From iatp@igc.apc.orgFri Sep 8 18:29:48 1995 Date: Thu, 02 Feb 1995 12:53:11 -0800 (PST) From: IATP To: Recipients of conference Subject: Trade News 2-2-95 Trade News Produced by the Institute for Agriculture and Trade Policy February 2, 1995 Volume 3, Number 2 ------------------------------------------------------------------------ HEADLINES ------------------------------------------------------------------------ - WTO HOLDS FIRST FORMAL MEETING - EU WILL SEEK WTO INVESTMENT RULES - US WARNS EU ABOUT BANANA REGIME - EU WARNS JAPAN ON CLOSED MARKETS - CHINA-US TRADE TALKS STALL - ITC RULES AGAINST PRISON LABOR IMPORTS - US TRADE DEFICIT HEADING TOWARD RECORD ------------------------------------------------------------------------ WTO NEWS SUMMARY ------------------------------------------------------------------------ WTO HOLDS FIRST FORMAL MEETING On January 31, the 76-member General Council which governs the new World Trade Organization (WTO) held its first formal meeting in Geneva. Singapore's ambassador to the WTO, K. Kesavapany was elected chairman of the Council, while Australia's ambassador Donald Kenyon was elected to head the Dispute Settlement Body. Ambassadors from Japan, Sweden, and Hong Kong were elected to chair the committees for goods, services, and intellectual property rights respectively, while Argentina's ambassador was elected to head the committee on trade and environment. The Council also elected Hungary's ambassador Andras Szepesi to chair the Textiles Monitoring Body which will supervise the dismantling of trade restrictions under the Multi-Fiber Arrangement (MFA). In addition to the election of chairmen to the WTO's main decision- making committees, the General Council also accepted Singapore's offer to host the first WTO ministerial meeting in 1996, and set up a working party to negotiate WTO entry terms for Vietnam. Finally, the Council established a working party to negotiate the compensation the European Union (EU) will have to pay trading partners under WTO rules for trade losses resulting from its expansion to Austria, Finland, and Sweden. Source: Frances Williams, "Textile Compromise Puts WTO Back on Course," FINANCIAL TIMES, February 1, 1995. EU WILL SEEK WTO INVESTMENT RULES Sir Leon Brittan, the European Union's (EU) trade commissioner, announced earlier this month that the EU wants WTO members to hold negotiations aimed at creating global rules and disciplines for the treatment of cross-border investment. Specifically, Brittan wants rules that would require host countries to operate transparent regulatory regimes, prevent unfair discrimination against foreign investors, guarantee against expropriation of assets, and guarantee freedom to repatriate profits and to convert between local and foreign currencies. According to informed observers, Brittan is pushing the proposal as a way to deflect pressures from some industrialized countries, such as the US and France, to place politically contentious issues, such as labor rights and environment, at the top of the WTO's agenda. EU officials say the proposal is backed by senior executives of many large European companies who want stronger rules to safeguard their investments and guarantee fair treatment, particularly in developing countries. Source: Guy de Jonquieres, "Brittan Wants WTO Rules for Investment," FINANCIAL TIMES, January 19, 1995. ------------------------------------------------------------------------ BILATERAL RELATIONS ------------------------------------------------------------------------ US WARNS EU ABOUT BANANA REGIME Earlier this month, US trade representative Mickey Kantor told the European Union (EU) that a preliminary Section 301 investigation had found that the EU's banana import regime was "adversely affecting US economic interests ... [and costing] ... US banana marketing and distribution firms hundreds of millions of dollars." As a result, Kantor announced that he had invited the public "to identify specific European goods and services against which retaliatory trade action could be taken" if the full investigation confirmed the finding. EU trade commissioner Sir Leon Brittan said he was disturbed by the reference to possible trade retaliation against European goods and services and declared that such unilateral action violates the rules of the World Trade Organization (WTO). Kantor's investigation began in October after Chiquita Brands International and the Hawaii Banana Industry Association filed complaints under Section 301 of US trade law alleging that the EU's banana regime is causing Chiquita to loose 50 percent of its potential EU market. The EU imports bananas from African, Caribbean and Pacific countries tariff-free, but imposes quotas on so-called dollar bananas from Latin America under an import regime implemented in July 1993. Sources: Nathaniel C. Nash, "Lowly Banana Has a High Profile in Trade Dispute," NEW YORK TIMES, January 29, 1995; Caroline Southey, "Brittan Resists Banana War Threat," FINANCIAL TIMES, January 11, 1995. EU WARNS JAPAN ON CLOSED MARKETS Earlier this month, Sir Leon Brittan announced that Japan's efforts to open its economy to foreign competition were overly cautious and warned that the EU may adopt a tougher policy to force open markets later this year when the EU-Japan Assessment Mechanism comes up for review. This mechanism governs trade relations between the two countries. "I hope we will be able to have a positive evaluation at that time," he said. "If not, then we shall consider what elements or strategy would be able to give us the substantial market-opening our industry requires." Up to now, the EU has practiced a much less aggressive approach than the United States in its efforts to open Japanese markets. Source: "EU May Toughen Policy to Open Japan Markets," JOURNAL OF COMMERCE, January 6, 1995. CHINA-US TRADE TALKS STALL On January 30, after nine days of intense negotiations and one week before US Section 301 sanctions are to go into effect, Chinese and US officials announced that they had failed to agree on a plan to curb Chinese violations of intellectual property rights--in particular, the piracy of compact and laser disks and computer software. Following the breakdown in talks, US trade representative Mickey Kantor announced that "[i]f there is not agreement by February 4, I will authorize publication of a final list of Chinese imports that will be subject to 100 percent tariffs." If sanctions are imposed, it could cost Chinese exporters one billion dollars a year. In the event of sanctions, China has threatened to suspend talks with US automakers on joint ventures. It has also said it would impose tariffs on imports of US cassette tapes, compact discs, cigarettes, alcoholic drinks, and cosmetics. China and the US have been locked in negotiations for 18 months over the intellectual property issue, with the US entertainment and information industries claiming that they are losing about one billion dollars a year through flagrant Chinese counterfeiting. Specifically, US officials have identified 29 factories in China's southern regions engaged in piracy and Washington is demanding that China either close the offending businesses or oblige them to shut down production lines for counterfeit goods. Sources: Tony Walker, "Trade Split Looms as US-China Talks on Copyright Stall," FINANCIAL TIMES, January 30, 1995; Helene Cooper and Marcus W. Brauchli, "US and China Near Trade War as Talks Collapse, " WALL STREET JOURNAL, January 30, 1995; David E. Rosenbaum, "China Trade Rift With US Deepens," NEW YORK TIMES, January 29, 1995. ------------------------------------------------------------------------ WORLD TRADE ROUND-UP ------------------------------------------------------------------------ ITC RULES AGAINST PRISON LABOR IMPORTS Last month, the US International Trade Commission (ITC) upheld a Customs Service ruling barring imports of goods made with prison labor. The decision clarifies the consumptive-demand clause of the US Smoot-Hawley Tariff Act of 1930. While this clause prohibits imports produced by prison or forced labor, up to now it has been unclear if the US government would allow the importation of merchandise made with prison labor if there were insufficient quantities of domestically produced goods to satisfy US consumer demand. The ITC's ruling makes clear that even goods in short supply in the US cannot be imported into the country if they are the products of prison labor. Source: Paula L. Greene, "Trade Court Backs Firm Stand Against Prison-Made Goods," JOURNAL OF COMMERCE, January 10, 1995. US TRADE DEFICIT HEADING TOWARD RECORD Despite continued vigorous export growth, the US trade deficit widened in November and is on track toward a record exceeding $150 billion for 1994. Through the first 11 months of 1994, the US trade deficit in goods was running at an annual rate of $152.5 billion; the record is $152.1 billion set in 1987. The Clinton administration blamed the deteriorating trade performance on unequal economic growth rates among US trading partners. But some private economists contended that trade barriers, especially in Japan and China, were to blame as well. Sources: "US Trade Deficit on Track Toward a Record of More than $150 Billion," ASSOCIATED PRESS, January 20, 1995; Kenneth N. Gilpin, "Trade Gap Wider in Month; Possible Record for '94 Seen," NEW YORK TIMES, January 20, 1995. ------------------------------------------------------------------------ RESOURCES ------------------------------------------------------------------------ NORTH AMERICAN FREE TRADE: ISSUES AND RECOMMENDATIONS, Gary Clyde Hufbauer and Jeffrey J. Schott, INSTITUTE FOR INTERNATIONAL ECONOMICS, April 1992. 369 pages. Institute for International Economics, Fulfillment Department, 11 Dupont Circle, NW, Washington, DC, 20036-1207. (800) 229-ECON. $25. This book has been the most widely cited analysis of the issues underlying the NAFTA negotiations. Many of its recommendations helped shape the negotiations. TRADING FREE: THE GATT AND US TRADE POLICY, Patrick Low, THE TWENTIETH CENTURY FUND PRESS, June 1993. 310 pages. The Brookings Institution, Publications, 1775 Massachusetts Avenue, Washington, DC, 20036. (800) 275-1447. $14.95. In this book Patrick Low, who was with the GATT Secretariat in Geneva from 1980 to 1988, argues that the current US focus on regional trade agreements is indicative of increasing doubts about the survival of the postwar multilateral trading system in general. Low asserts that without enlightened US leadership, the international trading system will be dominated by short-term improvisation punctuated by disruptive disputes. ======================================================= Trade News is produced by the Institute for Agriculture and Trade Policy. Editor: Orin Kirshner. Trade News is available via fax at the rate of $60/six months or $100/year. E-mail versions are available free of charge for Econet/IATP Net subscribers. For more information about fax or email subscriptions, contact: Institute for Agriculture and Trade Policy, 1313 Fifth Street S.E., Suite 303, Minneapolis, MN, 55414 Phone 612-379- 5980. 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