Office of the United States Trade Representative


USTR Releases 2002 Inventory of Trade Barriers
Contact: Richard Mills (202) 395-3230 04/02/2002

WASHINGTON - The Office of the United States Trade Representative today released the 2002 National Trade Estimate (NTE) Report on Foreign Trade Barriers. The annual report documents foreign trade barriers to U.S. exports. The report also highlights examples of our trading partners reducing or eliminating trade barriers.

"The Bush Administration continues to move forward to advance trade and free markets," said U.S. Trade Representative Robert B. Zoellick. "By identifying barriers to trade, we can work with our trading partners, globally, regionally, and bilaterally, to eliminate these barriers, while further liberalizing our market at home. Trade improves the economic well-being of Americans, advances freedom around the world, and promotes our nation"s security."

This year's report notes the increased use of non-tariff barriers (non-science based sanitary and phytosanitary standards, customs procedures, government monopolies and lack of transparency in regulations) as a strategy to hamper trade. The persistence of trade barriers affirms the need for the United States to remain actively engaged on multiple fronts. The trade barriers also underscore the importance of the new round of multilateral trade negotiations launched in Doha, Qatar. These negotiations are an opportunity for governments to reduce, and eventually eliminate, barriers to trade. To realize these benefits, we need to build public support for open trade. The report demonstrates what is at stake if the United States fails to take the lead in shaping the international trade agenda.

The NTE includes a comprehensive list of unfair trade practices and barriers to American exports of goods, services, and farm products. It covers 55 major trading partners in each region of the world and profiles policies restricting market access, as well as deficiencies in intellectual property rights protection, and investment barriers. The NTE also notes many examples where countries have reduced or eliminated trade barriers described in earlier reports.

As required by the Omnibus Trade and Competitiveness Act of 1988, USTR prepares the NTE Report in close consultation with other U.S. Government agencies, based on the Administration's monitoring program and information provided from the public and private sector trade advisory committees. This year, as in the past, the USTR solicited public comments and, in response, received 49 submissions. U.S. Embassies also participated actively in the preparation of the report and provided critical input based on the experience of U.S. exporters abroad. In addition, these barriers are the subject of consultation with the Congress throughout the year.

The full text of the trade barriers report is available here. Bound copies of the report will be available from USTR's Office of Public Affairs beginning April 8, 2002.

Highlights of the 2002 Report:

Most African countries are introducing economic and political reforms that will promote economic growth and facilitate their integration into global markets. With the exception of Zimbabwe, all of the sub-Saharan African countries under review in the 2002 NTE report are eligible for benefits under the African Growth and Opportunity Act (AGOA) and are taking steps to make their investment climate more attractive for foreign investors. Tariffs have been reduced but remain high in certain sectors and countries. Other issues that hamper U.S. exporters in certain countries are onerous customs delays, ineffective enforcement of intellectual property rights, and corruption.

South Africa is the United States' largest export market in sub-Saharan Africa and a major beneficiary of the African Growth and Opportunity Act. The United States is currently working cooperatively with the South African Government to address U.S. poultry industry concerns related to South Africa's December 2000 imposition of antidumping duties against certain chicken parts from the United States.

The United States has expressed serious concerns about the refusal of South Africa's monopoly telecommunications provider, Telkom, to lease lines to competitive providers of value-added network services. South Africa's newly enacted Telecommunications Amendment Bill would also prevent resale until 2005, which raises questions about South Africa's commitment to a competitive telecommunications market and its long-term ability to attract foreign participation in its high-technology sector.

During the past ten years, Brazil has liberalized its trading regime in a substantial manner, but still maintains high applied tariffs (such as a 35 percent tariff on motor vehicles) and tariff bindings, as well as various non-tariff barriers. In addition, Brazil has very high information technology tariffs of 30 percent, which, combined with other taxes, adds 100 percent to the cost of personal computers. The main non-tariff trade irritants include restrictive and non-transparent import licensing, an unofficial yet de facto imposition of questionable minimum import prices on certain sensitive products, and restrictions on payments for imports. Overall, Brazil's customs regime continues to be problematic among U.S. exporters for being non-transparent, burdensome, and costly.

The United States trades more with Canada than with any other country, but a number of issues continue to hamper this partnership.

The 1996 U.S.-Canada Softwood Lumber Agreement was created to mitigate the effects of market distorting Canadian provincial timber sales practices and to provide time to implement systemic reform. The Agreement expired in April 2001 having fostered little substantive reform. The U.S. industry filed antidumping and countervailing duty petitions immediately thereafter. On March 22, 2002, the U.S. Department of Commerce announced its final determinations that Canadian softwood lumber is being dumped into the U.S. market and benefits from government subsidies. The U.S. International Trade Commission continues to investigate injury to the U.S. industry caused by Canadian dumped and subsidized imports and its final decision will be made by May 6. In the absence of an agreement on basic reforms to the Canadian system which would form the basis of a durable solution as an alternative to trade litigation, the United States will effectively enforce U.S. trade laws.

The Canadian Wheat Board (CWB) has been reorganized but continues to enjoy government-sanctioned monopoly status, as well as other privileges that restrict competition. The United States is committed to using all effective tools available to end the CWB's monopoly on the purchase, sale and distribution of its wheat around the world. Responding to a petition from the North Dakota Wheat Commission (NDWC) for an investigation of CWB practices, on February 15, 2002, USTR issued an "affirmative finding" that reviewed the results of its investigation, detailed the CWB's monopolistic characteristics, and described the steps USTR intends to take. These include: examination of a possible dispute settlement case in the World Trade Organization (WTO) against the Canadian Wheat Board; working with the wheat industry to examine the possibilities of filing U.S. countervailing duty and antidumping petitions; and identifying specific impediments to U.S. wheat entering Canada to ensure the possibility of fair, two-way trade. These actions are complemented by the Administration's ongoing commitment to vigorously pursue comprehensive and meaningful reform of monopoly state trading enterprises in the WTO agriculture negotiations.

In July 2001, a WTO compliance review panel agreed with the United States that Canada had not taken the necessary steps to bring its dairy export subsidy program into compliance with the WTO. The United States intends to present further evidence to the WTO demonstrating that Canada is unfairly subsidizing its dairy exports in response to the review panel's judgment that the factual record in the case was incomplete.

A number of problems continue to affect the bilateral trade relationship. For example, import standards and phytosanitary requirements are being used to create import barriers, and imports of many products are required to undergo duplicative and expensive quality and safety inspection procedures. Imports of agricultural products such as grain, poultry, and citrus are at times arbitrarily blocked. In addition, transparency continues to be an issue for both foreign and domestic firms, as inconsistent notification and application of existing laws and regulations continues to create problems for businesses.

China did make further improvements in its intellectual property rights protection regime, but a high level of product counterfeiting and copyright piracy continues, and enforcement must be improved.

Following nearly 15 years of negotiations, China acceded to the WTO on December 11, 2001. Although China had begun the difficult process of reforming its trade regime in order to become WTO-compliant, this process is ongoing. It is expected that WTO accession will further open China's market to U.S. goods and services. In the long run, it is also expected that adherence to WTO rules and international norms should encourage structural reform and promote the rule of law throughout China.

European Union:
Several European Union policies continue to create significant barriers to U.S. economic interests. Among these barriers are unjustified bans on U.S. beef from livestock treated with hormones and U.S. poultry treated to minimize bacterial risks. The EU ban on U.S. beef has continued for more than ten years, despite a WTO ruling that the ban is inconsistent with multilateral trade rules. Other major barriers include Member State government financial support to the aircraft industry; and widely differing EU standards, testing, and certification procedures.

Since 1998 when several EU member states imposed a de facto moratorium, Europe has failed to have a functioning approval process for agricultural biotechnology products. As a result over $200 million in U.S. corn exports have been lost each year. Restarting the approval process is a high priority for the United States. During the past year, several officials of the European Commission indicated that the approval process would be restarted. However, the moratorium remains in effect and there appears to be little hope that the approvals process will be restarted in 2002. The United States is evaluating options for next steps.

In July 2001, the European Commission issued two proposals regarding agricultural biotechnology. The first proposal addressed the regulation of biotech food and animal feed and the second proposed labeling and traceability schemes. These proposals create new procedures for the regulation of biotechnology foods and, for the first time, propose to regulate animal feed made from agricultural biotech products. The traceability and labeling proposals create complicated and extensive paperwork documentation of agricultural biotechnology products from the farm to the retailer and propose a labeling regime based on consumer preferences rather than science-based factors. In late 2001 and early 2002, the United States provided detailed comments to the Commission stating the view that these proposals are not workable, will be extraordinarily expensive, do not provide increased health protections, and will not achieve the stated objectives. These proposals are subject to the co-decision process of the European Parliament and Council and the United States will continue to monitor developments regarding these proposals.

Many U.S. trade concerns stem from the lack of transparency in the development of EU regulations. The United States views transparency and public participation as essential to promoting more effective transatlantic regulatory cooperation, to achieving better quality regulation, and to reducing the number of possible bilateral trade disputes.

With the elimination of longstanding quantitative restrictions in the past year, access to the Indian market has improved. Nonetheless, a broad range of impediments remain, including high taxes and tariffs, and non-tariff barriers, affecting most trade. Serious deficiencies in intellectual property rights protection also persist.

Structural rigidity, excessive regulation, and market access barriers continue to limit opportunities for U.S. companies trading with, and operating in Japan, our third largest trading partner. The report underscores our continuing concern with a number of these obstacles.

For example, competition in Japan's $130 billion telecommunications sector remains stifled by high interconnection rates for both wired and wireless services; the absence of an independent regulator; burdensome filing and licensing requirements for competitive carriers; and weak dominant carrier regulation.

Japan also continues to maintain significant barriers to its agricultural market. These barriers are of particular concern to the United States as our exports of farm, forest and seafood products totaled $11 billion in 2001. There appears to have been an increase in Japan's use of standards and other administrative requirements to limit agricultural imports and a greater tendency to deviate from scientific principles in setting new import policies. Japan's restrictions on apples because of alleged concerns about the potential transmission of fire blight is one such example. On March 1, 2002, the United States requested consultations (the first step under WTO dispute settlement procedures) with Japan concerning its import restrictions on U.S. apples. The consultations will be held on April 18, 2002.

The United States also continues to urge Japan to remove regulatory and trade barriers and address systemic inefficiencies in the medical device and pharmaceutical sectors. The United States is particularly concerned about Japan's implementation of a new "foreign reference pricing" system for medical devices that arbitrarily sets a cap on prices without taking into full account the high cost of doing business in Japan.

Korea is one of the United States' major trading partners, and the progress of President Kim Dae Jung has made in establishing more open, market-oriented economic policies has helped address some trade issues between the United States and Korea. However, significant barriers to U.S. exports to Korea remain.

Despite some positive steps, Korea's high taxes and auto-related taxes combine to severely restrict U.S. companies' access to Korea's automotive market. While Korean automobile exports to the U.S. market again hit record levels in 2001, Korea only imported 7,747 vehicles from all foreign sources, representing 0.7 percent of the market. Korea also imposes high duties and maintains other non-tariff barriers on many agricultural and fishery products.

The lack of transparency in rule making and inconsistency of Korea's regulatory system are the principal problems cited by investors or exporters seeking to compete in the Korean market. These transparency-related barriers affect a wide range of sectors. U.S. pharmaceutical companies particularly have been adversely affected by the lack of transparency and piecemeal development of policies related to Korea's health care reform.

The United States remains concerned about Korea's inadequate protection of intellectual property rights and is closely monitoring Korea's action to strengthen its enforcement regime and intellectual property legal framework.

The United States has longstanding concerns about the Korean Government's excessive government influence and involvement in many industries, including steel and telecommunications. The U.S. Government also continues to express strong concerns about instances of possible Korean subsidization of semiconductor production and exports. The U.S. Government objects to Korean Government-directed lending as a part of Korea's economic restructuring efforts and we continue to monitor the situation for its negative implications for U.S. trade interests.

As a result of the changes brought about through NAFTA implementation, U.S. exports to Mexico have doubled, and Mexico has become our second largest trading partner. Nevertheless, Mexico continues to restrict access to certain U.S. goods and services.

Mexico continues to maintain measures that prevent competition in its international telecommunications services market. This market remains dominated by a single company with a government mandate to set high wholesale prices for calls to Mexico and prevent competitive alternatives. The United States is currently challenging these measures in the WTO.

On January 1, 2002, the Mexican Congress imposed a consumption tax on certain beverages sweetened with ingredients other than cane sugar, including high fructose corn syrup (HCFS). This discriminatory and counterproductive action established a major barrier to a settlement of broader sweetener disputes between the United States and Mexico. In March 2002, the tax was suspended by President Fox. However, the Mexican Congress continues to threaten new restrictions and HFCS sales remain well below prior volumes.

The United States remains concerned about the continuing high levels of piracy and counterfeiting in Mexico and will closely monitor how the Mexican Government addresses these problems.

Russia has undertaken a comprehensive economic reform program which includes the ongoing negotiation of Russia's terms of accession to the World Trade Organization (WTO). Despite reforms underway, the Russian Government maintains several policies that pose barriers to U.S. economic interests. The most significant of these is the current ban on U.S. poultry exports. After several weeks of negotiations, on March 31, 2002, the United States signed a protocol with Russia that should result in the ban being lifted by April 10, 2002. Other Russian trade-restricting measures include Russia's licensing regime and standards and certification procedures, sanitary and phytosanitary measures, services and investment barriers and an inadequate enforcement regime with respect to intellectual property.

Despite continued efforts by the U.S. Government to urge Ukraine to implement laws and regulations adequately protecting optical disc media products, Ukrainian legislative and legal efforts to combat CD and DVD piracy remain weak. Although Ukraine passed an Optical Disc licensing law in January, it contains numerous flaws and exceptions (including the exclusion from coverage of discs in transit). We continue to stress the importance of adequate protection for the rights of copyright holders and will continue to seek ways to facilitate reliable and enforceable intellectual property rights protection in Ukraine.

Ukraine has recently imposed a ban on imports of U.S. poultry meat based on unjustified food safety claims.

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