TRADE WEEK, Volume 3 Number 4 Friday, January 28, 1994 ___________________________________________________________ Headlines: U.S., JAPAN MAKE LITTLE PROGRESS IN MARKET ACCESS TALKS GATT EXPECTED TO COST U.S. $11 BILLION GATT ENVIRO WORKING GROUP GAINS SUPPORT GATT PANEL WILL INVESTIGATE U.S. TOBACCO LAW TRADE GROWTH SLOWED IN 1993 ___________________________________________________________ GATT News Summary ___________________________________________________________ U.S., JAPAN MAKE LITTLE PROGRESS IN MARKET ACCESS TALKS U.S. and Japanese officials remain "miles apart" in talks centered on improving market access provisions for several key products under the General Agreement on Tariffs and Trade. The United States is pressing Japan to follow-through on GATT market access commitments made last July during the Tokyo Summit of Quad countries -- the U.S., Japan, Canada and the EU. But Japan remains reluctant to make tariff cuts beyond what negotiators recently agreed to under the Uruguay Round of GATT talks on December 15, 1993, or to set numerical targets for imported U.S. goods. Discussions over the past few weeks have centered on tariff reductions for wood products, chemicals, leather, footwear, copper items and white spirits, as well as improved market access for autos and auto parts (by setting numerical targets), insurance and government procurement of medical and telecommunications equipment. USTR Mickey Kantor may fly to Japan in hopes of moving ahead on the proposals before President Bill Clinton and Prime Minister Morihiro Hosokawa meet in Washington for a summit February 11. "We fully expect and insist that we reach agreements in autos, auto parts, insurance, telecommunications and medical equipment," Kantor said. Otherwise, he warned, "We would look to appropriate methods we might have to open those markets if we felt at that point that the framework agreement was not going to result in opening these markets." The U.S. is considering reviving the Super 301 trade policy through an executive order, under which it can impose trade sanctions. However a Japanese trade official said "Hosokawa will tell Clinton that (numerical targets) are impossible so he can't promise them." GATT participants have until February 15 to work out the details of draft market access schedule and until March 31 to complete the final schedules. Sources: George Graham, Michiyo Nakamoto, "Friction Over Talks on Japan Market Access," FINANCIAL TIMES, January 27, 1994; "Japanese Officials Say Hosokawa Won't Give Into Trade Demands," INVESTOR'S BUSINESS DAILY, January 27, 1994; "U.S. Presses on GATT Market Access, But Japan Says Deal is Final," INSIDE THE WHITE HOUSE, January 13, 1994; Thomas L. Friedman, "U.S. Pondering Its Options as Japan Trade Talks Falter," NEW YORK TIMES, January 26, 1994; Bob Davis, "U.S. and Japan Are at Impasse in Trade Talks," WALL STREET JOURNAL, January 26, 1994; "Kantor Says Japanese Negotiators Not Faithful to Framework Deal," INSIDE U.S. TRADE, January 14, 1994; Mark Magnier, "Kantor May Go to Japan in Attempt to Break Impasse," JOURNAL OF COMMERCE, January 20, 1994. ___________________________________________________________ GATT EXPECTED TO COST U.S. $11 BILLION U.S. Trade Representative Mickey Kantor told the House Ways and Means Committee Wednesday that the GATT Uruguay Round accord is expected to cost the United States $11 billion during the first five years as a result of lost tariff revenues. Kantor stressed that most costs incurred would be eventually offset by other revenue gains resulting from freer global trade. But, under U.S. "pay-as-you-go" budget rules, all lost revenues must be immediately offset. "We want to work with (the Congress) to decide what to do (about lost revenues)," Kantor said. The administration has hinted that it may be willing to raise taxes to pay for the GATT accord, but Republican opposition to the idea has been strong. Representative Jim McCrery (R-LA) suggested Congressional action to change the pay-as you-go budget rules so that the costs of the agreement won't need to be recouped immediately. Kantor said OMB Director Leon Panetta would likely consider changing the rule. "I know Director Panetta is looking for ways we can pay for this without" taxes, Kantor said. Subcommittee hearings on the pact are scheduled to begin next week. Source:s "Kantor: Administration Looking For Ways to Pay for GATT," SPARKS & CO., January 28, 1994; "Looking for Way to Pay for GATT- Trade Rep Kantor," REUTER, January 26, 1994; Peter Behr, "Administration Must Now Find Funds for GATT; Pact's Affect on Tariffs Could Delay Its Congressional Approval," WASHINGTON POST, January 27, 1994. ___________________________________________________________ GATT ENVIRO WORKING GROUP GAINS SUPPORT The Committee on Trade and the Environment, a proposed GATT working group, gained wide support from global trade members during their annual meeting in Geneva yesterday. GATT members are scheduled to meet in Marrakesh, Morocco April 15 to sign the Uruguay Round accord and are now also expected to approve a GATT work program on trade and the environment. Details of the program will need to be worked out over the next few months, but members of the current working group have reportedly paved the way for progress in three areas linking trade and the environment: trade provisions of international environmental agreements, transparency of national environmental regulations, and the trade effects of packaging and labeling aimed at protecting the environment. Environmental groups are also pushing the working group to include on its agenda "eco-dumping" provisions to address alleged gains achieved by countries which produce goods under weak environmental standards. Details will also need to be worked out for GATT Article 8.2(c), the Agreement on Subsidies and Countervailing Measures, under which "assistance to promote adaptation of existing facilities to new environmental requirements imposed by law" is permitted. U.S. manufactures say they will push for an investment tax credit for environmental improvements, but are wary of a provision originally proposed by Mexico, and supported by developing countries, to provide a direct subsidy to industries for making environmental improvements. U.S. industry sources worry that a direct subsidy would give companies in the developing world a competitive advantage. Environmental groups are also hesitant to endorse the proposal because they say it undermines the "polluter pays" principle by forcing the private sector, rather than industry, to pay for the environmental updates through subsidies. Sources: Frances Williams, "GATT Support on Environmental Links," FINANCIAL TIMES, January 27, 1994; Paula L. Green, "Green Light Seen for GATT Environment Panel," JOURNAL OF COMMERCE, January 18, 1994; "GATT Environmental Subsidy Provision Angers U.S. Manufacturers," INSIDE THE WHITE HOUSE, January 13, 1994. ___________________________________________________________ GATT PANEL WILL INVESTIGATE U.S. TOBACCO LAW A GATT working panel will be established to resolve a dispute over the U.S. tobacco law which limits the amount of imported tobacco U.S. cigarette producers can use in their products. President Clinton passed the law last August as part of the Budget Reconcilliation Act mandating that 75 percent of all tobacco used in U.S. cigarette production is supplied by U.S. growers. Ten tobacco exporting countries, including Brazil, Chile, Colombia, El Salvador, Guatemala, Thailand, Canada and Zimbabwe, lodged a complaint over the law last December. Contracting GATT members decided a working panel would be the quickest way to resolve the dispute. Panel members have not been announced, nor has the date for the first panel meeting, although UPI news service anticipates the investigation will not begin until after GATT members sign the Uruguay Round accord in April. Sources: "GATT Panel to Discuss U.S. Tobacco Protectionism," UPI, January 26, 1994; "GATT Sets Up Dispute Panel on U.S. Tobacco Law," REUTER, January 25, 1994; "USDA Report Warns Tobacco Measure Will Export U.S. Jobs," INSIDE U.S. TRADE, January 14, 1994. ___________________________________________________________ Other Trade News ___________________________________________________________ TRADE GROWTH SLOWED IN 1993 World trade growth slowed to less than 3 percent in 1993 from 4 percent in 1992 largely due to a decline in trade across Western European borders, which account for 47 percent of global trade activity. Staff GATT economists said strong growth in North America and Asia, including China, offset the European trade decline. Although the trade figure was significantly lower than the 4.5 percent growth predicted earlier by economists, the GATT staff said signs of 1993 fourth quarter growth in Western Europe "are grounds for optimism regarding a recovery in 1994." Sources: Stephanie Nebehay, "Trade Up by Mere Three Percent in 1993, GATT Says," REUTER, January 25, 1994; "Global Trade Pace Eases," WALL STREET JOURNAL, January 26, 1994. ___________________________________________________________ Recent Publications on International Trade ___________________________________________________________ For copies of the following, contact the authors or organizations listed. "European Jobs - Is GATT the Answer?" Tim Lang and Colin Hines, GATT PROJECT, 1994. 8 pages. 3rd Floor, 5-11 Worship St., London EC2A 2BH. (44-71) 628-2442. Fax: (44-71) 628-9329. $3. "The Political Arithmetic of the NAFTA Vote," Lawrence Mishel and Ruy A. Teixeira, ECONOMIC POLICY INSTITUTE, December 9, 1993. 20 pages. 1730 Rhode Island Ave., NW, Suite 200, Washington, DC 20036. (202) 775-8810. Fax: (202) 775-0819. $5. "Cities Trade and Ecological Deficits," William E. Rees and Mathis Wackernagel, PEOPLE-CENTERED DEVELOPMENT FORUM, November 10, 1993. 1 page. Institute for Agriculture and Trade Policy. $3.50. This issue of People-Centered Development Forum contains several new articles from authors including Vandana Shiva, Herman Daly, and Walden Bello. "Intellectual Property Rights in NAFTA: Implications for Health Care and Industrial Policy in Ontario," ECUMENICAL COALITION FOR ECONOMIC JUSTICE, October 1993. 50 pages. 11 Madison Ave., Toronto, Ontario M5R 2S2, Canada. (416) 921-4615. Fax: (416) 924- 5356. $6. "The Uruguay Round of GATT Jeopardizes Food Safety and Other Health, Safety, and Environmental Standards," Patti Goldman, PUBLIC CITIZEN, January 1994. 14 pages. 215 Pennsylvania Ave., SE, Washington, DC 20003. (202) 546-4996. Fax: (202) 547-7392. $2. "Final Agriculture Text of the Uruguay Round of the General Agreement on Tariffs and Trade," Mark Ritchie, INSTITUTE FOR AGRICULTURE AND TRADE POLICY, January 1994. 6 pages. $2. "Balancing: Policies for Just and Sustainable Trade," Kristin Dawkins, INSTITUTE FOR AGRICULTURE AND TRADE POLICY, January 1994. 16 pages. $5. _____________________________________________________________ Editors: Gigi DiGiacomo, Hannah Holm and Chirag Mehta The Institute for Agriculture and Trade Policy (IATP) 1313 Fifth Street SE, Suite #303, Minneapolis, MN 55414-1546 USA Telephone:(612)379-5980 Fax:(612)379-5982 E- Mail:kmander@igc.apc.org _____________________________________________________________