AmericasTrade, Vol. 6, No. 21, October 21, 1999
Reporting on NAFTA, Mercosur, the FTAA and trade policy in the Americas
from the publishers of AmericasTrade
Following is from the Sept. 9 issue of AmericasTrade.
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Inside This Issue . . .Canadian auto pact found to be inconsistent with WTO rules
Archer calls on USTR to consult on labor initiative in WTO
Senate wrestles with details of bringing CBI, Africa to Senate floor
U.S. delivers muted response to Chile pre-fast track proposal
Civil society differences block search for FTAA ministerial text
House sends Senate truck safety bill with foreign carrier penalties
Commerce finds dumping, no subsidies in cattle imports from Canada
WTO panel reaches split interim decision on Mexican HFCS case
Helms, Gilman press for State action on firms with Cuban ventures
Text: Helms-Gilman letter on Cuba
Clinton, Chretien agree in principle to resolve ITAR dispute
Canada unlikely to seek WTO working group on culture in Seattle
Canada calls for WTO working party on biotechnology
Text: Canadian proposal on WTO biotech working party
House leaders name advisory group for WTO negotiations
WTO interim panel finds against U.S. CVD rules on privatization
U.S. Chamber engaged in talks with Cuba as sanctions bill returns
Following is from the Oct. 21 issue of AmericasTrade.AmericasTrade, Vol. 6, No. 21, October 21, 1999
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[email protected]. Thanks for the opportunity to serve you.CANADIAN AUTO PACT FOUND TO BE INCONSISTENT WITH WTO RULES
The World Trade Organization has struck a blow to Canada's implementation of a 30-year-old auto agreement that extends tariff benefits to signatory companies while their competitors, who have been unable to join,face tariffs on their imports. Signatories to the 1962 Auto Pact must invest in Canada, produce roughly one car for every car they sell there, and undertake a certain level of economic activity by using domestic parts and labor.
As a benefit, signatories can import cars to Canada without a 6.1 percent tariff, which allows them to round out their fleets for sale in the Canadian market. A confidential interim WTO panel found last week that this policy violates Canada's obligations under international trade rules to treat trading partners equally, and not to discriminate against certain companies.Specifically, the interim panel found that Canada violated the most favored nation principle, as expressed in Article I(1) of the General Agreement on Tariffs & Trade and Article II of the General Agreement on Trade in Services (GATS). Under both agreements, the panel found, Canada violated the national treatment provision, which is Article III of the GATT and Article XVII of the GATS. National treatment obligates a government to treat foreign goods and services no less favorably than domestic goods and services. The panel also found that the tariff benefits are inconsistent with Article 3 of the Agreement on Subsidies and Countervailing Measures (SCM) because they are contingent on meeting Auto Pact requirements for adding Canadian value to cars manufactured there. That value must amount to 60 percent of the total cost of the vehicles firms sell in Canada, and the requirement can be met by a combination of expenses on domestic parts, labor sourcing and overhead. Article 3 of the SCM Agreement prohibits subsidies that are contingent on the use of domestic rather than imported goods. As a result of this subsidies finding, the interim panel report asked Canada to eliminate the tariff preferences for Auto Pact signatories within 90 days from the adoption of the ruling.
In addition to the value-added requirement, signatories to the Auto Pact the value of the cars produced in Canada must be equal or greater to the value of the cars they sell in that market. The panel did not rule whether the Canadian policy violated Article II (1) of the Agreement on Trade-Related Investment Measures which deals with national treatment. The panel found that such an assessment was unnecessary because the measure was already found to violate the national treatment provision of the GATT, sources said.
Signatories to the Auto Pact are Ford, General Motors, Daimler-Chrysler, Volvo, and a General Motors-Suzuki joint venture known as CAMI. The agreement has been closed to new members since 1993.Under the Auto Pact, Ford imports Jaguars into Canada duty-free while General Motors imports Saabs and Isuzus, one source said. The preferential treatment of these signatories was challenged by Japanese automakers including Toyota, which has extensive investments in Canada. The government of Japan last year challenged the Canadian policy, and the EU followed; their complaints were combined into one panel. Canada could choose to extend to EU and Japanese companies that are non-signatories the same duty-free benefits it gives to signatories. But Canada has already stated publicly that it will not unilaterally reduce its tariffs on autos, sources said.
Canada could choose instead to eliminate the tariff benefits for signatories of the Auto Pact, sources said. Other options may come up after Canada fully analyzes the more than 400-page report, one source said. Sources speculated that if the interim panel report stands Canada will appeal the decision. They explained that Canada is facing domestic pressure to maintain the current tariff regime and that Canada will need more than 90 days to make any necessary changes to the tariff preferences. However, another source downplayed these possibilities by saying that the Auto Pact had become obsolete and no longer played a significant role in attracting foreign investment in the auto sector. The source also noted that the Canadian government would have enough time to make any necessary changes since the report will likely not be finalized until January because of
translation requirements. A spokesperson for the Canadian Dept. of International Trade said that Canada would not comment on the interim report at this time since it was still confidential. The spokesperson did note that Canada would be submitting its comments to the WTO in the next two weeks. The report is expected to be completed by the end of November and then be translated.ARCHER CALLS ON USTR TO CONSULT ON LABOR INITIATIVE IN WTO
The Chairman of the House Ways & Means Committee is seeking clarification of the Clinton Administration's plans to introduce the issue of labor standards into the World Trade Organization, which were highlighted by President Clinton last week without consulting the committee. He announced the U.S. would seek a working party on labor rights in the WTO and advocate a stronger working relationship between the WTO and the International Labor Organization. Chairman Bill Archer (R-TX) last week asked for a meeting with U.S. Trade Representative Charlene Barshefsky to get a better explanation of how the labor initiative fits into the stated trade agenda, according to congressional sources. The meeting is scheduled for today (Oct. 21). The U.S. has delayed the formal presentation of its labor working party proposal in the WTO, which was expected immediately after Clinton's speech on Oct. 13. Commerce Undersecretary David Aaron said this week the Administration was still consulting with Congress on the labor issue.Key among the issues Archer wants to clarify is which trade issues on the agenda the Administration is prepared to trade off to gain backing for its controversial labor initiative, according to a congressional source.
One possible tradeoff involving a delay in implementation was implied by Deputy Commerce Secretary Robert Mallet in an Oct. 11 press conference in Geneva. He said the U.S. could provide incentives to developing countries to endorse better labor rights and environmental protection. "I do not know what those incentives may be," he said in a Geneva press conference. "They may be a more protracted timetable for implementation of certain rules." Any plans to trade off trade liberalization goals to gain more backing for a labor proposal comes at a time when the U.S. is already at odds with many key trading partners over trade issues, a congressional source said. For example, the European Union and the U.S. are at odds over agriculture, while Japan opposes a priority U.S. initiative to eliminate tariffs in eight sectors such as forestry and fish, the source said. The source pointed out that House Republicans are not against addressing the labor issue by having the ILO take a strong stance and developing better coordination between the ILO and the WTO. But anything going beyond will
likely end up bogging down trade negotiations, the source said. A similar sentiment was expressed by Senate Finance Committee Chairman Bill Roth (R-DE) in an Oct. 15 statement following the Clinton speech to the Democratic Leadership Council. Roth said that any labor and environment initiative in the WTO will pose a problem for trade because the organization has no competence in these areas and they are controversial among trading partners."If we pursue that course, we will prevent any agreement on trade or on labor or on the environment," he said. Labor and environment standards should be addressed in international organizations dedicated to the tasks, namely the ILO and environmental organizations like the Convention on International Trade in Endangered Species, he said.
But Roth emphasized his belief that any examination of the nexus between labor and trade, such as impact on wages and working conditions, will show that trade is essential for a growing and competitive economy and, therefore, essential to raising living standards and maintaining full employment.Vice President Al Gore also highlighted the importance of labor and environmental standards in his speech to the AFL-CIO convention that endorsed him. Gore said these standards should be included in trade agreements that will be considered under fast-track negotiating authority. "I believe our president needs the authority to reach new trade agreements and open new markets to our goods and services," he told the convention. "But as president, I will also insist on and use the authority to enforce worker rights, human rights, and environmental protections in those agreements." In his Oct. 13 speech, Clinton strongly advocated linking labor and environment to the international trading
system to ensure that new multilateral trade negotiations will improve the quality of life and work around the world. By including these issues, the U.S. will ensure that new WTO negotiations will reflect the realities of the modern world, he said in a Oct. 13 speech laying out the U.S. trade agenda.He said that promoting trade liberalization and labor standards should not be contradictory goals, but reinforcing ones. Clinton also said the WTO should work more closely with the ILO, which has worked to protect human rights and to ban child labor. "This organization [the WTO] needs to be on the forefront of integrating our objectives and trying to build a global economy that will promote open trade and open prosperity and lift the standards of living and the quality of life for people throughout the world," he said. "They should be reinforcing efforts, not efforts in conflict." Clinton announced that the U.S. is seeking a working party on trade and labor, but did not discuss exactly what that group would do. A fact sheet accompanying his speech says the working group could follow up on the pledge in the 1996 ministerial declaration issued in Singapore that WTO members observe internationally recognized labor standards."The U.S. working group proposal could create a mechanism within the WTO to meet this commitment and build consensus on issues important to the lives of working people all over the world," the fact sheet said. It also emphasizes that the U.S. wants the ILO to have a strong cooperative relationship with the WTO.
U.S. Trade Representative Charlene Barshefsky elaborated on this message in an Oct. 13 briefing where she said the WTO working group would "review and analyze" a number of social issues.Its analysis would be carried out in cooperation with institutions like the World Bank, the International Monetary Fund, United Nations Council on Trade and Development, and the ILO on key social questions such as countries' safety nets and how to promote adjustment, or job retraining, Barshefsky said. It would also look at how to "intensify" global competition among the working population, the relationship between market opening and the observance of internationally recognized core labor standards, she said. This will be very useful work that the WTO will be in the best position to coordinate, she said, confining her remarks to only the most general of terms. The U.S. working party proposal is bound to be very controversial as would be a strong WTO-ILO cooperation, officials said. The European Union is still wrestling with its position on labor in the new WTO negotiations, but its stance may well fall short
of a working party because of an internal division among member states.Nevertheless, Barshefsky insisted she had the support of the EU for a working party. The Finnish EU presidency has proposed a compromise that would create a standing forum between the World Trade Organization and the International Labor Organization. The forum which would be open to governments, trade unions and employers, would examine trade, globalization and labor issues.The World Bank would also have a role in the forum to try to provide some reassurance to developing countries that the new forum would not be a "rich man's club," one official said. EU Trade Commissioner Pascal Lamy spoke out in favor of this compromise language at the Oct. 11 Council meeting, the official said.Lamy argued that member states should focus on the substance of the work they would like to see conducted on trade and labor issues rather than its location, according to the official. The Oct. 11 Council of Ministers was unable to reach agreement on labor, on how to handle antidumping negotiations and whether to exempt audiovisual services from the WTO negotiations. Officials then resumed their discussion on an ambassador-level the following week, but have yet to resolve the labor and audiovisual issues.
The member states seeking the labor working party are Germany, France, Luxembourg and Sweden, sources said. The working party is opposed by the United Kingdom, Netherlands, Ireland, Spain and Greece, one source said. The U.S. fought in the first ministerial of the WTO to have a WTO role on labor standards, but only managed language in the 1996 declaration that pledged WTO's members commitment to core labor standards.The declaration recognized the ILO as "the competent body to set and deal with these standards." The text states that the ILO and the WTO should continue their existing collaboration, which is little more than a rudimentary information exchange between the two organizations now.The 1996 declaration also agreed that
further trade liberalization should promote core labor standards, and rejected the use of labor standards for "protectionist purposes." On environment, the President said that the U.S. agenda includes a thorough review of the environmental impact the new negotiations will have. He also highlighted the U.S. approach of pursuing trade policies that also benefit the environment, such as reduction of agricultural subsidies that will help prevent the exhaustion of the land.The fact sheet also highlighted that the U.S. seeks an advisory role for the WTO Trade and Environment Committee to help identify the environmental impact of the negotiations. The fact sheet also emphasizes that the U.S. wants to preserve countries' rights to uphold a higher level of environmental standards if they are science based."We will continue to ensure that WTO rules recognize our right to take science-based health, safety and environmental measures even when they are higher than international standards," Clinton said. According to the fact sheet, the U.S. is also seeking to increase cooperation between the WTO and international environmental organizations such as the United Nations Environmental Program.
SENATE WRESTLES WITH DETAILS OF BRINGING CBI, AFRICA TO SENATE FLOOR
Senate Majority Leader Trent Lott (R-MS) is likely to move towards floor action on a package of bills that would extend trade benefits to Caribbean Basin Initiative and sub-Saharan African countries later this week. But at press time, Republicans and Democrats had not worked out critical details that would limit amendments and the time spent debating them, according to congressional sources. The outcome of that effort may well determine whether Lott will actually proceed to bring the bill to the floor for a vote, some sources said. But other sources said Lott may opt to begin the procedural process for bringing up the bill by filing a cloture motion on Oct. 22 even if not all the details are worked out. A cloture motion, which limits debate to 30 hours, takes a specified number of days to ripen before there can be a vote on it. The Senate is expected to stay in session another four weeks, which means there would be some time to consider a trade bill, one congressional source said.
One supporter of the Africa bill said this week that it is no longer a certainty that Lott will actually schedule the Africa bill for floor action this session, and said he believed it is impossible to hold a conference this year. However, such a conference could take place next year without delay, congressional sources said.He also said that the current divisive climate among Democrats and Republicans over unrelated issues makes any cooperation harder. "In the current climate, all bets are off," he said.
One of the issues Senate staff and principals are trying to work out is whether Senate Democratic Leader Tom Daschle (D-SD) will agree to invoke cloture, which is the procedure for limiting debate, sources said. Democrats are interested in protecting their rights to amend the trade package, which would allow such members as Sen. Edward Kennedy (D-MA) to offer a minimum wage amendment, they said. Amendments that would not be directly related to the provisions of the trade bill can be offered in the days that a cloture motion ripens. So far, Daschle has not given a "hard and fast" commitment to support cloture, sources said at press time.At issue for Daschle is the right of the minority to offer amendments on any issue, which has been severely limited all year by Lott's parliamentary maneuvers. In addition, some sources insist that the opposition among the left of center Democrats to the Africa bill has grown under the pressure of grassroots lobbying.That may have raised Daschle's concerns that bringing up the bill may divide the caucus, one source speculated. Lott plans to offer the trade bill package as a manager's amendment to the House bill, which will significantly limit amendments once cloture is invoked. That limit will be enforced by insisting that amendments are germane to the bill, which means they cannot expand its scope, sources said.There are about eight trade-related amendments that Democratic senators are likely to push actively, which is fewer than the more than twenty that have been identified
as possibilities, sources said. Among the most controversial of the expected amendments is an alternative Africa bill introduced by Sen. Russ Feingold (D-WI). That bill is similar to the Hope for Africa bill that was introduced by Rep. Jesse Jackson, Jr. (D-IL) in the House, Feingold said in an Oct. 4 floor statement. It would reduce the crushing debt burden on many African countries and deal with the AIDs crisis, according to Feingold.Other possible amendments could be offered by Sen. Tom Harkin (D-IA) to tighten the restrictions on the imports of products made with forced labor and broaden the definition of forced labor to include child labor, sources said. Sources lobbying for the bill say that the Administration has begun a strong lobbying campaign in its favor, partially under pressure from Lott.Senior Administration officials last week signaled that the timetable is getting tight for Senate action on trade. President Clinton on Oct. 13 said "there is broad bipartisan support" for the bills expanding trade with the CBI and sub-Saharan Africa, and expressed the hope that they could pass this year. "I hope and pray we will get that [trade package] out of this session of Congress," he said. The President's National Economic Adviser Gene Sperling also expressed the hope for congressional passage of the bills. "We
believe there is no reason we shouldn't be able to conclude both Africa free trade and the Caribbean Basin Initiative this year," Sperling told reporters on Oct. 13. He said that Senate Finance Committee chairman Bill Roth (R-DE) and the ranking member of the committee, Sen. Patrick Moynihan (D-NY), and assured President Clinton of their commitment to "working together" on passing the package. The Finance Committee approved the bills on June 22.The Senate CBI bill would allow quota- and duty-free access for apparel made with U.S. fabric made of U.S. yarn that is either cut in the U.S. or in the Caribbean Basin, through 2004. If passed the bill would have to be reconciled with a House Ways & Means Committee version that is more liberal.
It would allow either U.S. or regional fabric, made of U.S. yarn, stitched with U.S. or regional thread, and cut either in the U.S. or the region, but only until August 2002. The Senate Africa bill mirrors the Senate CBI bill by conditioning duty-free and quota free access on the use of U.S. fabric made of U.S. yarn. The House Africa bill would establish no such conditions and allow access to apparel made with regional fabric.