From iatp@igc.apc.orgWed Oct 4 09:56:53 1995 Date: Tue, 03 Oct 1995 13:18:30 -0700 (PDT) From: IATP To: Recipients of conference Subject: Trade News 10-3-95 TRADE NEWS Produced by the Institute for Agriculture and Trade Policy OCTOBER 3, 1995 VOL. 4, NO. 15 _________________________________________ Headlines: - WTO TO HEAR DISPUTE OVER JAPANESE LIQUOR - U.S. ANNOUNCES SOUTH KOREA AUTO AGREEMENT - EU WILL DEFEND BANANA RULES FROM U.S. ATTACK - U.S. FAILS TO WIN GREATER AIR ACCESS TO UK - U.S., JAPAN FAIL TO REACH AIR CARGO AGREEMENT - NAFTA PANEL REJECTS PETITION ON TIMBER -U.S. TRADE DEFICIT HITS MONTHLY RECORD _________________________________________ WTO NEWS SUMMARY _________________________________________ WTO TO HEAR DISPUTE OVER JAPANESE LIQUOR On September 26, the World Trade Organization (WTO) announced that it would establish a panel to adjudicate a dispute setting Japan against the United States, the European Union (EU) and Canada over Japanese liquor taxes. The U.S., EU and Canada argue that Japan's liquor tax system, which levies a lower tax on the domestic "shochu" beverage than on whisky, cognac and white spirits violates world trade rules. While the U.S., EU and Canada each made separate complaints to the WTO, the organization's Dispute Settlement Body (DSB) decided to set up one three-person panel to handle the issue. The panel will be created within the next month and should make its findings public within six months after that. "WTO Sets Up Panel for Japanese Liquor Dispute," REUTERS, September 27, 1995. _________________________________________ REGIONAL/BILATERAL AGREEMENTS _________________________________________ U.S. ANNOUNCES SOUTH KOREA AUTO AGREEMENT On September 28, U.S. trade representative Mickey Kantor announced that South Korea and the United States have reached an agreement to increase market access for U.S. and foreign passenger vehicles into Korea. "While much more needs to be accomplished to fully open the Korean auto market," Kantor said, "this agreement is a significant step forward in creating a more competitive environment for U.S. autos." Under the agreement, South Korea has agreed to liberalize standards and certification practices, reduce taxes that discriminate against imported vehicles, permit foreign advertisers equal access to television advertising time, allow foreign majority ownership of auto retail financing entities and improve consumer perception of auto imports in that country. South Korea also has made a commitment not to introduce any new measures that adversely affect market access. The United States will assess implementation of South Korea's commitments and will measure the actual effects they have on foreign passenger vehicle sales in the Korean market. Under the agreement's consultation provisions, South Korea has agreed to discuss further liberalization of discriminatory taxes that impede auto imports. South Korea's progress in meeting the goals specified in the agreement will be evaluated by the United States in June 1996. In the meantime, Mickey Kantor has announced that the United States retains the right to challenge South Korea car market practices at the World Trade Organization (WTO) despite the new trade agreement. "USTR Kantor Announces Agreement with Korea on Autos," PRESS RELEASE, Office of the United States Trade Representative, September 28, 1995; "U.S. Retains Right to Go to WTO on S. Korean Autos," REUTERS, September 28, 1995. EU WILL DEFEND BANANA RULES FROM U.S. ATTACK On September 27, the European Union (EU) announced that it will defend its banana import regime from U.S. attack after the United States complained to the World Trade Organization (WTO) that it discriminated against U.S. companies. "We will defend the regime in the WTO if it goes that far," said Gerrard Kiely, European Commission agriculture spokesman. He said a WTO disputes panel would only be created if no solution was found after 60 days of consultations. Kiely said that the EU banana import regime, introduced in July 1993, was part of the recent Uruguay Round trade accord, which included a waiver for the Lome convention between the EU and 70 African, Caribbean and Pacific (APC) developing countries. The EU banana regime was a compromise between conflicting interests of the EU, ACP and Latin American producers. "It took many years to put together . . . and will be difficult to change," he said. U.S. trade representative Mickey Kantor announced on September 27 that the United States was initiating action against the EU under Section 301 of U.S. trade law, which could lead to U.S. sanctions against Europe at the end of WTO talks or by March 27, 1997. "EU to Defend Banana Rules from U.S. Attack," REUTERS, September 28, 1995. U.S. FAILS TO WIN GREATER AIR ACCESS TO UK On September 15, the Clinton administration's attempt to expand a June 1995 aviation accord with England fell through when British negotiators said in London that they were not interested in renegotiating the deal. Both the administration and the U.S. aviation industry believed the London session would build on progress made in June, when the United States and England signed an agreement increasing aviation freedoms between the two countries. A fall expansion of the accord was necessary for U.S. airlines to effectively market any newly awarded routes for the spring travel season. The June accord gave United Airlines a service between Chicago and London's Heathrow International Airport, added frequencies for British Airways in the Philadelphia-London market, gave both U.S. and British carriers more rights to fly into regional cities, and expanded opportunities for U.S. carriers to forge partnerships with British lines. The June accord was the first such agreement in almost two decades. Last month's failed negotiations were the culmination of four rounds of additional talks scheduled simultaneously with the signing of the June accord. Lisa Burgess, "Aviation Talks with UK Fruitless for Administration," JOURNAL OF COMMERCE, September 18, 1995. U.S., JAPAN FAIL TO REACH AIR CARGO AGREEMENT On September 28, the United States and Japan ended three days of negotiations on bilateral air cargo issues without reaching an agreement. At the negotiations, the U.S. presented proposals on liberalizing the trans- Pacific cargo trade. For its part, the Japanese side called for ways to infuse "equal opportunity" into the 1952 bilateral air treaty. According to informed observers, Japan believes the agreement -- particularly provisions that grant three U.S. air carriers generous rights to fly beyond Japan to third country markets -- is unfair. A second round of talks is planned for November 1995 in Washington. Mark Magnier, "Japan, U.S. Fail to Reach Agreement on Air Cargo After 3 Days of Talks," JOURNAL OF COMMERCE, September 29, 1995. _________________________________________ WORLD TRADE ROUND-UP _________________________________________ NAFTA PANEL REJECTS PETITION ON TIMBER On September 25, the North American Free Trade Agreement's (NAFTA) environment committee rejected a petition by 25 environmental groups charging that the United States was failing to enforce its own environmental laws. The petition centered on a provision in legislation signed by President Clinton that allows salvage logging in public forests and suspends environmental laws such as the Endangered Species Act and the Clean Water Act. Environmental groups had charged that the legislation amounted to "a failure to effectively enforce U.S. environmental laws" in violation of NAFTA provisions designed to uphold environmental standards in Mexico, Canada and the United States. But the NAFTA panel, which is made up of the top environmental officials of all three countries, said it rejected the petition because it could "not characterize the application of a new legal regime as a failure to enforce the old one." The petition was first filed on August 30, 1995 by environmental groups led by the Sierra Club Legal Defense Fund. The groups are also filing a lawsuit in the United States to challenge the law. "NAFTA Panel Rejects U.S. Groups' Petition on Timber," REUTERS, September 25, 1995. U.S. TRADE DEFICIT HITS MONTHLY RECORD According to figures released by the Commerce Department on September 20, the U.S. trade deficit climbed to $11.5 billion in July, setting a record for the second straight month as plunging exports of commercial aircraft and rising imports of German luxury cars offset improvement in the deficit with Japan. The July deficit was 1.9 percent higher than the revised June imbalance of $11.28 billion. Both months had the highest imbalances since the government began releasing monthly data on goods and services trade in January 1992. The deficit with Japan declined for the fourth straight month, dropping to $5.12 billion. But for the year as a whole, the trade gap with Japan is running 3.8 percent higher than last year's record. U.S. trade representative Mickey Kantor insisted that the higher deficit did not look so bad when compared with the size of the nation's economy overall. He said the administration is happy with the strong export growth this year. While critics of administration trade policies have charged that the flood of imports means the loss of thousands of U.S. jobs to overseas competitors, Kantor said the big gains in exports will "mean the creation of thousands of jobs in the United States." "U.S. Trade Deficit Hits Record $11.5 Billion," ASSOCIATED PRESS, September 21, 1995. ___________________________________________ Trade News is produced by the Institute for Agriculture and Trade Policy, Mark Ritchie, President. Editor: Orin Kirshner. E-mail versions of Trade News are available free of charge for Econet/IATP Net subscribers. For more information about fax or mail subscriptions, contact: Institute for Agriculture and Trade Policy, 1313 Fifth Street S.E., Suite 303, Minneapolis, MN, 55414 Phone 612-379-5980. To learn more about IATP's contract research services, please contact Dale Wiehoff at dwiehoff@igc.apc.org