985 also foresees an additional reimbursement to the USDA, termed "Excess 20%", applicable if total costs incurred by the USDA for ocean freight and OFD on exports of agricultural commodities and products under certain agricultural programmes exceed 20% of the value of the commodities exported under these programmes; the reimbursement is made on the excess over 20%.

186. Under Public Resolution No. 17 of 1934, exports for which a government agency makes export loans or credit guarantees, must be carried exclusively in U.S. vessels; this applies to credits of the Ex-Im Bank or other government instruments. Waivers may be granted for partial use of national-flag vessels of recipient countries, when U.S. vessels are not available at reasonable rates, but the recipient country share may not exceed 50% of the total movement under the credit. These waivers are subject to reciprocal treatment for U.S.-flag vessels by the recipient country.214

Port services and shipbuilding

187. The United States has 361 public ports handling most U.S. overseas trade. In 2003, the top 50 ports accounted for 90% of total U.S. cargo tonnage; the 25 top container ports account for over 98% of all U.S. container shipments. Vessel calls to U.S. ports represent 10% of world vessel calls. The volume of traffic into U.S. west-coast ports has been increasing rapidly, due mainly to increased loads carried by vessels, stretching the capacity of some ports. The DOT has made congestion relief a top priority and is currently working to reduce this problem. The Port Development Program, run by MARAD, aims to address port congestion in the medium term, by doubling the cargo-handling capacity in every major U.S. port by 2020.215

188. Vessels from Cambodia, Cuba, Iran, Libya, North Korea, and Syria may not enter U.S. ports on national security grounds.

211 Agencies may opt for higher preference percentages. See MARAD online information. Viewed at:

http://www.marad.dot.gov/offices/cargo/laws.htm. 212 U.S. Government (2006). 213 The ocean freight differential (OFD) is the difference between the cost of shipping the same cargo

on a U.S.-flag vessel and on a foreign-flag vessel. 214 MARAD online information. Viewed at: http://www.marad.dot.gov/offices/cargo/PR17

waivers.html. 215 MARAD online information. Viewed at: http://www.marad.dot.gov/Headlines/factsheets/PDF%20

Versions/Port%20Development-FS.pdf.


189. The United States maintains an MFN exemption covering restrictions on performance of longshore work by crews of foreign vessels owned and flagged in countries that similarly restrict U.S. crews on U.S.-flag vessels from longshore work.216 The Immigration and Nationality Act of 1952, as amended, prohibits non-U.S.-national crewmembers from performing longshore work in the United States, but provides a reciprocity exception.

190. Under the Maritime Transportation Security Act of 2002, commercial vessels arriving in the United States from a foreign port are required to transmit electronically, in advance, information on passengers, crew, and cargo. Under the Port Security Grant Program (PSGP), U.S. port areas may receive federal government funding for the enhancement of security. In FY2007, 57 ports were eligible, for a total of US$110 million.217

191. Under the Jones Act, only U.S. shipbuilders may supply ships on domestic routes; the United States was granted an exemption from GATT rules for measures prohibiting the use, sale, or lease of foreign-built or foreign-reconstructed vessels in commercial applications between points in national waters or the waters of an exclusive economic zone. There are no restrictions on foreign investment in U.S. shipyards or ship-repair facilities, but benefits under certain programmes may be contingent upon nationality requirements.

192. MARAD provides financial assistance to ship-owners and U.S. shipyards (section (3) above), and U.S. citizens owning or leasing vessels may obtain tax benefits to build qualifying vessels. Assistance is also provided to construct tank vessels in the United States and carry out improvements in small shipyards.

(vi) Professional and business services

(a) Introduction

193. The United States has continued to maintain a sizeable trade surplus in professional and business services in recent years. Business, professional, and technical services receipts (exports) increased to US$96.2 billion in 2006: US$48.8 billion were affiliated services, and US$47.4 unaffiliated. Europe was the main destination of exports of unaffiliated services (40.6%), in particular the United Kingdom (12.8%), followed by Asia and the Pacific (25.4%) and Latin America and the Caribbean (12.2%). The main export areas were: R&D and testing services, and computer and information services. Business, professional, and technical services payments (imports) increased to US$58.2 billion in 2006; US$42.4 billion were affiliated services, and US$15.8 billion unaffiliated. The main sources of unaffiliated services imports in 2006 were Europe (43.2%), Canada (21%), Asia-Pacific (20.3%), and Latin America and the Caribbean (10%). The main import areas were: computer and information services, R&D and testing services, and management, consulting, and public relations services.218

194. States have responsibility for the regulation, licensing, and oversight of the professions practiced within their jurisdictions.219 Regulations vary from state to state and usually there is no automatic recognition of licences. The absence of a national regulatory regime creates different market access conditions among the states. Some professions are subject to national qualifying examinations recognized in most states as part of the licensing process, but there is no federal-level

216 WTO document S/C/W/71, 24 November 1998. 217 U.S. Department of Homeland Security (2007). 218 BEA (2007e). 219 U.S. Department of Education online information. Viewed at: http://www.ed.gov/about/offices/list/

ous/international/usnei/us/edlite-state-reg.html.


licensure that supersedes state regulation. The competent authorities for recognition, certification, and conferral of awards and titles are recognized institutions and programmes. The federal government does not itself evaluate diplomas or credits or recognize qualifications.220

195. In the context of previous U.S. reviews, the authorities noted that, in practice, there is a high degree of commonality across the states for some professions; for example, single national examinations are recognized by state authorities for accounting, architectural, and engineering services. They also noted that the Federal Government encourages states to pursue regulatory policies that minimize trade effects. While recognizing that residency and local presence requirements remained in a number of states, they noted that these had been eliminated for over 75% of the U.S. market for accounting, architectural, engineering, and foreign legal consultancy services, a market valued at over US$300 billion per year.221

196. In setting, evaluating, and enforcing standards for entry and continued competency in a profession, state regulatory authorities often use the services of independent institutions, including professional associations. For example, state authorities frequently recognize, contract with, or delegate legal authority to independent boards or organizations for accreditation of professional education programmes and licensing examinations.222

197. The United States applies caps on visas under the Specialty Occupation Aliens and Fashion Models of Distinguished Merit and Ability (H-1B) visa programme. The H1-B visa is a non-immigrant visa category under the Immigration and Nationality Act, section 101(a)(15)(H), which allows U.S. employers to employ foreign guest workers employed in specialty occupations. H-1B work-authorization is limited to employment by the sponsoring employer. The duration of stay is three years, extendible to six. There is an annual cap on H-1B admissions of 65,000 workers per fiscal year. An additional 20,000 foreign nationals holding a master's or higher degree from U.S. universities may be admitted beyond the 65,000 cap, under the H-1B Visa Reform Act of 2004; H-1B non-immigrants who enter the United States to work for universities and non-profit research facilities are not subject to the 65,000 cap. Visa renewals do not count towards the annual limits.223

198. Some U.S. trade agreements contain temporary entry provisions that relate to market access for professional services. Under the U.S.-Chile and U.S.-Singapore FTAs certain categories of persons (non-immigrant professionals) can seek to enter the United States temporarily to engage in business activities subject to numerical limits (1,400 for Chile and 5,400 for Singapore).224 The H1B1 admission category was introduced in 2004 to implement the temporary entry provisions for these agreements.225 In addition, a citizen of a NAFTA country may enter the United States temporarily to work in a professional occupation recognized under the terms of the NAFTA. Numerical limitations do not apply to NAFTA professionals.

220 U.S. Department of Education online information. Viewed at: http://www.ed.gov/about/offices/list/

ous/international/usnei/us/edlite-uscompauth.html. 221 WTO document WTO/TPR/M/160/Add 1, 15 June 2006, p. 365. 222 Williams and Nersessian (2007). 223 United States Citizenship and Immigration Services online information. Viewed at:

http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=1847c9ee2f82b010VgnVCM10000045f3d6a1RCRD&vgnextchannel=1847c9ee2f82b010VgnVCM10000045f3d6a1RCRD

224 U.S.-Chile Free Trade Agreement Implementation Act Statement Of Administrative Action. Viewed at http://waysandmeans.house.gov/media/pdf/chile/hr2738ChileSAA7-15-03.pdf.

225 U.S. Embassy in Singapore online information. Viewed at: http://singapore.usembassy.gov/fta _visas.html.


(b) Accounting services

199. Accounting, auditing, and bookkeeping is the only professional services activity where the United States runs a trade deficit. Exports of accounting, auditing, and bookkeeping services totalled US$420 million in 2006, while imports reached US$1 billion.226

200. Accountancy services are subject to professional licensing at the state level, as well as oversight by federal agencies where appropriate. The title of Certified Public Accountant (CPA) continues to be the statutory qualification for accountants.227 In most U.S. states, only CPAs are licensed to provide public attestation opinions on financial statements (including auditing). However, in Arizona, Kansas, North Carolina, and Wyoming the CPA designation, but not the practice of auditing, is restricted to those meeting in-state requirements. A few states have another tier of accountant qualification (Public Accountant - PA), which is being phased out. In a number of states an out-of-state CPA is restricted from using the CPA designation until a practice privilege licence or certificate from that State is obtained.

201. Since 2002 the U.S. auditing and accounting industry has undergone a significant transformation with respect to the expansion of auditors' duties vis-à-vis public companies, the creation of a new regulatory oversight, and its market structure.228 The Sarbanes-Oxley Act of 2002 (P. L. No. 107-204, 116 Stat. 745) introduced important accounting reforms, such as the creation of the Public Company Accounting Oversight Board (PCAOB), a private-sector, non-profit corporation, established to oversee the auditors of public companies subject to securities law.229 An Institute of Internal Auditors Research Foundation assessment of the costs and benefits associated with the Sarbanes-Oxley Act concluded that there were significant benefits associated with the control identification, documentation, and testing process.230 The SEC has recognized that, while most of the Act's benefits have been accomplished, there are also costs to public companies of achieving the full measure of the Act's objectives.231

202. The higher market concentration of the large U.S. accounting firms since the Arthur Andersen 2002 indictment has been noted as a factor influencing the auditing improvements mandated by the Sarbanes-Oxley Act of 2002.232 The remaining "big four" firms (PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, and KPMG), handle the vast majority of audits for publicly traded companies as well as many private companies.233

203. The American Institute of Certified Public Accountants (AICPA) is the largest CPA professional association in the United States.234 The AICPA plays a major role in assisting practicing CPAs. For example, under a contract with the state boards, it has developed the Uniform CPA Examination, which is used by all states, and the International Qualification Examination (IQEX),

226 BEA (2007e). 227 American Institute of Certified Public Accountants online information. Viewed at: http://www.

aicpa.org/. 228 Talley (2006). 229 PCAOB online information. Viewed at: http://www.pcaobus.org/. 230 Rittenberg and Miller (2005). 231 Testimony of U.S. Securities and Exchange Commission Chairman William H. Donaldson Before

the House Committee on Financial Services Concerning the Impact of the Sarbanes-Oxley Act, 21 April 2005. Viewed at: http://www.sec.gov/news/testimony/ts042105whd.htm.

232 Cunningham (2006). 233 Rutgers Accounting Web online information. Viewed at: http://raw.rutgers.edu/raw/internet/

big5.htm. 234 American Institute of Certified Public Accountants online information. Viewed at: http://www.

aicpa.org/.


which states can use for non-U.S. professionals covered by a mutual recognition agreement (MRA). The National Association of State Boards of Accountancy (NASBA) is an umbrella organization representing the accountancy boards in 55 U.S. jurisdictions that regulate the profession.235 The NASBA promotes uniformity among the states as they carry out their roles, which include setting entry-level professional standards and licence-renewal requirements (such as continuing professional education and firm-quality assurance reviews) and adopting and enforcing professional standards of the CPA qualification.

204. Through the International Qualifications Appraisal Boards, the AICPA and NASBA cooperate in setting up and maintaining MRAS with foreign accountancy institutes. In June 2006, agreements were in place with Australia, Canada, Ireland, and Mexico. Accountants from these countries who meet the specified criteria may sit for the IQEX as an alternative to the Uniform CPA Examination. A state board of accountancy may designate a professional accounting credential issued in a foreign country as substantially equivalent to a CPA certificate and may accept that credential in partial satisfaction of its requirements.

205. Issuing reports on financial statements and other attest and compilation services are reserved for CPAs, and auditors must be licensed by or have obtained a practice privilege from the regulatory authorities of each State where they wish to practice. There are no nationality requirements in 48 states236; the exceptions are Alabama and North Carolina, where U.S. citizenship (or permanent residency, in North Carolina) is a requirement for licensing, except if there is international reciprocity.237 Thirteen states require state residency, employment in the state, or an in-state office for licensing of accountancy. Nearly all states require accounting firms to operate only as sole proprietorships, partnerships or professional corporations. Auditors for all companies are regulated by the State Boards of Accountancy, and auditors with public company clients (those defined as "issuers" under the Securities Exchange Act of 1934), are also regulated by the SEC and the PCAOB.

(c) Legal services

206. U.S. exports of legal services increased significantly between 2001 and 2006, from US$3 billion to US$5 billion, while imports of legal services increased more moderately, from US$740 million to US$914 million.238

207. In accordance with its list of specific GATS commitments, legal services in the United States must be supplied by a natural person. Foreign law firms may, however, establish subsidiaries in the United States, with the same rights as U.S. firms, including the right to hire domestic lawyers. U.S. residency is required in order to practice before the U.S. Patents Office. Nine jurisdictions maintain in-state office requirements for licensing, and 15 jurisdiction maintain in-state or U.S. residency requirements for licensure.239 The 29 states with FLC rules represent 86% of the U.S. legal

235 There is a board for each of the 50 states, plus the District of Colombia, Puerto Rico, U.S. Virgin

Islands, Guam, and the North Mariana Islands. National Association of State Boards of Accountancy online information. Viewed at: http://www.nasba.org/nasbaweb/NASBAWeb.nsf/WPANP.

236 American Institute Of Certified Public Accountants (2004). 237 For Alabama, see http://www.alabamaadministrativecode.state.al.us/docs/acc/4ACC.RTF; and for

North Carolina, see http://www.nccpaboard.gov/Clients/NCBOA/Public/Static/license.htm#_North_ Carolina_ Accountancy.

238 BEA (2007e). 239 District of Colombia, Indiana, Michigan, Minnesota, Mississippi, New Jersey, Ohio, South Dakota,

and Tennessee have state office requirements. Iowa, Kansas, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Jersey, New Hampshire, Oklahoma, Rhode Island, South Dakota, Vermont, Virginia, Wyoming have residency requirements.


services market.240 The American Bar Association (ABA) and the American Law Institute represent lawyers as a profession.

208. The United States has been active in the DDA services negotiations and, together with other Members, has formulated a specific proposal on licensing of foreign lawyers.241 The United States has made GATS commitments to accord market access and national treatment for the provision of foreign legal consultancy services in 16 jurisdictions.242 Thirteen other states have implemented rules on foreign legal consultancy in recent years and foreign-licensed lawyers may provide consultancy services in these jurisdictions.243

209. The practice of law in the United States requires admission to the bar of a particular state or jurisdiction.244 Each U.S. state/jurisdiction has its own rules for bar admission.245 All jurisdictions require that applicants for admission to the bar pass a written bar examination; all jurisdictions, except Maryland, Puerto Rico, Wisconsin, and Washington, also require applicants to pass a separate Multistate Professional Responsibility Examination (MPRE). Eighteen states limit eligibility for the bar exam to Juris Doctor or LL.B. graduates of ABA-approved law schools. The remaining states have more extensive lists of approved law schools and/or allow other means for meeting the education requirement, including foreign law degrees. Graduates of foreign law schools are eligible for admission in 25 states, generally upon a determination of educational equivalency. The state-administered bar exam includes the Multistate Bar Examination (MBE), in all jurisdictions except Louisiana, Washington, and Puerto Rico.246 Lawyers who have been admitted to the bar in one jurisdiction may be admitted to the bar in another without taking another examination if they meet the latter jurisdiction's standards, which usually include a specified period of legal experience. In most cases, however, lawyers must pass the bar examination in each state in which they plan to practice.

210. Admission to a state bar does not entitle the admitted attorney to appear and plead before the U.S. district courts or any U.S. Court of Appeals; in some states admission to the bar does not entitle the admitted attorney to appear and plead before the State's appellate courts. Observers have noted that, because lawyers often represent individuals/corporations with business dealings in multiple states, the regulation of legal practice at the state level tends to create impediments to the efficient delivery of legal services.247

(d) Architectural and engineering services

211. The United States posts a significant trade surplus in architectural, engineering, and other technical services. In general, both exports and imports have increased rapidly in recent years: U.S. exports of these services increased to US$3.7 billion in 2006, while imports rose to US$169 million.248 Commercial presence remains the most important mode of delivery.

240 U.S. Economic Census, 2002. Viewed at: http://www.census.gov/econ/census02/ index.html. 241 WTO document TN/S/W/37, S/CSC/W/46, 24 February 2005. 242 Alaska, California, Connecticut, District of Colombia, Florida, Georgia, Hawaii, Illinois, Michigan,

Minnesota, New Jersey, New York, Ohio, Oregon, Texas, and Washington. 243 Arizona, Delaware, Idaho, Indiana, Louisiana, Massachusetts, Missouri, New Mexico, North

Carolina, North Dakota, Pennsylvania, South Carolina, and Utah. 244 USDOJ, United States Attorneys' Manual. Viewed at http://www.usdoj.gov/usao/eousa/foia_

reading_room/usam/index.html. 245 For admission rules see: http://www.abanet.org. 246 A Lawyer's Guide to the United States. Viewed at: http://www.lexmundi.com/images/lexmundi

/PDF/guide-unitedstates.PDF. 247 Williams and Nersessian, (2007e). 248 BEA (2007e).


Architectural services

212. The U.S. GATS Schedule binds market access in modes 1, 2 and 3, with the exception of a commercial presence limitation applied by Michigan, where two thirds of the officers, partners, and/or directors of an architectural firm must be licensed in that state as architects, professional engineers, and/or land surveyors.

213. The right to practice architecture and to use the title "architect" is granted by registration boards in each of the 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands, who also regulate the profession in their jurisdiction.249 The National Council of Architectural Registration Boards (NCARB), which represents state boards, works with its member boards to establish registration or licensing policies. The National Architectural Accrediting Board (NAAB) is the sole agency authorized to accredit U.S. professional degree programmes in architecture. Most state registration boards require a degree in architecture from a NAAB accredited programme as a precondition to registration.250

214. There is no reciprocal registration between foreign countries and the United States, with the exception of Canada, with which the United States maintains a full mutual recognition and immediate access agreement, the Inter-Recognition Agreement.

215. To register as an architect in a U.S. jurisdiction, a foreign architect must first comply with the education, training and examination requirements of that jurisdiction. The NAAB examines non-U.S. programmes in order to give NCARB a basis for deciding whether the architectural education in another country is comparable.251 Foreign architects credentialed in countries that the NCARB determines offer reasonable reciprocal credentialing opportunities for U.S. architects may apply for NCARB certification through the Broadly Experienced Foreign Architects process. The NCARB has worked to increase the mobility of architectural credentials through international agreements; at end 2007, NCARB had agreements with entities in Australia, Canada, China, the Czech Republic, Japan, Mexico, and New Zealand. The agreement with Mexico will end once the trinational agreement under negotiation is operational. Negotiations have been held with over 50 countries, including broader-scope MRA discussions with Australia and the EC.252

Engineering and integrated engineering services

216. In the GATS, the United States has undertaken market-access commitments regarding engineering and integrated engineering services. The only reservations involve citizenship requirements for the licensing of professional engineers in the District of Colombia and in-state residency requirements in 12 states.253

217. The registration of professional engineers is performed by the individual states.254 Each registration or licence is valid only in the State in which it is granted. The licensing procedure

249 NCARB (1999). 250 NCARB (2007). 251 NAAB online information. Viewed at: http://www.naab.org/newsletter1727/newsletter_show

.htm?doc_id=14327. 252 AIA International Enews, "NCARB Fosters International Mobility". Viewed at: http://www.aia.org

/nwsltr_intl.cfm?pagename=intl_a_ncarb_07. 253 Idaho, Iowa, Kansas, Maine, Mississippi, Nevada, Oklahoma, South Carolina, South Dakota,

Tennessee, Texas, and West Virginia. 254 For a list of the states' engineering sites, see: http://www.nspenetforum.org/eweb/Dynamic

Page.aspx?Site=NSPE1&Webcode=state_society_website.


requirements vary but in general include: (i) graduation with a degree from an accredited four-year university programme in engineering; (ii) completing a standard Fundamentals of Engineering (FE) written examination; (iii) accumulating a certain amount of engineering experience (four years, in most states); and (iv) completing a written Principles and Practice in Engineering examination.255 Some states also have state-specific examinations.256 Various states issue generic professional engineering licences, while others issue licences for specific disciplines.257

218. The National Council of Examiners for Engineering and Surveying (NCEES) is a non-profit organization composed of engineering and surveying licensing boards representing all states and U.S. territories. NCEES develops, scores, and administers the examinations used for engineering and surveying licensure throughout the United States. The accreditation of domestic and international engineering programmes from other countries considered to be substantially equivalent is performed by ABET. The U.S. Council for International Engineering Practice (USCIEP) participates in international fora that facilitate international mobility for qualified professional engineers, including the APEC Engineer Coordinating Committee and the Engineers Mobility Forum.258

255 National Council of Examiners for Engineering and Surveying (NCEES) online information.

Viewed at: http://www.ncees.org/licensure/licensing_boards/. 256 NCEES online information. Viewed at: http://www.ncees.org/exams/. 257 National Society of Professional Engineers online information. Viewed at: http://www.nspe.

org/pd-home.asp. 258 USCIEP online information. Viewed at: http://www.usciep.org/.


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APPENDIX TABLES


Table AI.1 Merchandise exports and re-exports by group of products, 2000-06 (US$ million and per cent)

Description 2000 2001 2002 2003 2004 2005 2006

(US$ million) Total 780,332 731,006 693,222 723,609 817,905 904,339 1,037,029 (% of total) Total primary products 12.7 13.2 13.5 14.4 14.3 14.7 15.8 Agriculture 9.2 9.6 9.9 10.5 9.7 9.1 8.9 Food 7.0 7.4 7.7 8.1 7.3 6.8 6.7 0449 Other maize, unmilled 0.6 0.6 0.7 0.7 0.7 0.5 0.7 2222 Soya beans 0.7 0.7 0.8 1.1 0.8 0.7 0.7 0412 Other wheat (including spelt), unmilled 0.4 0.4 0.5 0.5 0.6 0.5 0.4 Agricultural raw material 2.2 2.2 2.3 2.5 2.4 2.3 2.3 2631 Cotton (other than linters), not carded or combed

0.2 0.3 0.3 0.5 0.5 0.4 0.4

2515 Chemical wood pulp, soda/sulphate bleached

0.3 0.3 0.3 0.3 0.3 0.3 0.3

2321 Synthetic rubber 0.2 0.2 0.2 0.2 0.2 0.2 0.3 Mining 3.6 3.6 3.6 3.9 4.6 5.6 6.8 Ores and other minerals 0.8 0.9 0.9 1.0 1.2 1.4 1.8 2882 Other non-ferrous base metal waste/ scrap

0.1 0.2 0.2 0.2 0.2 0.3 0.5

Non-ferrous metals 1.1 1.0 1.0 0.9 1.1 1.2 1.6 6842 Aluminium and aluminium alloys, worked

0.4 0.4 0.4 0.4 0.4 0.4 0.5

6812 Platinum unwrought, unworked or semi-manufactured

0.2 0.2 0.2 0.1 0.2 0.2 0.4

Fuels 1.7 1.8 1.7 1.9 2.3 2.9 3.4 3212 Other coal, whether or pulverized, not agglomerated

0.3 0.2 0.2 0.2 0.3 0.4 0.3

3432 Natural gas, in the gaseous state 0.0 0.0 0.1 0.2 0.2 0.3 0.2 Manufactures 83.2 82.4 82.4 81.4 81.8 81.0 79.9 Iron and steel 0.8 0.8 0.8 0.9 1.1 1.3 1.2 Chemicals 10.6 11.3 12.1 13.0 13.8 13.3 13.1 5429 Medicaments, n.e.s. 0.7 1.0 1.0 1.1 1.3 1.2 1.3 5416 Glycosides; glands, etc. and extracts 0.3 0.4 0.5 0.6 0.7 0.7 0.7 Other semi-manufactures 6.0 5.9 6.0 6.0 6.0 6.0 5.9 6672 Diamonds (excl. industrial, sorted) not mounted

0.5 0.6 0.7 0.7 0.9 0.9 0.9

Machinery and transport equipment 52.8 51.3 50.5 48.6 48.1 48.0 47.7 Power generating machines 2.6 3.2 3.1 2.9 3.1 3.2 3.0 7149 Parts of engines and motors of 714.4... 1.2 1.4 1.4 1.3 1.4 1.4 1.4 7144 Reaction engines 0.6 0.7 0.6 0.6 0.5 0.6 0.5 Other non-electrical machinery 9.5 9.1 8.9 8.5 9.1 9.3 9.3 7239 Parts n.e.s., of machinery of 723 and 744.3

0.7 0.9 0.9 0.8 0.9 1.0 1.0

7284 Machinery and appliances for particular industries

1.3 0.9 0.7 0.7 0.8 0.7 0.7

Office machines & telecommunication equipment

19.7 17.3 15.7 15.6 14.8 13.9 13.2

7764 Electronic integrated circuits and micro assembly

6.7 5.4 5.3 5.6 5.1 4.5 4.4

7599 Parts and accessories of 751.1, 751.2, 751.9

3.2 2.8 2.4 2.5 2.3 2.2 2.0

7649 Parts and accessories for apparatus of division

1.6 1.5 1.4 1.3 1.2 1.1 1.2

Other electrical machines 5.8 5.3 5.2 5.0 5.0 4.9 5.0 7725 Switches, relays, fuses etc. for a voltage not

0.9 0.8 0.8 0.7 0.8 0.7 0.7

7731 Insulated wire, cable etc.; optical fibre cable

0.8 0.7 0.6 0.6 0.6 0.6 0.6

Table AI.1 (cont'd)


Description 2000 2001 2002 2003 2004 2005 2006

7787 Electrical machines/apparatus 0.3 0.3 0.4 0.4 0.5 0.4 0.5 Automotive products 8.6 8.7 9.7 9.6 9.3 9.5 9.2 7812 Motor vehicles for the transport of persons

2.2 2.5 3.0 3.1 3.0 3.4 3.4

7843 Other motor vehicle parts and accessories

4.0 3.9 4.2 3.8 3.7 3.4 3.2

7821 Goods vehicles 0.8 0.8 0.9 1.0 1.1 1.1 1.1 Other transport equipment 6.7 7.6 7.8 7.0 6.7 7.2 8.1

7924 Aeroplanes, etc. (excl. helicopters), >15,000

2.7 3.3 3.5 3.0 2.5 2.8 3.5

7929 Parts, n.e.s., (excl. tyres, engines, electric

2.0 2.2 2.1 2.1 1.9 1.9 2.0

Textiles 1.4 1.4 1.5 1.5 1.5 1.4 1.2 Clothing 1.1 1.0 0.9 0.8 0.6 0.6 0.5 Other consumer goods 10.5 10.8 10.6 10.6 10.7 10.6 10.3 Other 4.1 4.4 4.2 4.1 3.9 4.3 4.3 Gold 0.8 0.7 0.5 0.7 0.5 0.6 0.8

Source: UNSD, Comtrade database (SITC Rev.3).


Table AI.2 Merchandise imports by group of products, 2000-06 (US$ million and per cent)

Description 2000 2001 2002 2003 2004 2005 2006

(US$ million) Total 1,258,080 1,180,074 1,202,284 1,305,092 1,525,268 1,732,321 1,918,997 (% of total) Total primary products 18.8 18.9 17.9 20.1 22.0 24.9 26.2 Agriculture 5.5 5.8 5.9 5.9 5.8 5.5 5.4 Food 4.1 4.4 4.6 4.7 4.4 4.2 4.2 1124 Spirits 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0361 Crustaceans, frozen 0.3 0.3 0.3 0.3 0.3 0.2 0.2 1121 Wine of fresh grapes (including fortified wine)

0.2 0.2 0.2 0.3 0.2 0.2 0.2

Agricultural raw material 1.4 1.4 1.4 1.3 1.4 1.3 1.2 2482 Wood of coniferous, sawn of a thickness > 6 mm

0.5 0.6 0.5 0.5 0.6 0.5 0.4

2515 Chemical wood pulp, soda/sulphate bleached

0.2 0.2 0.2 0.2 0.2 0.2 0.1

Mining 13.3 13.1 12.0 14.2 16.2 19.4 20.7 Ores and other minerals 0.5 0.4 0.4 0.4 0.4 0.5 0.5 Non-ferrous metals 1.8 1.7 1.4 1.3 1.6 1.7 2.3 6841 Aluminium and aluminium alloys, unwrought

0.3 0.4 0.4 0.3 0.4 0.4 0.5

6821 Copper anodes; alloys; unwrought

0.2 0.2 0.2 0.1 0.2 0.2 0.4

Fuels 11.1 10.9 10.1 12.5 14.2 17.2 18.0 3330 Crude oils of petroleum and bituminous minerals

7.5 6.7 6.9 8.2 9.4 11.0 12.2

3432 Natural gas, in the gaseous state

0.8 1.3 1.0 1.4 1.3 1.6 1.3

Manufactures 77.0 76.7 77.7 75.9 74.3 71.5 70.4 Iron and steel 1.5 1.3 1.3 1.1 1.8 1.8 2.1 Chemicals 6.0 6.9 7.4 8.0 7.6 7.6 7.6 5429 Medicaments, n.e.s. 0.6 0.9 1.3 1.4 1.4 1.4 1.6 5157 Other heterocyclic compounds; nucleic acids

1.1 1.2 1.2 1.2 1.1 1.0 1.0

Other semi-manufactures 6.6 6.7 7.0 7.0 7.0 6.9 6.7 6672 Diamonds (excl. industrial, sorted) not mounted

1.0 0.9 1.0 1.0 1.0 0.9 0.9

6991 Locksmiths´ wares, and hardware, of base metal

0.3 0.3 0.3 0.3 0.3 0.4 0.4

Machinery and transport equipment

44.8 43.1 42.9 40.9 39.9 38.3 37.7

Power generating machines 1.5 1.9 1.6 1.3 1.2 1.2 1.3 7149 Parts of engines and motors of 714.41 and 714.8

0.5 0.6 0.5 0.5 0.4 0.4 0.5

Other non-electrical machinery 5.3 5.2 5.0 5.1 5.3 5.4 5.5 7478 Taps, cocks, valves and similar appliances, n.e.s.

0.3 0.3 0.3 0.3 0.3 0.3 0.3

7232 Mechanical shovels, etc., self-propelled

0.2 0.2 0.2 0.2 0.2 0.3 0.3

Office machines & telecommunication equipment

17.1 14.6 14.4 13.8 14.0 13.5 13.2

7599 Parts and accessories of 751.1, 751.2, 751.9 and 752

2.6 2.2 2.0 1.9 2.0 1.8 1.8

7643 Radio or television transmission apparatus

1.2 1.4 1.4 1.4 1.6 1.6 1.5

7611 Color television receivers 0.6 0.7 0.8 0.9 1.1 1.2 1.5 7522 Digital automatic data processing machines, containing in the same housing at least a central processing unit an input and output unit whether or not combined

0.6 0.7 0.9 1.1 1.1 1.2 1.2

Table AI.2 (cont'd)


Description 2000 2001 2002 2003 2004 2005 2006

7764 Electronic integrated circuits and microassemblies

3.3 2.2 1.9 1.6 1.5 1.2 1.2

Other electrical machines 4.6 4.4 4.3 4.2 4.1 4.0 4.1 Automotive products 13.5 14.0 14.7 13.9 12.9 11.9 11.5 7812 Motor vehicles for the transport of persons, n.e.s.

8.8 9.2 9.6 8.9 8.1 7.2 7.1

7843 Other motor vehicle parts and accessories of 722, 781 to 783

2.3 2.3 2.5 2.5 2.5 2.5 2.3

7821 Goods vehicles 1.2 1.4 1.4 1.3 1.1 1.1 1.0 Other transport equipment 2.8 3.0 2.8 2.6 2.4 2.3 2.2 Textiles 1.3 1.3 1.4 1.4 1.4 1.3 1.2 Clothing 5.3 5.6 5.6 5.5 5.0 4.6 4.3 8453 Jerseys, pullovers, cardigans, knitted/crocheted

0.9 1.0 1.0 1.0 0.9 0.8 0.7

8426 Trousers, breeches, women´s/girls´, not knitted/crocheted

0.5 0.6 0.6 0.6 0.5 0.5 0.5

Other consumer goods 11.3 11.8 12.2 12.1 11.6 11.1 10.7 8211 Seats (excl. of 872.4), and parts

0.7 0.7 0.8 0.9 0.8 0.8 0.8

8514 Other footwear, leather or composition leather uppers

0.7 0.8 0.9 0.8 0.7 0.7 0.6

8215 Furniture, n.e.s., of wood 0.5 0.6 0.7 0.7 0.7 0.7 0.6 8942 Children´s toys 0.8 0.8 0.8 0.8 0.7 0.6 0.6 Other 4.2 4.4 4.4 4.0 3.7 3.5 3.5 Gold 0.2 0.2 0.2 0.2 0.3 0.3 0.3



Table AI.3 Merchandise exports and re-exports by trading partner, 2000-06 (US$ million and per cent)

Description 2000 2001 2002 2003 2004 2005 2006

(US$ million) Total 780,332 731,006 693,222 723,609 817,905 904,339 1,037,029 (% of total) America 44.5 44.2 44.7 44.0 44.1 44.6 43.7 Other America 44.5 44.2 44.7 44.0 44.1 44.6 43.7 Canada 22.6 22.4 23.2 23.4 23.1 23.4 22.2 Mexico 14.3 13.9 14.1 13.5 13.5 13.3 12.9 Brazil 2.0 2.2 1.8 1.6 1.7 1.7 1.9 Venezuela 0.7 0.8 0.6 0.4 0.6 0.7 0.9 Chile 0.4 0.4 0.4 0.4 0.4 0.6 0.7 Colombia 0.5 0.5 0.5 0.5 0.6 0.6 0.6 Dominican Rep. 0.6 0.6 0.6 0.6 0.5 0.5 0.5 Argentina 0.6 0.5 0.2 0.3 0.4 0.5 0.5 Europe 23.6 24.4 23.1 23.3 23.1 22.7 23.0 EC(25) 21.5 22.2 21.2 21.3 21.1 20.6 20.6 United Kingdom 5.3 5.6 4.8 4.7 4.4 4.3 4.4 Germany 3.7 4.1 3.8 4.0 3.8 3.8 4.0 The Netherlands 2.8 2.7 2.6 2.9 3.0 2.9 3.0 EFTA 1.5 1.6 1.4 1.4 1.4 1.5 1.7 Switzerland 1.3 1.3 1.1 1.2 1.1 1.2 1.4 Other Europe 0.6 0.5 0.5 0.5 0.6 0.6 0.7 Turkey 0.5 0.4 0.4 0.4 0.4 0.5 0.6 Commonwealth of Independent States 0.4 0.5 0.6 0.5 0.6 0.6 0.7 Russian Federation 0.3 0.4 0.3 0.3 0.4 0.4 0.5 Africa 1.4 1.7 1.5 1.5 1.6 1.7 1.8 South Africa 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Egypt 0.4 0.5 0.4 0.4 0.4 0.4 0.4 Nigeria 0.1 0.1 0.2 0.1 0.2 0.2 0.2 Middle East 2.4 2.6 2.7 2.7 2.9 3.5 3.8 United Arab Emirates 0.3 0.4 0.5 0.5 0.5 0.9 1.1 Israel 1.0 1.0 1.0 1.0 1.1 1.1 1.1 Saudi Arabia 0.8 0.8 0.7 0.6 0.6 0.8 0.8 Asia 27.6 26.5 27.4 28.0 27.7 26.8 27.0 China 2.1 2.6 3.2 3.9 4.2 4.6 5.3 Japan 8.4 7.9 7.4 7.2 6.7 6.1 5.8 Six East Asian Traders 13.1 12.0 12.3 12.2 12.3 11.5 11.4 Korea, Rep. of 3.6 3.0 3.3 3.3 3.2 3.1 3.1 Singapore 2.3 2.4 2.3 2.3 2.4 2.3 2.4 Chinese Taipei 3.1 2.5 2.7 2.4 2.7 2.4 2.2 Hong Kong, China 1.9 1.9 1.8 1.9 1.9 1.8 1.7 Malaysia 1.4 1.3 1.5 1.5 1.3 1.2 1.2 Thailand 0.9 0.8 0.7 0.8 0.8 0.8 0.8 Other Asia 4.0 4.0 4.5 4.6 4.5 4.5 4.5 Australia 1.6 1.5 1.9 1.8 1.7 1.7 1.7 India 0.5 0.5 0.6 0.7 0.7 0.9 1.0 Philippines 1.1 1.0 1.0 1.1 0.9 0.8 0.7 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum: EC(15) 21.1 21.8 20.8 20.8 20.6 20.1 20.0



Table AI.4 Merchandise imports by trading partner, 2000-06 (US$ million and per cent)

Description 2000 2001 2002 2003 2004 2005 2006

(US$ million) Total 1,258,080 1,180,074 1,202,284 1,305,092 1,525,268 1,732,321 1,918,997 (% of total) America 35.6 36.0 35.3 34.6 34.3 34.3 33.8 Other America 35.6 36.0 35.3 34.6 34.3 34.3 33.8 Canada 18.5 18.7 17.8 17.4 17.0 16.8 16.0 Mexico 10.9 11.3 11.3 10.7 10.3 10.0 10.4 Venezuela 1.6 1.4 1.3 1.4 1.7 2.0 2.0 Brazil 1.2 1.3 1.4 1.5 1.5 1.5 1.5 Chile 0.3 0.3 0.4 0.3 0.4 0.4 0.5 Colombia 0.6 0.5 0.5 0.5 0.5 0.5 0.5 Trinidad and Tobago 0.2 0.2 0.2 0.4 0.4 0.5 0.5 Ecuador 0.2 0.2 0.2 0.2 0.3 0.4 0.4 Europe 20.3 21.4 21.6 21.7 20.8 20.0 19.3 EC(25) 18.6 19.7 19.9 19.9 19.1 18.3 17.7 Germany 4.8 5.1 5.3 5.3 5.2 5.0 4.8 United Kingdom 3.5 3.6 3.5 3.4 3.1 3.0 2.8 France 2.4 2.6 2.4 2.3 2.1 2.0 2.0 EFTA 1.3 1.3 1.3 1.3 1.3 1.2 1.2 Switzerland 0.8 0.8 0.8 0.8 0.8 0.8 0.8 Other Europe 0.3 0.4 0.4 0.4 0.5 0.5 0.4 Turkey 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Commonwealth of Independent States 0.8 0.7 0.7 0.8 1.0 1.1 1.3 Russian Federation 0.6 0.6 0.6 0.7 0.8 0.9 1.1 Ukraine 0.1 0.1 0.0 0.0 0.1 0.1 0.1 Kazakhstan 0.0 0.0 0.0 0.0 0.0 0.1 0.1 Africa 2.3 2.3 1.9 2.6 3.2 3.9 4.4 Nigeria 0.9 0.8 0.5 0.8 1.1 1.4 1.5 Algeria 0.2 0.2 0.2 0.4 0.5 0.6 0.8 Angola 0.3 0.3 0.3 0.3 0.3 0.5 0.6 Middle East 3.2 3.3 3.0 3.4 3.6 3.8 3.9 Saudi Arabia 1.2 1.2 1.2 1.5 1.5 1.7 1.7 Israel 1.1 1.0 1.1 1.0 1.0 1.0 1.0 Iraq 0.5 0.5 0.3 0.4 0.6 0.6 0.6 Asia 37.8 36.3 37.5 37.0 37.2 36.8 37.3 China 8.6 9.3 11.1 12.5 13.8 15.0 15.9 Japan 12.0 11.0 10.4 9.3 8.7 8.2 7.9 Six East Asian Traders 12.7 11.5 11.3 10.6 10.3 9.4 9.1 Korea, Rep. of 3.3 3.1 3.1 2.9 3.1 2.6 2.5 Chinese Taipei 3.4 2.9 2.8 2.5 2.4 2.1 2.1 Malaysia 2.1 2.0 2.1 2.0 1.9 2.0 2.0 Thailand 1.4 1.3 1.3 1.2 1.2 1.2 1.2 Singapore 1.6 1.3 1.3 1.2 1.0 0.9 0.9 Hong Kong, China 1.0 0.9 0.8 0.7 0.6 0.5 0.4 Other Asia 4.6 4.6 4.7 4.6 4.4 4.3 4.3 India 0.9 0.9 1.0 1.1 1.1 1.1 1.2 Indonesia 0.9 0.9 0.9 0.8 0.8 0.7 0.7 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum: EC(15) 18.0 19.2 19.3 19.3 18.4 17.7 17.1



Table AI.5 Cross-border trade in services, 2002-06 (US$ billion) Exports Imports 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006

Total private services 279.2 291.5 323.4 367.8 404.3 209.2 224.6 258.1 281.6 307.8Travel 66.6 64.4 74.5 81.8 85.7 58.7 57.4 65.6 69.0 72.0Passenger fares 17.0 15.7 18.9 21.0 22.2 20.0 21.0 23.7 26.1 27.5Other transportation 29.2 31.3 36.9 41.3 46.3 38.4 44.7 54.2 61.9 65.3

Freight 12.3 14.1 15.8 16.5 17.3 26.0 31.8 39.2 43.9 45.7Port services 16.8 17.7 21.0 24.9 29.0 12.6 13.0 14.9 18.0 19.6

Royalties and licence fees 44.5 48.1 52.6 59.4 62.4 19.3 19.4 23.9 24.6 26.4Affiliated 32.8 35.9 39.0 43.9 44.5 15.1 15.7 18.8 20.4 21.0

U.S. parents' transactions 29.7 32.5 35.1 39.8 39.3 3.0 2.7 2.9 3.1 2.3U.S. affiliates' transactions 3.1 3.4 3.9 4.1 5.1 12.1 13.7 15.8 17.3 18.7

Unaffiliated 11.7 12.3 13.6 15.5 17.9 4.2 3.7 5.2 4.3 5.5Other private services 121.8 132.0 140.5 164.3 187.8 72.8 82.1 90.7 99.9 116.5Affiliated services 39.9 43.3 45.7 50.1 57.6 29.2 31.7 34.4 39.8 48.2Unaffiliated services 81.9 88.8 94.8 114.2 130.1 43.6 50.4 56.2 60.1 68.3

Education 12.6 13.3 13.5 14.1 14.6 2.7 3.2 3.5 4.0 4.4Financial services 22.0 24.3 27.4 31.0 37.1 9.6 9.8 11.2 6.7 8.5Insurance, net 4.5 5.9 6.1 7.8 9.3 22.2 26.6 29.9 28.5 33.6Telecommunications 3.9 4.5 4.4 5.2 6.3 4.2 4.3 4.4 4.5 4.6

Business, professional, and technical services

62.0 66.6 71.0 84.0 96.2 33.5 37.5 40.8 48.8 58.2

Other services 11.6 12.0 13.2 14.2 15.5 0.7 0.8 1.0 1.5 1.4Memorandum for insurance services

Premiums 11.9 15.8 .. 21.3 23.3 48.2 57.6 .. 65.7 65.3Actual losses 2.8 .. .. 14.1 10.9 15.3 .. .. 42.2 29.3

.. Not available. Source: U.S. Department of Commerce, Bureau of Economic Analysis online information. Viewed at: http://www.bea. doc.gov.


Table AI.6 Major indicators of U.S. inbound and outbound direct investment by selected country and sector, 2006

U.S. direct investment abroad (outbound investment)

Foreign direct investment in the United States (inbound investment)

Stocks US$ billion Stocks US$ billion

All countries 2,384.0 1,789.1 United Kingdom 364.1 303.2 Canada 246.5 159.0 Netherlands 215.7 189.3 Switzerland 90.1 140.3 Bermuda 108.5 2.8 Japan 91.8 211.0 Germany 99.3 202.6 Singapore 60.4 2.4 Mexico 84.7 6.1 France 65.9 158.8 Ireland 83.6 28.6 Australia 122.6 25.7 Hong Kong, China 38.1 3.5 Luxembourg 82.6 130.9 Brazil 32.6 2.1 By industry Mining 136.1 – Utilities – Manufacturing 503.5 593.4 Wholesale trade 164.3 242.2 Retail trade .. 32.9 Information 74.4 126.0 Depositary credit intermediation (banking) 67.6 149.0 Finance (except depositary inst.) and insurance 484.8 257.7 Real estate and rental and leasing – 43.3 Professional, scientific, and technical services 57.4 62.3 Holding companies (non-bank) 710.3 .. Other industriesa 185.5 272.2

– Nil or not significant. .. Not available. a Includes agriculture, forestry, fishing, and hunting, and other services. Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, various issues.

Viewed at: http://www.bea.doc.gov/bea/di1.htm.


Table AII.1 Selected notifications to the WTO, October 2005-February 2008a

Legal provision Description of requirement Frequency Document

General Agreement on Tariffs and Trade 1994 Article XVIII:5 Reservation of rights to modify

schedule Ad hoc G/MA/175, 9 December 2005

Article XVII:4(a) Products traded by state-trading enterprises

Every three years (updating notifications in the two intervening years)

G/STR/N/11/USA, 4 October 2006b

Article XXIV:7(a) Customs unions and free-trade areas

Ad hoc WT/REG211/N/1-4; WT/REG219/N/1, 15 September 2006; WT/REG208/N/1, 16 January 2006

Decision of 28 November 1979 GATT document L/4903 MFN derogation in favour of

developing countries Ad hoc WT/COMTD/N/1/Add.5, 17 October 2007

WT/COMTD/N/1/Add.4, 1 March 2007 Decision on Notification Procedures for Quantitative Restrictions WTO document G/L/59 Quantitative restrictions Biennial No notification submitted Agreement on Agriculture Article 18.2 Administration of tariff and other

quota commitments Once, then changes G/AG/N/USA/57, 18 May 2007(Table

MA:1) Article 18.2 Imports under tariff quotas Annual Last notification in February 2005 (Table

MA:2) Article 5.7 and 18.2 Special safeguard Annual G/AG/N/USA/61, 17 December 2007

(Table MA:5) Article 18.2 and 18.3 Domestic support Annual G/AG/N/USA/60, 9 October 2007 (Table

DS:1); G/AG/N/USA/58 and 59, 9 October 2007 (Table DS:2)

Article 18.2 Export subsidies Annual G/AG/N/USA/62, 28 February 2008 (Tables ES:1 and 2)

Article 16.2 Possible negative effects of the reform programme on least-developed and net food-importing developing countries

Annual G/AG/N/USA/56, 10 October 2006 (Table NF:1)

Agreement on the Application of Sanitary and Phytosanitary Measures Annex B, paragraph 3 Enquiry point Once; then changes G/SPS/ENQ/22, 9 October 2007 Annex B, paragraph 10 National notification authority Once; then changes G/SPS/NNA/12, 9 October 2007 Article 7 and Annex B, paragraph 5

Proposed and adopted SPS regulations

Ad hoc 933 notifications between July 2005 and October 2007 (series G/SPS/N/USA)c

Agreement on Technical Barriers to Trade Articles 2, 3, 5 and 7 Proposed and adopted technical

regulations Prior or, in the case of urgent problems, immediately after the measure is taken

174 notifications between July 2005 and October 2007 (series G/TBT/N/USA)d

Article 10.1 and 10.3 Enquiry point Once; then changes G/TBT/ENQ/31, 29 October 2007 Article 10.7 Bilateral or plurilateral

agreements Ad hoc G/TBT/10.7/N/49, 3 March 2006 (EEA

EFTA States); G/TBT/10.7/N/50, 3 March 2006 (EEA EFTA States)

Agreement on Implementation of Article VI of the GATT 1994 (Anti-Dumping Agreement) Article 16.5 Competent authorities Once, then changes G/ADP/N/14/Add.24-

G/SCM/N/18/Add.24, 15 October 2007 Article 18.5 Laws and regulations Once, then changes G/ADP/N/1/USA/1/Suppl.7-

G/SCM/N/1/USA/1/Suppl.7, 10 August 2007

Article 16.4 Anti-dumping actions Semi-annual G/ADP/N/158/USA, 2 October 2007b Article 16.4 Anti-dumping actions Ad hoc 25 notifications; latest: G/ADP/N/168,

27 February 2008 c Table AII.1 (cont'd)


Legal provision Description of requirement Frequency Document

Agreement on Rules of Origin Annex II, paragraph 4 Preferential rules of origin Once, then changes Last notification in 1997 Agreement on Import Licensing Procedures Articles 1.4(a) and 8.2(b) Sources of information of and

changes to laws and regulations Ad hoc G/LIC/N/1/USA/3, 24 April 2006

Article 5 New licensing procedures or changes thereto

Ad hoc G/LIC/N/2/USA/3, 14 December 2007

Article 7.3 Questionnaire Annual G/LIC/N/3/USA/5, 29 February 2008 Agreement on Subsidies and Countervailing Measures Article 25.12 Competent authorities Once, then changes G/ADP/N/14/Add.24-

G/SCM/N/18/Add.24, 15 October 2007 Article 32.6 Laws and regulations Once, then changes G/ADP/N/1/USA/1/Suppl.7-

G/SCM/N/1/USA/1/Suppl.7, 10 August 2007

Article 25.2 Subsidies Every three years (updating notifications in the two intervening years)

G/SCM/N/123/USA, 15 November 2007

Article 25.11 Countervailing duties actions Semi-annual G/SCM/N/162/USA, 20 September 2007b Article 25.11 Countervailing duties actions Ad hoc 26 notifications, latest: G/SCM/N/172,

26 February 2008c General Agreement on Trade in Services Article V:7(a) Economic integration agreements Ad hoc S/C/N/391, 6 March 2007 (Dominican

Republic); S/C/N/375, 15 September 2006 (Bahrain); S/C/N/372, 17 August 2006 (Guatemala); S/C/N/366, 24 April 2006 (Honduras and Nicaragua); S/C/N/365, 28 March 2006 (El Salvador); S/C/N/362, 16 January 2006 (Morocco)

Agreement on Government Procurement WTO document GPA/1, Annex 3

National threshold Biennial GPA/W/299/Add.1, 21 December 2007b

Article XIX.5 Procurement statistics Annual Last notification submitted in January 2002

a Unless otherwise indicated. b Regular notifications - refers only to the most recent notification. c Excluding notifications contained in documents with the symbol "Corr". d Excluding notifications contained in documents with the symbols "Add" and/or "Corr". Source: WTO Secretariat.


Table AII.2 Status of dispute-related WTO matters involving the United States, October 2005-December 2007

Subject of dispute Raised by/against (WTO document

series)

Request for consultations

Panel established

Panel report

circulated

AB report circulateda

Other developments

As respondent

Preliminary anti-dumping and countervailing duty determinations on coated free sheet paper

China/United States (WT/DS368/...)

14.09.2007 No n.a. n.a. None

Domestic support and export credit guarantees for agricultural products

Brazil/United States (WT/DS365/...)

11.07.2007 17.12.2007 No n.a. None

Subsidies and other domestic support for corn and other agricultural products

Canada (WT/DS357/...)

08.01.2007 17.12.2007 No n.a. None

Measures affecting trade in large civil aircraft (second complaint)

EU/United States (WT/DS353/...)

27.06.2005 17.02.2006 No n.a. None

Continued existence and application of zeroing methodology

EU (WT/DS350/...) 02.10.2006 04.06.2007 No n.a. None

Anti-dumping administrative review on oil country tubular goods

Argentina/United States (WT/DS346/...)

20.06.2006 No n.a. n.a. None

Customs bond directive for merchandise subject to anti-dumping/countervailing duties

India/United States (WT/DS345/...)

06.06.2006 21.11.2006 No n.a. The panel expects to complete its work by November 2007

Final anti-dumping measures on stainless steel

Mexico/United States (WT/DS344/...)

26.05.2006 26.10.2006 20.12.2007 n.a. None

Measures relating to shrimp

Thailand/United States (WT/DS343/...)

24.04.2006 26.10.2006 No n.a. The panel expects to complete its work by November 2007

Anti-dumping measure on shrimp

Ecuador/United States (WT/DS335/...)

17.11.2005 19.07.2006 30.01.2007 n.a. Mutual agreement on implementation period (26.03.2007)

Measures relating to zeroing and sunset reviews

Japan/United States (WT/DS322/...)

24.11.2004 28.02.2005 20.09.2006 09.01.2007 Mutual agreement on implementation period (04.05.2007)

Continued suspension of obligations in the EU – Hormones Dispute


08.11.2004 17.02.2005 No n.a. None

Measures affecting trade in large civil aircraft


06.10.2004 20.07.2005 No n.a. None

Reviews of countervailing duty on softwood lumber

Canada/United States (WT/DS311/...)

14.04.2004 No n.a. n.a. Mutually agreed solution (12.10.2006)

Table AII.2 (cont'd)



series)


Panel established

Panel report

circulated


Other developments

Countervailing duty investigation on dynamic random access memory semiconductors (DRAMS)

Korea/United States (WT/DS296/...)


Laws, regulations and methodology for calculating dumping margins (zeroing)


12.06.2003 19.03.2004 31.10.2005 18.04.2006 Art. 21.5 panel established (25.09.2007)

Measures affecting the cross-border supply of gambling and betting services

Antigua and Barbuda/United States (WT/DS285/...)

13.03.2003 21.07.2003 10.11.2004 07.04.2005 Art. 21.3(c) arbitration report (19.08.2005); art. 21.5 panel report (30.03.2007)

Anti-dumping measures on oil country tubular goods


18.02.2003 29.08.2003 20.06.2005 02.11.2005 Mexico requested art. 21.5 panel to suspend its work (05.07.2007)

Anti-dumping measures on cement


31.01.2003 29.08.2003 No n.a. Mutually agreed solution (16.05.2007)

Investigation of the International Trade Commission in softwood lumber from Canada


20.12.2002 07.05.2003 22.03.2004 n.a. Mutually agreed solution (12.10.2006)

Sunset reviews of anti-dumping measures on oil country tubular goods

Argentina/United States (WT/DS268/...)

07.10.2002 19.05.2003 16.07.2004 29.11.2004 Art. 21.5 panel report (30.11.2006); art. 21.3(c) arbitration report (07.06.2005); art. 21.5 AB report (12.04.2007)

Subsidies on upland cotton Brazil/United States (WT/DS267/...)

27.09.2002 18.03.2003 08.09.2004 03.03.2005 Article 21.5 Panel Report (18.12.2007)

Final dumping determination on softwood lumber


13.09.2002 08.01.2003 13.04.2004 11.08.2004 Mutually agreed solution (12.10.2006)

Final countervailing duty determination with respect to certain softwood lumber from Canada


03.05.2002 01.10.2002 29.08.2003 19.01.2004 Mutually agreed solution (12.10.2006)

Provisional anti-dumping measure on imports of certain softwood lumber



Preliminary determinations with respect to certain softwood lumber


21.08.2001 05.12.2001 27.09.2002 n.a. Mutually agreed solution (12.10.2006)




series)


Panel established

Panel report

circulated


Other developments

As complainant Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment products

United States/China (WT/DS363/...)

10.04.2007 27.11.2007 n.a. n.a. None

Measures affecting the protection and enforcement of intellectual property rights


10.04.2007 25.09.2007 No n.a. None

Additional and extra-additional duties on imports

United States/India (WT/DS360/...)

06.03.2007 20.06.2007 No n.a. None

Certain measures granting refunds, reductions or exemptions from taxes and other payments


02.02.2007 No n.a. n.a. None

Measures affecting trade in large civil aircraft (second complaint)

United States/EU (WT/DS347/...)

31.01.2006 09.05.2006 No n.a. U.S. requested panel to suspend its work (09.10.2006)

Measures affecting imports of automobile parts


30.03.2006 26.10.2006 No n.a. None

Provisional anti-dumping and countervailing duties on grain corn

United States/Canada (WT/DS338/...)

17.03.2006 No n.a. n.a. None

Measures affecting the importation of rice

United States/Turkey (WT/DS334/...)

02.11.2005 17.03.2006 21.09.2007 n.a. None

Measures affecting trade in large civil aircraft


06.10.2004 20.07.2005 No n.a. None

Selected customs matters United States/EU (WT/DS315/...)

21.09.2004 21.03.2005 16.06.2006 13.11.2006 None

Value-added tax on integrated circuits



Tax measures on soft drinks and other beverages

United States/Mexico (WT/DS308/...)


Definitive anti-dumping measures on beef and rice

United States/Mexico (WT/DS295/...)


Measures affecting the approval and marketing of biotech products


13.05.2003 29.08.2003 29.09.2006 n.a. Mutual agreement on implementation period (21.06.2007)

n.a. Not applicable. a AB refers to Appellate Body. Source: WTO Secretariat.


Table AII.3 Overview of preferential trade agreements, early 2008

AGREEMENT

ENTRY INTO FORCE

WTO NOTIFICATIO

N

TARIFF ELIMINATION

MAIN PRODUCTS EXCLUDED

FROM TARIFF ELIMINATION

ADDITIONAL COVERAGE

NAFTA Canada January 1994 L/7176 (GATT)

and S/C/N/4 U.S. duties on most goods eliminated in 1998

Dairy products, cocoa products, peanuts, sugar, and syrups

Services, investment, competition policy, government procurement, intellectual property rights

Mexico January 1994 L/7176 (GATT) and S/C/N/4

U.S. duties on most goods eliminated immediately; remainder phased out over 5, 10, or 15 years (the last phase out period ended on 1 January 2008)

None Services, investment, competition policy, government procurement, intellectual property rights

Israel September 1985 (Agreement on Trade in Agricultural Products in effect since 2004)

L/5862 (GATT) U.S. duties on most goods eliminated in 1995

Dairy products, beef, peanuts, sugar and sugar-containing products, cotton, seasonings

Government procurement

Jordan December 2001 WT/REG134/1 and S/C/N/193

Most U.S. duties phased out over periods of between 2 and 10 years

Tobacco and tobacco products

Services, intellectual property rights, environment, labour

Chile January 2004 WT/REG160/N/1, S/C/N/262

U.S. duties on most goods eliminated immediately; remainder phased out over periods of between 2 and 12 years

None Services, investment, competition policy, government procurement, intellectual property rights, environment, labour

Singapore January 2004 WT/REG161/N/1, S/C/N/263

U.S. duties on most goods eliminated immediately; remainder phased out over 4, 8, or 10 years

None Services, investment, competition, government procurement, intellectual property rights, environment, labour

Australia January 2005 WT/REG184/N/1, S/C/N/310


Dairy products, and sugar and sugar containing products

Services, investment, competition, government procurement, intellectual property rights, environment, labour

Morocco January 2006 WT/REG208/N/1, S/C/N/362


None Services, investment, government procurement, intellectual property rights, environment, labour

Bahrain August 2006 WT/REG219/N/1, S/C/N/375

U.S. duties on most goods eliminated immediately; remainder phased out over periods of 5 or 10 years

None Services, government procurement, intellectual property rights, environment, labour



AGREEMENT

ENTRY INTO FORCE

WTO NOTIFICATIO

N

TARIFF ELIMINATION

MAIN PRODUCTS EXCLUDED

FROM TARIFF ELIMINATION

ADDITIONAL COVERAGE

Central America-Dominican Republic

March 2006 (El Salvador), April 2006 (Honduras and Nicaragua), July 2006 (Guatemala), and March 2007 (Dominican Republic)

WT/REG211/N/1-4 and S/C/N/365, 366, 372, 391

U.S. duties on most goods eliminated immediately; remainder phased out over periods of 5 to 20 years

Sugar Services, investment, government procurement, intellectual property rights, environment, labour

Agreements signed but not yet in force Colombia n.a. n.a. U.S. duties on most

goods eliminated immediately; remainder phased out over periods of between 5 and 15 years

Sugar Services, investment, competition policy, government procurement, intellectual property rights, environment, labour

Costa Rica n.a. n.a. U.S. duties on most goods eliminated immediately; remainder phased out over periods of 5 to 20 years


Panama n.a. n.a. U.S. duties on most goods eliminated immediately; remainder phased out over periods of between 5 and 17 years


Peru n.a. n.a. U.S. duties on most goods eliminated immediately; remainder phased out over periods of between 5 and 17 years

Sugar Services, investment, competition policy, government procurement, intellectual property rights, environment, labour

Korea n.a. n.a. U.S. duties on most goods eliminated immediately; remainder phased out over periods of between 2 and 15 years

None Services, investment, competition policy, government procurement, intellectual property rights, environment, labour

Oman n.a. n.a. U.S. duties on most goods eliminated immediately; remainder phased out over periods of 5 or 10 years

None Services, investment, government procurement, intellectual property rights, environment, labour

n.a. Not applicable. Source: WTO Secretariat, based on USTR online information. Viewed at: http://www.ustr.gov.


Table AIII.1 General overview of preferential rules of origin

Substantial transformation criteria

CTHc Minimum local value added Technical testd

Main tolerance provisionsa Cumulationb

Free-trade agreements U.S.-Israel No 35% of appraised value No None Only up to a maximum of

15% of value

NAFTA Yes 60% under transaction value method or 50% under net cost method; different thresholds apply to certain products under HS 34-37, 64, and 87

Yes 7% of value; textiles and apparel: total weight of fibres or yarns must not exceed 7% of total weight

Full

U.S.-Jordan No 35% of appraised value No None Only up to a maximum of 15% of value

U.S.-Chile Yes 45% under build-down method or 35% under build-up method; different thresholds apply to products under HS 64, 84, and 87

Yes 10% of value; textiles and apparel: total weight of fibres or yarns must not exceed 7% of the total weight

Full

U.S.-Singapore

Yes 45% under build-down method or 35% under build-up method;different thresholds apply to products under HS 64, 84, 86, and 87


Full

U.S.-Australia

Yes 45% under build-down method or 35% under build-up method;different thresholds apply to products under HS 64, 84, 87, and 90

Yes 10% of value; textiles and apparel: total weight of fibres or yarns must not exceed 7% of total weight

Full

U.S.-Morocco

Limited to certain products in HS6-9, 12, 13, 20-22, 39, 72, 85, and 87, and to textiles and apparel

35% of appraised value Yes None; textiles and apparel: total weight of fibre or yarns must not exceed 7% of total weight

Full

U.S.-Dominican Republic-Central America

Yes 45% under build-down method or 35% under build-up method;different thresholds apply to products under HS 39, 40, 76, 84, 85, 87, and 92


Full; under certain conditions, accumulation with Canada and Mexico for woven apparel, subject to a cap

U.S.-Bahrain

Limited to certain products in HS 17, 18, 20, and 21, and to textiles and apparel

35% of appraised value No None; textiles and apparel: total weight of fibre or yarns must not exceed 7% of total weight

Full

Table AIII.1 (cont'd)


Substantial transformation criteria

CTHc Minimum local value added Technical testd

Main tolerance provisionsa Cumulationb

Unilateral tariff concessionse GSP No 35% of appraised value No None Only between members of

the same association

AGOA No 35% of appraised value No Similar to CBTPA for textiles

Full cumulation between AGOA beneficiaries

CBERA No 35% of appraised value No None Full cumulation between CBERA beneficiaries (including Puerto Rico and U.S. Virgin Islands)

CBTPA Yes Same as NAFTA Yes Same as NAFTA Full cumulation between CBTPA beneficiaries

ATPA No 35% of appraised value;

ATPA rules also apply to additional products eligible under ATPDEA (footwear, handbags, leather, petroleum, tuna, and watches)

No Similar to CBTPA for textiles

Full cumulation between ATPA beneficiaries

a Refers to the limits on the use of materials supplied by non-cumulation-beneficiary countries that would otherwise not be accepted. b Cumulation provisions set the conditions under which inputs imported from certain sources may be counted as domestically supplied in the (preference-receiving) exporting country. c Change in tariff heading. d Refers to the presence of certain production requirements that may or may not confer originating status. e The regimes involving unilateral tariff concessions are discussed in Chapter II. Source: U.S. Harmonized Tariff Schedule 2007.


Table AIII.2 Summary analysis of the MFN tariff, 2007

MFN Description

No. of lines Averagea (%)

Range (%)

Coefficient of variation

(CV) Total 10,253 4.8 0 - 350 2.5 HS 01-24 1,648 8.7 0 - 350 3.0 HS 25-97 8,605 4.1 0 - 67.3 1.4 By WTO category WTO Agriculture 1,595 8.9 0 - 350 3.0 - Animals and products thereof 139 4.2 0 - 100 2.4 - Dairy products 166 21.4 0 - 177.2 1.1 - Coffee and tea, cocoa, sugar etc. 315 9.7 0 - 90.7 1.4 - Cut flowers, Plants 57 1.7 0 - 6.8 1.2 - Fruit and vegetables 439 6.3 0 - 131.8 1.9 - Grains 21 1.6 0 - 11.2 1.6 - Oil seeds, fats and oils and their products 95 6.3 0 - 163.8 3.4 - Beverages and spirits 100 4.8 0 - 51.8 1.8 - Tobacco 47 56.0 0 - 350 2.2 - Other agricultural products n.e.s. 216 2.0 0 - 67.3 2.8 WTO Non-agriculture (incl. petroleum) 8,658 4.0 0 - 63.9 1.4 - WTO Non-agriculture (excl. petroleum) 8,630 4.1 0 - 63.9 1.4 - - Fish and fishery products 201 2.0 0 - 35 2.2 - - Mineral products, precious stones and precious metals 540 3.5 0 - 38 1.5 - - Metals 1,015 1.9 0 - 23.8 1.4 - - Chemicals and photographic supplies 1,843 3.7 0 - 6.5 0.7 - - Leather, rubber, footwear and travel goods 397 7.3 0 - 63.9 1.6 - - Wood, pulp, paper and furniture 526 0.7 0 - 14 2.8 - - Textile and clothing 1,659 9.1 0 - 42.1 0.7 - - Transport equipment 242 2.5 0 - 25 1.9 - - Non-electric machinery 790 1.4 0 - 9.9 1.4 - - Electric machinery 529 2.2 0 - 15 1.0 - - Non-agriculture articles n.e.s. 888 3.0 0 - 35.8 1.2 - Petroleum 28 2.2 0 - 7 1.2 By ISIC sectorb Agriculture and fisheries 488 5.5 0 - 350 5.9 Mining 116 0.3 0 - 10.5 3.7 Manufacturing 9,648 4.8 0 - 350 2.0 By HS section 01 Live animals & products 437 9.4 0 - 177.2 1.8 02 Vegetable products 499 4.1 0 - 163.8 2.6 03 Fats & oils 66 3.7 0 - 19.1 1.3 04 Prepared food etc. 646 12.2 0 - 350 3.1 05 Minerals 201 0.6 0 - 13.1 2.9 06 Chemical & products 1,710 3.5 0 - 6.5 0.8 07 Plastics & rubber 375 3.7 0 - 14 0.7 08 Hides & skins 220 4.3 0 - 20 1.1 09 Wood & articles 237 2.5 0 - 18 1.4 10 Pulp, paper etc. 279 0.0 0 - 0 n.a. 11 Textile & articles 1,594 9.0 0 - 67.3 0.8 12 Footwear, headgear 174 13.9 0 - 63.9 1.1 13 Articles of stone 298 5.2 0 - 38 1.2 14 Precious stones, etc. 105 3.0 0 - 13.5 1.1 15 Base metals & products 995 1.9 0 - 23.8 1.4 16 Machinery 1,340 1.7 0 - 15 1.2 17 Transport equipment 253 2.4 0 - 25 1.9 18 Precision equipment 514 3.0 0 - 19.6 1.1 19 Arms and ammunition 39 1.6 0 - 10 1.5 20 Miscellaneous manufacturing 264 3.3 0 - 35.8 1.3 21 Works of art, etc. 7 0.0 0 - 0 n.a.



MFN Description

No. of lines Averagea (%)

Range (%)

Coefficient of variation

(CV) By stage of processing First stage of processing 959 3.7 0 - 350 6.5 Semi-processed products 3,418 4.2 0 - 83.8 1.1 Fully-processed products 5,876 5.3 0 - 350 2.2

n.a. Not applicable a Averages do not include HS lines and duty rates for in-quota tariffs. b ISIC (Rev.2) classification, excluding electricity (1 line). Source: WTO Secretariat estimates, based on data provided by the authorities of the United States.


Table AIII.3 Tariffs according to U.S.preferential agreements, 2006

Average tariffs (per cent)

Description No. of linesa MFN Canadaa Mexicoa Australiaa Bahrain Chilea

Total 10,311 4.7 0.6 0.0 1.5 1.0 1.0 HS 01-24 1,647 8.7 3.4 0.1 3.9 5.5 5.3 HS 25-97 8,664 4.0 0.0 0.0 1.1 0.1 0.2 By WTO category WTO Agriculture 1,611 8.9 3.5 0.1 4.1 5.7 5.5 - Animals & products thereof 140 4.3 0.0 0.0 1.6 1.9 0.8 - Dairy products 166 22.5 17.5 0.5 2.2 16.0 18.1 - Coffee, tea, cocoa, sugar etc. 314 9.4 6.1 0.1 4.3 6.1 5.6 - Cut flowers, plants 60 1.4 0.0 0.0 0.1 0.0 0.0 - Fruit & vegetables 437 6.4 0.9 0.1 3.9 3.0 3.0 - Grains 21 1.7 0.0 0.0 0.3 0.0 0.0 - Oil seeds, fats & oils & their products 100 6.0 3.1 0.3 3.6 3.5 2.9 - Beverages & spirits 100 4.8 0.3 0.2 0.2 2.8 2.8 - Tobacco 47 55.9 0.0 0.0 48.6 48.9 40.8 - Other agricultural products n.e.s. 226 2.0 0.7 0.0 0.2 0.5 0.6 WTO Non-agriculture (incl. petroleum) 8,700 3.9 0.0 0.0 1.1 0.1 0.2 - WTO Non-agriculture (excl. petroleum) 8,672 4.0 0.0 0.0 1.1 0.1 0.2 - - Fish & fishery products 192 2.0 0.0 0.0 0.0 0.1 0.3 - - Mineral products, precious stones & precious metals 530 3.3 0.0 0.2 0.9 0.2 0.7 - - Metals 1,011 1.9 0.0 0.0 0.1 0.0 0.1 - - Chemicals & photographic supplies 1,828 3.7 0.0 0.0 0.0 0.0 0.0 - - Leather, rubber, footwear & travel goods 389 7.0 0.0 0.3 1.1 1.3 1.6 - - Wood, pulp, paper & furniture 508 0.7 0.0 0.0 0.0 0.0 0.0 - - Textiles & clothing 1,658 9.0 0.0 0.0 5.0 0.0 0.0 - - Transport equipment 229 2.6 0.0 0.0 0.0 0.0 0.1 - - Non-electric machinery 853 1.3 0.0 0.0 0.1 0.0 0.0 - - Electric machinery 564 2.1 0.0 0.0 0.1 0.1 0.0 - - Non-agriculture articles n.e.s. 910 2.9 0.0 0.0 0.1 0.0 0.3 - Petroleum 28 2.1 0.0 0.0 0.0 0.0 0.2 By ISIC sector a Agriculture & fisheries 493 5.6 0.4 0.1 4.0 3.9 3.3 Mining 118 0.3 0.0 0.0 0.1 0.0 0.0 Manufacturing 9,699 4.7 0.6 0.0 1.4 0.8 0.9 By HS section 01 Live animals & products 428 10.1 6.8 0.2 1.3 6.7 7.3 02 Vegetable products 505 4.0 0.6 0.1 2.1 1.9 1.6 03 Fats & oils 67 3.7 0.2 0.0 1.2 0.9 1.1 04 Prepared food etc. 647 12.0 3.7 0.2 7.5 8.1 7.3 05 Minerals 203 0.6 0.0 0.0 0.0 0.0 0.0 06 Chemicals & products 1,707 3.5 0.0 0.0 0.0 0.0 0.0 07 Plastics & rubber 373 3.7 0.0 0.0 0.0 0.0 0.0 08 Hides & skins 222 4.3 0.0 0.0 0.0 0.0 0.6 09 Wood & articles 193 2.2 0.0 0.0 0.1 0.0 0.1 10 Pulp, paper etc. 288 0.0 0.0 0.0 0.0 0.0 0.0 11 Textiles & articles 1,591 9.0 0.1 0.0 5.2 0.1 0.1 12 Footwear, headgear 168 13.4 0.0 0.6 2.5 3.1 3.0 13 Articles of stone 283 5.0 0.0 0.3 1.7 0.5 1.4 14 Precious stones, etc. 105 3.0 0.0 0.0 0.1 0.0 0.0 15 Base metals & products 991 1.9 0.0 0.0 0.1 0.0 0.1 16 Machinery 1,444 1.6 0.0 0.0 0.1 0.0 0.0




Description No. of linesa MFN Canadaa Mexicoa Australiaa Bahrain Chilea

17 Transport equipment 240 2.6 0.0 0.0 0.0 0.0 0.1 18 Precision equipment 531 3.0 0.0 0.0 0.1 0.0 0.5 19 Arms & ammunition 40 1.6 0.0 0.0 0.0 0.0 0.0 20 Miscellaneous manufacturing 278 3.2 0.0 0.0 0.1 0.0 0.2 21 Works of art, etc. 7 0.0 0.0 0.0 0.0 0.0 0.0 By stage of processing First stage of processing 962 3.7 0.4 0.0 2.2 2.3 1.9 Semi-processed products 3,395 4.2 0.1 0.0 1.2 0.1 0.1 Fully-processed products 5,954 5.2 0.8 0.1 1.6 1.2 1.4


Description No. of linesa MFN DR CAFTAa Israela Jordanb Moroccoa Singaporea

Total 10,311 4.7 0.8 0.3 0.7 1.8 1.3 HS 01-24 1,647 8.7 4.8 1.9 3.1 5.9 4.7 HS 25-97 8,664 4.0 0.0 0.0 0.3 1.0 0.7 By WTO category WTO Agriculture 1,611 8.9 5.0 2.0 3.2 6.1 4.7 - Animals & products thereof 140 4.3 1.1 1.1 0.5 1.8 1.2 - Dairy products 166 22.5 17.3 5.8 6.9 17.4 12.8 - Coffee, tea, cocoa, sugar etc. 314 9.4 6.0 5.8 2.4 6.5 4.9 - Cut flowers, plants 60 1.4 0.0 0.0 0.0 0.0 0.1 - Fruit & vegetables 437 6.4 0.9 0.3 0.6 3.1 3.0 - Grains 21 1.7 0.0 0.0 0.0 0.0 0.3 - Oil seeds, fats & oils & their products 100 6.0 3.1 0.1 1.2 3.8 2.8 - Beverages & spirits 100 4.8 0.3 0.3 1.2 3.4 2.5 - Tobacco 47 55.9 48.6 0.0 55.3 51.0 38.2 - Other agricultural products n.e.s. 226 2.0 0.8 0.7 0.3 0.8 0.6 WTO Non-agriculture (incl. petroleum) 8,700 3.9 0.0 0.0 0.3 1.0 0.7 - WTO Non-agriculture (excl. petroleum) 8,672 4.0 0.0 0.0 0.3 1.0 0.7 - - Fish & fishery products 192 2.0 0.0 0.0 0.1 0.1 0.8 - - Mineral products, precious stones & precious metals 530 3.3 0.0 0.0 0.2 0.4 1.3 - - Metals 1,011 1.9 0.0 0.0 0.0 0.1 0.3 - - Chemicals & photographic supplies 1,828 3.7 0.0 0.0 0.0 0.0 1.2 - - Leather, rubber, footwear & travel goods 389 7.0 0.3 0.0 1.4 1.3 3.4 - - Wood, pulp, paper & furniture 508 0.7 0.0 0.0 0.0 0.0 0.1 - - Textiles & clothing 1,658 9.0 0.0 0.0 1.0 4.6 0.1 - - Transport equipment 229 2.6 0.0 0.0 0.3 0.0 1.0 - - Non-electric machinery 853 1.3 0.0 0.0 0.0 0.1 0.1 - - Electric machinery 564 2.1 0.0 0.0 0.0 0.2 0.2 - - Non-agriculture articles n.e.s. 910 2.9 0.0 0.0 0.1 0.0 0.7 - Petroleum 28 2.1 0.0 0.0 0.0 0.0 0.2 By ISIC sector a Agriculture & fisheries 493 5.6 3.1 0.1 3.3 3.9 3.2 Mining 118 0.3 0.0 0.0 0.0 0.0 0.1 Manufacturing 9,699 4.7 0.7 0.3 0.6 1.7 1.2 By HS section 01 Live animals & products 428 10.1 7.0 2.6 2.8 7.4 5.5 02 Vegetable products 505 4.0 0.6 0.0 0.4 1.8 1.7 03 Fats & oils 67 3.7 0.2 0.2 0.1 1.5 1.1 04 Prepared food etc. 647 12.0 7.2 3.2 5.7 8.6 6.8 05 Minerals 203 0.6 0.0 0.0 0.0 0.0 0.1




Description No. of linesa MFN DR CAFTAa Israela Jordanb Moroccoa Singaporea

06 Chemicals & products 1,707 3.5 0.0 0.0 0.0 0.0 1.2 07 Plastics & rubber 373 3.7 0.0 0.0 0.0 0.1 0.5 08 Hides & skins 222 4.3 0.0 0.0 0.2 0.8 0.8 09 Wood & articles 193 2.2 0.0 0.0 0.0 0.0 0.5 10 Pulp, paper etc. 288 0.0 0.0 0.0 0.0 0.0 0.0 11 Textiles & articles 1,591 9.0 0.1 0.1 1.1 4.5 0.1 12 Footwear, headgear 168 13.4 0.7 0.0 3.5 4.7 7.9 13 Articles of stone 283 5.0 0.0 0.0 0.4 0.8 2.0 14 Precious stones, etc. 105 3.0 0.0 0.0 0.0 0.0 0.8 15 Base metals & products 991 1.9 0.0 0.0 0.0 0.1 0.3 16 Machinery 1,444 1.6 0.0 0.0 0.0 0.1 0.1 17 Transport equipment 240 2.6 0.0 0.0 0.3 0.0 1.0 18 Precision equipment 531 3.0 0.0 0.0 0.0 0.0 0.6 19 Arms & ammunition 40 1.6 0.0 0.0 0.0 0.0 0.4 20 Miscellaneous manufacturing 278 3.2 0.1 0.0 0.1 0.1 0.8 21 Works of art, etc. 7 0.0 0.0 0.0 0.0 0.0 0.0 By stage of processing First stage of processing 962 3.7 1.8 0.1 1.8 2.3 1.9 Semi-processed products 3,395 4.2 0.1 0.1 0.2 1.0 0.8 Fully-processed products 5,954 5.2 1.0 0.5 0.9 2.1 1.5


Description No. of linesa MFN AGOAc ATPAb ATPDEAb CBIb CBTPAb

Total 10,311 4.7 2.2 2.4 2.2 2.1 3.1 HS 01-24 1,647 8.7 5.0 5.0 5.0 5.0 7.4 HS 25-97 8,664 4.0 1.7 1.8 1.7 1.6 2.3 By WTO category WTO Agriculture 1,611 8.9 5.2 5.2 5.2 5.2 7.6 - Animals & products thereof 140 4.3 1.1 1.1 1.1 1.1 3.5 - Dairy products 166 22.5 17.5 17.5 17.5 17.5 22.3 - Coffee, tea, cocoa, sugar etc. 314 9.4 6.1 6.0 6.0 6.0 7.5 - Cut flowers, plants 60 1.4 0.0 0.0 0.0 0.0 0.3 - Fruit & vegetables 437 6.4 1.0 0.9 0.9 0.9 4.2 - Grains 21 1.7 0.0 0.0 0.0 0.0 1.0 - Oil seeds, fats & oils & their products 100 6.0 3.1 3.1 3.1 3.1 5.1 - Beverages & spirits 100 4.8 0.5 0.8 0.8 0.3 4.3 - Tobacco 47 55.9 52.1 52.1 52.1 52.1 55.3 - Other agricultural products n.e.s. 226 2.0 1.0 0.8 0.8 0.8 1.3 WTO Non-agriculture (incl. petroleum) 8,700 3.9 1.6 1.8 1.6 1.5 2.3 - WTO Non-agriculture (excl. petroleum) 8,672 4.0 1.6 1.8 1.6 1.5 2.3 - - Fish & fishery products 192 2.0 0.0 0.3 0.3 0.3 0.8 - - Mineral products, precious stones & precious metals 530 3.3 0.0 0.0 0.0 0.0 1.3 - - Metals 1,011 1.9 0.0 0.0 0.0 0.0 0.4 - - Chemicals & photographic supplies 1,828 3.7 0.0 0.0 0.0 0.0 1.3 - - Leather, rubber, footwear & travel goods 389 7.0 0.0 4.9 1.5 2.0 0.8 - - Wood, pulp, paper & furniture 508 0.7 0.0 0.0 0.0 0.0 0.1 - - Textiles & clothing 1,658 9.0 8.6 8.4 8.2 7.5 8.7 - - Transport equipment 229 2.6 0.0 0.0 0.0 0.0 1.4 - - Non-electric machinery 853 1.3 0.0 0.0 0.0 0.0 0.1 - - Electric machinery 564 2.1 0.0 0.0 0.0 0.0 0.5 - - Non-agriculture articles n.e.s. 910 2.9 0.0 0.0 0.0 0.0 0.6 - Petroleum 28 2.1 0.0 0.5 0.0 0.5 0.8




Description No. of linesa MFN AGOAc ATPAb ATPDEAb CBIb CBTPAb

By ISIC sector a Agriculture & fisheries 493 5.6 3.3 3.3 3.3 3.3 4.8 Mining 118 0.3 0.0 0.0 0.0 0.0 0.0 Manufacturing 9,699 4.7 2.2 2.3 2.2 2.1 3.1 By HS section 01 Live animals & products 428 10.1 7.2 7.2 7.2 7.2 9.7 02 Vegetable products 505 4.0 0.6 0.6 0.6 0.6 2.5 03 Fats & oils 67 3.7 0.2 0.2 0.2 0.2 2.6 04 Prepared food etc. 647 12.0 7.5 7.6 7.6 7.6 10.1 05 Minerals 203 0.6 0.0 0.1 0.0 0.1 0.1 06 Chemicals & products 1,707 3.5 0.0 0.0 0.0 0.0 1.4 07 Plastics & rubber 373 3.7 0.1 0.1 0.1 0.0 0.5 08 Hides & skins 222 4.3 0.7 1.6 0.7 1.3 1.6 09 Wood & articles 193 2.2 0.0 0.2 0.0 0.2 0.2 10 Pulp, paper etc. 288 0.0 0.0 0.0 0.0 0.0 0.0 11 Textiles & articles 1,591 9.0 8.8 8.5 8.5 7.6 8.8 12 Footwear, headgear 168 13.4 0.9 12.1 4.0 5.3 2.1 13 Articles of stone 283 5.0 0.2 0.2 0.2 0.2 2.6 14 Precious stones, etc. 105 3.0 0.0 0.0 0.0 0.0 0.1 15 Base metals & products 991 1.9 0.0 0.0 0.0 0.0 0.4 16 Machinery 1,444 1.6 0.0 0.0 0.0 0.0 0.3 17 Transport equipment 240 2.6 0.0 0.0 0.0 0.0 1.3 18 Precision equipment 531 3.0 0.0 0.0 0.0 0.0 0.7 19 Arms & ammunition 40 1.6 0.0 0.0 0.0 0.0 0.2 20 Miscellaneous manufacturing 278 3.2 0.1 0.1 0.1 0.0 0.7 21 Works of art, etc. 7 0.0 0.0 0.0 0.0 0.0 0.0 By stage of processing First stage of processing 962 3.7 2.1 2.1 2.1 2.1 3.0 Semi-processed products 3,395 4.2 1.9 1.9 1.9 1.8 2.7 Fully-processed products 5,954 5.2 2.4 2.7 2.4 2.3 3.3

Average tariffs (per cent) Description No. of linesa MFN GSPa LDCs

Total 10,311 4.7 3.3 2.5 HS 01-24 1,647 8.7 7.4 5.2 HS 25-97 8,664 4.0 2.6 2.0 By WTO category WTO Agriculture 1,611 8.9 7.6 5.4 - Animals & products thereof 140 4.3 3.5 1.1 - Dairy products 166 22.5 22.3 17.5 - Coffee, tea, cocoa, sugar etc. 314 9.4 7.5 6.1 - Cut flowers, plants 60 1.4 0.3 0.1 - Fruit & vegetables 437 6.4 4.2 1.3 - Grains 21 1.7 1.0 0.0 - Oil seeds, fats & oils & their products 100 6.0 5.1 3.1 - Beverages & spirits 100 4.8 4.3 2.1 - Tobacco 47 55.9 55.3 52.1 - Other agricultural products n.e.s. 226 2.0 1.3 1.0 WTO Non-agriculture (incl. petroleum) 8,700 3.9 2.6 2.0 - WTO Non-agriculture (excl. petroleum) 8,672 4.0 2.6 2.0 - - Fish & fishery products 192 2.0 1.0 0.0 - - Mineral products, precious stones & precious metals 530 3.3 1.3 0.1 - - Metals 1,011 1.9 0.4 0.1 - - Chemicals & photographic supplies 1,828 3.7 1.3 0.0 - - Leather, rubber, footwear & travel goods 389 7.0 5.4 5.1 - - Wood, pulp, paper & furniture 508 0.7 0.1 0.0 - - Textiles & clothing 1,658 9.0 8.8 8.8 - - Transport equipment 229 2.6 1.4 0.0 - - Non-electric machinery 853 1.3 0.1 0.0



Average tariffs (per cent) Description No. of linesa MFN GSPa LDCs

- - Electric machinery 564 2.1 0.5 0.0 - - Non-agriculture articles n.e.s. 910 2.9 1.1 0.4 - Petroleum 28 2.1 1.3 0.0 By ISIC sector a Agriculture & fisheries 493 5.6 4.8 3.6 Mining 118 0.3 0.0 0.0 Manufacturing 9,699 4.7 3.3 2.5 By HS section 01 Live animals & products 428 10.1 9.7 7.2 02 Vegetable products 505 4.0 2.5 1.0 03 Fats & oils 67 3.7 2.6 0.2 04 Prepared food etc. 647 12.0 10.2 7.8 05 Minerals 203 0.6 0.2 0.0 06 Chemicals & products 1,707 3.5 1.4 0.0 07 Plastics & rubber 373 3.7 0.5 0.1 08 Hides & skins 222 4.3 2.5 2.1 09 Wood & articles 193 2.2 0.4 0.2 10 Pulp, paper etc. 288 0.0 0.0 0.0 11 Textiles & articles 1,591 9.0 8.8 8.8 12 Footwear, headgear 168 13.4 12.4 12.4 13 Articles of stone 283 5.0 2.6 0.4 14 Precious stones, etc. 105 3.0 0.1 0.0 15 Base metals & products 991 1.9 0.4 0.1 16 Machinery 1,444 1.6 0.3 0.0 17 Transport equipment 240 2.6 1.3 0.0 18 Precision equipment 531 3.0 1.5 0.7 19 Arms & ammunition 40 1.6 0.2 0.0 20 Miscellaneous manufacturing 278 3.2 0.7 0.1 21 Works of art, etc. 7 0.0 0.0 0.0 By stage of processing First stage of processing 962 3.7 3.0 2.2 Semi-processed products 3,395 4.2 2.7 1.9 Fully-processed products 5,954 5.2 3.8 2.9

a If a tariff lines is not eligible for this preferential programme, the rate used in the calculation of averages is the MFN rate. b If a tariff line is not eligible for this preferential programme, the rate used in the calculation of averages is the GSP or MFN rate,

whichever is the lowest rate generally applicable to that product. c The calculations were made for LDC AGOA beneficiaries, as they constitute the majority of beneficiaries. If a tariff line is not

eligible for this preferential programme, the rate used in the calculation of averages is the GSP or MFN rate, whichever is the lowest rate generally applicable to that product.

Source: WTO Secretariat estimates, based on data provided by the U.S. authorities.


Table AIII.4 Anti-dumping investigation initiations, 1 July 2005-31 December 2007

Country/customs territory and

product

Initiation date

Provisional measures date, dumping margin

Definitive duty, date, dumping

margin No injury date Trade volume

ARGENTINA Lemon juice 19.10.06 85.64%-128.50% Suspension

agreemen ..

AUSTRALIA Electrolytic manganese dioxide

17.09.07 ..

BRAZIL Certain orange juice 11.02.05 24.08.05: 24.62-60.29%;

13.01.06: 9.73-60.29%; 21.02.06: 12.46-60.29%

09.03.06; 12.46-60.29%

876,398,111, litres (2003)

PET film, sheet, and strip 26.10.07 ..

CANADA Liquid sulfur dioxide 17.11.05 ..

CHINA Artist canvas 28.04.05 07.11.05: 55.78-73.66%;

15.12.05: 70.28%; 30.03.06: 264.09-77.90%

01.06.06; 77.90-264.09%

4,547,000 sq meters (2004)

Certain lined paper products 06.10.05 17.04.06: 52.10-143.49%; 01.06.06: 80.18-143.49%; 08.09.06: 76.7-94.98%

28.11.06; 76.70-94.91%

..

Diamond sawblades and parts thereof

21.06.05 29.12.2005: 0.11-14.96%; 22.05.06: 2.50-48.50%; 22.06.06: 2.82-21.13%

..

Certain activated carbon 04.04.06 11.10.06: 13.78-84.45%; 02.03.07: 62.08-28.11%; 30.03.07: 61.95-228.11%

27.04.07; 61.95%-228.11%

..

Certain polyester staple fiber 20.07.06 26.12.06: 4.39-15.30%; 19.04.07: 44.30%

01.06.07: de minimis-44.3%

25.10.07: 21.12-99.65%

..

Coated free sheet paper 27.11.06 04.06.07: 23.19 - 99.65% .. Sodium hexametaphosphate 06.03.07 14.09.07: 183.15% .. Circular welded carbon quality steel pipe

05.07.07 ..

Certain steel nails 16.07.07 .. Light-walled rectangular pipe and tube

24.07.07 ..

Laminated woven sacks 25.07.07 .. Certain new pneumatic off-the-road tyres

06.08.07 ..

Steel wire garment hangers 17.09.07 .. Electrolytic manganese dioxide

17.09.07 ..

Raw flexible magnets 18.10.07 .. PET film, sheet, and strip 26.10.07 .. Lightweight thermal paper 05.11.07 .. Sodium nitrite 05.12.07 ..

CHINESE TAIPEI Raw flexible magnets 18.10.07 ..

FRANCE Sodium metal 20.11.07 ..

GERMANY Carbon and certain alloy steel wire rod 07.12.05 23.12.05: ITC

Negative Prelim Lightweight thermal paper 05.11.07 .. Sodium nitrite 05.12.07 ..



Country/customs territory and

product

Initiation date

Provisional measures date, dumping margin

Definitive duty, date, dumping

margin No injury date Trade volume

INDIA Certain lined paper products 06.10.05 17.04.06: 22.53-110.43%;

08.08.06: 3.91-23.17% 28.09.06; 3.91-23.17%

..

Glycine 27.04.07 07.11.07: 0-121.62% ..

INDONESIA Certain lined paper products 06.10.05 27.03.06: 97.85%;

16.08.06: 97.85% 28.09.06; 97.85% ..

Coated free sheet paper 27.11.06 04.06.07: 10.85% 8.63% ..

JAPAN Metal calendar slides 26.07.05 01.02.06: 7.68%;

23.06.06: 3.02% 08.08.06

Negative Injury Determin.

..

Diamond sawblades and parts thereof

21.06.05 29.12.2005: 6.15-11.25%; 22.05.06: 6.43-26.55%

11.07.06 ..

Superalloy degassed chromium

30.03.05 18.08.05: 129.32% 01.11.05; 129.32%

183,528 kg (2004)

Glycine 27.04.07 13.09.07: 165.34-280.57% 28.11.07: 165.34-280.57%

..

KOREA Diamond sawblades and parts

21.07.05 29.12.2005: 6.15-11.25% ..

Coated free sheet paper 27.11.06 04.06.07: 0.00%-30.86% 25.10.07: de minimis-31.55%

..

Glycine 26.04.07 13.09.07: 138.33-138.80% 28.11.07: 138.33-138.8%

..

Light-walled rectangular pipe and tube

24.07.07 ..

Lightweight thermal paper 05.11.07 ..

MEXICO Lemon juice 19.10.06 26.04.07: 146.1-205.37% Suspension

Agreement ..


24.07.07 ..

THAILAND Polyethylene retail carrier bags

28.09.05 ..

PET film, sheet, and strip 26.10.07 ..

TURKEY Carbon and certain alloy steel wire rod

07.12.05 23.12.05: ITC Negative Prelim

..


24.07.07 ..

UNITED ARAB EMIRATES (UAE) Certain steel nails 16.07.07 .. PET film, sheet, and strip 26.10.07 ..

.. Not available. Source: WTO documents G/ADP/N/139/USA, 22 February 2006; G/ADP/N/145/USA, 1 September 2006; G/ADP/N/153/USA, 13 March 2007; and G/ADP/N/158/USA, 2 October 2007.


Table AIII.5 In-State government procurement preferences

State Margin of preference Scope of preference and conditions

Alabama 5% The awarding authority may award a contract to a "preferred vendor", as defined by State law, who is a responsible bidder, and offers a price not more than 5% greater than the lowest responsible bid.

Alaska 5% Alaska Bidder Preference: when evaluating bids, the bid price of an Alaska bidder is reduced by 5%. 10% Alaska Offer or Preference, granted to Alaska bidders if a numerical rating system is used to evaluate

factors other than price. 7% Forest, agricultural and fisheries products produced, manufactured or harvested in the State. 3-7% Alaskan Product Preference: products produced in-state on value added basis (at least 25%). The

discount depends on the percentage of local value added. 15% Bidder that qualifies for the Alaska bidder Preference, and is offering services through an employment

programme as defined under AS 36.30.990(10). 10% Disabilities preference: Bidder that qualifies for the Alaska bidder Preference, and is a partnership or

corporation where all the partners or owners have disabilities, or employs a staff that is made up of 50% or more people with disabilities.

5% Bids and proposals that meet recycled content requirements in procurement specifications. Arizona None Small business preference for award of contracts between US$1,000 - US$25,000. Arkansas 15% Preference against out-of-state prison industry bids. California 5% Small businesses up to US$ $50,000 per bid, when price range is between 5-10% of lowest bidder. Up to 5% Non-small Business Subcontractor Preference: Goods, services, construction and IT. The maximum

preference is US$50,000 and when combined with other preferences, the total cannot exceed US$100,000. Applies to bids submitted by non-small business that are subcontracting with certified small businesses.

5-10% Recycled Paper Goods. Applies unless application of the preference would preclude a small business from winning the contract. Maximum preference is US$50,000 and when combined with other preferences, the total cannot exceed US$100,000.

5% Recycled Tires. Applies unless application of the preference would preclude a small business from winning the contract. Maximum preference is US$50,000 and when combined with other preferences, the total cannot exceed US$100,000.

5% +1-4% Target Area Contract Preference Act (TACPA). Goods and IT over US$50,000; combination with other preferences not to exceed 15% of the net bid price or US$100,000, whichever is lower. Extra preference margin for hiring high risk unemployed people as percentage of workforce.

5% +1-4% Economic Zone Act (EZA). Goods and IT. Same as for TACPA except applies to worksites in enterprises benefiting from EZA and hiring persons living in targeted employment area.

5% +1-4% Local Agency Military base Recovery Area (LAMBRA): Goods & IT. Works the same as the TACPA preference.

Colorado None Low tie bids require an in-state award of contract. Connecticut None 25% of state funded procurements are set-aside for small businesses. Delaware None In public works contracts, preference must be granted to for Delaware Labor. Must be bonafide legal

citizens of the state. Florida Up to 10%+

up to 5% Reciprocity applies to political subdivisions for purchases of personal property. In awarding a contract, the Division of Purchasing or agency may give up to 10% preference to responsive bidder who has certified that the products or materials contain at least the minimum percentage of recycled content and post consumer recovered material and up to an additional 5% price preference to a bidder who has certified that the products or materials are made or materials recovered in this State.

Georgia None Reciprocal preferences for Georgia bidders that are the same as those granted by the State of residence of other bidders for evaluation purposes. In road building, agencies must give preference to the use of compost and mulch made in Georgia.

Hawaii Ad hoc Reciprocity applies to bidders from States which grant preferences. The margin of preference is equal to the preference the out-of-state bidder would receive in his/her own state or to the amount by which the out-of-state preference exceeds comparable Hawaii preference.

3, 5 or 10% Preference applies to State and counties for commodities produced, manufactured, grown, mined, or excavated in Hawaii on value added basis (at least 25%).

5% Recycled products based on recycled content as a percentage to total weight. In-state contractors preference.




10% Software development businesses principally located in-state, with 80% of labour for software development performed by persons domiciled in Hawaii.

15% In-state printing, binding, and stationary work. 4% Tax preference to ensure fair competition for bidders paying the Hawaii general excise and applicable

use tax. 5% Preference for qualified community rehabilitation programs located in Hawaii. Idaho 10% Printing preference applies to State and counties. Ad hoc Reciprocal preferences apply to State and political subdivisions for commodities, construction and

services. In tie-bids preference granted to locally manufactured products or of Idaho domiciled bidders.

Illinois 10% (Coal) Preference is given for use of Illinois coal. There is also a preference for U.S.-made steel products. None Preference is given to “Illinois Correctional Industries” and “Illinois Sheltered Workshops for the

severely handicapped” for certain designated contracts. Preference is given to “Illinois Small Businesses” participating in the Small Business Set-aside Program.

Ad hoc Reciprocal preferences applied to bidder from other States. In the case of a tie bid between an Illinois vendor and a out-of-state vendor, the Illinois vendor is given

preference. Contract award preference given to "Illinois Correctional Industries" and "Illinois Sheltered Workshops for the severely handicapped" for certain designated contracts and to "Illinois Small Businesses" participating in the Small Business Set-aside Program.

Indiana 15% Indiana Small Business Preference applied for evaluation purposes. Iowa None Award preference for products and purchases from Iowa businesses when equally priced to out-of-

state bidder. Ad hoc Reciprocal preferences apply to State and political subdivisions for commodities, services, and

construction. Kansas None Tie bids from in-state and out of state vendors awarded to the in-state vendor. Kentucky None Award preference given to products made by Kentucky prison industries, industries for the blind and

agencies of individuals with severe disabilities; applies to all State agencies and political subdivisions. Louisiana 10% Preference applies for agricultural or forestry products, including meat, seafood, produce, eggs, paper

or paper products produced and processed in Louisiana. Eggs must bee laid in Louisiana and egg products shall be processed from eggs laid in Louisiana; meat and Meat products shall be processed in Louisiana from animals which are alive at the time they enter the processing plant; seafood shall be harvested in Louisiana seas or other Louisiana waters, by a holder of a valid appropriate commercial fishing license issued under State law. Paper and paper products must be manufactured or converted in Louisiana. All other agricultural or forestry products shall be produced, manufactured, or processed in Louisiana.

7% Meat and meat products further processed in Louisiana under the grading and certification service of the Louisiana Department of Agriculture and Forestry.

7% Domesticated or wild catfish processed in Louisiana but grown outside of Louisiana. 7% Produce processed in Louisiana but grown outside of Louisiana. 7% Eggs or crawfish which are processed in Louisiana under the grading service of the Louisiana

Department of Agriculture and Forestry. 10% Materials, supplies, products, provisions, or equipment produced, manufactured, or assembled in

Louisiana. For adjudication of bid only. 10% Steel rolled in Louisiana. Ad hoc Reciprocity preferences to State and political subdivisions for commodities, services, and construction. Maine 10% Recycled paper over virgin paper products, from vendors from any state following Maine's recycling

guidelines. Maryland Ad hoc Reciprocal law applies to all State procurement. Boilers must be able to burn Maryland coal. Massachusetts Unspecified State may give preferences to goods and supplies first manufactured and sold in it, but assigns no per

cent for this. Michigan Ad hoc All printing is set aside for Michigan printers only. Reciprocal law applies to procurements over

US$100,000. Minnesota Yes All-terrain vehicles purchased by the Commissioner of Natural Resources must be manufactured in

Minnesota.




Mississippi Ad hoc Reciprocal law applies to State for commodities, services, and construction. Missouri Ad hoc Reciprocal law applies to State for commodities, services and public works, except for public works or

product transportation where bid is less than US$5,000, or bids with Department of Transportation. when federal funds are involved. Vendor need not claim preference.

Montana Ad hoc Reciprocal preference is applied only for supplies, some services, and construction contracts, equal to other bidder's in-state preference.

Nebraska Ad hoc Reciprocal law applies to State for commodities, services, and construction. Not specified Products manufactured from recycled material are granted a non-specified preference. Nevada 5% (10%) 5% preference for recycled products; up to 10% preference if manufactured within the State of

Nevada. N. Hampshire None None. New Jersey Ad hoc Reciprocity for application of preferences to out-of-State bidders through matching preference margin

or access conditions. New Mexico 5% Preference applies to State, county and political subdivisions for commodities, services, and

construction. A business must be pre-certified as “resident firm” before being given a preference. A bidder must claim manufacturer preference on bid document. State reciprocity conditions apply, provided they do not exceed 5%. In accordance with a 1997 law, “resident business” means a New Mexico resident business or a New York state business enterprise, which is considered a resident solely for the purpose of evaluating its bid against those of others.

New York 5% Preference granted if at least 50% of the secondary materials utilized in manufacture of the product are generated from the waste stream in New York State. Contract award may be denied if contractor's principal place of business penalizes New York State vendors. Award preference applies to State goods for purchase of food products.

Varying preferences: preferred source preference for commodities and services from correctional programs and qualified agencies for the blind or other disabilities.

North Carolina None North Dakota Ad hoc Reciprocal law applies to State and political subdivisions for professional services commodities and

construction. Vendor need not claim preference. Where practicable, all state, county, and other political subdivision public printing, binding, and other printed stationery, must be done in North Dakota.

Ohio Ad hoc Preference applies to purchases of supplies, services and spot purchases of printed goods, except from border States that impose no restrictions toward Ohio bidders. For major term contracts of printed goods, printing must be completed within the state of Ohio. Reciprocal law applies for construction.

Oklahoma None n.a Oregon Ad hoc Reciprocal law applies to State and political subdivisions for commodities, services and construction.

All printing is set aside for Oregon printers unless in-State printers are unable to supply. Pennsylvania Ad hoc Reciprocal law applies to supplies (including printing) for state procurements in excess of US$10,000.

Use of Pennsylvania coal is mandated for heating State buildings. 5% Unspecified recycled content preference. Rhode Island None South Carolina 7% In-State preference for procurements. Must be requested and does not apply to: ( a) construction;

(b) when price of a single unit involved is more than US$30,000; (c) requests for proposals; (d) awards less than US$10,000.

7%; 2% Made In-State/In U.S. Preference: (a) End products made, manufactured or grown in South Carolina shall be procured unless the cost is 7% higher than end products made, manufactured or grown in other U.S. states or foreign countries or territories; (b) If the same or substantially the same end products are not available in South Carolina, end products made in states other than South Carolina shall be procured unless the cost is 2% higher than end products from a foreign country or territory.

South Dakota 5% Grade A milk processors only. Reciprocal law applies to State and political subdivisions for commodities, services and construction. Tennessee Ad hoc Reciprocal preference applies only to public construction projects. Texas None Award preference in tie bids for goods and agricultural products produced or grown in Texas, or

offered by Texas bidders that are of equal cost and quality to other states of the United States. Award preference in tie bids for goods and agricultural products from other U.S: states over foreign goods and agricultural products of equal cost and quality.




Utah Ad hoc Reciprocal preference applies if Utah vendor claims preference in the bid and is within the applicable preference percentage of the lowest responsible out-of-state bidder who is entitled to a preference in his/her State.

Vermont None Award preference for resident bidders and products in tie bids. Virginia 4% Coal Coal mined in Virginia preference. Vendor need not claim preference. Ad hoc Reciprocal law applies to State level for goods, services and construction (including highways).

Award preference for Virginia products with recycled content and for Virginia firms. In the case of a tie bid, award preference given to goods produced in Virginia, goods or services or construction provided by Virginia persons, firms or corporations.

Washington Ad hoc Reciprocal law applies to State for commodities and services. West Virginia 2-1/2 or 5% A preference applies to all purchases of commodities and services, excluding construction, to

individual resident vendor who has resided in West Virginia continuously for four years immediately preceding the date for bid submission, or a business entity which has maintained its headquarters or principal place of business within West Virginia continuously for four years immediately preceding the date of bid submission. Written claim preference required if vendor's bid does not exceed the lowest qualified bid from a non-resident vendor by more than 2-1/2%.

Wisconsin None Wyoming Up to 5%,

10% for printing

Preference of up to 5% applies to State and political subdivisions for commodities manufactured or produced in Wyoming or supplied by a Wyoming resident. For construction, a 5% preference is granted if not more than 20% is subcontracted to out-of-state firms. For printing, preference is granted if at least 75% of the work is done in-state.

n.a. Not applicable. Note: References to reciprocity or reciprocal law refer to the practice by a State of adding the same margin of preference granted by the State of residence of the bidder when evaluating a bid. It is classified in the table as ad hoc since it varies according to the bidder. Source: WTO Secretariat, based on State of North Carolina, Department of Administration, Purchase and Contract online

information. Viewed at: http://www.doa.state.nc.us/PandC/rplaw.htm; and other state's online information.


Table AIV.1 Products covered by tariff quotas

Average tariff ratea

2007 (%) Products In-quota Out-of-

quota

Bound import quota

Fill rateb 2002 (%)

Fill rateb 2003 (%)

Partners with reserved access (% of WTO quota)c

Beef, fresh, chilled or frozen (t) 4.5 26.4 696,621 83 90 Canada and Mexico (no limit), Australia (57.6), New Zealand (32.5), Japan (0.03), others (9.9)

Cream ('000 litres) 3.5 6.5 6,695 65 62 New Zealand (87.3) Evaporated/condensed milk (t) 2.9 22.4 6,857 87 73 EU (21.8), Canada (17.0), Australia

(1.5) Non-fat dried milk (t) 3.7 26.9 5,261 98 22 Global, no country allocation Dried whole milk (t) 3.7 31.7 3,321 96 97 Global, no country allocation Dried cream (kg) 9 109.9 99,500 7 90 Global, no country allocation Dried whey/buttermilk (t) 6.7 42.9 296 22 23 Global, no country allocation Butter (t) 4.4 19.1 6,977 98 99 Global, no country allocation Butter oil/substitutes (t) 8 67 6,080 100 100 Global, no country allocation Dairy mixtures (t) 12.8 29.5 4,105 100 100 Australia (27.7), EU (4.2) Blue cheese (t) 14.4 34.4 2,911 97 99 EU (96.1), Chile (2.3), Czech

Republic (1.5), Argentina (0.07) Cheddar cheese (t) 12 20.4 13,256 98 99 New Zealand (56.8), Australia (25.4),

EU (8.5), Canada (6.4), others (2.8) American type cheese (t) 14.3 49.7 3,523 99 93 New Zealand (57.0) Australia (28.5),

EU (9.6), others (4.8) Edam and Gouda cheese (t) 12.1 33.9 6,816 98 95 EU (81.2), Costa Rica (10.2),

Argentina (2.9), Uruguay (2.8), others (3.0)

Italian type cheese (t) 13.9 48 13,481 99 98 Argentina (51.2), EU (33.5), Uruguay (7.1), Romania (3.5), Hungary (2.8), Poland (1.8), Others (0.1)

Swiss/Emmenthal cheese (t) 6.4 33.6 34,475 83 80 EU (62.6), Norway (20.3), Switzerland (10.6), Australia (1.5), Czech Rep.(1.0), Hungary (1.0), others (3.0)

Gruyere process cheese (t) 9.3 30.4 7,855 86 82 EU (74.1), Switzerland (16.0), others (1.0)

Other cheese NSPF (t) 10 41.5 48,628 99 95 EU (56.7), New Zealand (25.2), Switzerland (3.6), Australia (3.3), Poland (2.7), Canada (2.5), Israel (1.5), others (4.3)

Low fat cheese (t) 10 22.7 5,475 65 56 EU (74.2), New Zealand (17.5), Australia (4.4), Poland (3.1), Israel (0.9)

Peanuts (t) 9.1 139.8 52,906 100 100 Argentina (84.0), others (16.0) Chocolate crumb (t) 4.5 13.6 26,168 79 76 EU (32.1), Australia (8.3)

Low-fat chocolate crumb (t) 5.9 14 2,123 0 0 Ireland (80.1), United Kingdom (19.9)

Infant formula containing oligo saccharides (t)

17.5 33.2 100 100 55 Global, no country allocation

Table AIV.1 (cont'd)


Average tariff ratea

2007 (%) Products In-quota Out-of-

quota

Bound import quota

Fill rateb 2002 (%)

Fill rateb 2003 (%)

Partners with reserved access (% of WTO quota)c

Green ripe olives (t) 7 1.6 730 0 0 Global, no country allocation Place packed stuffed olives (t) 1.1 1.2 2,700 31 38 Global, no country allocation Green olives, other (t) 2 2.4 550 69 68 Global, no country allocation Green whole olives (t) 2.4 1.7 4,400 19 11 Global, no country allocation Mandarin oranges (Satsuma) (t) 0 0.3 40,000 100 100 Global, no country allocation Peanut butter and paste (t) 0 131.8 20,000 78 83 Canada (73.1), Argentina (15.4),

others (9.3) Ice cream ('000 litres) 20 36.5 5,668 57 71 EU (20.0), New Zealand (11.4),

Jamaica (0.7)

Animal feed containing milk (t) 7.5 26.9 7,400 1 1 EU (75.1), New Zealand (24.1), Australia (0.8)

Raw cane sugar ('000 t) 3.1 59.9 1,117 81 94 Mexico (2.1), others (95.3) Other cane or beet sugars or syrups ('000 t)

3.3 45.4 22 151 96 Canada (29.4), Mexico (8.6), others (62.1)

Other mixtures over 10% sugar (t) 9.2 20.6 64,709 99 99 Canada (91.6), others (8.4) Sweetened cocoa powder (t) 6.7 13.5 2,313 15 28 Global, no country allocation Mixes and doughs (t) 10 29.5 5,398 100 100 Global, no country allocation Mixed condiments and seasonings (t) 7.5 14.1 689 45 45 Global, no country allocation Tobacco (t) 17.7 350 150,700 75 71 Brazil (53.3), Malawi (8.0),

Zimbabwe (8.0), Argentina (7.1), EU (6.6), Guatemala (6.6), others (10.5)

Short staple cotton (t) 0 13.7 20,207 2 0 Global, no country allocation Harsh or rough cotton (t) 2.7 1.6 1,400 0 0 Global, no country allocation Medium staple cotton (t) 1.4 6.8 11,500 7 2 Global, no country allocation Long staple cotton (t) 0.7 14.9 40,100 13 34 Global, no country allocation Cotton waste (t) 0 0.7 3,335 0 0 EU (26.3), Japan (5.7), Canada (4.0),

India and Pakistan (1.2), China (0.3) Cotton processed but not spun (kg) 5 67.3 2,500 100 100 Global, no country allocation

a Average based on ad valorem rates for 2007 or on ad valorem equivalents for 2006 provided by the authorities. b Calculated as the ratio of actual import volumes to the bound import quota. c Data on country allocation based on Schedule XX. Source: WTO documents G/AG/N/USA/54, 17 February 2005 and G/AG/N/USA/48, 24 June 2003; Schedule XX -

United States of America, Harmonized Tariff Schedule of the United States. Viewed at: http://dataweb.usitc.gov; and information provided by the U.S. authorities.

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TRADE POLICY REVIEW Report by the Secretariat UNITED STATES

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