USTR Comments on the 1999 WTO Ministerial

Comments of the Joint Industry Group (JIG)
in Response to the
Solicitation of Public Comment Regarding
U.S. Preparations for the
World Trade Organization’s Ministerial Meeting, Fourth Quarter 1999

This communication constitutes the response of the Joint Industry Group ("JIG") to the invitation for public comments issued by the Trade Policy Staff Committee (63 Fed. Reg. 44,500 August 19, 1998) in relation to priorities for the United States in the preparations leading to the 1999 Ministerial Conference of the World Trade Organization ("WTO"). Given the early stage of this process, the JIG may provide further comments as the preparations for the 1999 Ministerial Conference progress.

JIG is a coalition of more than 130 companies, trade associations, professionals and businesses actively involved in international trade. We both examine and reflect the concerns of the business community relative to current and proposed international trade-related policies, actions, legislation, and regulations. We undertake to improve policies and procedures through dialogue with government agencies and the Congress. The Joint Industry Group represents over $250 billion in trade.

The JIG commends the Member governments of the World Trade Organization for the significant progress they made in the Uruguay Round in addressing barriers to trade in goods. WTO Members have made great strides in the universal application of disciplines on valuation practices through the multilateral Agreement on the Implementation of Article VII of the General Agreement on Tariffs and Trade ("GATT") 1994; the extension of GATT rules to trade in textiles and apparel through the Agreement on Textiles and Clothing; and the introduction of new disciplines in the Agreement on Rules of Origin and the Agreement on Pre-Shipment Inspection. The JIG urges the U.S. Government to continue to assign its highest trade policy priority to the implementation of these rules by our trading partners, and to pursue their enforcement vigorously, including through the use of WTO dispute settlement proceedings. The promise of these recently negotiated rules is great, but they have been in force for a very short period of time, and in the case of many developing country Members, not yet at all. The global business community can ill-afford a shift in focus and resources away from the full exploitation of the gains so hard-fought and won in the Uruguay Round.

The 1999 session of the Ministerial Conference represents a singular opportunity for WTO Members to take stock of the gains emerging from the Uruguay Round and to build on those gains through further negotiating efforts. The focal point of the Uruguay Round was the extension of the GATT's workable, enforceable rules to the "new" areas of trade in services and the protection of intellectual property rights. The JIG recommends that, if the 1999 session of the Ministerial Conference leads to the initiation of a new global trade round, WTO Members should set as their principal negotiating objectives the reduction of unnecessary costs related to customs formalities, the enhancement of transparency and the facilitation of commerce in the "old" area of trade in goods. Trade in goods will continue to form the bedrock of international commerce in much of the world for many years to come. Enhancing disciplines on

government regulation at the border will greatly assist developing and developed countries alike to reap the benefits of global trade rules.

The following comments expand upon these two basic themes in connection with the subject headings enumerated by the Committee in its solicitation of public comment.

I. Implementation of Existing Agreements and Work Programs

The Committee has requested comments with respect to experience in implementation, including where the WTO Agreements have been successful in addressing U.S. interests, and in areas where charges would facilitate better enforcement and adherence to rules and commitments, or otherwise advance U.S. objectives.

GATT 1994 Articles VIII and X – The JIG considers Article X to be the foundation of all GATT rules on trade in goods, requiring that Member governments ensure transparency and due process in customs procedures. Without the strict adherence to these fundamental principles, none of the other disciplines on government regulation of trade in goods would be meaningful. GATT Article VIII:1(c) recognizes the need to minimize the incidence and complexity of import and export formalities and for decreasing and simplifying import and export documentation requirements.

The JIG believes that compliance with, and enforcement of, Article X obligations by our trading partners has not been sufficient to meet the needs of the global marketplace. Although the provisions of GATT Article X have been in force for more than 50 years, the broad language of Article X appears to have made it difficult for WTO Members (and GATT 1947 contracting parties before them) to enforce violations and seek meaningful changes in country practices. Moreover, WTO Members have not acted on the need to simplify customs formalities and documentation requirements as expressed in Article VIII:1(c).

Accordingly, the JIG recommends that the U.S. Government pursue the negotiation in the WTO of an understanding on the interpretation and implementation of GATT 1994 Articles VIII and X. The understanding could be a specialized Annex 1A agreement, such as the existing agreement on customs valuation, or it could be similar in nature to the understandings developed during the Uruguay Round that became part of the GATT 1994.

The objective in negotiating an understanding on these GATT articles would be to create concrete, practical disciplines that would be enforceable under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes. In this regard, the JIG recommends that WTO Members develop rules on data collection, timely release of goods, transparency of the customs clearance process, and administrative appellate procedures.

As they consider the manner in which GATT Articles VIII and X should be interpreted, WTO Members might use as models existing WTO provisions on customs procedures, including Articles 2(h) and 3(f) of the Agreement on Rules of Origin and Article 13 of the Agreement on Implementation of Article VII of GATT 1994. Articles 2(h) and 3(f) of the Agreement on Rules of Origin permit interested persons to obtain "assessments" of origin from Member governments within a fixed period of time, before or after goods are shipped. The obligation to grant such assessments could be extended to other areas of customs regulation (e.g., tariff classification and valuation). Similarly, Members should consider the extension of Article 13 of the Agreement on Implementation of Article VII of GATT 1994 to permit the timely release of goods from the custody of customs authorities pending the completion of formalities regarding questions other than the valuation of goods.

Furthermore, the JIG recommends that, in the months leading up to the next session of the Ministerial Conference, the U.S. Government and other delegations to the General Council’s special sessions review carefully the work on trade facilitation conducted in the World Customs Organization, the G-7 countries, and other similar forums. Some of this work was described in a document circulated by the WTO Secretariat in the Council on Trade in Goods on 23 May 1997 (G/C/W/80).

Agreement on Textiles and Clothing – The JIG believes that the Agreement on Textiles and Clothing ("ATC") has not been implemented fully and fairly in all regions of the world. The JIG believes that, rather than a further elaboration of the rules applicable to this sector, a careful review of implementation of the existing rules would enable WTO Members to address outstanding compliance issues effectively.

III. Reviews of Existing Arrangements and Work Programs

The Committee seeks comments regarding U.S. priorities pursuant to the Agreements from the Uruguay Round that specifically provide for reviews and other work as part of their individual work programs.

Customs Valuation – Many developing country Members of the WTO have invoked the five-year transitional provisions of Article 20 of the Agreement on Implementation of Article VII. Pursuant to paragraph 2 of Article 20, certain developing country Members will be eligible to delay for an additional three years the application of some of the technical rules on customs valuation. In addition, pursuant to Annex III to the Agreement, many developing country Members may request a three-year extension of the transition period with respect to other provisions of the Agreement upon a showing of good cause. It is in the interest of all WTO Members to ensure the faithful compliance with the Agreement as soon as possible. Accordingly, the JIG recommends that, consistent with paragraph 3 of Article 20 of the Agreement, WTO Members assign sufficient technical resources to assist developing country Members to meet their obligations without delay after the expiration of the initial five-year transitional period.

Agreement on Textiles and Clothing – The JIG urges WTO Members to complete a review of the implementation of the ATC sufficiently in advance of the 1999 session of the Ministerial Conference so that Ministers might review the results of the review at the session. The review could be conducted along the lines of the review that the Council on Trade in Goods conducted in 1996 and 1997. The purpose of the review would not be to facilitate the negotiation of new rules, but rather to assess the difficulties that Member governments face in implementing the existing rules and address those difficulties through the Council for Trade in Goods, the Textiles Monitoring Body, or another suitable forum.

Rules of Origin – The JIG considers the harmonization work program on non-preferential rules of origin under the Agreement on Rules of Origin to be one of the most important pieces of unfinished business from the Uruguay Round. In the course of the work program, Members must ensure that the harmonized rules of origin are based on objective standards that promote transparency, uniformity, predictability, and simplicity of application. These rules should be based on objective standards that reflect the substantial transformation of goods. The rules should be based upon the change in tariff classification approach to the greatest extent possible.

Non-preferential rules of origin should be applied in an impartial, transparent and consistent manner. Finally, these rules should not create additional documentation or data retention requirements – that is, any new rules should be based on existing commercial data or documents kept by traders in the "normal" course of business.

The JIG notes that the Council for Trade in Goods approved the recommendations of the Committee on Rules of Origin to complete the harmonization work program on non-preferential rules of origin by November 1999. It is imperative that Members complete the work program by this revised deadline.

IV. Singapore Ministerial Work Program

The Committee seeks comments on what, if any, steps should be taken with respect to the issues raised in the context of the work of the working groups established on trade and investment, trade and competition policy, transparency in government procurement and the exploratory work undertaken by the WTO regarding trade facilitation.

Trade Facilitation – The JIG strongly supports the work that has been conducted in the WTO on trade facilitation, and urges WTO Members to continue such efforts in the future.

In particular, WTO Members must (a) analyze the impact of customs-related barriers to trade on WTO commitments; and (b) promote and coordinate the development and implementation of initiatives to simplify trade procedures, including those under the auspices of the World Customs Organization and the G-7 countries. In this regard, the U.S. Government should ensure that symposia with private sector representatives continue to be held in Geneva periodically to facilitate the dialogue of the private sector with governmental officials.

The simplification and standardization of customs procedures must be a primary focus of attention for Ministers in the 1999 session. The JIG has already noted above the need to examine GATT Articles VIII and X with a view to the development of a new understanding on the interpretation and implementation of those provisions. The JIG urges the U.S. Government to explore with other Members whether the work on trade facilitation would be best accomplished in the context of existing WTO bodies, such as the Council on Trade in Goods, or in a separate working group.

VII. Electronic Commerce

Consistent with the Declaration issued at the May 1998 Ministerial Conference, the Committee has solicited comments with respect to the commitment by WTO Members not to impose customs duties on electronic commerce and agreements to establish a work program for further consideration of the relationship between trade and electronic commerce.

The JIG believes that the Internet and similar electronic venues represent significant new markets for trade in goods. Accordingly, the JIG strongly supports the initiative taken by the U.S. Government to obtain commitments from WTO Member governments now to eliminate customs duties on electronic goods over the Internet.