WORLD TRADE ORGANIZATION...57 WORLD TRADE ORGANIZATION Peru, and Tunisia.6 As for CVD measures, seven WTO Members notified CVD actions taken during the latter half of 2000, whereas

WORLD TRADE ORGANIZATION57

Peru, and Tunisia.6 As for CVD measures,seven WTO Members notified CVD actionstaken during the latter half of 2000, whereasseven Members also notified actions taken in thefirst half of 2001. The Committee reviewedactions taken by Argentina, Australia, Canada,the EU, Peru, South Africa and the UnitedStates. With respect to subsidy notifications,the Committee continued its examination of newand full notifications submitted for 1998, as wellas updating notifications submitted for 1999 and2000. The table contained in Annex II of thisreport shows the WTO Members whose subsidynotifications were reviewed by the Committee in2001.

As of January 1, 2002, when Membership in theWTO had reached 144, only 50 Members hadsubmitted new and full subsidy notifications for1998, while 43 and 35 Members, respectively,had submitted updating notifications for the1999 and 2000 periods. Notably, 41 Membershave never made a subsidy notification to theWTO.

In view of the ongoing difficulties experiencedby Members, including the United States, inmeeting the Agreement’s subsidy notificationobligations, the Committee took several actionsin 2001 aimed at improving the situation. At theend of 2000, the Working Party on SubsidyNotifications was reconvened to take a freshlook at the notification problems confrontingMembers and develop possible long-termsolutions for the Committee’s consideration. Following a questionnaire to Memberscirculated by the Secretariat inquiring about thespecific problems faced in making notificationsand several informal meetings in the spring of2001, a three-prong strategy was agreed upon toaddress the problems of subsidy notifications. The first prong was to examine alternative

practical approaches to the frequency and natureof subsidy notifications, as well as their review. Examination of the format for a subsidynotification constitutes the second prong of thestrategy –the effort began in 2001 and willcontinue into 2002. The third prong is theorganization of a subsidy notification seminar inthe fall 2002, coinciding with the regularCommittee meeting, for government officialsfrom developing countries responsible fornotification.

An important action was taken by theCommittee in 2001 with respect to thefrequency and nature of subsidy notifications. Under Article 26 of the Agreement, “new andfull notifications” are submitted every thirdyear; while “updating notifications” aresubmitted in intervening years. At a specialmeeting held in May 2001, the Committeerecognized that most Members were havingsignificant difficulties in making theirnotifications, primarily due to resourceconstraints. Importantly, Members indicatedthat the effort and resources required to preparethe annual updating notifications are essentiallyequal to those required for new and fullnotifications. Generally, Members expressedtheir belief that their resources would be bestutilized by devoting maximum effort tosubmitting new and full notifications, every twoyears, and by de-emphasizing the review of theannual updating notifications. Under this newapproach, Members can concentrate theirresources in alternating years, first on makingtheir own new and full notifications, and then onreviewing other Members’ notifications. It isexpected that this approach will have the effectof increasing transparency, which is theobjective of the notification obligation under theAgreement.

Implementation Issues: Over the course of 2001and especially during the period just prior to theFourth Ministerial Conference, the Committeeheld numerous informal and formal meetings todiscuss several implementation issues. Pursuantto various General Council decisions, the

6 In keeping with WT O practice, the review

of legislative provisions which pertain or apply to

both antidumping and CVD actions by a Member

generally took place in the Antidumping Committee.

2001 ANNUAL REPORT 58

Committee held extensive discussions on fivegeneral topics:

C determining “export competitiveness”under Articles 27.5 and 27.6 of theAgreement, including the possibility ofextending the period for establishingexport competitiveness;

C special procedures, under Article 27.4of the Agreement, for small exporterdeveloping countries seeking anextension of the transition period for thephase-out of export subsidies;

C the appropriate methodology forcalculating the permissible level forrebates of indirect taxes and importduties on exported products underAnnex I of the Agreement;

C a general review of the Agreement’sprovisions regarding countervailing dutyinvestigations; and,

C the methodology for the calculation ofthe GNP per capita threshold delineatedin Annex VII of the Agreement for thedesignation of certain developingcountries entitled to particular types of“special and differential treatment”under the Agreement.

1. Determining “Export Competitiveness”under Article 27.5 and 27.6

Under Article 27.2 developing countries notlisted in Annex VII of the Agreement mustphase-out their export subsidies no later thanJanuary 1, 2003. Notwithstanding thisprovision, Article 27.5 and 27.6 of theAgreement provide that a developing countrywhich has reached 3.25 percent of world tradein a given product over two consecutive yearsmust accelerate the phase-out of its exportsubsidies on that product. The product scope isdefined as a section heading of the HarmonizedSystem nomenclature. Application of thisprovision can be triggered either by a

notification made by the developing country or acomputation done by the WTO Secretariat at therequest of another Member.

Many developing countries sought: (1) anextension of the period for establishing exportcompetitiveness under Article 27.6 from two tofive years; and, (2) a mechanism to allowdeveloping countries that have achieved exportcompetitiveness to resume export subsidizationif exports fall below the level of exportcompetitiveness. An expansion of the countrieseligible for the special and differential treatmentprovided to Annex VII countries and abroadening of the product scope for thedetermination of export competitiveness werealso sought.

Despite extensive discussions, the Committeewas unable to agree on whether the two-yearperiod could be effectively extended in somemanner without violating the express terms ofthe Agreement, or whether, the two-year periodcould be calculated on an alternative basis, suchas a multi-year rolling average. As to themechanism for the resumption of exportsubsidization after export competitiveness islost, numerous issues remained unresolved as tothe terms under which a resumption could beauthorized. Nor was agreement reachedregarding the appropriate level of aggregationunder the Harmonized System nomenclaturewhen defining the product scope and theexpansion of the countries eligible for thespecial and differential treatment provided toAnnex VII countries under the Agreement. Thisimplementation proposal was not considered atthe Fourth Ministerial Conference.

2. Special Article 27.4 procedures forsmall exporter developing countries

As noted above, the Agreement requiresdeveloping countries to eliminate their exportsubsidies by January 1, 2003. Article 27.4 ofthe Agreement allows for an extension of thisdeadline on a year-to-year basis if a request ismade to the Subsidies Committee by December31, 2001. The Committee must then decide


whether an extension is justified based onrelevant “economic, financial and developmentneeds” of the developing-country Member. Ifthe Committee grants an extension, annualconsultations with the Committee must be heldto determine the necessity of maintaining thesubsidies.7 If the Committee does notaffirmatively sanction a continuation, the exportsubsidies must be phased out within two years.

Two developing-country proposals were madethat would have permanently grandfathered theexport subsidy programs of developingcountries under certain conditions. One of theconditions proposed was that the exports of thedeveloping country represent a small share oftotal world exports. Several countries, includingthe United States, objected to the proposedpermanent exemption from the Agreement’sexport subsidy disciplines. Nonetheless, in anattempt to try and address the concerns of smallexporter developing countries, a specialprocedure was discussed within the context ofArticle 27.4 of the Agreement under whichcountries whose share of world exports was notmore than 0.10 percent and whose GrossNational Income was not greater than $20billion could be granted a limited extension forparticular types of export subsidy programssubject to rigorous transparency and standstillprovisions. While the Committee could notreach a consensus on all the particularprovisions of the extension procedure –such asthe length of the extension –based on theCommittee’s work, the Committee chairmanmade a recommendation to the General Councilwhich substantially formed the basis of theprocedure agreed upon as part of theimplementation decision taken at the FourthMinisterial Conference. Members meeting allthe qualifications for the agreed upon specialprocedures will be eligible for a five-year

extension of the transition period, in addition tothe two years referred to under Article 27.4.8 Todate, Barbados, Belize, Costa Rica, El Salvador,Guatemala, Honduras, Jamaica, Kenya, Panama,Papua New Guinea, St. Kitts and Nevis, andSt.Vincents, have applied for the specialprocedures under Article 27.4. The Committeewill conduct a detailed review of all extensionrequests in 2002.

3. The appropriate methodology for thecalculation of the rebate of indirecttaxes and import duties

Under the Agreement’s export subsidy rules,countries are permitted to rebate certain indirecttaxes (e.g., sales taxes) and import duties oninputs used in the production process andphysically incorporated in an exported product. The Committee considered two implementationproposals with respect to this issue. The firstwas a request that countries be permitted tocalculate the level of the rebate on an“aggregate” or “generalized” basis rather thanon a product- or company-specific basis. Undersuch an approach, a particular rebate levelwould be established on an industry-wide basisand the same rate applied to each company inthe industry. Due primarily to seriousreservations – expressed by the United Statesand other developed country Members – thatany aggregate methodology for calculating therebate could result in an excessive rebate, noconsensus within the Committee was reached.

The second proposal related to the question ofwhether indirect taxes and import duties oncapital equipment used in the production ofexports could be included when calculating theamount of the rebate. As noted above, under the

7 Any extension granted by the Committee

would only preclude a W TO dispute settlement case

from being brought against the export subsidies at

issue. A Member’s ability to bring a countervailing

duty action under its national laws would not be

affected .

8 In add ition to agreement on the specific

length of the extension, it was also agreed at the

Fourth Ministerial Conference, in essence, that the

Committee should look favorably upon the extension

requests of Members which do not meet all the

specific eligibility criteria for the special small

exporter procedures but which are similarly situated

to those that do meet all the criteria.


Agreement indirect taxes and import duties oninputs consumed in the production process canbe rebated when a product is exported. However, the phrase “inputs consumed in theproduction process” as defined in theAgreement does not specifically include capitalequipment. Due to the clarity of the language inthe Agreement many countries, including theUnited States, voiced concern that this was notan issue of implementation and that adoption ofthis proposal would effectively constitute anamendment or authoritative interpretation of theAgreement – neither of which the Committee isempowered to do. Other countries expresseddoubts as to how the rebate could be accuratelyand transparently calculated. Consequently, noconsensus was reached on this issue.

4. Review of the provisions of theAgreement regarding countervailingduty investigations

The General Council referred this topic to theCommittee on August 2, 2001. Brazil and Indiasubmitted papers making specific proposals asto how to clarify or, in some instances, modifythe provisions of the Agreement regardingcountervailing duty investigations. Theproposals related to: the appropriate definitionsof “domestic industry”and “like product;” theuse of “facts available;” numerous calculationissues; and the conduct of annual reviews ofcountervailing duty orders already in place. Due to the breadth and complexity of the issuesraised and the relatively short period of timeprior to the Fourth Ministerial Conference, verylittle substantive discussion occurred withrespect to the specific proposals made beyondthe formal presentation of proposals. Thus, theCommittee recommended to the GeneralCouncil that the Committee continue to considerthese issues. This recommendation was adoptedas part of the implementation decision adoptedat the Fourth Ministerial Conference.

In December of 2001, the Committee met andadopted a plan to examine and discuss the twopreviously submitted papers. The Committeemust report to the General Council by July 31,

2002. In light of the anticipated rulesnegotiations, it is unclear the extent to which theCommittee is the appropriate forum foraddressing some of the proposals, especiallythose which affect the rights and obligations ofcountries under the existing Agreement.

5. The methodology for the calculation ofthe per capita GNP threshold in AnnexVII of the Agreement

Annex VII of the Agreement identifies certaincountries that are eligible for particular specialand differential treatment. Specifically, theexport subsidies of these countries are notprohibited and, therefore, are not actionableunder the dispute settlement process. Secondly,a higher de minimis threshold applies incountervailing duty investigations of importsfrom these countries, although this standardexpires at the end of 2002.9 The countriesidentified in Annex VII include those WTOMembers designated by the United Nations as“least-developed countries” (Annex VII(a)) aswell as countries that had, at the time of thenegotiation of the Agreement, a per capita GNPunder $1,000 per annum and are specificallylisted in Annex VII(b).10 A countryautomatically “graduates” from Annex VII(b)status when its per capita GNP rises above the$1,000 threshold. When a country crosses thisthreshold it becomes subject to the subsidydisciplines of other developing countries.

9 This de minimis for Annex VII countries is

3 percent, compared with the 2 percent for other

develop ing countries.

10 Annex VII(b) countries are Bolivia,

Cameroon, Congo, Cote d’Ivoire, Dominican

Republic, Egypt, Ghana, Guatemala, Guyana, India,

Indonesia, Kenya, Morocco, Nicaragua, Nigeria,

Pakistan, Philippines, Senegal, Sri Lanka, and

Zimbabwe. In recognition of an apparent technical

error made in the initial compilation of this list and

pursuant to a General Council decision, Honduras

was formally added to Annex VII(b) on January 20,

2001.


Since the adoption of the Agreement in 1995,the de facto interpretation by the Committee ofthe $1,000 threshold has been current (i.e.,nominal or inflated) dollars. The concern withthis interpretation, however, was that a countrycould graduate from Annex VII on the basis ofinflation alone, rather than on the basis of realeconomic growth. The possible use of a $1000constant 1990 dollar threshold was first raisedas part of the preparatory process for the ThirdMinisterial Conference in Seattle, and at thattime some work on different possiblemethodologies for deriving GNP per capita inconstant 1990 US dollars was developed.11

In October 2001, the Chairman of the GeneralCouncil requested that the Committee take upthe question of the methodology for calculationof the $1000 threshold in constant 1990US dollars. The Chairman of the Committee, inconjunction with the WTO Secretariat,developed an approach based on certain WorldBank data that were used by the Uruguay Roundnegotiators in 1990 in developing Annex VII(b). While many Members expressed the view thatthey could accept this proposed methodology,other Members indicated that it was moreappropriate to rely on more recently availabledata. Thus, it was not possible to reach aconsensus on the question of methodology.

At the Fourth Ministerial Conference, it wasagreed:

. . . that Annex VII(b) to the Agreement on Subsidies andCountervailing Measures includes the Members that arelisted therein until their GNP per capita reaches US $1,000in constant 1990 dollars for three consecutive years. Thisdecision will enter into effect upon the adoption by theCommittee on Subsidies and Countervailing Measures ofan appropriate methodology for calculating constant 1990dollars. If, however, the Committee on Subsidies andCountervailing Measures does not reach a consensusagreement on an appropriate methodology by 1 January

2003, the methodology proposed by the Chairman of theCommittee set forth in G/SCM/38, Appendix 2 shall beapplied. A Member shall not leave Annex VII(b) so longas its GNP per capita in current dollars has not reached US$1000 based upon the most recent data from the WorldBank.12

Pursuant to this decision, the Committee will re-examine the methodology proposed by theChairman of the Committee in the course of2002.13

6. Financial Support by the Government ofKorea for Hynix Semiconductor

At the two formal meetings of the Committee in2001, the United States made statementsexpressing serious concerns regarding thecontinued financial support which variousKorean government authorities have beenproviding to Hynix Semiconductor, Inc. Thissupport has had the effect of shielding Hynixfrom market discipline and exacerbating thealready distressed state of the globalsemiconductor market. At the May 2001

11 While some Members were concerned

that they might graduate from Annex VII due, in part,

to inflation, other countries were concerned that use

of constant 1990 dollars might result in their being

closer to Annex VII graduation relative to their

position calculated using nominal dollars.

12 The addition of the phrase “for three

consecutive years” was added at the request of

Honduras which was concerned that their possible

graduation from Annex VII in the near future might

place them in a worse condition than those Members

which avail themselves of the special procedures

under Article 27.4 for small developing-country

exporters.

13 In addition to the subsidy-related

implementation issues noted above, the Fourth

Ministerial Conference agreed to three other

proposals which were not discussed by the

Committee. The first permits a Member whose GNP

per capita income rose above $1000 and graduated

from Annex VII to be re-included if its GNP per

capita income falls back below $1000. The second

reaffirms the rights of least-developed countries to

provide export subsidies and to have an eight-year

phase-out period for export subsidies after export

competitiveness is reached with respect to a particular

product. The third takes note of a proposal to treat

certain types of subsidies provided by developing

countries as non-actionable and urges M embers to

exercise due restraint with respect to challenging such

measures.


meeting, Korean officials attempted to assurethe United States that: (1) Hynix benefits fromno government-subsidized support; and, (2) thespecial government-orchestrated measures,which Korea claims are intended to compensatefor an underdeveloped capital market, would beof limited duration.

At the time of the November meeting, theUnited States again expressed concern regardingthe variety and magnitude of governmentsupport for Hynix as a result of the adversetrade effects likely to result. The Koreangovernment’s financial and other support hasenabled Hynix to maintain capacity andproduction at uneconomic levels, contributingsignificantly to the global supply/demandimbalance for DRAM semiconductors. Giventhe continued state ownership in many ofHynix’s creditors, and the historical record ofgovernment influence over the allocation ofcredit in the Korean economy, the United Statesexpressed its view to the Committee that it iscritical for the Korean authorities todemonstrate unequivocally their commitment tothe stated policy of non-interference in thecommercial judgment of banks and otherfinancial institutions with respect to the futureof Hynix. In conclusion, the United Statesurged the Korean authorities to take immediate,transparent and affirmative steps to assure thatthe Korean government will not provide anyadditional subsidies to Hynix and that thecreditors of Hynix will not be pressured orinfluenced by the government into taking anydecisions that cannot be justified solely oncommercial terms. At the November meeting,the EU made an equally strong statement whileJapan and Singapore raised concerns as well.

7. Export Credits

At the May meeting, Brazil made a statementregarding the Agreement’s provisions on exportfinancing. Brazil’s concerns stemmed from itsparticipation in aircraft dispute settlementproceedings. Brazil made four basic pointsregarding export credits. First, the existingprovisions of the Agreement – items (j) and (k)

of the Illustrative List of export subsidies foundin Annex I of the Agreement – covering exportcredit guarantees and export credits areinsufficient to deal with the diversity ofmechanisms utilized in the market today and arepotentially unfair to developing countries. Second, the manner in which the OECDArrangement on Guidelines for OfficiallySupported Export Credits was incorporated intothe Agreement allows participants of thatArrangement to effectively alter the Agreementwithout the participation of other Members. Third, the use of the so-called “marketwindow,” pursuant to which a participant of theOECD Arrangement may depart from the OECDrules by claiming that it is operating as a privateentity, is “virtually unchallengeable” andgenerally unavailable to developing countries. Fourth, the Appellate Body’s definition andinterpretation of the de facto export subsidiesprovisions in the Agreement was overly narrowand insufficient to discipline such subsidies.

In a related matter, the Committee received acommunication from the OECD that wasdistributed at the May meeting. In thiscommunication, the Participants to theArrangement on Guidelines for OfficiallySupported Exports Credits decided to publishthe country risk classifications that were usedfor the Premium Agreement of the Arrangementand made these classifications available on theirwebsite. The OECD also requested theSecretariat to make available to any requestingMember the full text of the Export CreditArrangement and the Premium Agreement,unless the Committee believed that it might bemore useful simply to circulate these to allMembers of the Committee. In addition, ininformal discussions between the WTOSecretariat, as observer to the ParticipantsGroup on the Export Credits Arrangement, andthe OECD Secretariat, the possibility wasdiscussed that representatives of the OECDSecretariat make a factual presentation on theoperation of the Arrangement for interestedMembers.


8. Permanent Group of Experts

Article 24 of the Agreement directs theCommittee to establish a Permanent Group ofExperts (PGE), “composed of five independentpersons, highly qualified in the fields ofsubsidies and trade relations.” The Agreementarticulates three possible roles for the PGE: (i)to provide, at the request of a dispute settlementpanel, a binding ruling on whether a particularpractice brought before that panel constitutes aprohibited subsidy, within the meaning ofArticle 3 of the Agreement; (ii) to provide, atthe request of the Committee, an advisoryopinion on the existence and nature of anysubsidy; and (iii) to provide, at the request of aWTO Member, a “confidential” advisoryopinion on the nature of any subsidy proposedto be introduced or currently maintained by thatMember. (To date, the PGE has not yet beencalled upon to perform any of theaforementioned duties.) Article 24 furtherprovides for the Committee to elect the expertsto the PGE, with one of the five experts beingreplaced every year. One PGE member, Mr. A.V. Ganesan of India, resigned his membership,effective May 18, 2000, prior to the end of histerm. At a special meeting in February 2001,the Committee elected Professor Okan Aktan toreplace Mr. Ganesan, for the remainder of Mr.Ganesan’s term, which expires in 2002. At itsMay 2001 regular meeting, the Committeeelected Mr. Jorge Castro Bernieri to replace Mr.Gary Horlick, whose term expired in 2001.

Prospects for 2002

In 2002, the Subsidies Committee will continueits attention to implementation issues in avariety of respects. First, as noted above, theUnited States will continue to work with othersto try to identify ways to rationalize the burdensof subsidy notification for all WTO Memberswithout diminishing transparency or takingaway from the other substantive benefits of thenotification obligation. Second, the UnitedStates will participate actively in the review ofother WTO Members’ CVD legislation andactions, and will bring to Members’ and the

Committee’s attention any concerns which mayarise about such laws or actions, whether ingeneral or in the context of specific proceedings. As noted above, as a direct result of the decisiontaken at the Fourth Ministerial Conference, theCommittee will continue its examination of theprovisions of the Agreement regardingcountervailing duty investigations and report tothe General Council by July 31, 2002. Finally,the United States will actively review thenormal and special extension requests madeunder Article 27.4 of the Agreement to ensurethe close adherence to the provisions of theAgreement and the agreed upon procedures forsmall exporter developing countries.

10. Committee on Technical Barriers toTrade

Status

The Agreement on Technical Barriers to Trade(TBT Agreement) establishes rules andprocedures regarding the development,adoption, and application of voluntary productstandards, mandatory technical regulations, andthe procedures (such as testing or certification)used to determine whether a particular productmeets such standards or regulations. Its aim isto prevent the use of technical requirements asunnecessary barriers to trade. The Agreementapplies to a broad range of industrial andagricultural products, though sanitary andphytosanitary (SPS) measures and specificationsfor government procurement are covered underseparate agreements. It establishes rules thathelp to distinguish legitimate standards andtechnical regulations from protectionistmeasures. Standards, technical regulations andconformity assessment procedures are to bedeveloped and applied on a non-discriminatorybasis, developed and applied transparently, andshould be based on relevant internationalstandards and guidelines, when appropriate.


U.S. Inquiry Point

National Center for Standards and CertificationInformationNational Institute of Standards and Technology (NIST)100 Bureau Drive, Stop 2150Gaithersburg, MD 20899-2150

Telephone: (301) 975-4040Fax: (301) 926-1559email: [email protected]

The TBT Committee14 serves as a forum forconsultation on issues associated with theimplementation and administration of theAgreement. This includes discussions and/orpresentations concerning specific standards,technical regulations and conformity assessmentprocedures maintained by a Member that arecreating adverse trade consequences and/or areperceived to be violations of the Agreement. Italso includes an exchange of information onMember government practices related toimplementation of the Agreement and relevantinternational developments.

Transparency and Availability of WTO/TBTDocuments: A key opportunity for the publicresulting from the TBT Agreement is the abilityto obtain information on proposed standards,technical regulations and conformity assessmentprocedures, and to provide written comments for

consideration on those proposals before they arefinalized. Members are also required toestablish a central contact point, known as aninquiry point, which is responsible forresponding to requests for information ontechnical requirements or making theappropriate referral.

The National Institute of Standards andTechnology (NIST) serves as the U.S. inquirypoint. NIST maintains a reference collection ofstandards, specifications, test methods, codesand recommended practices. This referencematerial includes U.S. Government agencies’regulations, and standards of U.S. privatestandards-developing organizations and foreignnational and standardizing bodies. The inquirypoint responds to all requests for informationconcerning federal, state and private regulations,standards and conformity assessmentprocedures. Upon request, NIST will providecopies of notifications of proposed regulationsfrom foreign governments received under theTBT Agreement. The NIST also will provideinformation on central contact points forinformation maintained by other WTOMembers. On questions concerning standardsand technical regulations for agriculturalproducts, including SPS measures, the NISTrefers requests for information to the U.S.Department of Agriculture, which maintains theU.S. inquiry point under the Sanitary andPhytosanitary Agreement.

A number of documents relating to the work ofthe TBT Committee are available to the publicdirectly from the WTO website: www.wto.org.

14 Participation in the Committee is open to

all WTO M embers. Certain non-WTO M ember

governments also participate, in accordance with

guidance agreed by the General Council.

Representatives of a number of international

intergovernmental organizations were invited to

attend meetings of the Committee as observers: the

International Monetary Fund (IMF), the United

Nations Conference on Trade and Development

(UNCTAD); the International Trade Center (ITC);

the International Organization for Standardization

(ISO); the International Electrotechnical Commission

(IEC); the Food and Agriculture Organization (FAO);

the World Health Organization (WHO); the

FAO/WHO Codex Alimentarius Commission; the

International Office of Epizootics (OIE); the

Organization for Economic Cooperation and

Development (OECD); the UN Economic

Commission for Europe (UN /ECE); and the W orld

Bank. The International Organization of Legal

Metrology (OIML), the United Nations Industrial

Development Organization (UNID O), the Latin

American Integration Association (ALAD I), the

European Free T rade Association (EFTA) and the

African, Caribbean and Pacific Group of States

(ACP) have been granted observer status on an ad

hoc basis, pending final agreement by the General

Council on the application of the guidelines for

observer status for international intergovernmental

organizations in the WTO.


TBT Committee documents are indicated by thesymbols, “G/TBT/....” Notifications byMembers of proposed technical regulations andconformity assessment procedures which areavailable for comment are issued as: G/TBT/N(the “N” stands for “notification”)/USA (which,in this case stands for the United States ofAmerica; three letter symbols will be used todesignate the WTO Member originating thenotification)/X (where “x” will indicate thenumerical sequence for that country).15 Partiesin the United States interested in submittingcomments to foreign governments on theirproposals should send them through the U.S.inquiry point at the address above. Minutes ofthe Committee meetings are issued as“G/TBT/M/...” (followed by a number). Submissions by Members (e.g., statements;informational documents; proposals; etc.) andother working documents of the Committee areissued as “G/TBT/W/...” (followed by anumber). As a general rule, written informationprovided by the United States to the Committeeis provided on an “unrestricted” basis andavailable to the public on the WTO’s website.

Major Issues in 2001

The TBT Committee met three times in 2001. At the meetings, the Committee addressedimplementation of the Agreement, including anexchange of information on actions taken byMembers domestically to ensure implementationand ongoing compliance. A number ofMembers used the Committee meetings to raiseconcerns about specific technical regulationswhich affected, or had the potential to affect,trade adversely and were perceived to createunnecessary barriers to trade. U.S. interventionswere primarily targeted at a variety of proposalsfrom the European Commission that couldseriously disrupt trade. The United Statescompiled information on the range of

notifications under the TBT Agreement(G/TBT/W/115), as well as the Agreement onSanitary and Phytosanitary Measures (SPS)(G/SPS/GEN/186), to emphasize to WTOMembers that the provisions of both agreementswere relevant to international trade in bio-engineered products.

The Committee conducted its sixth AnnualReview of the Implementation and Operation ofthe Agreement based on backgrounddocumentation contained in G/TBT/10, and itsSixth Annual Review of the Code of GoodPractice for the Preparation, Adoption andApplication of Standards (Annex 3 of theAgreement) based on backgrounddocumentation contained in WTO TBTStandards Code Directory (Sixth Edition),G/TBT/CS/1/Add.5 and G/TBT/CS/2/Rev.7. Decisions and recommendations adopted by theCommittee are contained in G/TBT/1/Rev.7.

A Special Meeting on Procedures forInformation Exchange was held in conjunctionwith the Committee’s second meeting in orderto give Members the opportunity to discussissues relating to information exchange and toensure a focused review of how wellnotification procedures under the Agreement arefunctioning.

Follow-up to the Second Triennial Review of theAgreement: The primary focus of theCommittee in 2001 was the work programarising from its Second Triennial Review (seeG/TBT/9). The review provided the opportunityfor WTO Members to review and discuss all ofthe provisions of the Agreement, whichfacilitated a common understanding of theirrights and obligations under the Agreement. Infollow-up to that review, in 2001 priorityattention was given to technical assistance andthe implementation needs of developingcountries, as well as trade effects resulting frommandatory labeling requirements.

Technical Assistance: In the Second TriennialReview, the Committee recognized theimportance of ensuring that solutions were

15 Before 2000, the numbering of

notifications of proposed technical regulations and

conformity assessment procedures read:

“G/TBT/Notif./...” (followed by a number).


targeted at the specific priorities and needsidentified by individual or groups of developing-country Members. This called for effectivecoordination at the national level betweenauthorities, agencies, and other interested partiesto identify and assess priority infrastructureneeds of a specific Member. The Committeerecognized the need for coordination andcooperation between donor Members andorganizations, and between the Committee,other relevant WTO bodies, and other donororganizations. In order to enhance theeffectiveness of technical assistance andcooperation, the Committee agreed to develop ademand-driven technical cooperation programbeginning with the identification andprioritization of needs by developing countries,and working with other relevant internationaland regional organizations. To this end, workwas begun to develop a survey both to elicit theneeds of developing countries and to targetassistance provided by donors. The Committeeagreed to assess progress made in the context ofthe Third Triennial Review.

Labeling: The Committee intensified itsexchange of information on issues associatedwith mandatory labeling requirements, notingthe frequency with which specific concernsregarding labeling were raised at meetings of theCommittee during discussions onimplementation, and stressing that althoughsuch requirements can be legitimate measures,they should not become disguised restrictions ontrade.

Prospects for 2002

The Committee will continue to monitorimplementation of the Agreement by WTOMembers. The number of specific tradeconcerns raised in the Committee appears to beincreasing and the Committee has been a usefulforum for Members to raise concerns andfacilitate bilateral resolution of specificconcerns. In 2002, the United States expectscontinued attention to issues relating totechnical assistance and implementation of theAgreement by developing-country Members in

particular. Priority will be given to enhancingthe awareness of Committee Members regardingthe trade impediments which can result frommandatory labeling requirements, the relevanceof existing trade disciplines, and the need forgood regulatory practice in the development andadoption of technical regulations.

11. Committee on Trade-RelatedInvestment Measures

Status

The Agreement on Trade-Related InvestmentMeasures (TRIMS) prohibits investmentmeasures that violate the GATT Article IIIobligations to treat imports no less favorablythan domestically produced products, or theGATT Article XI obligation not to imposequantitative restrictions on imports. TheAgreement thus expressly requires eliminationof measures such as those that require orprovide benefits for the incorporation of localinputs or “local content requirements” in themanufacturing process, or measures that restricta firm’s imports to an amount related to itsexports or related to the amount of foreignexchange a firm earns (“trade balancingrequirements”). It also includes an illustrativelist of measures that violate its requirements. The Agreement requires that any such measuresexisting as of the date of entry into force of theWTO (January 1, 1995) be notified andeventually eliminated. Developed countrieswere required to bring notified measures intoconformity by January 1, 1997. Developingcountries had until January 1, 2000 unlessadditional time was granted by the Council forTrade in Goods (CTG), and least-developedcountries have until January 1, 2002.


The TRIMS Committee held no meetings thisyear. As was the case last year, the key TRIMSissues related to Article 5.3, which outlines theprocess for granting an extension of thetransition periods for developing countries, andArticle 9, which describes a mandated review of


the Agreement, were both required topics fordiscussion in the Council for Trade in Goods(CTG), rather than in the TRIMS Committee(see separate section on the CTG).

The Committee did produce two documents thisyear. The first was on notifications underArticle 6.2 of the Agreement. Under Article6.2, Members with non-conforming TRIMSmust provide a notification to the WTOregarding the publications in which informationon such measures can be found. The otherdocument was Part I of a report drafted by theWTO Secretariat and UNCTAD on the impactof TRIMS for developing countries. Thisportion of the report describes definitions ofperformance requirements found in variousagreements as well as the disciplines applied tosuch measures. The United States is stillreviewing the report and has not yet commentedon it. Part II of the report, which is not yetavailable, will focus specifically on developingcountry experiences with TRIMS.

Prospects for 2002

Once both portions of the report on the impactof TRIMS have been drafted, consensus in theCTG on the scope of the work to be undertakenin response to the Article 9 mandate may bepossible which may invigorate discussions inthe TRIMS Committee. Absent such a mandate,work in the TRIMS Committee will be limited.

12. Textiles Monitoring Body

Status

The Textiles Monitoring Body (TMB),established in the Agreement on Textiles andClothing (ATC), supervises the implementationof all aspects of the Agreement. In 2001, TMBmembership was composed of appointees andalternates from the United States, the EU, Japan,Canada/Norway, Switzerland/Turkey, Brazil,Thailand, Pakistan/Macau, India/Egypt, andHong Kong/Republic of Korea. Upon itsaccession in December 2001, China assumed

membership on the TMB. Each TMB memberserves in a personal capacity.

The ATC succeeded the Multifiber Arrangement(MFA) as an interim arrangement establishingspecial rules for trade in textile and apparelproducts on January 1, 1995. All Members ofthe WTO are subject to the disciplines of theATC, whether or not they were signatories tothe MFA, and only Members of the WTO areentitled to the benefits of the ATC. The ATC isa ten-year, time-limited arrangement whichprovides for the gradual integration of the textileand clothing sector into the WTO and providesfor improved market access and the gradual andorderly phase-out of the special quantitativearrangements that have regulated trade in thesector among the major exporting and importingnations.

The United States has implemented theAgreement on Textiles and Clothing in amanner in which ensures that the affected U.S.industries and workers as well as U.S. importersand retailers have a gradual, stable andpredictable regime under which to operateduring the quota phase-out period. At the sametime, the United States has aggressively soughtto ensure full compliance with market openingcommitments by U.S. trading partners, so thatU.S. exporters may enjoy growing opportunitiesin foreign markets.

Under the ATC, the United States is required to“integrate” products which accounted forspecified percentages of 1990 imports in volumeover three stages during the course of thetransition period, that is, to designate thosetextile and apparel products for which it willhenceforth observe full GATT disciplines. Once it has “integrated” a product, a WTOMember may not impose or maintain importquotas on that product other than under normalGATT procedures, such as Article XIX. Asrequired by Section 331 of the Uruguay RoundAgreements Act, the United States selected theproducts for early integration after seekingpublic comment, and published the list of itemsat the outset of the transition period, for


purposes of certainty and transparency. Theintegration commitments for stages one and twowere completed in 1995 and 1998. The UnitedStates notified the TMB in 2001 of theintegration commitments for stage three andimplemented these commitments on January 1,2002. The list for all three stages may be foundin the Federal Register, volume 60, number 83,pages 21075-21130, May 1, 1995.

Also keyed to the ATC “stages” is a requirementthat the United States and other importingMembers increase the annual growth ratesapplicable to each quota maintained under theAgreement by designated factors. Under theATC, the weighted average annual growth ratefor WTO Members’ quotas increased from 4.9percent in 1994 to 5.7 percent in 1995 and 7.3percent in 2001.

Article 5 of the ATC requires that Memberscooperate to prevent circumvention of quotas byillegal transshipment or other means. TheUnited States actively worked with tradingpartners to improve cooperation and informationsharing, and concluded a new agreement withHong Kong to this end. The United States alsoestablished a Textile Transshipment Task Forceat the U.S. Customs Service to improveenforcement of textile quotas at U.S. bordersand has tightened enforcement actions vis-a-visother trading partners where an improvedbilateral agreement was not possible.


Safeguard Restraints: A special three-yearsafeguard is provided in the ATC to controlsurges in uncontrolled imports that cause orthreaten to cause serious damage to domesticindustry. Actions taken under the safeguard areautomatically reviewed by the TMB. In 2001,the TMB reviewed a safeguard action taken byPoland on synthetic fiber imports fromRomania. The TMB found that Poland had notdemonstrated serious damage or actual threatthereof with respect to these imports.

Notifications and Other Issues: A considerableportion of the TMB’s time was spent reviewingnotifications made under Article 2 of the ATCdealing with textile products integrated intonormal GATT rules and no longer subject to theprovisions of the ATC. WTO Members wishingto retain the right to use the Article 6 safeguardmechanism were required in 2001 to submit alist of products comprising at least 18 percent bytrade volume of the products included in theannex to the ATC. A number of thesenotifications were defective for various reasonsand in a number of cases the TMB’s review hascarried into 2002. The TMB expressed concernthat a number of countries which announcedtheir intention to retain the right to use Article 6safeguards failed to make the requiredintegration notification. TMB documents areavailable on the WTO’s web site:http://www.wto.org. Documents are filed in theDocument Distribution Facility under thedocument symbol “G/TMB.” The TMB’s reporton the implementation of the second stage of theATC covering the years 1998-2001 appears asdocument G/L/459.

Prospects for 2002

The United States will continue to monitorcompliance by trading partners with marketopening commitments, and will raise concernsregarding the implementation of thesecommitments in the TMB or other WTO fora, asappropriate. The United States will also pursuefurther market openings, including in thenegotiation of new Members’ accessions to theWTO. In addition, the United States willcontinue to respond to surges in imports oftextile products which cause or threaten seriousdamage to U.S. domestic producers. The UnitedStates will also continue efforts to enhancecooperation with U.S. trading partners andimprove the effectiveness of customs measuresto ensure that restraints on textile products arenot circumvented through illegal transshipmentor other means.


13. Working Party on State Trading

Status

Article XVII of GATT 1994 requires Membersto place certain restrictions on the behavior ofstate trading firms and on private firms to whichthey accord special or exclusive privileges toengage in importation and exportation. Amongother things, Article XVII requires Members toensure that these “state trading enterprises,” actin a manner consistent with the general principleof non-discriminatory treatment; e.g., to makepurchases or sales solely in accordance withcommercial considerations, and to abide byother GATT disciplines. To address theambiguity regarding which types of firms fallwithin the scope of “state trading enterprises,”agreement was reached in the Uruguay Roundon “The Understanding on the Interpretation ofArticle XVII.” It provides a working definitionof a state trading enterprise and instructsMembers to notify the Working Party of allfirms in their territory that fall within the agreeddefinition, whether or not such entities haveimported or exported goods.

A WTO Working Party was established toreview the notifications of state tradingenterprises, and their adequacy, and develop anillustrative list of relationships betweenMembers and state trading enterprises and thekinds of activities engaged in by theseenterprises. All Members are required underArticle XVII of GATT 1994 and paragraph 1 ofthe Understanding to submit annuallynotifications of their state trading activities.

The Uruguay Round ensured, for the first time,that the operation of agricultural state tradingenterprises would be subject to internationalscrutiny and disciplines. Before the UruguayRound, agricultural products were effectivelyoutside the disciplines of GATT 1947. Thisexclusion limited the scrutiny of state tradingenterprises since many of them directed trade inagricultural products. The lack of tariffbindings on agricultural products in mostcountries also limited the scope of GATT 1947

disciplines because without tariff bindings statetrading enterprises could capriciously raiseimport duties and/or domestic mark-ups onimported products.

The Uruguay Round Agreement on Agriculturemarked an important step in bringing theactivities of agricultural state trading entitiesunder the same disciplines that apply to non-agricultural products. All agricultural tariffs(including tariff-rate quotas) are now bound. While further work is needed on theadministration of tariff-rate quotas, bindings doact to limit the scope of state traders tomanipulate imports. Likewise, the disciplineson export competition, including value andquantity ceilings on export subsidies, apply fullyto state trading enterprises. U.S. agriculturalproducers and exporters have expressedconcerns about the operation of certain statetrading enterprises, particularly single-deskimporters or exporters of agricultural productsand called for more meaningful disciplines.


New and full notifications were first required in1995 and, subsequently, every third yearthereafter, while updating notifications are to bemade in the intervening years, indicating anychanges. As of October 2001, 25 Memberssubmitted new and full notifications for 2001. In 1998, the previous period requiring fullnotification by Members, 45 Memberssubmitted new and full notifications. In theintervening period, 34 Members submittedupdating notifications for 2000, and39 Members submitted updating notificationsfor 1999.

The Working Party held one formal meeting inOctober 2001 to review Member notifications. During the meeting, the Working Party reviewed57 notifications, including the 25 new and fullnotifications. At the meeting, the Chairmanmade statements concerning the need for timelycompliance with notification requirements.


Prospects for 2002

As part of the mandated agriculturalnegotiations already underway, several countrieshave identified issues to be addressed innegotiations related directly to measures used bystate trading enterprises, such as in tariff-ratequota administration or export competition. Several countries have called for stricterdisciplines on privileges enjoyed by statetrading enterprises. The United States hastabled a proposal, to be further discussed in2002, that calls for the development of newdisciplines on agricultural export state tradingenterprises that would ensure exporttransactions are non-discriminatory andtransparent. Specifically, disciplines should beestablished that eliminate exclusive rights ofsingle desk exporters and importers, strengthennotification requirements, and eliminate the useof government funds or guarantees to financepotential operational deficits or to otherwiseinsulate state trading enterprises from market orpricing risk.

The Working Party on state trading enterpriseswill contribute to the ongoing discussion ofthese and other state trading issues through itsreview of new notifications and its examinationof what further information might beappropriate to notify to enhance transparency ofstate trading enterprises. In anticipation of moreexpanded negotiations during the year, theWorking Party also will intensify efforts toimprove the notification record.

C. Council for Trade in Services

Status

The General Agreement on Trade in Services(GATS) is the first multilateral, legallyenforceable agreement covering trade andinvestment in the services sector. It is designedto reduce or eliminate governmental measuresthat prevent services from being freely providedacross national borders or that discriminateagainst locally-established service firms withforeign ownership. The Agreement provides a

legal framework for addressing barriers to tradeand investment in services. It includes specificcommitments by WTO Members to restrict theiruse of those barriers and provides a forum forfurther negotiations to open services marketsaround the world. These commitments arecontained in national schedules, similar to thenational schedules for tariffs. The Council forTrade in Services (CTS) overseesimplementation of the GATS and reports to theGeneral Council.


The major activity of the Council this yearconsisted of the Built-In-Agenda (BIA)negotiations described at the beginning of thischapter. In addition to the BIA, the CTS isconducting two previously agreed reviews.

The air transport review, required in the GATSAnnex on Air Transport Services, began in late2000 and continued in 2001. The reviewexamines “developments in the air transportsector and the operation of this Annex with aview to considering the possible furtherapplication of the Agreement in this sector.” While a small number of countries haveadvocated changes to the current exclusion, theUnited States has taken the position that to datebilateral and plurilateral venues outside theWTO have proven to be effective in promotingliberalization in this important sector. InOctober 2001, the United States submitted awritten statement presenting these views(available at http://docsonline.wto.org:80/DDFDocuments/t/S/C/W198.doc).

The second review, regarding the status of basictelecommunications accounting rates underGATS MFN provisions, was provided for in thecourse of the 1997 basic telecommunicationsnegotiations and continued through 2001. During that review, some Members requestedthat those seeking to retain a “gentleman'sagreement” not to bring a dispute on accountingrates on MFN grounds explain why there is aneed to retain this agreement. The United Statessupports a more thorough examination of why


Members need to retain such an agreement,particularly in light of increased competition inthe telecommunications sector.

Separately, at the initiative of the United States,the CTS took steps to ensure that preferentialfree trade agreements are reviewed for theirconsistency with countries’ GATS obligations. In 2001, the CTS decided to refer nine suchagreements to the WTO Committee on RegionalTrade Agreements for review.

Prospects for 2002

The air transport review will continue in 2002. The main work of the CTS, however, will berelated to the WTO services negotiationsdescribed at the beginning of this chapter.

1. Agreement on BasicTelecommunications Services

Status

The WTO Agreement on BasicTelecommunication Services, which came intoforce in February 1998, opened over 95 percentof the world telecommunications market, byrevenue, to varying levels of competition. Therange of services and technologies covered bythe Agreement ranges from submarine cables tosatellite systems, from broadband data tocellular services, to business networks based onthe Internet. The majority of WTO Membershave made regulatory as well as market accesscommitments, ensuring adherence to amultilateral framework for promotingcompetition in this sector. The Philippines, andPapua New Guinea made commitments thathave yet to be ratified. Brazil’s offer wascontingent on expected improvements, details ofwhich, however, were not accepted by otherWTO Members.

Through the Agreement on BasicTelecommunications, the United States haslargely succeeded in shaping an internationalconsensus that telecommunications monopoliesmust be replaced with competitive markets for

any economy to enjoy the benefits of the digitaleconomy.

Accordingly, WTO Members around the worldare rewriting rules to permit effectivecompetition and to promote the growth of newmarkets. The results continue to promotegrowth: usage of telecommunications networkshas increased as prices have dropped, fuelingnew services and introducing new efficienciesthroughout economies. With demand foradvanced services, including the Internet, newentrants willing to innovate with differenttechnologies are creating markets that wouldnever have developed had control of othernations’ networks remained in the hands ofmonopolists.

As a result of this Agreement, U.S. firms haveinvested billions of dollars abroad, extendingtheir networks, bringing down the cost ofcommunications for U.S. consumers andbusinesses, and laying the infrastructure forglobal electronic commerce. The experienceU.S. firms have gained in developingcompetitive markets in the United States hasprovided an enormous advantage in these newlyopened markets, allowing them to bring to thesemarkets the same innovation and efficiency U.S.consumers have long enjoyed. Opening foreignmarkets has had immediate benefits for U.S.consumers and businesses as well. Prices forcalls to many competitive markets now differlittle from domestic long-distance prices.

In addition to fueling growth in new services,market liberalization has stimulated a boom inequipment sales. U.S. manufacturers have beenmajor beneficiaries in the growth of a globalmarket for telecommunications equipment, withU.S. equipment exports in 2000 increasing 23percent over the previous year to $28 billion. This spending is largely dedicated to investmentin new networks, or upgrades to existingnetworks, driven by competitive pressures.


Major issues in 2001

Governments have recognized the value ofreducing the governmental role in the supply oftelecommunications services, and havecontinued to divest shares in government-ownedoperators – including in Germany, Greece,Israel, Japan, Korea, Norway and Taiwan. Thistrend is expected to continue. Governmentshave also taken significant steps to increasemarket access opportunities through pro-competitive regulatory initiatives, including theunbundling directive in the EU andestablishment of dominant carrier regulation inJapan. Newly-acceding WTO Members, such asChina also brought into force broad-basedtelecommunications commitments in 2001.

Prospects for 2002

The global investment needs in thetelecommunications sector, and U.S. firms’interest in meeting this demand show no sign ofabating. Demand for high-capacity (broadband)services on wireline networks and thedevelopment of advanced wireless services (e.g.so-called Third Generation services) ensure thatcompetitive opportunities, and the importance ofthe Agreement as a framework for ensuringmarket access, will increase.

Given the recent trend in unilateralliberalization, prospects are good that the WTOservices negotiations now underway will expandexisting commitments to cover a broader rangeof telecommunications sub-sectors with fewermarket access limitations. In regions that werepreviously not a major market focus (e.g., indeveloping countries) there is substantial roomfor improved commitments.

2. Agreement and Committee on Tradein Financial Services

Status

The Committee on Trade in Financial Services(CTFS) met four times in 2001. It serves as aforum for discussion of important issues related

to WTO Members’ existing liberalizationcommitments and for technical approachesregarding further liberalization.


Several WTO Members reported ondevelopments under their financial servicesregimes. The United States providedinformation on the processes it follows to ensuretransparency in its development and applicationof financial services regulations. The UnitedStates encouraged other countries to providesimilar information on their national regimes fordevelopment of regulations.

The United States also worked with othertrading partners to maintain pressure on thosefew countries that have not ratified theircommitments under the 1997 Financial ServicesAgreement - the Fifth Protocol to the GATS - todo so as quickly as possible and to providestatus reports of progress underway. In October,2001, the Dominican Republic notified that ithad completed its domestic ratificationprocedures. The United States expects that theDominican Republic will complete theprocedures necessary to accept the FifthProtocol in the near future. Six countries –Bolivia, Brazil, Jamaica, Poland, the Philippinesand Uruguay – have not yet ratified theircommitments or accepted the Protocol. Progress was reported by the majority of thesesix countries.

Prospects for 2002

Work of the CTFS will continue to pick up pacein 2002. The CTFS will enable WTO Membersto hold substantive discussions of some of theissues raised in negotiating proposals tabled infinancial services.


3. Working Party on DomesticRegulation

Status

GATS Article VI, on Domestic Regulation,directs the CTS to develop any necessarydisciplines “with a view to ensuring thatmeasures relating to qualification requirementsand procedures, technical standards, andlicensing requirements do not constituteunnecessary barriers to trade in services.” A1994 Ministerial Decision had assigned priorityto the professional services sector, for which theWorking Party on Professional Services (WPPS)was established. The WPPS developedGuidelines for the Negotiation of MutualRecognition Agreements in the AccountancySector, adopted by the WTO in May 1997. TheWPPS completed Disciplines on DomesticRegulation in the Accountancy Sector inDecember 1998 (The texts are available atwww.wto.org/english/news_e/pres97_e/pr73_e.htm and www.wto.org/english/news_e/ pres98_e/pr118_e.htm, respectively.)

After the completion of the AccountancyDisciplines, in May 1999 the CTS established anew Working Party on Domestic Regulation(WPDR) which also took on the work of thepredecessor WPPS and its existing mandate. Using the experience from accountancy, theWPDR is now charged with determiningwhether these or similar disciplines may begenerally applicable across sectors. TheWorking Party is to report its recommendationsto the CTS not later than the conclusion of theservices negotiations.


With respect to development of generallyapplicable regulatory disciplines, Members havediscussed needed improvements in GATStransparency obligations, which the UnitedStates supports. Members also have begundiscussion of possible disciplines aimed atensuring that regulations are not more traderestrictive than necessary to fulfill legitimate

objectives for the full range of service sectors. The United States has taken a deliberateapproach in this second area and has supporteddiscussion first of problems or restrictions forwhich new disciplines would be appropriate.

To continue work on professional services,Members agreed to solicit views on theaccountancy disciplines from their relevantdomestic professional bodies, addressingwhether those other professions would favor useof the accountancy disciplines with appropriatemodifications. As agreed, Members contactedtheir domestic professional bodies, requestingcomments on the applicability of theaccountancy disciplines to those professions. Some professions in various countries foundthat the disciplines, with perhaps a fewmodifications, could apply to their profession;some professions in several countries foundotherwise. Given the large number ofprofessions and Member countries, theinformation thus far is incomplete and work iscontinuing. Members also reviewed a list ofinternational professional organizations,compiled by the Secretariat from Membersubmissions, and are considering whether theorganizations listed are the appropriate ones toconsult regarding the applicability of theaccountancy disciplines to those professions.

Prospects for 2002

The Working Party will continue discussion ofpossible regulatory disciplines, both horizontaland sector-specific, to promote the GATSobjective of effective market access.

The work program on accounting was animportant step in the multilateral liberalizationof this important sector. While the UnitedStates was disappointed that Membersultimately were not able to agree to earlyapplication of the accountancy disciplines, thedisciplines remain open for improvement beforethey are to become effective at the conclusion ofthe current GATS negotiations. The UnitedStates will be working to improve theaccountancy disciplines, as well as working with


interested U.S. constituencies to consider theirapplicability to other professions.

4. Working Party on GATS Rules

Status

The Working Party on GATS Rules wasestablished to determine whether the GATSshould include new disciplines on safeguards,government procurement, or subsidies.


Of the three issues, the GATS established adeadline only for safeguards. In 2000, thisdeadline was again extended, to March 2002,reflecting the continuing disagreement amongWTO Members on both the desirability andfeasibility of a safeguards provision similar tothe WTO provisions for goods.

Discussions were more focused in 2001 than inprevious years, benefitting from submissions byASEAN, Canada, Mexico, Mauritius, Argentina,and Chile, Switzerland, and Costa Rica. TheUnited States also submitted a paper arguingthat for safeguards to be desirable in the servicescontext they would need to be shown to promoteliberalization of services trade. In the first partof the year, discussion among Members focusedon feasibility of safeguards, and addressedconcepts including domestic industry, acquiredrights, modal application of safeguards,situations justifying safeguards, and indicatorsand criteria to determine injury and causality. Inits submission, the United States argued that acase for the desirability of safeguards has notbeen made and needs to be discussed. Alldiscussions were without prejudice to thequestion of whether the GATS should includesuch provisions.

Regarding government procurement, workcontinued on definitional questions relevant toservices and how such disciplines would relateto the results of ongoing negotiating in the WTOWorking Group on Transparency in GovernmentProcurement.

With respect to subsidies negotiations, theCommittee is working through a "checklist" ofissues to help understand better whether newprovisions are appropriate in this area, includingidentification of trade distortions caused bysubsidy-like measures. Discussion was limitedin this area due to the Working Party’s increasedfocus on safeguards resulting from the March2002 deadline.

Prospects for 2002

Information-gathering and discussion of allthree issues will continue. The continuing sharpdivergence of views on safeguards may result ina decision to extend the negotiating deadlineonce again.

5. Committee on Specific Commitments

Status

The Committee on Specific Commitmentsexamines ways to improve the technicalaccuracy of scheduling commitments, primarilyin preparation for the GATS negotiations, andoversees application of the procedures for themodification of schedules under Article XXI ofthe GATS. The Committee also overseesimplementation of commitments in countryschedules in sectors for which there is nosectoral body, currently all sectors exceptfinancial services.


The Committee concluded its work on revisingscheduling guidelines. These guidelines, whichoriginally were developed by the GATTSecretariat for use in scheduling countrycommitments during the Uruguay Round, areintended to improve transparency andconsistency of new commitments. The CTSformally adopted the revised guidelines inMarch 2001.

The Committee also continued work onimproving classification of services inindividual sectors for which problems have been


identified. The United States has advocatedchanges in express delivery services, energyservices, environmental services, and legalservices and has made submissions in each ofthese areas.

At the end of 2001, the Committee decided tobegin work on procedures for consolidation ofcountry schedules; these procedures will beimportant in light of new market access andnational treatment expected in the current GATSnegotiations.

Prospects for 2002

Work will continue on technical issues insupport of the ongoing negotiations.

D. Council on Trade-Related Aspects ofIntellectual Property Rights

Status

The Agreement on Trade-Related Aspects ofIntellectual Property Rights (the TRIPSAgreement) is a multilateral agreement that setsminimum standards of protection for copyrightsand neighboring rights, trademarks,geographical indications, industrial designs,patents, integrated- circuit layout designs, andundisclosed information. Minimum standardsare established by the TRIPS Agreement for theenforcement of intellectual property rights incivil actions for infringement and, at least inregard to copyright piracy and trademarkcounterfeiting, in criminal actions and actions atthe border. The TRIPS Agreement requires aswell that, with very limited exceptions, WTOMembers provide national and most-favored-nation treatment to the nationals of other WTOMembers with regards to the protection andenforcement of intellectual property. Inaddition, the TRIPS Agreement is the firstmultilateral intellectual property agreement thatis enforceable between governments throughWTO dispute settlement provisions.

The TRIPS Agreement entered into force onJanuary 1, 1995, and its obligations to provide

“most favored nation” and national treatmentbecame effective on January 1, 1996 for allMembers. However, some obligations arephased in based on a country’s level ofdevelopment. Developed country Memberswere required to implement by January 1, 1996;developing-country Members generally had toimplement by January 1, 2000; andleast-developed country Members mustimplement by January 1, 2006. However, basedon a proposal made by the United States,Ministers agreed in Doha to change theimplementation date for least-developedMembers with respect to certain obligationsrelated to pharmaceutical products to 2016 aspart of the Declaration on the TRIPS Agreementand Public Health. Several specific obligationsbecame effective on January 1, 1995, includinga general “standstill” obligation, and, withrespect to Members that do not provide patentprotection for pharmaceuticals and agriculturalchemicals, an obligation to provide a patent“mailbox” in which to file applications for suchinventions to preserve a filing date, and anobligation to provide exclusive marketing rightssystems.

TRIPS Council: The WTO TRIPS Councilmonitors implementation of the TRIPSAgreement, provides a forum in which WTOMembers can consult on intellectual propertymatters, and carries out the specificresponsibilities assigned to the Council in theTRIPS Agreement. The TRIPS Agreement isimportant to U.S. interests and has yieldedsignificant benefits for U.S. industries andindividuals, from those engaged in thepharmaceutical, agricultural chemical, andbiotechnology industries to those producingmotion pictures, sound recordings, software,books, magazines, and consumer goods.


In 2001, the TRIPS Council held four formalmeetings, including several “special discussion”sessions on the issue of intellectual property andaccess to medicines. In addition to continuingits work reviewing the implementation of the


Agreement by developing countries and newlyacceding Members, the Council’s work in 2001focused on defining the TRIPS issues to beaddressed in the Doha Ministerial Declarationand the Declaration on the TRIPS Agreementand Public Health.

Review of Developing-Country Members’TRIPS Implementation: As a result of theAgreement’s staggered implementationprovisions, the TRIPS Council during 2001devoted much of its time to reviewing theAgreement’s implementation by developing-country Members and newly acceding Membersas well as to providing assistance to developing-country Members so they can fully implementthe Agreement. In particular, the TRIPSCouncil called for developing-country Membersto respond to the questionnaires alreadyanswered by developed country Membersregarding their protection of geographicalindications and implementation of theAgreement’s enforcement provisions, and toprovide detailed information on theirimplementation of Article 27.3(b) of theAgreement that permits Members to excludefrom patentability plants, animals, and essentialbiological processes for producing plants andanimals. The Council also concentrated oninstitution building internally and with theWorld Intellectual Property Organization(WIPO). During the TRIPS Council meetings,the United States continued to press for fullimplementation of the TRIPS Agreement bydeveloping-country Members and participatedactively during the reviews of legislation byhighlighting specific concerns about howindividual Member’s had implemented theirobligations.

During 2001, laws of the following 50 Memberswere reviewed: in April - Bolivia, Cameroon,Congo, Grenada, Guyana, Jordan, Namibia,Papua New Guinea, Saint Lucia, Suriname,Venezuela; in June - Albania, Argentina,Bahrain, Botswana, Costa Rica, Cote d'Ivoire,Croatia and St. Kitts and Nevis; in July -Dominica, Dominican Republic, Egypt, Fiji,Georgia, Honduras, Jamaica, Kenya, Mauritius,

Morocco, Nicaragua, Oman, The Philippinesand United Arab Emirates; in November -Antigua and Barbuda, Barbados, Brazil, BruneiDarussalam, Cuba, Gabon, Ghana, India,Lithuania, Malaysia, Pakistan, Sri Lanka,Thailand, Tunisia, Uruguay and Zimbabwe.

Intellectual Property and Access to Medicines: Health activists and certain WTO Membershave expressed concern about the relationshipbetween access to essential drugs in low-incomecountries and the obligations under the TRIPSAgreement related to pharmaceuticals,particularly in the dire circumstances of theHIV/AIDS epidemic in sub-Saharan Africa.

Patents are widely acknowledged as providingthe incentive for investment in research anddevelopment (R&D) to bring new and moreeffective pharmaceutical products to market; although there is no cure for HIV/AIDS atpresent, there is hope that research effortscurrently under way will yield results. However, critics have expressed concern that byrequiring developing countries to providepharmaceutical patent protection, TRIPSenables pharmaceutical companies to chargehigh prices for essential drugs thereby limitingtheir availability in low-income markets.

These concerns have been expressed despite thefact that TRIPS does not require least-developedMembers to provide patent protection until 2006and developing countries, including Egypt andIndia, enjoy a transition from the deadline ofJanuary 1, 2000 to January 1, 2005. Suchconcerns also failed to take into account theextent to which essential drugs are patent-protected in markets hardest hit by pandemicssuch as HIV/AIDS. For example, during thecourse of the 2001, researchers at HarvardUniversity published a study specifically aimedat uncovering the extent to which antiretroviraldrugs used to treat HIV/AIDS were patented inAfrica, the continent hardest hit by thepandemic. The report concluded, inter alia, that“anti-retroviral drugs are patented in fewAfrican countries.... We conclude that a varietyof de facto barriers are more responsible for


impeding access to antiretroviral treatment,including but not limited to the poverty ofAfrican countries, the high cost of antiretroviraltreatment, national regulatory requirements formedicines, tariffs and sales taxes, and, above all,a lack of sufficient international financial aid tofund anti-retroviral treatment.” This issue has emerged in the wider context of acampaign to provide better access to essentialdrugs for the treatment of health and relatedproblems in needy populations. TheAccelerating Access Initiative was launched byUNICEF, UNFPA, WHO, the World Bank, andthe UNAIDS Secretariat in May 2000, on thebasis of offers by five pharmaceuticalmanufacturers to supply anti-retroviral drugs atreduced prices for use in developing countries;other manufacturers have since responded to theAccess initiative.

In June 2001, a Special Session of the GeneralAssembly on HIV/AIDS endorsed the GlobalFund to fight HIV/AIDS, malaria, andtuberculosis in developing countries. The GlobalFund had been announced earlier in the year bythe Secretary-General of the UN. The UnitedStates was the founding donor to this unique anddistinctive approach to combating the nearly sixmillion deaths each year attributed to thesediseases.

The United States has taken a leadership role inresponding to the global challenge of theHIV/AIDS pandemic. The United States is thelargest bilateral donor of funds for HIV/AIDSassistance, in support of HIV/AIDS preventionand care and treatment programs in developingcountries. In addition, the US invests over $2billion per year on HIV/AIDS research. TheUnited States was the first contributor, to thenew “Global Fund to fight AIDS, Tuberculosis,and Malaria” with an initial contribution of$200 million.

However, because of the concerns expressedabout the WTO TRIPS Agreement, the UnitedStates has also taken a leadership role in trying

to address these concerns, through discussionsin the TRIPS Council and other fora.

Following a request from Zimbabwe on behalfof the African Group, the United States was thefirst WTO Member to agree that the Councilshould take up the issue of "Intellectual Propertyand Access to Medicines." The objective ofthese discussions was to enable Members todiscern more clearly the relationship betweenthe TRIPS Agreement and the public policyobjective of affordable access to patent-protected essential drugs, and to identify anagenda of points requiring further discussion; this included clarification of the Agreement'sflexibility provisions so as to minimize thepotential for disputes.

The United States supported this discussion inthe hope that through this dialogue, Memberswould come to appreciate the important role theTRIPS Agreement plays in stimulatingdevelopment and commercialization of new life-saving drugs. The United States also hoped thatthis dialogue would result in a clearerunderstanding of existing flexibility in theAgreement which enables Members to ensurethat such drugs are available to their citizens,particularly those that are unable to afford basicmedical care. The United States consistentlyexpressed the view that TRIPS strikes the properbalance between these two objectives. Weexpressed concern that some have quiteincorrectly blamed the Agreement for healthcrises or claimed that it stands in the way ofresolving such crises. Quite the contrary,Members have the ability under the Agreementto implement their obligations in a way thatfully supports their national health careobjectives. On the other hand, without theeconomic incentives provided by patentsystems, there would be far fewer drugsavailable for the treatment and cure of life-threatening diseases and conditions anddistribution of those that did exist would be farmore limited.

The United States expressed its commitment tostrong intellectual property protection but also


to ensuring Members are able to use theflexibility in the TRIPS Agreement wherenecessary to meet their health care objectives. InFebruary 2001, the Bush Administrationreaffirmed the commitment of the United Statesto a flexible approach on health and intellectualproperty. Under this policy, we have informedWTO Members that, as they take steps toaddress major health crises, such as theHIV/AIDS crisis in sub-Saharan Africa andelsewhere, the United States would raise noobjection if Members availed themselves of theflexibility afforded by the WTO TRIPSAgreement.

While supportive of the use of the flexibility inthe TRIPS Agreement, the United Statesrecognizes that a comprehensive approach isneeded to serious health problems. The TRIPSAgreement – its obligations and flexibility – isat most one element of the equation. To dealwith serious health problems, countries need tostress education and prevention as well as careand treatment if health crises are to beeliminated. Health experts inform us that thecost of drugs is only one of many importantissues that must be addressed in any healthcrisis. Effective drug treatment necessitatesurgent action to strengthen health managementsystems particularly directed to drug distributionand patient monitoring. Appropriate drugselection policies and standard treatmentguidelines; training of care providers at alllevels; adequate laboratory support to diagnoseand monitor complex therapies; and systems forensuring that the right drugs are used for theright purpose and in the right amount are allrequired to address the HIV/AIDS crisis.

We must recognize that even if enough drugs totreat every single HIV positive person wereprovided, free of charge, an adequateinfrastructure to deliver them and monitor theiruse does not appear to exist in many areas mostin need. To ensure that healthcare is available,particularly to those unable to afford basicmedical care, according to health experts, eachcountry must also develop its medical andpublic health infrastructure, increase the

resources allocated to health care, and take otherappropriate steps. The Director General of theWorld Health Organization, Dr. Brundtland, hasmade the following statements about the keyfactors to improve access to medicines: “Wehave heard quite clearly that the price of drugsmatters, it matters to poor people, and it mattersto poor countries. But little progress will bepossible without a significant investment inbuilding effective health systems... just makingdrugs available - even at no cost - does notguarantee that they will be utilized. All otherpieces of the picture have to be in place as well:the distribution systems, the partnershipsbetween public and private providers; theagreements between governments anddevelopment agencies; and clear and explicitgoals and objectives.”

Ultimately, the special discussions in the TRIPSCouncil, and further work on the issue ofintellectual property and public health in Doha,Qatar, resulted in WTO Ministers adopting theDeclaration on the TRIPS Agreement and PublicHealth.

The declaration sends a strong message ofsupport for the TRIPS Agreement, confirmingthat it is an essential part of the wider nationaland international response to the public healthcrises that afflict many developing and least-developed Members of the WTO, in particularthose resulting from HIV/AIDS, tuberculosisand malaria. Ministers worked in a cooperativeand constructive fashion to produce a politicalstatement that answers the questions identifiedby certain Members regarding the flexibilityinherent in the TRIPS Agreement. This strongpolitical statement demonstrates that TRIPS ispart of the solution to these crises. Thestatement does so, without altering the rightsand obligations of WTO Members under theTRIPS Agreement, by reaffirming that Membersare maintaining their commitments under theAgreement while at the same time highlightingthe flexibilities in the Agreement.

The United States is pleased that thisDeclaration reflects and confirms our profound


conviction that the exclusive rights provided byMembers as required under the TRIPSAgreement are a powerful force supportingpublic health objectives. As a consequence ofMinisters’ efforts, we believe those Memberssuffering under the effects of the pandemics ofHIV/AIDS, tuberculosis and malaria,particularly those in sub-Saharan Africa, shouldhave greater confidence in meeting theirresponsibilities to address these crises.

The United States is committed to working withthe international community to ensure thatadditional funding and resources are madeavailable to the least-developed and developing-country Members to assist them in addressingtheir public health care problems.

Several important points need to be emphasizedabout the Doha Decision:

• The Declaration recognizes andconfirms the important link that existsbetween the protection of intellectualproperty rights and the continueddevelopment and availability ofmedicines, in particular those used totreat HIV/AIDS and other pandemics,such as tuberculosis and malaria.

• Pursuant to the TRIPS Agreement,measures may be taken to protect publichealth. The Declaration does not alterthe requirement in Article 8 that suchmeasures must be consistent with theprovisions of the Agreement.

• The TRIPS Agreement is governed bythe customary rules of interpretation ofinternational agreements as reflected inpublic international law.

• Pursuant to Article 6 of the TRIPSAgreement, Members' exhaustion(parallel import) regimes may not besubject to challenge under WTO disputesettlement procedures. Ministers havenot altered Members' rights andobligations under the TRIPS Agreement

with respect to exhaustion ofintellectual property rights. Measuresthat are inconsistent with TRIPSrequirements concerning the exclusiveright to authorize importation can bechallenged under national or otherinternational legal procedures.

• Members may define grounds forgranting a compulsory license. Members remain obligated by the termsof the TRIPS Agreement with respect totheir use of compulsory licensing,including the provisions that prohibitdiscrimination based on whether thepatented product is imported ordomestically produced.

• Ministers have recognized the complexissues associated with the ability ofleast-developed Members that lackdomestic manufacturing capacity tomake use of the flexibilities in theTRIPS Agreement. Ministers havedirected the TRIPS Council toundertake work in this area and report tothe General Council. We note that oneissue to be evaluated in this process isthat developers of new pharmaceuticalproducts frequently do not seekintellectual property protection incountries that lack domesticmanufacturing capacity.

Finally, in recognition of the special challengesfacing the least-developed Members, Ministersadopted a U.S. proposal to direct the TRIPSCouncil to take the necessary action pursuant toArticle 66.1 of the TRIPS Agreement to extenduntil 1 January 2016 the transition period underSections 5 and 7 of Part II of the TRIPSAgreement and enforcement of those sectionswith respect to pharmaceutical products forleast-developed country Members.

TRIPS-related WTO Dispute Settlement Cases: During the year, the United States continued topursue consultations on enforcement issues witha number of developed countries, including


Denmark regarding its failure to provideprovisional relief in civil enforcementproceedings, the European Communities, for itsfailure to provide TRIPS-consistent protectionof geographical indications, Greece regarding itsfailure to take appropriate action to stoptelevision broadcast piracy in that country, andIreland for its failure to implement a TRIPS-consistent copyright law. As a result ofIreland’s enactment of needed amendments toits copyright law, the United States and Irelandannounced resolution of the WTO case broughtby the United States over Ireland’s failure toamend its copyright law to comply with theTRIPS Agreement on November 6, 2000, andthe new law became effective on January 1,2001. On March 20, 2001, the DanishParliament approved legislation making civil exparte searches available. The legislation wassigned into law on March 28, 2001. The WTOAppellate Body decided in favor of the UnitedStates in a dispute with Canada regarding theterm of protection for patents applied for priorto October 1, 1989, and recommended thatCanada implement the recommendations of thedispute settlement panel within a reasonabletime. As no agreement was reached regardingwhat was reasonable, the United States asked anarbitrator to determine the reasonable period oftime for Canada to comply, and on February 28,2001, the arbitrator determined that the deadlinefor compliance would be August 12, 2001. Effective July 12, 2001, Canada announced thatit had enacted an amendment to its Patent Act tobring it into conformity with its obligationsunder the TRIPS Agreement. On March 22,2001, the United States and Greece formallynotified the WTO of the resolution of thedispute settlement case regarding televisionpiracy. This was possible due to the sharpdecline in the level of television piracy inGreece, passage of new legislation providing forthe immediate closure of infringing stations,closure of several stations that had pirated U.S.films, and the issuance of the first criminalconvictions for television piracy in Greece.

Also during the year, the United Statescontinued consultations with Argentina

regarding patent and data protection issues. Consultations continued with Brazil regarding aprovision in its patent law providing for patentowners to manufacture their products in Brazilin order to maintain full patent rights. On June25, 2001, the USTR announced that the UnitedStates and Brazil had agreed to transfer theirdisagreement over this provision from formalWTO litigation to a newly created bilateralconsultative mechanism. Under the terms of theAgreement, Brazil would consult with theUnited States before granting any compulsorylicenses and the complaint was withdrawn.

There are a number of other WTO Members thatlikewise appear not to be in compliance withtheir TRIPS obligations. The United States, forthis reason, is still considering possible disputesettlement cases against India, Australia, theDominican Republic, Egypt, Hungary, Israel,the Philippines and Uruguay. We will continueto consult with all these countries in an effort toencourage them to resolve outstanding TRIPScompliance concerns as soon as possible. Wewill also gather data on these and othercountries’ enforcement of their TRIPSobligations and assess the best cases for furtheraction if consultations prove unsuccessful.

Geographical Indications: During 2000 and2001, the Council has continued negotiationsunder Article 23.4 on a multilateral system fornotification and registration of geographicalindications for wines and spirits intended tofacilitate protection of such indications. In1999, the European Union submitted a proposalfor such a system under which Members wouldnotify the WTO of their geographicalindications and other Members would have oneyear in which to oppose any such notifiedgeographical indications. If not opposed, thenotified geographical indications would beregistered and all WTO Members would berequired to provide protection as required underArticle 23. The United States, Canada, Chileand Japan introduced an alternative proposalunder which Members would notify theirgeographical indications for wines and spiritsfor incorporation in a register available to all


Members on the WTO website. Under thisproposal, Members choosing to participate inthe system would agree to consult thenotifications made on the website when makingdecisions regarding registration of relatedtrademarks or otherwise providing protection forgeographical indications for wines and spirits. Implementation of this proposal would not placeobligations on Members beyond those alreadyprovided under the TRIPS Agreement or placeundue burdens on the WTO Secretariat. In2000, the European Communities introduced arevision of its original proposal and Hungaryintroduced a proposal for a formal oppositionsystem. Discussion on the proposals continuedduring the 2001 meetings. The United Statescontinues to support the “collective” proposalthat it sponsored along with Canada, Chile andJapan. Other delegations including Argentina,Australia, Brazil, Korea, Mexico, and NewZealand, have also expressed support for theU.S. approach. The United States willaggressively pursue additional support for itsapproach to the multilateral register in 2002 inlight of the direction from Ministers in the DohaMinisterial Declaration to complete negotiationsby the Fifth Ministerial Conference.

A review of the implementation of theapplication of the TRIPS provisions ongeographical indications pursuant to Article24.2 of the Agreement continues on the agenda.At each of the 2001 TRIPS Council meetings,the United States urged those Members thathave not yet provided information on theirregimes for the protection of geographicalindications to do so. The United States alsosupported a proposal by New Zealand in 2000that the Council conduct the review byaddressing each article of the TRIPS Agreementcovering geographical indications in light of theexperience of Members. Some Members havesought to use the review to initiate negotiationsto expand “enhanced” geographical indicationprotection under Article 23 for products otherthan wines and spirits. The United States,supported by several other Members, opposedefforts to initiate further negotiations in this

area, noting that the Agreement provides nomandate for such negotiations.

The Doha Ministerial Declaration did notprovide a mandate for such negotiations. However, the Declaration does direct the TRIPSCouncil to discuss issues related to extension ofArticle 23-level protection to geographicalindications for products other than wines andspirits and report to the Trade NegotiationsCommittee by the end of 2002 for appropriateaction.

Review of Current Exceptions to Patentabilityfor Plants and Animals: TRIPS Article 27.3(b)authorizes Members to except plants andanimals and biological processes frompatenability, but not micro-organisms and non-biological and microbiological processes. In1999, the TRIPS Council initiated a review ofthis Article as called for under the Agreementand, because of the interest expressed by someMembers, discussion of this Article continuedthrough 2000 and 2001. In 1999, the Secretariatprepared a synoptic table of informationprovided by those Members that were alreadyobligated to implement the provisions. Thesynoptic table facilitated the review bypermitting Members’ practices to be comparedeasily. This portion of the review revealed thatthere was considerable uniformity in thepractices of the Members that have implementedtheir obligations. During the discussion, theUnited States noted that the ability to patentmicro-organisms and non-biological andmicrobiological processes, as well as plants andanimals, has given rise to a whole new industrythat has brought inestimable benefits in healthcare, agriculture, and protection of theenvironment in those countries providing patentprotection in this area. In 2001, the UnitedStates again called for developing-countryMembers to provide this same information sothat the Council will have a more completepicture if the discussion of this article is tocontinue. Regrettably, some Members havechosen not to provide such information and haveraised topics that fall outside the scope ofArticle 27.3(b), such as the relationship between


the TRIPS Agreement and the Convention onBiological Diversity (CBD), and traditionalknowledge.

While maintaining the view that these issues arebeyond the scope of the review of Article27.3(b), and that the discussion should focus onrelevant information regarding Members’implementation of the provision, the UnitedStates has responded by providing two papersexpressing views on these topics in 2000 and anadditional paper in 2001 outlining a contractmethod by which those Members that are alsoParties to the CBD might implement theirobligations under the latter agreement. Anadditional paper is being prepared for the firstmeeting of the TRIPS Council in 2002,describing the contracts used by the NationalCancer Institute when it collects plants outsidethe United States.

The Doha Ministerial Declaration directs theCouncil for TRIPS, in pursuing its workprogram under the review of Article 27.3(b) toexamine, inter alia, the relationship between theTRIPS Agreement and the CBD, the protectionof traditional knowledge and folklore.

Non-violation: Throughout the year, some WTOMembers continued to raise questions regardingthe operation of non-violation nullification andimpairment complaints in the context of theTRIPS Agreement and called for the Council todefine the appropriate “scope and modalities”for addressing such complaints. They arguedthat the possibility of such complaints, now thatthe moratorium on such cases has expired,created uncertainty. As in past years, the UnitedStates continued to argue that no moreuncertainty was created than was the case withother WTO agreements.

The Doha Ministerial Declaration onImplementation directs the TRIPS Council tocontinue its examination of the scope andmodalities for non-violation nullification andimpairment complaints related to the TRIPSAgreement, to make recommendations to theFifth Ministerial Conference, and, during the

intervening period, not to make use of suchcomplaints.

Electronic Commerce: The TRIPS Councilcontinued discussing the provisions of theTRIPS Agreement most relevant to electroniccommerce and explored how these provisionsapply in the digital world. The United Statesspecifically suggested that the Secretariat mightusefully undertake a study of how Members areimplementing TRIPS with respect to the on-lineenvironment. The United States will continue tosupport discussion of the application of theTRIPS Agreement in the digital environment.

Further Reviews of the TRIPS Agreement: Article 71.1 calls for a review of theimplementation of the Agreement, beginning in2000. The Council currently is considering howthe review should best be conducted in light ofthe Council’s other work. The Doha MinisterialDeclaration states that, in its work under thisArticle, the Council is also to consider therelationship between intellectual property andthe CBD, traditional knowledge, folklore, andother relevant new developments raised byMembers pursuant to Article 71.1.

Prospects for 2002

In 2002, the TRIPS Council will continue tofocus on its built-in agenda as well as theadditional mandates established in Doha. TheTRIPS Council will issue a report to the TradeNegotiations Committee by the end of 2002 on anumber of issues, including compulsorylicensing, geographical indications, therelationship with the CBD, traditionalknowledge and folklore as well as other relevantnew developments.

While the review of developing-countryMembers’ implementation was to have beencompleted in 2001, follow up of some countrieswas not completed and was rescheduled for2002. Reviews yet to be completed are for: Albania, Antigua and Barbuda, Barbados,Botswana, Brazil, Brunei Darussalam,Cameroon, Congo, Côte d'Ivoire, Cuba, Egypt,


Fiji, Gabon, Ghana, Grenada, Guyana, India,Kenya, Lithuania, Malaysia, Mauritius,Namibia, Oman, Pakistan, the Philippines, SaintKitts and Nevis, Sri Lanka, Suriname, Thailand,Tunisia, the United Arab Emirates, Uruguay,and Zimbabwe.

U.S. objectives for 2002 continue to be:

• to resolve differences through disputesettlement consultations and panelswhere appropriate;

• to continue its efforts to ensure fullTRIPS implementation bydeveloping-country Members;

• to participate actively in the review offormal notifications of intellectualproperty laws and regulations to ensuretheir consistency with TRIPSobligations by Members;

• to ensure that no weakening of theAgreement occurs; and

• to develop further Members’ views onthe relationship between the TRIPSAgreement and electronic commerce.

E. Other General Council Bodies/Activities

1. Trade Policy Review Body

Status

The Trade Policy Review Body (TPRB), asubsidiary body of the General Council, wascreated by the Marrakesh Agreementestablishing the WTO to administer the TradePolicy Review Mechanism (TPRM). TheTPRM has served as a valuable resource forimproving transparency in WTO Members’trade and investment regimes and in ensuringtheir adherence to WTO rules. The TPRMexamines national trade policies of WTOMembers on a schedule designed to cover allWTO Members on a frequency determined bytrade volume. The process starts with an

independent report on a Member’s trade policiesand practices that is written by the WTOSecretariat on the basis of information providedby the subject Member. This report isaccompanied by the report of the country underreview. Together the reports are subsequentlydiscussed by WTO Members in the TPRB at asession at which representatives of the countryunder review discuss the reports on its tradepolicies and practices and answer questions. The purpose of the process is to strengthenMember observance of WTO provisions andcontribute to the smoother functioning of themultilateral trading system. A number ofsmaller countries have found the preparationsfor the review helpful in improving their owntrade policy formulation and coordination.

The current process reflects improvements tostreamline the instrument and gives it morecoverage and flexibility. Reports now coverservices, intellectual property rights and otherissues addressed by WTO Agreements. Thereports issued for the reviews are available onthe WTO’s web site at www.wto.org.


During 2001, the TPRB conducted 15 policyreviews: Brunei, Cameroon, Costa Rica, CzechRepublic, Gabon, Ghana, Macau, Madagascar,Malaysia, Mauritius, Mozambique, SlovakRepublic, Uganda, the United States and theWTO Members of the Organization of EastCaribbean States.

Five countries were reviewed for the first time,including two least-developed countries, Madagascar and Mozambique. As of December2001, 150 reviews have been conducted sincethe formation of the TPR. These reviewscovered 84 of the 128 Members, counting theEuropean Union as one, and represent 83percent of world merchandise trade. Theincreased importance of least-developed countryreviews has led to 11 such reviews since 1998.

Despite the importance of the TPRM, questionscontinue to be raised about the ever-increasing


amount of resources needed to conduct thereviews. For many developing and least-developed countries, the reports represent thefirst comprehensive analysis of their commercialpolicies, laws and regulations and haveimplications and uses beyond the meeting of theTPRB. Some Members have used theSecretariat’s Report as a national trade andinvestment promotion document, while othershave indicated that the report has served as abasis for internal analysis of inefficiencies andoverlaps in domestic laws and governmentagencies. For other trading partners and U.S.businesses, the reports are a dependableresource for assessing the commercialenvironment of WTO Members countries. Inthe coming year the United States will givesome additional attention to the question ofresources for the TPRM and potentialimprovements.

Reviews have emphasized the macroeconomicand structural context for trade policies,including the effects of economic and tradereforms, transparency with respect to theformulation and implementation of policy, andthe current economic performance of Membersunder review. Another important issue has beenthe balance between multilateral, bilateral,regional and unilateral trade policy initiatives;in particular, the priorities given to multilateraland regional arrangements have been importantsystemic concerns. Closer attention has beengiven to the link between Members’ tradepolicies and the implementation of WTOAgreements, focusing on Members’participation in particular Agreements, thefulfillment of notification requirements, theimplementation of TRIPS, the use ofantidumping measures, governmentprocurement, state-trading, the introduction bydeveloping-countries of customs valuationmethods, the adaptation of national legislationto WTO requirements and technical assistance.

Prospects for 2002

The TPRM is an important tool for monitoringand surveillance, in addition to encouraging

WTO Members to meet their WTO obligationsand to maintain or expand trade liberalizationmeasures. The program for 2002 containsprovisions to conduct reviews of 17 Members:Australia, Barbados, the Dominican Republic,the European Union, Guatemala, Haiti, HongKong-China, India, Japan, Malawi, Mauritania,Mexico, Pakistan, Slovenia, South Africa,Venezuela, and Zambia.

2. Committee on Trade andEnvironment

Status

The Committee on Trade and Environment(CTE) was created by the WTO GeneralCouncil on January 31, 1995 pursuant to theMarrakesh Ministerial Decision on Trade andEnvironment. The mandate of the CTE is tomake appropriate recommendations to theMinisterial Conference as to whether, and if sowhat, changes are needed in the rules of themultilateral trading system to foster positiveinteraction between trade and environmentmeasures and to avoid protectionist measures. At the Fourth WTO ministerial meeting inDoha, Qatar, Members agreed to an enhancedrole for the CTE including serving as a forumfor identifying and debating environmentalissues in connection with the negotiations andincreasing the focus on certain items of itsagenda (see below).


The CTE met three times in 2001. The UnitedStates contributed to the Committee’sdeliberations by, inter alia, working to build aconsensus that important trade andenvironmental benefits can be achieved byaddressing fisheries subsidies that contribute tooverfishing, and through the liberalization oftrade in environmental goods and services.

Multilateral Environmental Agreements(MEAs): The CTE continued to help enhanceWTO Members’ understanding of the tradeprovisions of MEAs by holding information


exchanges with representatives from a numberof MEA Secretariats, who briefed CommitteeMembers on recent developments in theirrespective agreements. In June 2001, the CTEheld an information session that focused on thecompliance and dispute settlement provisions inMEAs and the WTO. The Secretariats of theWTO and the UN Environmental Programme(UNEP), in close cooperation with MEASecretariats, jointly prepared a backgroundpaper for the meeting. These discussions helpedinform the decision of WTO Members at Dohato begin negotiations on ways to enhancecooperation between the WTO and MEASecretariats, and to explore further therelationship between existing WTO rules andspecific MEA trade obligations, as appliedamong parties to the MEA in question.

Market Access: The CTE continued its work onthe environmental implications of reducing oreliminating trade-distorting measures. Thiswork reflected a broad degree of consensus thattrade liberalization, in conjunction withappropriate environmental policies, can yieldenvironmental benefits. As mentioned above,the CTE continued to discuss in depth thepotential environmental benefits of reducing oreliminating fisheries subsidies. The CTE alsocontinued discussions of the benefits ofimproving market access for environmentalservices and goods and the environmentalimplications of agricultural and services tradeliberalization and liberalization in other sectorssuch as energy.

TRIPS: The CTE continued its discussions ofthe relationship between the TRIPS Agreementand the environment. A few Members arguedfor consideration of changes to the TRIPSAgreement to address perceived contradictionsbetween the WTO and the CBD. The UnitedStates has made clear its view that there is noincompatibility between WTO Agreements andthe CBD.

Relations with NGOs/Transparency/Environmental Reviews: In 2001, the UnitedStates, joined by several other Members,continued to emphasize the need for furtherwork to develop adequate mechanisms forinvolving NGOs in the work of the WTO and toimprove transparency, including throughproviding adequate public access to documents. The United States also continued to stress theusefulness of environmental assessments inhelping to assure that trade and environmentalpolicies are mutually supportive. The UnitedStates conducts reviews of major tradeagreements to which it is a party pursuant toExecutive Order 13141 (1999) and encouragesMembers to perform reviews of their ownagreements.

Prospects for 2002

As a result of new negotiations launched atDoha, the CTE is expected to play a key role onsuch items as enhancing cooperation betweenthe WTO and MEA Secretariats. TheCommittee is also instructed to pay particularattention to the effect of environmentalmeasures on market access, the relevantprovisions of the TRIPS Agreement, andlabeling requirements for environmentalpurposes. The Committee will prepare a reportto the Fifth Ministerial Conference in 2003 withrecommendations, including on potentialnegotiations. More generally, the CTE willserve as a forum for identifying and discussingenvironmental implications of the newnegotiations launched at Doha, to help assurethat the negotiations appropriately reflect theobjective of sustainable development.

3. Committee on Trade andDevelopment

Status

The Committee on Trade and Development(CTD) was established in 1965 to strengthen theGATT’s role in the economic development ofless-developed GATT Contracting Parties. Inthe WTO, the Committee on Trade and


Development is a subsidiary body of theGeneral Council. The Committee providesdeveloping countries, who comprise two-thirdsof the WTO’s Membership, an opportunity tofocus on trade issues from a developmentperspective, in contrast to the other committeesin the WTO structure which are responsible forthe operation and implementation of particularAgreements. Among subjects the Committeehas discussed are the benefits of tradeliberalization to development prospects, the roleof technical assistance and capacity building inthis effort and electronic commerce, pursuant tothe 1998 Ministerial decision on electroniccommerce.


The Committee held five formal meetings andtwo seminars in 2001. The Committee’s workfocused on the following areas: review of thespecial provisions in the Multilateral TradingAgreements and related Ministerial Decisions infavor of developing-country Members (inparticular least-developed countries); participation of developing countries in worldtrade, implementation of WTO agreements,technical cooperation and training, concerns andproblems of small economies, developmentdimensions of electronic commerce, marketaccess for least-developed countries, and thegeneralized system of preferences. TheCommittee seminars focused on technology,trade and development, and governmentfacilitation of electronic commerce fordevelopment.

The Committee also discussed the nature of theWTO’s role in technical assistance and how tocollaborate effectively with other internationaland national agencies in providing andmonitoring such assistance. At the Committeemeeting in November, the United Statessubmitted a report on U.S. Governmentinitiatives to build trade-related capacity indeveloping and transition countries. The reportprovides details on the $1.3 billion worth oftrade-related capacity building the United Stateshas provided during the last three years. The

report can be viewed at http://www.usaid.gov/

economic_growth/trade report. (The U.S.Government also has developed a trade-relatedcapacity building database available online athttp://qesdb.cdie.org/tcb/index.html.)

Sub-Committee on Least-Developed Countries: The Committee on Trade and Development hasa sub-committee that focuses on the least-developed countries. At the 1996 SingaporeMinisterial Meeting, Members agreed to a Planof Action to foster an integrated approach totrade-related technical assistance activities forthe least-developed countries and to improvetheir overall capacity to respond to thechallenges and opportunities offered by thetrading system. The result was the IntegratedFramework for Trade-related TechnicalAssistance (“Integrated Framework”) that seeksto coordinate the trade assistance programs ofsix core international organizations (theInternational Monetary Fund, the InternationalTrade Center, the United Nations Conference onTrade and Development, the United NationsDevelopment Program, the World Bank and theWTO). In addition, least-developed countriescan invite other multilateral and bilateraldevelopment partners to participate in theIntegrated Framework process. In 2001, theSub-Committee on Least-Developed Countriesof the Committee on Trade and Developmentcontinued to focus its work on the IntegratedFramework, communicating with and providingviews to the Inter-Agency Working Groupwhich includes representatives from the six coreinternational organizations on the arrangementsfor the Integrated Framework. In January 2001,the Sub-Committee held a seminar on the PolicyRelevance of Mainstreaming Trade into CountryDevelopment Strategies. In February, the Sub-Committee adopted a proposal for an IntegratedFramework pilot scheme and in May the Sub-Committee was informed of the selection of thefirst three Integrated Framework pilot projectcountries: Madagascar, Mauritania, andCambodia.


Prospects for 2002

The Committee on Trade and Development,which is scheduled to meet four times in 2002,will continue its function as the forum fordiscussion of development issues within theWTO. Particular emphasis is likely to be placedon special and differential treatment, theparticipation of developing countries in themultilateral trading system, electroniccommerce, technical cooperation, and the UNConference on Financing for Development. TheCommittee will host a seminar on electroniccommerce in April.

The Sub-Committee on Least-DevelopedCountries will meet three times in 2002. It willcontinue to focus on the special needs of andopportunities available to the least-developedcountries and the Integrated Framework. Thisyear, the Sub-Committee will hold two differentseminars on the Integrated Framework andWTO Trade Policy Reviews.

4. Committee on Balance of PaymentsRestrictions

Status

WTO rules require any Member imposingrestrictions for balance of payments purposes toconsult regularly with the Balance of Payments(BOP) Committee to determine whether the useof restrictive measures is necessary or desirableto address its balance of payments difficulties. Full consultations involve a completeexamination of a country’s trade restrictions andbalance of payments situation, while simplifiedconsultations provide more general reviews. Full consultations are held when restrictivemeasures are introduced or modified, or at therequest of a Member in view of improvementsin the balance of payments. The UruguayRound results strengthened substantially theprovisions on balance of payments. The BOPCommittee works closely with the InternationalMonetary Fund in conducting its BOPconsultations.


Since entry-into-force of the WTO on January 1,1995, the WTO BOP Committee hasdemonstrated that the new WTO rules provideMembers additional, effective tools to enforceobligations under the BOP provisions. At itsDecember 2000 meeting, the Committeeapproved a phase-out plan submitted byBangladesh to eliminate all of its balance-of-payments restraints on certain textiles in fourtranches by January 2005. In July 2001, theCommittee held additional consultations withBangladesh. In consultations in December2001, Bangladesh informed the Committee thatit would be willing to eliminate its restrictionson the import of sugar by July 1, 2005, andwould try to justify its ban on non-iodized saltunder Article XX. For the remaining threeproducts subject to import restrictions,Bangladesh indicated that it would besubmitting a notification in the near future onhow it intends to deal with these products. InJanuary and February 2001 Pakistan, notifiedthe BOP Committee that it had removed therestrictions on netting fabrics, special wovenfabrics, knitted clothing and non-knittedclothing in accordance with the second trancheof its phase-out plan. In late December 2001,BOP Committee announced that Pakistan hadinformed it that it had removed the remainingimport restrictions on woven fabrics and bedlinens, fully implementing its balance ofpayments restrictions phase-out plan.

Prospects for 2002

The Committee will consult with Bangladesh inJanuary 2002 and as necessary with othercountries maintaining BOP-related restrictionsduring the year. Additionally, should otherMembers resort to new BOP measures, theWTO provides for a program of rigorousconsultation with the Committee. The UnitedStates expects the Committee to continue to seethat WTO BOP provisions are used as intended,to address legitimate, serious BOP problemsthrough the imposition of temporary,price-based measures. The Committee will also


continue to rely upon its close cooperation withthe IMF.

5. Committee on Budget, Finance, andAdministration

Status

WTO Members are responsible for establishingand approving the budget for the WTOSecretariat via the Budget Committee. Although the Committee meets throughout theyear to address the financial requirements of theorganization, the formal process to approve thebudget for the upcoming year begins in the fallwhen the Secretariat provides to Members thefinancial data from the previous year andforecasts the financial needs for the upcomingyear. The United States is an active participantin the Budget Committee.

The WTO annual budget is reviewed by theCommittee and approved by the WTO GeneralCouncil. It is the practice in the WTO to takedecisions on budgetary issues by consensus. For the 2002 budget, the U.S. assessment rate is15.723 percent of the total assessment, or SwissFrancs (CHF) 22,342,383 (about $14 million). Details on the WTO’s budget required bySection 124 of the URAA are provided inAnnex II.


In 2001, the launch of the new round ofnegotiations in Doha and the capacity buildingneeds of developing countries were the majorissues facing the Budget Committee. Otherissues of significance in 2001 includedimplementing a new performance-based paysystem, reviewing a Swiss proposal to provideadditional facilities for the WTO, and the firstcontribution received under the WTO’s newguidelines governing the acceptance ofcontributions from non-governmentalorganizations.

Agreed Budget for 2002: After considerablediscussion to ensure that the organization would

be able to meet the technical assistance andcapacity building needs of developing countriesagreed during the launch of the new round atDoha, the Committee proposed, and the GeneralCouncil approved, a 2002 budget for the WTOSecretariat and Appellate Body of CHF143,129,850 (approximately $88 million).

The discussions within the Budget Committeefocused primarily on meeting the call in theDoha Ministerial declaration for stable andpredictable funding for trade capacity-relatedtechnical assistance and cooperative programsfor developing countries. Previously, there hadbeen significant debate within the Committeeover whether the resources needed to meet thetechnical assistance needs of developing-country Members should be brought onto theregular budget, funded by Members’contributions. In 2001, the United States and anumber of other Members opposed funding allof the technical assistance and capacity buildingexpenses from the regular budget for bothsystemic and budgetary reasons. (Historically, aportion of the staffing for technical assistanceprograms was provided by the WTO Secretariatout of the budget. The variable expenses ofthese programs–mostly for facilities,interpretation and non-Secretariat travel–arefunded primarily by donations of individualdeveloped countries, including contributions bythe United States of $600,000 in November2000 and $1.0 million in May 2001).

The agreed 2002 budget package provides forincreased technical assistance and additionalfinancing for the International Trade Center. The budget resolution also creates the DohaDevelopment Agenda Trust Fund, which will befinanced by voluntary contributions. WTOMembers agreed to double the number of highlyacclaimed WTO training courses, which educatedeveloping countries’ officials on how toparticipate in the work of the WTO, includinghow to meet their trade obligations. Thetraining program is funded out of the regularWTO budget. Another element of the budgetpackage will provide technical assistance fordeveloping countries that do not have offices in


Geneva to represent them at the World TradeOrganization. These efforts will assist countriesthat have the greatest difficulty in participatingin WTO activities.

The Doha Development Agenda Trust Fund,with a target endowment level of CHF15,000,000 (about $9 million), will allow theWTO to meet the trade capacity developmentcommitments in the Doha Declaration and willabsorb previous trust funds, including theTechnical Assistance Global Trust Fund. Apledging conference in the first quarter of 2002will kick off efforts to reach the targetendowment for the Doha Fund, which will havea CHF 1,000,000 buffer account to ensure thatprograms will not be disrupted due to temporaryshortfalls in the receipt of pledged contributions. The Doha Fund will operate with specifictargets tied to identified benchmarks and will bejointly supervised by the Committee on Tradeand Development and the Budget Committee. For the year 2002, it was agreed that up to CHF480,000 from the new trust fund can be used tofund a symposium with non-governmentalorganizations (NGOs).

WTO Members agreed to increase the staffingof the organization by eight people to addresshigher workloads, including in several areasrelated to the launch of the new round. Thepositions are to be allocated in the followingdivisions: three in the Training Institute, one inEconomic Research and Analysis, one inStatistics, one in the Human Resources, one inTrade Policy Review, and one to be determined. The WTO Secretariat will also be redeployingfive positions within the organization.

As a result of the budget agreement, the UnitedStates assessment for 2002 is CHF 22,342,383(about $14 million). The U.S. contributionaccounts for 15.723 percent of the totalassessments of WTO Members, which are basedon the share of WTO Members’ trade in goods,services, and intellectual property. In 2001, theCommittee adopted a new methodology basedon the average trade of each Member over afive-year period. To assure uniformity, the fifth

year corresponds to the year that is two yearsbefore the particular budget year. Therefore,assessments for 2002 are based on average tradein the years 1996-2000, inclusive. At the end of2001, the accumulated arrears of the UnitedStates to the WTO amounted to CHF 3,205,232(nearly two million dollars).

Performance Award Program: In 2001, theWTO developed performance benchmarks andtrained supervisors in performance assessmentto implement the performance-based pay systemintroduced in 2000 at the insistence of theUnited States and a number of other countries. The performance-based system replaced thepractice of staff receiving salary increases basedsolely on the length of time that they haveserved. Salary increases are now granted only ifan employee’s performance had been evaluatedas satisfactory and bonuses reward outstandingperformance.

Building Facilities: The Budget Committeeconsidered a building proposal from the SwissGovernment intended to accommodate thecurrent needs of the WTO Secretariat, whichexceeds the space available in the WTO’s mainbuilding, and to take into account the futureneeds of the WTO and its Appellate Body. Theproposal allows for the WTO to finance designstudies and construction of the building with aloan of CHF 50,000,000 (close to $31 million)payable over 50 years. The Government ofSwitzerland would pay the interest on the loanand the Canton of Geneva would pay for therental of the ground the building would occupyuntil 2059, at which time the WTO could eitherpurchase the land, negotiate an extension of theagreement, or sell the building. Constructioncould begin in 2005 and be completed in 2007-2008. A final decision will need to be made bythe General Council at some time in the future. However, the Budget Committee recommended,and the General Council agreed, to acceptSwitzerland’s proposal in principle so that theSwiss authorities can hold the necessary landand work with the WTO to develop theadditional plans and analysis that will benecessary to take a final decision.


Prospects for 2002

In 2002, the Budget Committee will workclosely with the Committee on Trade andDevelopment to develop a program of technicalcooperation for 2003 and recommend to theGeneral Council a target level of financing fromthe Doha Development Agenda Trust Fund thatwill be necessary to fund these efforts. Additional consideration will also need to begiven to the Swiss proposal on additionalfacilities for the WTO. The Budget Committeehas also agreed to look closely at anindependent consultant’s report on staffinglevels and potential reorganization of the WTOSecretariat, which was completed at the veryend of 2001 and therefore not able to be fullyreviewed by the Committee. Further work willbe accomplished in the area of performance-based budgeting.

6. Committee on Regional TradeAgreements

Status

The Committee on Regional Trade Agreements(CRTA), a subsidiary body of the GeneralCouncil, was established in early 1996 as acentral body to oversee all regional agreementsto which Members are party. The CRTA ischarged with conducting reviews of individualagreements, seeking ways to facilitate andimprove the review process, implementing thebiennial reporting requirements established bythe Uruguay Round agreements, and consideringthe systemic implications of such agreementsand regional initiatives on the multilateraltrading system. Prior to 1996, these reviewswere typically conducted by a “working party”formed to review a specific agreement.

The WTO addresses regional trade agreementsin more than one agreement. In the GATT1947, Article XXIV was the principal provisiongoverning Free Trade Areas (FTAs), CustomsUnions (CUs), and interim agreements leadingto an FTA or CU. Additionally, the 1979Decision on Differential and More Favorable

Treatment, Reciprocity and Fuller Participationof Developing Countries, commonly known asthe “Enabling Clause,” provides a basis for lesscomprehensive agreements between or amongdeveloping countries. The Uruguay Roundadded two more provisions: Article V of theGeneral Agreement on Trade in Services(GATS), which governs the services-relatedaspects of FTAs and CUs; and theUnderstanding on the Interpretation of ArticleXXIV, which clarifies and enhances therequirements of GATT Article XXIV.

FTAs and CUs, both exceptions to the principleof MFN treatment, are allowed in the WTO ifcertain requirements are met. First,substantially all of the trade between the partiesto the agreement must be covered by theagreement, i.e., tariffs and other restrictions ontrade must be eliminated on substantially alltrade. Second, the incidence of duties and otherrestrictions of commerce applied to thirdcountries upon the formation of the FTA or CUmust not, on the whole, be higher or morerestrictive than was the case before theagreement. Finally, while interim agreementsleading to FTAs or CUs are permissible,transition periods to full FTAs or CUs canexceed ten years only in exceptional cases. With respect to the formation of a CU, theparties must notify WTO Members and beginnegotiations to compensate other Members forexceeding their WTO bindings with marketaccess concessions. A similar compensationagreement exists for services.


Examination of Reports: The Committee heldthree formal meetings during 2001. TheCommittee examined 107 agreements, referring94 of them to the Council on Trade in Goodsand 13 agreements to the Council for Trade inServices.16 The Committee has a backlog of

16 A list of all regional trade agreements

notified to the GATT /WTO and in force is included

in the appendix to this chapter.


draft reports, for which Members do not agreeon the nature of appropriate conclusions. Throughout 2001, the Committee held extensiveconsultations in attempt to resolve Members’differences. At the same time, the Committeeconsidered 20 biennial reports on regionalagreements notified under the Article XXIV ofGATT 1947.

Systemic Issues: At the direction of the CRTA,the Secretariat undertook two horizontal surveysof crosscutting measures to assist the Committeein its understanding of the impact of regionaltrade agreements on the multilateral tradingsystem. The two studies, on product coverageand rules of origin, will be discussed by theCommittee in 2002.

Prospects for 2002

The Doha Declaration calls for clarifying andimproving rules for regional trade agreements. The Committee may play a role in these newnegotiations, the exact structure of which will bedecided in early 2002. In the meantime, theCommittee will continue to address all aspectsof its mandate, in particular reviewing the newregional trade agreements being notified to theWTO and attempting to clear the backlog ofreports. Further discussions on improving thereview process and the systemic effects ofregional agreements will likely be major issuesin the coming year, particularly in the context ofthe horizontal studies already undertaken by theSecretariat. The Committee also plans to hold aseminar engaging the academic community in adiscussion of regionalism in early spring inorder to increase its understanding of the impactof regional trade agreements on the multilateraltrading system.

7. Accessions to the World TradeOrganization

Status

The year 2001 saw the completion of overfifteen years of negotiations for the WTOMembership of the People’s Republic of China.

Three other long-term accession applicants,Lithuania, Moldova, and Taiwan (officiallyknown in the WTO as the Separate CustomsTerritory of Taiwan, Pengu, Kinmen, andMatsu, or Chinese Taipei) also completed theaccession process in 2001, bringing total WTOMembership to 144 as of January 1, 2002. Inaddition, there are twenty-eight other accessionapplicants with established Working Parties, andEthiopia and Sao Tome and Principe participateas observers.

Countries and separate customs territoriesseeking to join the WTO must negotiate theterms of their accession with current Members,as provided for in Article XII of the WTOAgreement. After accepting an application, theWTO General Council establishes a WorkingParty to review information on the applicant’strade regime and conduct the negotiations. Accession negotiations are time consuming andtechnically complex. They involve a detailedreview of an applicant’s entire trade regime bythe Working Party. Applicants must beprepared to make legislative changes toimplement WTO institutional and regulatoryrequirements, to eliminate existing WTO-inconsistent measures, and to make specificcommitments on market access for goods andservices. It is widely recognized that theaccession process, with its emphasis onimplementation of WTO provisions and theestablishment of stable and predictable marketaccess for goods and services, provides a provenframework for adoption of policies and practicesthat encourage growth, development, andinvestment. The accession process strengthensthe international trading system by ensuring thatnew Members understand and can implementWTO rules from the outset, and it offers currentMembers the opportunity to secure expandedmarket access opportunities and to addressoutstanding trade issues in a multilateralcontext.

The terms of accession developed with WorkingParty Members in these bilateral andmultilateral negotiations are recorded in anaccession “protocol package” consisting of a


Working Party report and Protocol ofAccession, consolidated schedules of specificcommitments on market access for importedgoods and foreign service suppliers, andagriculture schedules that contain commitmentson export subsidies and domestic supports. TheWorking Party adopts the completed protocolpackage containing the negotiated terms ofaccession and transmits it with itsrecommendation to the General Council orMinisterial Conference for approval. AfterGeneral Council approval, accession applicantsnormally submit the package to their domesticauthorities for ratification. Thirty days after theinstrument of ratification is received in Geneva,accession to the WTO occurs.

At the end of 2001, thirty-one applications forWTO Membership were pending, up from 29 atthe beginning of the year, and Membership inthe WTO remains an economic, and political,priority for a number of governments. Inaddition to the four new Members whoseparliaments ratified the results of theirnegotiations, Vanuatu’s Working Party adoptedthe terms of its accession in October, the firsttime since the WTO was established that a least-developed country (LDC) had reached thisstage. The package awaits acceptance byVanuatu and the General Council to completethe process.

The General Council accepted new accessionapplications from The Bahamas, Tajikistan, andYugoslavia during 2001. Applications fromSyria and Libya were tabled late in the year. Ofthe twenty-eight applicants with WorkingParties established, all but seven have submittedinitial descriptions of their trade regimes, ineffect activating the accession process. Azerbaijan, Cambodia, Samoa, Tonga, Sudanand Uzbekistan all provided comprehensiveinformation on their trade regimes, andCambodia and Tonga initiated negotiations withtheir first Working Party meetings. WorkingParty meetings and/or bilateral market accessnegotiations were also held with Armenia,Belarus, China, Kazakhstan, Macedonia,Moldova, Russia, Tonga, Ukraine, Taiwan, and

Vanuatu. The chart included in the Annex tothis section reports the current status of eachaccession negotiation.


Intensive work to complete the accessions ofChina, Chinese Taipei, and Vanuatu and tomake progress on those of Russia andMacedonia, took up most of the attention givenby WTO Members to individual accessions in2001.17 The accession negotiations of Ukraine,Kazakhstan, and Armenia also intensifiedduring 2001, either in terms of market accessnegotiations on goods and services or in termsof legislative implementation.

Members also attempted to respond to criticismleveled by the informal group of developingcountries during 1999 and 2000 that theaccession process was too burdensome for someapplicants. During 2001, they sought ways tosimplify and streamline the accession process,especially for the nine least-developed country(LDC) applicants with extremely low levels ofincome and economic development, and others,such as WTO observers Ethiopia and Sao Tomeand Principe, that might apply for Membershipin the future. Members generally recognized theunique problems facing LDCs applying forWTO accession, i.e., lack of human resources toconduct the negotiations, infrastructuredeficiencies, and a general lack of capacity toimplement WTO provisions without technicalassistance from the WTO and its Members.

At the time the accession package of Moldovawas approved, the United States invoked thenon-application provisions of the WTOAgreement contained in Article XIII withrespect to that country, bringing to five thenumber of times since the establishment of theWTO in 1995 that this step has been

17 For further information on the results of

the WT O accession negotiations with China and

Taiwan to the WTO, please consult Chapter IV.


necessary.18 Invoking Article XIII wasnecessary because the United States must retainthe right to withdraw “normal trade relations(NTR)” (called “most-favored-nation” treatmentin the WTO) for WTO Members that receiveNTR with the United States subject to theprovisions of the “Jackson-Vanik” clause andthe other requirements of Title IV of the TradeAct of 1974.19 In such cases, the United Statesand the other country do not have “WTOrelations” which, among other limitations,prevents the United States from bringing a WTOdispute based on a violation of the WTO or thecountry’s commitments in its accession package.

Prospects for 2002

As the new round of multilateral negotiationsgets underway, work in the WTO willincreasingly be focused in that direction, andday-to-day work in the organization and disputesettlement cases will also require WTOMembers’ attention. As a consequence, inaddition to continuing efforts to promoteprogress in the accessions of LDCs, emphasiswill center on accession applicants thatdemonstrate a willingness to implement WTOprovisions and reach agreement with WTO

Members on market access issues. U.S.representatives will remain key players in allaccession meetings, as the negotiations provideopportunities to expand market access for U.S.exports, to encourage trade liberalization indeveloping and transforming economies, and tosupport a high standard of implementation ofWTO provisions by both new and currentMembers. The United States has also pledgedto increase its efforts to promote trade capacitybuilding among least-developed countries,including those seeking accession to the WTO.

Armenia, Macedonia, Russia, and Vanuatu arethe most advanced in the accession process. Inaddition, Algeria and Kazakstan have resumedactive negotiations after a lengthy hiatus,declaring WTO accession a priority for theircountries, and will press to intensifynegotiations during 2002. Six additionalapplicants at the very beginning of the accessionprocess, including three additional least-developed countries, have circulated initialdocumentation and will expect to launchWorking Party reviews of their trade regimesthis year. Finally, the expectation remains thatadditional countries currently outside the WTOsystem will seek to initiate accessionnegotiations.

8. Working Group on Trade andCompetition Policy

Status

In 2002, the WTO Working Group on theInteraction between Trade and CompetitionPolicy (Working Group) enters its sixth year ofwork under the oversight of the WTO GeneralCouncil. The Working Group was set up byWTO Trade Ministers at their first MinisterialConference in Singapore in December 1996. Itsmandate was to “study issues raised byMembers relating to the interaction betweentrade and competition policy, includinganti-competitive practices, in order to identifyany areas that may merit further consideration inthe WTO framework.” In December 1998, theGeneral Council authorized the Working Group

18 The United States invoked nonapplication

of the WT O when Romania became an original

Member in 1995, and when the accession packages of

Mongolia, the Kyrgyz Republic, and Georgia were

approved by the WTO General Council in 1996,

1998, and 1999, respectively. Congress subsequently

authorized the President to grant them permanent

NTR, and the United States withdrew its invocation

of non-application in the W TO for these countries.

19 In addition to Moldova, eight of the

remaining 28 WTO accession applicants with active

Working Parties are covered by Title IV. They are:

Armenia, Azerbaijan, Belarus, Kazakhstan, Russia,

Ukraine, Uzbekistan, and Vietnam. The

Administration recently proposed that Armenia,

Azerbaijan, Kazakhstan, Moldova, Russia, Ukraine,

and Uzbekistan be granted permanent NTR. For

further information on this issue, please consult

Chapter IV. For further information on granting

permanent NTR to China, please consult Chapter IV.


to continue its work on the basis of a morefocused framework of issues. This frameworkcontinued to serve as the basis of the WorkingGroup’s work in 2001.

In Paragraph 23 of the November 2001 DohaMinisterial Declaration, the Ministers agreedthat “negotiations regarding competition policywould take place after the Fifth Session of theMinisterial Conference on the basis of adecision to be taken, by explicit consensus, atthat session on modalities of negotiations.” TheMinisterial Declaration provides that furtherwork in the Working Group up to the FifthSession will focus on the clarification of: coreprinciples, including transparency, non-discrimination and procedural fairness, andprovisions on hardcore cartels; modalities forvoluntary cooperation; and support forprogressive reinforcement of competitioninstitutions in developing countries throughcapacity building. The Ministerial Declarationalso recognized the needs of developing andleast-developed countries for technicalassistance and capacity building in this area, andpledged to work in cooperation with otherintergovernmental organizations, includingUNCTAD, to provide assistance in response tothese needs.


The Working Group held three meetings in2001, in March, July and September. TheWorking Group continued to organize its workon the basis of written contributions fromMembers, supplemented by discussion andcommentary offered by delegations at themeetings and, where requested, factualinformation and analysis from the WTOSecretariat and observer organizations such asthe OECD, the World Bank and UNCTAD. Asnoted, in December 1998, the General Councilset a focused framework for study by theWorking Group, which continued to set theparameters of the Working Group’s work in2001. These parameters were: (i) the relevanceof fundamental WTO principles of nationaltreatment, transparency and most-favored-nation

treatment to competition policy, and vice-versa;(ii) approaches to promoting cooperation andcommunication among Members, including inthe field of technical cooperation; and (iii) thecontribution of competition policy to achievingthe objectives of the WTO, including thepromotion of international trade.

Beyond these three broad areas of focus, theWorking Group also took account of somesuggestions developed by the Working GroupChairman, Professor Frédéric Jenny of France,in the course of informal consultations withMembers. These suggestions were that theWorking Group:

• continue placing emphasis onaddressing the concerns that had beenexpressed by some developing-countryMembers regarding both the generalimpact of implementing competitionpolicy on their national economies andthe particular implications that amultilateral framework on competitionpolicy might have for development-related policies and programs;

• continue exploring the implications,modalities and potential benefits ofenhanced international cooperation,including in the WTO, in regard to thesubject-matter of trade and competitionpolicy; and

• continue focusing on the issue ofcapacity building in the area ofcompetition law and policy.

Twenty written submissions were contributed bya total of 16 Members (counting the EU and its15 Member States as one contributor). Thesesubmissions ranged across the three areas offocus set by the General Council, but themajority of them addressed issues arising underthe rubric of “approaches to promotingcooperation and communication amongMembers, including in the field of technicalcooperation.” The United States made twosubmissions to the Working Group in 2001: the


first (which had previously circulated as anadvance copy for the Working Group’s meetingin October 2000) addressed “The Role ofCompetition Advocacy,” while the secondaddressed “Administering a Competition Lawand Policy: The Mechanics of Setting andPursuing Policy Goals with Finite Resources.”

Prospects for 2002

The work of the Working Group in 2002 willfocus on the clarification of the topics specifiedin the Ministerial Declaration (i.e., coreprinciples, hardcore cartels, voluntarycooperation, and capacity building). Meetingsof the Working Group are already scheduled forMarch and July, and a further meeting inSeptember also has been discussed.

9. Working Group on Transparency inGovernment Procurement

Status

Building on the progress to date in the WorkingGroup on Government Procurement, the DohaMinisterial Declaration calls for decisions to betaken at the Fifth WTO Ministerial Conferenceon the modalities for negotiations on a potentialAgreement on Transparency in GovernmentProcurement, and for negotiations to begin onthat basis. Continued progress toward a multilateralAgreement on Transparency in GovernmentProcurement is an important element of theUnited States’ longstanding efforts to bring allWTO Members’ procurement markets withinthe scope of the international rules-based tradingsystem. This work also contributes to broaderU.S. initiatives aimed at promoting theinternational rule of law, combatinginternational bribery and corruption, andsupporting the good governance practices thatmany WTO Members have adopted as part oftheir overall structural reform programs.


The Working Group has made significantprogress in identifying many of the keysubstantive elements of a potential Agreementon Transparency in Government Procurement,including:

• Publication of information regarding theregulatory framework for procurement,including relevant laws, regulations andadministrative guidelines;

• Publication of information regardingopportunities for participation ingovernment procurement, includingnotices of future procurements;

• Clear specification in tender documentsof evaluation criteria for award ofcontracts;

• Availability to suppliers of informationon contracts that have been awarded;and

• Availability of mechanisms to challengecontract awards and other procurementdecisions.

The Working Group’s discussions haveconfirmed that a wide range of WTO Membersconsider these elements to be fundamental to anefficient and accountable procurement systemand, accordingly, already incorporate theseelements, as appropriate, in their existingprocurement laws, regulations and practices.

In 2001, discussions in the Working Groupfocused on the important benefits to all WTOMembers of concluding a multilateralAgreement in this area. Many delegationsstressed that incorporating predictable standardsof transparency in government procurement intothe rules-based international trading systemwould not only facilitate commercialdevelopment and the integration of all Membereconomies into the global trading system, butcould also contribute to Members’ efforts toensure the most efficient possible use of scarcepublic resources. Some developing-countrydelegations noted that computer-basedinformation and communications technologies


can provide a cost-effective way for allgovernments to achieve their transparencyobjectives.

Prospects for 2002

Pursuant to the Doha Ministerial Declaration,the United States will work with other WTOMembers to push for progress on a number ofkey issues relating to modalities for negotiationson an Agreement on Transparency inGovernment Procurement, including: 1)potential capacity building needs related to thesubstance of the negotiations; 2) the appropriatescope and coverage of an Agreement; and 3) theappropriate application of WTO disputesettlement procedures to such an Agreement.

10. Working Group on Trade andInvestment

Status

The Working Group on Trade and Investment(WGTI), which was originally established bythe Singapore Ministerial Declaration in 1996,provides a multilateral forum for theconsideration of investment liberalization andinternational investment agreements and theirrelationship to trade and economic development. The WTO General Council oversees the work ofthe WGTI and has approved an extension of itsinitial two-year mandate until the nextMinisterial in 2003. During this time, theWGTI has been tasked to focus on severalinvestment issues including scope anddefinition, transparency, non-discrimination,development provisions, exceptions and disputesettlement. Following this period, negotiationswill occur “on the basis of a decision to betaken, by explicit consensus, at that Session onmodalities of negotiations.”

The WGTI provides an opportunity for theUnited States and other countries to present thebenefits they derive from open investmentpolicies and programs and to advanceinternational understanding of these benefits. Itis also a valuable forum in which to dispel

misconceptions about investment liberalization,such as the concern in some developingcountries that foreign investment marginalizesdomestic firms. To date, the group has analyzedthe full range of investment agreement modelscurrently in use, and considered the implicationsof the differences. The group assessed theadvantages and disadvantages of the variety ofapproaches, including as they affected economicdevelopment. The United States believes thatthe WGTI’s work significantly raises othercountries’ understanding of investment rules.


The WGTI met three times in 2001. Drawingfrom the checklist of issues developed duringthe initial two years of its work, and relying onwritten submissions from Members, the WTOSecretariat and multilateral bodies such as theOECD and UNCTAD, the WGTI reviewed threebroad subject areas. The first was theimplications of trade and investment forfacilitating economic development and growth,including the following subtopics: therelationship between balance of payments andFDI with a focus on mergers and acquisitions,portfolio investment, and the advantages ofmultilateral investment rules. The second topicwas the economic relationship between tradeand investment, where investment incentivesand FDI flows and technology transfer wereaddressed. Finally, the Working Group tookstock of and analyzed existing internationalinstruments and activities regarding trade andinvestment, focusing on investment seminarsoutside of the WTO.

Prospects for 2002

With a renewed mandate for the WGTI, and theprospects of negotiations to begin following thenext Ministerial, it is expected that the work inthis body will take on renewed importance. Members looking to include specific topics onthe negotiating agenda will need to begindeveloping a consensus, given that the contentof negotiations remains a decision to be made byMinisters in 2003.


11. Trade Facilitation

Status

The 1996 Singapore Ministerial Declarationrequested the Council for Trade in Goods “toundertake exploratory and analytical work,drawing on the work of other relevantinternational organizations, on the simplificationof trade procedures in order to assess the scopefor WTO rules in this area.” The Councilcontinued its work under this mandate in 2001,leading up to the Doha Ministerial, where anambitious and focused program was establishedfor new work to be undertaken, leading up to theFifth Ministerial in 2003. At Doha, it wasagreed that negotiations on Trade Facilitationwill take place after the Fifth Ministerial, basedupon a decision to be taken at that Ministerialon modalities of negotiations.


In 2001, the Council for Trade in Goods metseveral times in informal session, continuing itsanalysis of various ‘national experience’submissions, and exploring potential current"gaps" within the parameters of relevant WTOrules. Emerging in 2001 was a significant levelof interest by many Members to add to theTrade Facilitation agenda those issuespertaining to the transit of goods throughterritories– a matter of particular importance toseveral ‘land-locked’ countries. In addition, akey event in 2001 was a comprehensive two-day“WTO Workshop on Technical Assistance andCapacity Building in Trade Facilitation,”featuring speakers from both donor andrecipient countries, international organizationsactively involved in trade capacity building, andthe private sector.

As the year progressed, there continued to besome resistance exhibited on the part of certaindeveloping-country Members towardcommencing negotiations on Trade Facilitation. However, many developing countries joined theUnited States and other Members in supportinga view that the development of a rules-based

environment for conducting trade transactionswould be an important element for securingcontinued growth in the economic output of allWTO Members. There was no disagreementamong Members that systemic reforms relatedto increased transparency and efficiency in theconduct of border transactions would diminishcorruption, while providing an additional benefitof enhancing administrative capabilities thatensure effective compliance with customs-related requirements or laws concerning health,safety, and the environment. For the UnitedStates and many of its key trading partners,small and medium size enterprises (SMEs) havebecome important stakeholders in advancingWTO work in the area of Trade Facilitation. SMEs are especially poised to take advantage ofopportunities provided by today’s instantcommunications and ever-improvingefficiencies in the movement of physical goods,while at the same time are particularlydisadvantaged when border procedures areopaque and overly burdensome.

Prospects for 2002

As reflected in the Doha Declaration, the UnitedStates and all other Members are challenged inthe area of Trade Facilitation to move beyondthe previous Singapore Ministerial analyticalmandate and undertake an ambitious workagenda leading up to the Fifth Ministerial. TheCouncil on Trade in Goods will not only review,but also undertake as appropriate to “clarify andimprove” relevant aspects of GATT Article V(“Freedom of Transit”), GATT Article VIII(“Fees and Formalities Connected withImportation and Exportation”), and GATTArticle X (“Publication and Administration ofTrade Regulations”). At the same time,Members will identify trade facilitation needsand priorities of Members, while concurrentlytaking up the challenge of ensuring adequatetechnical assistance and support for capacitybuilding in this area. The United States andother leading Members will move aggressivelytoward advancing the Doha Trade Facilitationagenda, in order to ensure that the work iseffectively positioned at the Fifth Ministerial for


completing negotiations in the three-year timeframe of the overall Doha negotiating workprogram.

The United States views work in this area asultimately leading to one of the most importantsystemic negotiations to be undertaken by theWTO. The future WTO negotiations in the areaof Trade Facilitation are a “win-win”opportunity, given the important linkagesbetween a rules-based trade transactionenvironment and a stable economicinfrastructure. The United States will continueto advance ongoing complementary initiativesinvolving existing Agreements, such as withregard to implementation of the WTOAgreement on Customs Valuation. The UnitedStates will also be working with key Membersto ensure the technical assistance is demand-driven and is effective in bringing aboutconcrete measurable results that will translateinto increased trade and investmentopportunities for all Members.

F. Plurilateral Agreements

1. Committee on the Expansion ofTrade in Information TechnologyProducts

Status

The landmark agreement to eliminate tariffs byJanuary 1, 2000 on a wide range of informationtechnology products, generally known as theInformation Technology Agreement, or ITA,was concluded at the WTO’s first MinisterialConference at Singapore in December 1996.The ITA has 57 participants representing over95 percent of trade in the $600 billion-plusglobal market for information technologyproducts. 20 The agreement covers computers

and computer equipment, semiconductors andintegrated circuits, computer software products,set-top boxes, telecommunications equipment,semiconductor manufacturing equipment andcomputer-based analytical instruments.


The WTO Committee of ITA Participants heldfour formal meetings in 2001, during which theCommittee reviewed implementation status. Although developed country participantsimplemented duty-free treatment for theseproducts on January 1, 2000, some limitedstaging of tariff reductions for individualproducts up to 2005 for developing countrieswas granted on a country-by-country basis.

Pursuant to the provisions of the SingaporeMinisterial declaration establishing the ITA, theCommittee continued its work to addressdivergent classification of informationtechnology products. Building on the workdone in 1999 and 2000, substantial progress wasmade in 2001 on reaching agreed classificationsfor many products. A list of products whereagreement was not possible was forwarded tothe World Customs Organization for theirconsideration.

As a result of the approval of the Non-TariffMeasures (NTM) Work Program in late 2000,the Committee began work in 2001 byidentifying NTMs which impede trade in ITAproducts. On this issue there have been ninesubmissions from participants to date. TheCommittee is in the process of examining theeconomic and development impact of suchmeasures on trade in ITA products and thebenefits which would accrue to participants

20 ITA participants are: Albania, Australia,

Bulgaria, Canada, Costa Rica, Croatia, Cyprus, Czech

Republic, El Salvador, Estonia, European

Communities (on behalf of 15 Member States),

Georgia, Hong Kong China, Iceland, India,

Indonesia, Israel, Japan, Jordan, Republic of Korea,

Krygyz Republic, Latvia, Lithuania, Macau,

Malaysia, Mauritius, Moldova, New Zealand,

Norway, Oman, Panama, Philippines, Poland,

Romania, Singapore, Slovak Republic, Slovenia,

Switzerland and Liechtenstein, Taiwan, Thailand,

Turkey, and the United States. China and Armenia

have indicated their intention to join the ITA.


from addressing their undue trade-distortingeffects.

Prospects for 2002

The Committee’s decision to establish a workprogram on non-tariff measures effectivelydemonstrates how the WTO provides a dynamicmechanism that is responsive to the ever-changing nature of the information technologysector. ITA participants have already identifieda number of non-tariff measures that act asunnecessary impediments to trade. TheCommittee intends to bring together industryrepresentatives and government regulators in2002 to consider how these impediments can beremoved.

Throughout 2002 the Committee will continueto undertake its mandated work, includingreviewing possibilities for product expansionalong with addressing further technicalclassification issues. In addition, the Committeewill continue to monitor implementation of theAgreement, including undertaking any necessaryclarifications.

2. Committee on GovernmentProcurement

Status

The WTO Government Procurement Agreement(GPA) is a “plurilateral” agreement included inAnnex 4 to the WTO Agreement. As such, it isnot part of the WTO’s single undertaking and itsmembership is limited to WTO Members thatspecifically signed it in Marrakesh or that havesubsequently acceded to it. WTO Members arenot required to join the GPA, but the UnitedStates strongly encourages all WTO Members toparticipate in this important agreement. Thecurrent membership is: the United States, themember states of the European Union (Austria,Belgium, Denmark, Finland, France, Germany,Greece, Ireland, Italy, Luxembourg, theNetherlands, Portugal, Spain, Sweden, UnitedKingdom), the Netherlands with respect toAruba, Canada, Hong Kong China, Iceland,

Israel, Japan, Liechtenstein, Norway, theRepublic of Korea, Singapore and Switzerland. Iceland acceded to the GPA in April 2001. Albania, Bulgaria, Chinese Taipei, Estonia,Jordan, the Kyrgyz Republic, Latvia, Oman,Panama, and Slovenia are in the process ofnegotiating GPA accession.


In Article XXIV:7 of the GPA, the Partiesagreed to conduct further negotiations with aview to improving both the text of theAgreement and its market access coverage. TheParties have since agreed that, as part of thereview, the Committee should take into accountthe objective of promoting expandedmembership of the GPA by making it moreaccessible to non-members. With these objectives in mind, the United Stateshas taken the lead in advocating significantstreamlining of some of the GPA’s proceduralrequirements, while continuing to ensure fulltransparency and predictable market access. Much of the existing text of the GPA wasdeveloped in the late 1970s, during thenegotiations on the original GATT GovernmentProcurement Code. As the current review of theAgreement has proceeded, the Committee hasbecome aware that the GPA text should becarefully analyzed in view of the ongoingmodernization of the Parties’ procurementsystems and technologies.

As provided for in the GPA, the Committeecontinued the process of monitoring members’implementing legislation. In 2001, it completedits review of the implementing legislation ofCanada, Hong Kong China, Israel, Japan,Liechtenstein, Norway, Singapore and theUnited States.

Prospects for 2002

In 2002, the Committee will continue its reviewand analysis of the text of the GPA, focusing onproposals by the United States and other Partiesaimed at “streamlining” the Agreement’s


procedural requirements. It will also considerproposals that have been made with respect topotential negotiations to further expand theAgreement’s market access coverage. TheCommittee will review the implementinglegislation of Iceland and the Netherlands withrespect to Aruba, which will complete thereview for all the current GPA Parties.

3. Committee on Trade in Civil Aircraft

Status

The Agreement on Trade in Civil Aircraft(Aircraft Agreement), was concluded in 1979 aspart of the Tokyo Round of multilateral tradenegotiations. Although the Aircraft Agreementwas not renegotiated during the Uruguay Round,it remains fully in force and is included inAnnex 4 to the WTO Agreement as aplurilateral trade agreement. The Aircraft Agreement requires Signatories toeliminate duties on civil aircraft, their engines,subassemblies and parts, ground flightsimulators and their components, and to providethese benefits on a PNTR basis to all WTOMembers. On non-tariff issues, the AircraftAgreement establishes international obligationsconcerning government intervention in aircraftand aircraft component development,manufacture and marketing, including:

Government-directed procurement actions andmandatory subcontracts: The Agreementprovides that purchasers of civil aircraft(including parts, subassemblies, and engines)will be free to select suppliers on the basis ofcommercial considerations and governmentswill not require purchases from a particularsource.

Sales-related inducements: The Agreementstates that governments are to avoid attachingpolitical or economic inducements (positive ornegative linkages to government actions) as anincentive to the sale or lease of civil aircraft.

Certification requirements: The Agreementprovides that civil aircraft certificationrequirements and specifications on operatingand maintenance procedures will be governed,as between Signatories, by the provisions of theAgreement on Technical Barriers to Trade.

Under Article II.3 of the Marrakesh Agreement,the Aircraft Agreement is part of the WTOAgreement, however only for those Memberswho have accepted it and not for all WTOMembers. As of December 31, 2001, there were29 Signatories to the Aircraft Agreement: Bulgaria, Canada, the European Communities,Austria, Belgium, Denmark, France, Germany,Greece, Ireland, Italy, Luxembourg, theNetherlands, Portugal, Spain, Sweden, theUnited Kingdom, Egypt, Estonia, Georgia,Japan, Latvia, Lithuania, Macau, Malta,Norway, Romania, Switzerland and the UnitedStates. Although Albania and Croatia havecommitted to become parties upon accession tothe WTO, which occurred in 2001, neither hasaccepted the Agreement. Chinese Taipei, whichbecame a WTO Member on January 1, 2002,also became a Signatory to the AircraftAgreement on that date. Oman agreed tobecome a party within three years of accession. Those WTO Members with observer status inthe Committee are: Argentina, Australia,Bangladesh, Brazil, Cameroon, China, ChineseTaipei, Colombia, the Czech Republic, Finland,Gabon, Ghana, Hungary, India, Indonesia,Israel, Korea, Mauritius, Nigeria, Oman, Poland,Singapore, the Slovak Republic, Sri Lanka,Trinidad and Tobago, Tunisia and Turkey. Inaddition two WTO accession candidates, theRussian Federation and Saudi Arabia, haveobserver status in the Committee. The IMF andUNCTAD are also observers.


The Aircraft Committee, permanentlyestablished under the Aircraft Agreement,affords the Signatories an opportunity to consulton the operation of the Agreement, to proposeamendments to the Agreement and to resolveany disputes. During 2001, the full Committee


formally convened twice and also met onceinformally in conjunction with a meeting of theTechnical Sub-Committee reviewing theAgreement’s Annex. The Committee agreed toopen a new Protocol (2001) for acceptance bythe Signatories that revises the Agreement’sAnnex of aircraft items to be accorded duty-freetreatment to bring them into accord withchanges to the international HarmonizedCommodity Description and Coding System. The Committee also agreed to recommendinterim application of duty-free treatment forground maintenance simulators, a product notcurrently within the defined coverage of theAgreement.

In addition, the Committee discussed variousaircraft-related trade matters including:conforming the language in the Agreement tothe WTO; end-use customs administrationincluding a proposal to define “civil” aircraft byinitial certification rather than by registration;and, statistical reporting of trade data. TheUnited States also raised certain activities byother Signatories that might result in tradebarriers or market distortions, such as the failureby France to promptly certify large civil aircraftat full seating capacity, European Union supportfor large civil aircraft development andmarketing, Belgian government exchange rateguarantees for aircraft componentmanufacturers, and European Union regulationsrestricting the operation of aircraft, otherwisecompliant with International Civil AviationOrganization Stage III noise standards.

Prospects for 2002

The United States will continue to seek toconform the Aircraft Agreement with the newWTO framework while maintaining the existingbalance of rights and obligations. The UnitedStates will also continue to make it a highpriority for countries with aircraft industries thatare seeking membership in the WTO to becomea Signatory to the existing Aircraft Agreement. In addition, other countries that might procurecivil aircraft products, but are not currentlysignificant aircraft product manufacturers, are

being encouraged to become members of theAgreement in order to foster non-discriminatoryand efficient selection processes for aircraftproducts based solely upon product quality,price, and delivery.