From iatp@igc.apc.orgTue Jan 17 17:08:19 1995 Date: Tue, 17 Jan 1995 08:12:03 -0800 (PST) From: IATP To: Recipients of conference Subject: Trade News 1/12/95 Trade News Produced by the Institute for Agriculture and Trade Policy January 12, 1995 Volume 3, Number 1 -------------------------------------------------------------------- HEADLINES: ------------------------------------------------------------------------ -URUGUAY ROUND ENTERS INTO FORCE; WTO BEGINS -SUTHERLAND TO HEAD WTO FOR NOW -FRANCE PUSHES TV QUOTAS -MERCOSUR LAUNCHED -INDIA WILL EXPAND TEXTILE TRADE WITH U.S. AND EU -US STARTS CHINA SANCTIONS -CHINA'S SHARE OF WORLD TEXTILE TRADE GROWS ------------------------------------------------------------------------ WTO NEWS SUMMARY ------------------------------------------------------------------------ URUGUAY ROUND ENTERS INTO FORCE; WTO BEGINS On January 1, the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) entered into force. Eighty-five countries out of the 125 participating in the round have ratified the agreement thus far, including the United States, Japan, and the European Union (EU). Chief among the agreements is the creation of the World Trade Organization (WTO), a new international organization which will administer the agreements and become the forum for all future negotiations. Unlike the GATT, which since its creation in 1947 was limited to monitoring international trade in goods, the WTO has a much broader mandate and strengthened dispute settlement mechanism. Besides the goods area, the WTO will cover issues in service sectors such as banking, insurance, tourism and telecommunications, as well as intellectual property rights (such as patents and copyrights) and investment rules and regulations. Sources: "WTO Debuts as Beacon of Stability and Trade, Sutherland Says," John Zarocostas, JOURNAL OF COMMERCE, January 1, 1995"WTO will Change Face of World Trade," John Zarocostas, JOURNAL OF COMMERCE, December 30, 1994; "WTO Nations Urged to Limit Use of Sanctions," John Zarocostas, JOURNAL OF COMMERCE, December 16, 1994. SUTHERLAND TO HEAD WTO FOR NOW GATT Director-General Peter Sutherland has agreed to stay on as caretaker head of the new WTO until March 15 to allow more time to break the deadlock among the nominees for this post. Currently, there are three candidates vying for the new WTO post: former Italian trade minister Renato Ruggiero; former Mexican President Carlos Salinas; and South Korea's trade and industry minister Kim Chul-su. Ruggiero is backed by the European Union (EU) and several dozen developing countries with close trade and aid ties to the EU. Salinas has the support of the United States, Canada, and all Latin American countries, but the collapse of the Mexican peso has virtually eliminated him from the race. Kim Chul-su has the support of many Asian-Pacific nations, including Japan and Australia. According to informed observers, Ruggiero is currently the strongest candidate, but new candidates may emerge before the March deadline. Sources: "Peso Crisis Pulls at Salinas as He Strives for International Trade Job," Anthony De Palma, NEW YORK TIMES, January 9, 1995; "GATT Chief to Stay as WTO Caretaker," Francis Williams, FINANCIAL TIMES, December 22, 1994. ------------------------------------------------------------------------ REGIONAL AGREEMENTS ------------------------------------------------------------------------ FRANCE PUSHES TV QUOTAS On January 8, Nicolas Sarkozy, France's communications minister, said that the French Government was stepping up efforts to get television quotas adopted by the EU to prevent Europe's culture industry from disappearing in a flood of U.S.-made movies and TV programs. "The issue is very simple," he said. "Europe is the biggest consumption market [in] the world with 300 million people. In the name of what do we have to accept that this market ... has to belong 100 percent to American products?" Sarkozy, and French Culture Minister Jacques Toubon, met with outgoing EU President, Jacques Delores, on Monday, January 9 to press their case. The issue of how to deal with the flood of U.S. cultural products in Europe was left unresolved by the Uruguay Round of the GATT. Source: "France Backing TV Quotas," NEW YORK TIMES, January 9, 1995. MERCOSUR LAUNCHED On January 1, the four South American countries in the Mercosur trade group -- Brazil, Argentina, Paraguay, and Uruguay -- transformed the trade area into a full customs union. The Mercosur customs union agreement -- known as the Protocol of Ouro Preto -- requires the four countries to cut their tariffs to zero on all but a handful of industries. It also creates an arbitration system for dispute settlement as well as rules to promote competition and ease customs procedures. In addition, the Protocol commits the four countries to review before 2001 whether and how to move ahead toward a full common market, which would mean the free movement of labor as well as goods. Source: "Mercosur Customs Union to Begin on January 1," Angus Foster, FINANCIAL TIMES, December 17-18, 1994. ------------------------------------------------------------------------ BILATERAL RELATIONS ------------------------------------------------------------------------ INDIA WILL EXPAND TEXTILE TRADE WITH U.S. AND EU Late last month, trade officials in India, the United States, and the European Union (EU) announced agreements which will open the Indian market to foreign textiles and clothing. The agreements -- one between India and the U.S., the other between India and the EU - - remove fibers, yarns and some industrial fabrics made in the U.S. and EU from India's so-called restricted list, which has so far prevented their goods from being imported. Certain other fabrics and garments will be removed from the restricted list beginning in 1998; most other garments will be freed from restraints by 2002. India also agreed to lower tariffs on various textile items to 20 percent or less from the current 65-70 percent. At the same time, Indian exporters will gain considerably better access to the U.S. and EU markets, which together absorb about two- thirds of India's textile exports. India's agreement with the U.S. promises increased access to the U.S. market for Indian-made handloom garments, terry-cotton towels, and various textile products produced by cottage industry. India's agreement with the EU promises the immediate removal of all restraints on handloom products. It also increases the size of India's EU textile and apparel quotas. As part of the Uruguay Round GATT agreements, the U.S. and EU agreed to reduce their textile and apparel quotas to zero by 2004. Sources: "Indian Textile and Clothing Deals Welcomed," Shiraz Sidhva and Nancy Dunne, FINANCIAL TIMES, January 5, 1995; "India Agrees to Expand Textile Trade with U.S. and EU, Change Patent Laws," Suman Dubey, WALL STREET JOURNAL, January 2, 1995; "U.S.-India Textile Accord," NEW YORK TIMES, January 2, 1995; "Kantor Announces Textile Market Access Agreement with India," Press Release, USTR, January 1, 1995. US STARTS CHINA SANCTIONS After 18 months and eight unsuccessful rounds of negotiations, on December 31, 1994 U.S. Trade Representative Mickey Kantor announced that the United States would impose $2.8 billion in trade sanctions on Chinese goods by January 31, 1995 unless China stopped the "rampant piracy" of U.S. computer software, movies, and music. Kantor said that the U.S. would target 23 categories of Chinese products for possible punitive tariffs of 100 percent, including such things as athletic shoes, toys, sporting goods, and watches. In justifying the action, Kantor said that U.S. companies lose about $1 billion each year in theft of copyrighted products, and that 100 percent of videotapes and 94 percent of computer programs sold in China are pirated. Calling the U.S. action "barbarous," Chinese officials warned that if the U.S. carried through with its threat, China would have no choice but to retaliate against U.S. companies. In particular, Chinese officials said they would break off negotiations with U.S. companies seeking to set up auto, chemical, and pharmaceutical operations in China; suspend imports of U.S. films, TV programs, and laser discs; and raise tariffs 100 percent on imports of U.S.-made cassette tapes, compact discs, cigarettes, alcoholic beverages, and cosmetics. Kantor's action was taken under the so-called "special 301" section of U.S. trade law. Under this provision, U.S. sanctions will not take effect until after a 30-day period during which the public has an opportunity to argue that certain items be removed from the targeted list because higher tariffs would represent an undue harm to U.S. economic interests. Also during this period, the U.S. and China will seek to resolve the dispute short of sanctions. Sources: "Beijing Threatens to Retaliate Against U.S. Sanctions," Simon Holberton, FINANCIAL TIMES, January 2, 1995; "U.S. Threatens China with Trade Sanctions for 'Rampant Piracy'," ASSOCIATED PRESS, January 1, 1995; "China Threatens Retaliation on Trade Sanctions," NEW YORK TIMES, January 1, 1995; "U.S. Likely to Extend China Piracy Deadline But Prepare Actions," John Maggs, JOURNAL OF COMMERCE, December 30, 1994; "China Official Sees Trade War if U.S. Elects to Impose Santions," P.T. Bangsberg, JOURNAL OF COMMERCE, December 29, 1994. ------------------------------------------------------------------------ WORLD TRADE ROUND-UP ------------------------------------------------------------------------ CHINA'S SHARE OF WORLD TEXTILE TRADE GROWS Last month, the China National Textile Council announced that it expects China to produce 13 percent of the world's textile exports by the year 2000, up from a 7.5 percent share in 1990. The Council said better product quality and concentration on enhancement of natural fibers will fuel the expansion. To meet the demand for fibers for both the foreign and domestic textile markets, the council reported that China's fiber-processing capacity will rise by about four percent by the end of the century. Source: "China Sees Rise in Textile Share," WALL STREET JOURNAL, December 27, 1994. ------------------------------------------------------------------------ Editor: Orin Kirshner. 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