From iatp@igc.apc.org Fri Jan 3 00:57:07 1997 Date: Thu, 16 May 1996 13:55:51 -0700 (PDT) From: IATP To: Recipients of conference Subject: Trade News 5-16-96 TRADE NEWS Produced by the Institute for Agriculture and Trade Policy May 16, 1996 Volume 5, Number 10 __________________________________________ WTO RULES AGAINST U.S. TELECOM TALKS POSTPONED PRESHIPMENT BODY READY SAUDIS NEGOTIATE TO JOIN WTO U.S. THREATENS CHINA SANCTIONS EAST AFRICA TRADE BODY LAUNCHED __________________________________________ WTO NEWS SUMMARY __________________________________________ WTO RULES AGAINST U.S. On April 29, the U.S. lost its final appeal in the first major case brought before the World Trade Organization's (WTO) Appellate Body, the Supreme Court of international trade. A three judge panel ruled that regulations issued under the U.S. Clean Air Act discriminated against foreign oil refiners. The practical effect of the ruling is that the U.S. Environmental Protection Agency (EPA) will be forced to change its rules concerning the environmental standards of imported gasoline or face trade sanctions from the countries that filed the complaint, Venezuela and Brazil. The judges in the case -- from the Philippines, Japan and New Zealand -- concluded that standards set by the EPA constituted "unjustifiable discrimination" because they set different rules for foreign producers than for domestic refiners. They found that the rules were a "disguised restriction on international trade." In response to the ruling, acting U.S. trade representative Charlene Barshefsky said that she was "disappointed that the practical result of this case remains unchanged," but "gratified" that the appellate panel ruled for the U.S. on a number of technical points. Administration officials noted that the panel acknowledged that countries had the right to control air pollution or take other steps to protect the environment -- as long as the rules applied equally to domestic and foreign companies. The dispute that led to the decision began three years ago, when Venezuela asked the U.S. for permission to ship gasoline to the Northeast that produced more smog- emitting chemicals than American refiners were permitted to sell. Most of that gasoline came from the state-owned Petroleos de Venezuela, which sells gasoline under the Citgo name. Under the Clean Air Act, domestic producers are required to meet standards based on the emissions of gasoline they produced in 1990. But many foreign producers did not keep equivalent baseline records of their shipments at that time. So a different standard was created: they only could ship gasoline that met an average quality standard in the U.S. The foreign companies argued, successfully, that the rule effectively required them to meet a higher standard than some American concerns were required to meet, putting them at a competitive disadvantage. David E. Sanger, "U.S. Defeated in Trade Case at World Body," NEW YORK TIMES, April 30, 1996; "U.S. Disappointed by WTO's Decision to Uphold Ruling on Reformulated Gasoline," JOURNAL OF COMMERCE, May 1, 1996. TELECOM TALKS POSTPONED Last minute objections by the U.S. have forced the World Trade Organization (WTO) to postpone the conclusion of a 53-nation negotiation on opening telecommunications markets to international competition. American trade negotiators complained that the liberalization offers that other countries had made did not represent the "critical mass" needed for a successful outcome, meaning that not enough offers had been received to make it worthwhile for the U.S. to open up its own telecommunications sector. In a statement issued in Washington, acting U.S. trade representative Charlene Barshefsky said: "Over 40 percent of world telecom revenues and over 34 percent of global international traffic are not covered by acceptable offers. We will not enter an agreement on these terms. While 10 countries, including Austria, Germany, New Zealand, Britain and Sweden, have made offers acceptable to the United States, a further 36 national offers -- including those of Australia, Belgium, Mexico, Thailand and Venezuela -- need improvement before the U.S. can make a deal." An additional four countries have made no offer at all, including Indonesia and South Africa. Originally slated to conclude April 30, 1996, negotiators now have until February 15, 1997 to finalize a deal. "I see a strong will to save what has been accomplished up to now," said WTO director general Renato Ruggiero. "What is also important is that there is a strong will to save the implementation date," referring to the January 1, 1998 deadline for all members to open their telecommunications markets to foreign competition. Paul Lewis, "Telecom Talks at Trade Body Are Postponed as U.S. Balks," NEW YORK TIMES, May 1, 1996; "WTO's Basic Telecommunications Negotiations Result in Substantial Offers: Re-examination in Early 1997," WORLD TRADE ORGANIZATION PRESS RELEASE, May 1, 1996. PRESHIPMENT BODY READY On May 1, the World Trade Organization's (WTO) mechanism for settling disputes between exporters and preshipment inspection companies -- the Independent Entity (IE) -- became operational. The IE is constituted jointly by the WTO, the International Chamber of Commerce (ICC), and the International Federation of Inspection Agencies (IFIA), and is administered by the WTO. The IE was established in December 1995 by the WTO's General Council pursuant to Article 4 of the WTO Agreement on Preshipment Inspection, which calls for an independent review procedure to resolve disputes between an exporter and a preshipment inspection agency. The IE became operational following confirmation from the ICC and the IFIA that the necessary administrative and procedural requirements had been fulfilled -- including the translation and distribution to their affiliates and contacts around the world of the relevant information and forms as well as the List of Experts for Independent Reviews. IE's rules of procedure call for quick resolutions of disputes. Once a complaint is filed, the IE appoints, depending upon the agreement of the parties, either a single independent trade expert or a three member panel, selected from the List of Experts. The panel is required to make a decision, by a majority vote, within eight working days from the filing of the dispute. "WTO Preshipment Inspection Body Becomes Operational," WORLD TRADE ORGANIZATION PRESS RELEASE, May 1, 1996. SAUDIS NEGOTIATE TO JOIN WTO Saudi Arabia has begun negotiations with the World Trade Organization (WTO) to join the organization. The talks are expected to last well into 1997 or beyond. The oil- rich country, which ranks as the world's 26th largest exporter, is seeking WTO membership mainly as a way to expand markets for its manufactured exports, notably petrochemicals. "It's a question of marketing our petrochemicals, which face a lot of trade restrictions in various European countries as well as in the U.S.," said a Saudi diplomat. Saudi Arabia applied to join the GATT, the WTO's predecessor, in July 1993 but these negotiations had made little progress by the time the WTO was created in January 1995. The country hopes to join the WTO as a developing nation, which will give it more leeway in applying some of the organization's free trade rules. But trading partners have raised various concerns, including access for farm goods, non-tariff barriers to imports, and export subsidies. The U.S., which has put Saudi Arabia on its "watch list" for violations of intellectual property rights, is expected to press the country to adopt tough legislation to enforce copyrights, patents and trademarks. Of the six members of the Gulf Cooperation Council, Kuwait, Qatar, Bahrain and the United Arab Emirates are already WTO members. Oman has not yet applied. Frances Williams, "Saudis Start Talks on Joining the WTO," FINANCIAL TIMES, May 3, 1996. __________________________________________ REGIONAL AGREEMENTS/BILATERAL RELATIONS __________________________________________ U.S. THREATENS CHINA SANCTIONS On May 14, last-ditch trade talks between China and the U.S. ended without the countries resolving their wide differences over Chinese pirating of software, music and movies, drawing the two nations closer to a trade war. The U.S. accuses China of broad violations of agreements reached last year on the piracy issue, while China maintains that it has made significant progress in protecting intellectual property rights. The failure to reach agreement sets in motion a series of punitive actions by the U.S. The first step is publication of a list of Chinese exports to the U.S. totaling about $3 billion a year that could be subject to 100 percent tariffs. By mid-June, when the sanctions are to be imposed, the list is likely to have been reduced to about $2 billion. China's massive textile trade is the primary target of the Clinton administration's trade sanctions list. The list also prominently includes electronics and, to a lesser extent, China's huge toy shipments to the U.S. Chinese trade officials have vowed to retaliate with sanctions of their own if U.S. sanctions are imposed. Seth Faison, "U.S.-China Talks on Piracy Fail and a Trade War Seems Closer," NEW YORK TIMES, May 15, 1996; Helene Cooper and Kathy Chen, "China's Textiles to Top U.S. Hit List of Sanctions Aimed at Curbing Piracy," WALL STREET JOURNAL, May 14, 1996. EAST AFRICA TRADE BODY LAUNCHED After a year of delays, the presidents of Kenya, Uganda and Tanzania have launched a regional administrative body to boost free trade and economic cooperation in East Africa. The body, the East Africa Cooperation (EAC) forum, is the successor to the East African Community, which dissolved in 1977 amid political disputes among the three countries. According to the permanent secretary of Kenya's Ministry of Planning and National Development Karega Mutahi, while government was the primary player in the East African Community, in the EAC it will be the private sector. Mutahi said the EAC will seek to make the three East African currencies freely convertible, to allow for open immigration among the three countries, and to standardize customs documentation and taxation. "There is complete unanimous agreement among the heads of state for the enhancement of free trade in the region," he said. The three East African countries have a combined population of more than 70 million and a combined gross national product of about $40 billion. Scott Straus, "Trade Body Relaunched in East Africa," JOURNAL OF COMMERCE, May 6, 1996. __________________________________________ 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