ECONOMIC POLICY COUNCIL MEETING - JUNE 13, 1986

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G01117R000702230002-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 22, 2016
• Document Release Date: June 21, 2011
• Sequence Number: 2
• Publication Date: June 10, 1986
• Content Type: MISC

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STAT
Exe Live Secretary
11 June 86
Do,.
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THE WHITE HOUSE ONF IU~i~
WASHINGTON
CABINET AFFAIRS STAFFING MEMORANDU
16. 2656x
Date: 6/10/86 Number:. 317, 135 Due By:
Subject: Economic Policy Council Meeting June 1.3, 1986
100 A.M. Roosevelt Room
Action FYI
ALL CABINET MEMBERS ^ ^
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Chief of Staff
CEA
CEQ
OSTP
Poindexter
Svahn
Chew (For WH Staffing)
6f ^
USTR ?' ^
N ^ ^
EPA
GSA
NASA
OPM
SBA
VA
REMARKS:
The Economic Policy Council
June,}.Y, 1986 at_lfl_:.AB A.M.
The agenda and background
your information.
RETURN TO:
Executive Secretary for:
DPC
EPC
will meet on Wednesday,
in the Roosevelt Room.
papers are attached for
5 Alfred H. Kingon
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^ Don Clarey
^ Rick Davis
^ Ed Sticky
Associate Director
Office of Cabinet Affairs
456-2800 (Room 235, OEOB)
/1 0d
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June 10, 1986
MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL
FROM: EUGENE J. McALLISTER"-t
SUBJECT: Agenda and Papers for the June 11 Meeting
The agenda and papers for the June 11 meeting of the
Economic Policy Council are attached. The meeting is scheduled
for 10:00 a.m. in the Roosevelt Room.
The first agenda item will be a discussion of our GATT
objectives. A revised version of the paper circulated last week
is attached.
The second agenda item will be a report from the Strike
Force on Trade. The Strike Force has developed several
recommendations for the Council's consideration. A paper
describing these recommendations is attached.
In addition, Ambassador Yeutter has asked that the Council
briefly discuss recent developments in the Brazilian informatics
Section 301 case. There is no paper for this item.
Secret and Confidential Attachments
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ECONOMIC POLICY COUNCIL
June 11, 1986
10:00 a.m.
Roosevelt Room
AGENDA
1. GATT Objectives
2. Report of the Strike Force on Trade
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THE UNITED STATES TRADE REPRESENTATIVE
WASHMTON
20500
June 9, 1986
MEMORANDUM
TO: THE ECONOMIC POLICY COUNCIL
FROM: THE TRADE POLICY REVIEW GROUP
SUBJECT: U.S. Objectives and Strategic Considerations for the
New Round of Multilateral Trade Negotiations
Issue
The GATT Preparatory Committee (PrepCom) for the New Round has
reached a critical stage in its work. It has reviewed the
thirty-odd issues proposed for inclusion in the new trade talks
and is now drafting the declaration that Ministers will approve
in September at a meeting in Uruguay to launch the new round.
The purpose of this paper is to:
update the EPC on the PrepCom's work;
-- reaffirm the U.S. objectives for the negotiations;
-- clarify key current strategic and tactical consider-
ations; and
-- outline next steps.
The appendix describes key issues of interest to the U.S. and
specific negotiating objectives we want to achieve for each
issue. Additional issues proposed by other countries may also
be acceptable to the U.S., but do not warrant EPC consideration
at this point.
It is anticipated that the EPC will review our new round strategy
and tactics, once the PrepCom has completed its work in mid-July
and prepared a draft ministerial declaration. If necessary, the
EPC could discuss the issue again just prior to the Ministerial
meeting in September.
Background
-- Since the decision of the GATT Contracting Parties
in November, the Preparatory Committee has met six times and set
(TOP SECRET,~.SLCRETAOR
CLASSIFIED BY_
AUTOS C LY DLCLhISIFIE. vN
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out an intensive schedule of meetings through aid-July. At
that time, the Committee is to make recommendations, in the form
of a ministerial declaration, on the objectives, subject matter
and organizational details for the new round, as well as partici-
pation in it. The recommendations will be forwarded for action
to Ministers, who will meet in Punta del Este, Uruguay during the
week of September 15. We expect the Ministers will adopt the
declaration and formally open the new trade talks.
U.S. Objectives for the New Round
-- We have four basic objectives for the new round. They
are to:
o seek trade liberalization as a means to increase
global economic growth and to create expanded export
opportunities for competitive American producers;
o resist new protectionist measures and eliminate
those now in place around the world;
o strengthen and expand the rules of the trading
system, including those that are currently deficient
(such as agriculture and safeguards) and to develop
new rules to deal with the increasingly important areas
of international trade (such as intellectual property,
investment and services); and
o strengthen the GATT as an institution to make it
relevant to the problems of today's trading environment
and capable of dealing with those of the future as they
arise.
-- These objectives are necessarily interrelated and, to
be successful, we have to achieve all four.
Strategic Considerations
There are a number of strategic questions which must be resolved
before the September ministerial meeting.
1. What are our priorities for the new round?
-- We face an uphill battle to get agreement -- not to
mention agreement in September -- on the early launching of the
new round which will be based on the agenda we have advocated.
Nonetheless, the agenda for the negotiations must be both ambitious
and comprehensive if we are to achieve meaningful agreements and
lasting results. We must insist on the inclusion of key issues
of principal importance to the U.S. (See appendix.)
SFCPI'T
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Does the EPC agree that establishing a rank ordering of
issues for inclusion on the negotiating agenda is one trap we
should avoid?
o Setting priorities would, by definition, single out
certain items for priority treatment in the negotia-
tions. Given the state of the trading system today,
progress on AU issues is critical.
o The identification of priorities could limit the
agenda, and thereby jeopardize inclusion of items of
importance to us. A negotiating agenda that failed to
include agriculture or services, for example, would be
clearly inadequate.
o The negotiating agenda also must reflect the
interests of all countries. It will be difficult to
encourage broad participation in the negotiations if
the agenda is not balanced and the talks do not proceed
on all subjects simultaneously. (It should be noted
that balancing the agenda may require mention of
certain items in the Ministerial declaration that are
not critical to us, such as restrictive business
practices.)
o The rank ordering of issues at this stage also might
limit our flexibility to introduce additional subjects,
as appropriate, during the course of the negotiations.
From the domestic point of view, continuing private
sector support is conditioned on the inclusion of issues of
interest to particular industries or groups. It is, therefore,
critical at the outset of the negotiations to ensure, to the
greatest extent possible, that the agenda encompasses all issues
of interest to our domestic constituents.
Although we want a comprehensive agenda and negotiations
that proceed on all subjects simultaneously, we want to have
meaningful results as soon as possible. It may be feasible to
conclude agreements or interim understandings on certain issues
in advance of others. This may be particularly true with issues
that have long been the subject of debate and negotiation in the
GATT, such as agriculture and safeguards. However, our desire to
reach early agreement should not be misinterpreted as an implied
higher priority for these issues.
2. What is our position on standstill/rollback?
-- To set a positive tone for the start of the negotiations
and lend credibility to the process, a number of developed and
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developing countries support a political-level commitment by
trade ministers to a "standstill and rollback" of protectionist
measures. Proposals now under discussion in Geneva call for trade
ministers to: 1) commit their governments at the start of the nego-
tiations (presumably at the Ministerial meeting in September) not
to introduce new protectionist measures, and to 2) progressively
dismantle existing trade restrictions during the course of the
negotiations.
-- A standstill/rollback pledge is essentially a political,
not a legal, commitment. Countries would obtain no additional
GATT rights by accepting the commitment. In the event we violated
it (for example, by extension of the manufacturing clause), we
would face retaliation by affected countries, just as we would
without a standstill/rollback commitment. However, if we violated
the commitment in a massive or repeated way, the negotiations
would almost certainly come to a halt, given the importance that
numerous GATT countries attach to a meaningful standstill and
rollback pledge.
-- To be acceptable to the U.S., the standstill/rollback
commitment must be undertaken by all other GATT members, whether
developed or developing. The terms must be defined as precisely
as possible.
-- "Standstill" should cover new measures only, so that the
extension of existing measures or the introduction of new measures
under an existing program would not violate the commitment. The
commitment would not be honored if old, discretionary measures
were made more restrictive. We cannot accept any constraint on
the application of U.S. trade law (including changes in sugar
quotas or meat VRAs), nor limitations on our rights under inter-
national law, as part of the "standstill" commitment.
o Section 201, antidumping, countervailing duty and
national security measures would be excluded from the
standstill commitment; we would be free to act in
accordance with our GATT rights in these areas;
o Section 301 cases would be excluded from the
standstill commitment, provided GATT dispute settlement
procedures are followed where GATT disciplines exist.
(FYI. To retaliate against unfair foreign trade practices
without GATT authorization, such as we did recently
against the EC on citrus and enlargement, would be
inconsistent with such a commitment. END FYI);
o However, the U.S. cannot allow a trading partner to
delay or stonewall dispute settlement proceedings;
should this occur, we will not be bound by the standstill
commitment. Where the GATT is not relevant (such as on
intellectual property, investment or services), or where
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the party in question is not a GATT member, we will
proceed as usual under Section 301.
o With respect to retaliation under Section 301, we
cannot accept a standstill commitment that would limit
our leverage to act; we must have flexibility to
retaliate against unfair foreign trade practices now
outside GATT disciplines, such as intellectual property,
with measures on goods.
-- The "standstill" commitment must be closely linked
with a credible program to "roll back" existing trade restric-
tions that are not maintained under the GATT system or under GATT
auspices. (This would exclude measures that are consistent with
the Multifiber Arrangement.)
"Rollback" would entail:
o a commitment to eliminate GATT-illegal measures or
bring them into conformity with GATT disciplines; and
o a commitment to phase-out grey-area measures or bring
them into conformity with GATT disciplines, perhaps on
a schedule that goes beyond the end of the round. Any
phase-out agreement would have to contain elements of
degressivity.
o alleged GATT-illegal or inconsistent measures that
are determined to have a GATT cover would not be
subject to a rollback commitment; rather, they would be
the subject of negotiations elsewhere in the new round.
-- Acceptance of such a rollback commitment would not
prohibit the exercise of U.S. law or U.S. rights under the GATT.
Our trading partners would be obligated to eliminate GATT illegal
measures, and we would have the opportunity to negotiate the
elimination of grey-area measures.
-- Is the EPC prepared to accept a standstill/rollback
commitment drawn along these lines, provided our trading partners
did the same?
3. What should our position be on providing favored treatment
for LDCs in the new round?
-- Developing countries have pressed for inclusion in the
ministerial declaration of a commitment by developed countries to
grant LDCs special and more favorable treatment in every phase of
the negotiations. We believe this is an unnecessary objective
for the negotiations.
SFCPT
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-- We recognize the principles for special treatment
contained in Part IV of the GATT and do not intend to rewrite
them; rather, our concern is with their appropriate application.
In order for any reference to special treatment for LDCs to be
acceptable to us, we have to reach agreement to close the giant
loopholes that prevent the advanced developing countries from any
meaningful discipline over their trade practices and "graduate"
these countries from special status.
We anticipate that this issue will be a major bone of
contention over the next few months. We are likely to come under
increasing pressure from a number of our developed country
trading partners to cave early on this point. Is the EPC agreed
that a critical new round objective for us is to substantially
reduce the level of special GATT treatment that the most advanced
and internationally competitive developing countries receive?
4. How should we deal with trade-offs among issues?
This round will focus on developing more effective and
enforceable rules with respect to government policies and practices
affecting trade. As far as practicable, we seek self-contained
agreements, where the "concessions" countries make are acceptance
of new, higher standards of disciplines over their trade-distorting
practices.
-- An essential element of the negotiations will be
to strengthen the GATT as an institution. This includes not only
measures to improve its internal operations, such as dispute
settlement, but also steps to enhance the GATT's stature in the
international community vis-a-vis the IMF and World Bank. Such
institutional reforms would bolster the credibility of the GATT,
and are, therefore, in each country's self-interest.
-- There will be far less emphasis on the traditional
exchanging of tariff concessions than in previous rounds, primarily
because tariff levels are generally low and pose less significant
trade distortions. However, we do have some important market
access objectives that will require the reduction of foreign
tariffs, as well as some of our own.
From a domestic point of view, we envision many diffi-
culties with the inevitable trade-offs that will arise in the
course of the negotiations. Is the EPC agreed that, to the
greatest extent possible, our negotiators should seek to minimize
trade-offs between different areas of the negotiations?
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5. Negotiating Authority
-- Although there are a number of important trade legisla-
tion questions that will have a bearing on our ability to negotiate
comprehensive and meaningful agreements in the new round, one
strategic question for EPC consideration is the kind of authority
we desire to enable us best to negotiate reductions in both non-
tariff and tariff barriers as part of the new round.
-- With respect to non-tariff barriers, our current
authority under Section 102 of the Trade Act of 1974 allows us to
negotiate non-tariff agreements and bring them back to Congress
for "fast-track" approval until January 3, 1988. Since we are not
likely to complete all new round negotiations by then, an extension
of that provision under acceptable conditions this year would
allow us to immediately begin to negotiate reciprocal reductions
on non-tariff barriers. is the EPC agreed that "fast-track"
authority on essentially a permanent basis would help us achieve
our objectives in the area of non-tariff barriers?
-- On the tariff side, the Administration has no authority
to negotiate reductions in tariff levels, either in the new round
or in other negotiating fora. As noted above, we do not expect
tariffs to be a major element of the new round. Nevertheless,
our private sector advisors have identified a number of important
objectives to be achieved in the tariff area, such as reducing
high foreign tariffs on a number of diverse products in addition
to binding the currently unbound tariffs of many developing and a
few developed countries. (See market access section of the
Appendix.)
-- In the course of opposing HR-4800, we argued for an
extension of the expired Presidential authority to proclaim
tariff reductions (Section 101 of the Trade Act of 1974) with no
exceptions by product or sector. We have since had indications
from congressional contacts that this will be extremely difficult
to obtain. Alternatively, does the EPC agree that we should:
o seek time-limited (3-4 year) tariff cutting authority
on the same fast-track approval basis as non-tariff
authority;
o avoid an across-the-board formula for all tariff
reductions made in the negotiations; and
o negotiate tariff cuts on the basis of requests from
trading partners for reductions in duties?(We would
endeavor to make no offers of our own in order to allay
the concerns of sensitive U.S. industries.)
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Tactical Considerations
To ensure the successful conclusion of the PrepCom's work between
now and mid-July and a successful launch of the new round in
September, we must focus on a number of tactical issues.
1. Now do we counter those who argue for two ministerial meetings?
-- We have reports that certain countries, including some
in the EC and Brazil, have quietly suggested in Geneva that
"conditions may not be right" for the ministers to launch the new
round in September, and that a second Ministerial meeting (pre-
sumably next year) would be required. This is purely a stalling
tactic, which we need to counter.
-- The CP's decision last November clearly states that the
ministers, acting on the PrepCom's recommendations, will adopt a
program for the negotiations in September. The President has
personally pressed for an early start for the negotiations at the
past three Economic Summits.
-- Is the EPC agreed that, the U.B. should reject proposals
for two ministerial meetings to launch the new round? If so, EPC
members should use all international economic and political
contacts to press our arguments for a single, decisive meeting in
September. USTR will coordinate a program of high-level demarches
to make clear that if ministers fail to launch new negotiations
at that time, the U.S. will pursue unilateral, bilateral or
plurilateral measures to resolve trade problems.
2. How do we address the "Japan problem" in the new round?
-- The Japanese have been very supportive of the new round
and have actively participated in the multilateral preparatory
process. They are particularly vocal on the need for negotiations
on trade in services and intellectual property.
-- Nonetheless, access to the Japanese market is vitally
important to the U.S. It is an equal concern of many other GATT
members, some of whom have not attempted to penetrate the Japanese
market but see future opportunities there.
o Japan's restrictions on agricultural imports are
among the most stringent in the world;
o Japan imports a disproportionate share of total LDC
manufactured exports (7% versus 64% by the U.S. and 24%
by the EC); and
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o as a share of GNP, Japan's level of manufactured
imports is not only the lowest for all industrial
countries, but is declining. Their share dropped from
2.29% in 1980 to 2.16% in 1985.
-- Many of our trading partners would like to join us in
using the new round to make the multilateral case for meaningful
market-opening actions by Japan. The EC spokesman in Geneva has
put down a marker that the Community will not negotiate without
assurances that Japan will make market-opening concessions in the
new round. That theme has been reiterated by various member
states, as well as other GATT Contracting Parties in bilaterals
and other fora.
is the EPC agreed that we also expect a significant
improvement in access to the Japanese market as a result of the
new round? If so, how should we pursue this issue?
3. What should be our Dosition on textiles in the PrepCom and
the new round?
-- Last February, the President approved a strategy for
renegotiating the multifiber arrangement on a fast-track to
ensure that a renewed MFA is in place prior to the start of the
new round. Negotiations in Geneva are proceeding more slowly
than anticipated, however. As a worst case, we may face the
prospect of entering the Ministerial without a renewed MFA. At
the same time in the PrepCom setting, numerous LDCs have pressed
for concessions on textiles -- or at least agreement to negotiate
textile trade liberalization -- as a prerequisite to the new
round.
-- Given our position on the need for an ambitious and
comprehensive agenda for the new round, it is difficult for us to
argue that textiles should be excluded from the negotiating
agenda. The question comes down to largely one of timing.
-- The EPC should be aware that there is some discussion
in Geneva that the price for launching the new round in September
may be agreement to include textiles in the talks. Obviously,
this is a decision that should not be made until the last possible
moment in September -- well after we deal with the veto override
effort on the textiles bill and after we have a clearer picture
of Hill action on trade legislation.
-- Is the EPC agreed that, if textiles must be included on
the new round agenda, we should seek to avoid any prejudice to
the substantive treatment of the issue pending renewal of the
MFA?
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4. now do we press our substantive case most effectively
between now and September?
-- As noted above and outlined in the Appendix, we have
proposed an ambitious agenda for the new round. We have mounted
campaigns to educate our trading partners on some "new" issues
of critical importance to us -- investment and intellectual
property. These issues were pursued through various demarches in
capitals, Washington and Geneva.
-- What additional steps should we take between now and
September to:
o clarify our position on the various items on the
U.S. negotiating agenda;
o continue to "sell" our ideas internationally; and
o convince the Congress to support an aggressive and
ambitious new round agenda?
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Specific Negotiating Issues of Interest to the U.S.
1. Agriculture
Developing meaningful discipline over trade in agricul-
ture is an imperative objective for the U.S. and the vast majority
of GATT members. The EC, as was the case in the Tokyo Round, is
doing its best to restrict the nature of negotiations on agricul-
ture and to slow all progress. Nonetheless, the Community is the
source of many of our problems with agricultural trade and we
should not be dissuaded by their foot-dragging.
We seek to bring agriculture under effective trading
rules and disciplines by eliminating import restrictions on
agricultural products, treating agricultural export subsidies no
differently than subsidies for industrial products, and eliminating
other barriers to market access in both developed and developing
countries.
We should not address agricultural problems exclusively
in an agricultural group. Rather, we seek to address problems in
agricultural trade in all relevant areas of the negotiations --
be it in a group dealing with subsidies, or market access -- so
that no participant will be able to block progress on this issue
of vital importance to U.S. export interests.
2. Safeguards and Other Temporary Import Measures
-- For a large number of GATT members, including the U.S.,
it is essential to reach a comprehensive agreement over the use
of safeguard actions, that is emergency actions taken by govern-
ments to protect domestic industries from an influx of imports,
thereby giving them time to adjust to competition. Most current
safeguard practices have little to do with the disciplines of the
GATT.
We seek to develop a comprehensive agreement disciplining
the use of all safeguard actions, including voluntary restraint
agreements and orderly marketing arrangements. Such actions
should be temporary, transparent, degressive, and contribute
to -- not retard-- adjustment, without shifting the burden of
that adjustment on to other trading countries.
-- Comparable rules also must be developed to discipline
all temporary measures taken by developing countries to restrain
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imports, such as the exemptions available to developing countries
under the GATT rules for infant industry and balance-of-Da ants
measures. This is an area where GATT rules are particularly lax.
3. Review of GATT Articles and Tokyo Round Agreements
Not surprisingly, the first effort to negotiate meaning-
ful international disciplines over non-tariff barriers during the
Tokyo Round was not perfectly satisfactory. What we need to do
now is build on our experience with the codes over the past six
years, expand participation, update certain provisions, and
strengthen and improve their operation. We want to give particular
attention to the standards, government procurement, aircraft and
subsidies codes.
-- Negotiations on improvements to the codes do not
necessarily have to be part of the new round, but rather could
continue on their present track and be implemented before the new
round is completed. At the same time, the broad negotiations
might provide leverage for completing certain aspects of the code
improvements, for example expanding entity coverage for the
Government Procurement Code.
-- The U.S. should support a review of GATT articles as
part of the negotiations. We would welcome improvements in
certain provisions, such as Article XVII which stipulates that
government trading entities should act in accordance with commer-
cial considerations and GATT principles of non-discrimination.
Such reviews should be undertaken with the aim of making these
rules operational and enforceable.
4. Intellectual Property Protection
-- A key "issue of interest to many in the private sector
is negotiation of a code on intellectual property similar to the
codes negotiated in the Tokyo Round.
-- We have proposed that our trading partners join us in
developing such a GATT code, which would supplement existing
international conventions, and ensure that measures taken to
protect intellectual property do not distort international trade
flows. We envision the code will have several elements, including
binding provisions on transparency of regulations, notification,
dispute settlement, and address the aspects of those conventions
that need strengthening.
-- One element of the negotiation of intellectual property
should be to complete the work begun during the last round on a
code to deter the importation of counterfeit trademarked merchan-
dise.
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5. Investment Issues
Existing GATT disciplines cover trade but not investment
distortions. Yet, the effect of government investment policies
can be as distorting as any other non-tariff barrier. We,
therefore, seek agreement on specific disciplines over government
investment policies and measures.
-- A maximal approach would call for inclusion of the
broad investment issue on the new round agenda, with a view
toward developing an agreement or separate code with binding
provisions governing national treatment, right of establishment,
transparency of regulations, notification, and dispute settlement.
A number of countries have suggested that the U.S. is
being too ambitious by suggesting that all investment measures be
brought under GATT discipline. Some have argued that we should
limit our proposal to.trade-related investment measures only,
such as trade distorting export performance requirements and
local content requirements.
-- We are continuing an intensive effort to build support
for the inclusion of the broad investment issue in the new round,
but given the opposition to date, this is an issue that may not
be resolved until the ministerial meeting in September.
6. Trade in Services
The U.S. has strongly advocated the development of
international disciplines over the fastest growing segment of our
domestic economy and export trade, that of trade in services.
Our major trading partners joined us in calling for the inclusion
of services in the new round at both the OECD Ministerial and the
Tokyo Economic Summit. In addition, a number of developing
countries have expressed a willingness to include services as
part of the new round. However, a core group of developing
countries, led by Brazil and India, are acting as though they are
determined that services will not be included in the negotiations.
-- We want to use the new round to establish, under the
auspices of the GATT, a framework of principles and procedures,
that will provide for the maximum opportunity for international
transactions in services trade. These include national treatment,
transparency of regulations, notification, role of monopolies,
and dispute settlement.
Consensus on the broad principles should enable us to
identify concrete applications through the development of sector-
specific understandings. Work currently underway on the services
SFCRFT.
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CF(;RFT
portion of the U.S.-Israeli Free Trade Agreement may serve as a
useful model for the multilateral exercise.
7. Trade in High Technology Products
-- High technology is an increasingly vital component of
American production. We have decided that separate negotiations
on a "high technology code" are not the best nor the broadest
approach to address the wide-range of trade challenges facing
high technology industries. We have changed only our approach,
not our objectives.
-- We will factor in high technology considerations, and
the industrial targetting strategies they often encourage, as we
negotiate in such areas as dispute settlement, government procure-
ment, standards, subsidies, intellectual property protection, and
tariffs.
8. Worker Rights
-- Just as high technology considerations are important to
many areas of the negotiations, so too are worker rights. We
should ensure that trade expansion is not an end in itself, but
that it benefits all workers in all countries.
-- In opposing an amendment to make denial of "internation-
ally recognized worker rights" an "unreasonable" practice* in
Section 301 cases, the Administration has stated that worker
rights questions are better pursued in the new round. Unless we
make a credible effort in the GATT, it will be difficult to
forestall legislative initiatives on the Hill.
-- We have told our trading partners that worker rights
should be considered in the new round in some form. While we
have not yet proposed any particular negotiating approach, an
appropriate start would be to examine worker rights in light of
GATT articles and the overall objectives of the GATT. So far, no
other country has supported our effort, as they believe worker
rights is beyond the scope of the GATT.
9. Market Access
-- An essential part of the negotiations is to substantially
reduce barriers, both tariff and non-tariff, to our access to
foreign markets. Competitive American firms need better access
to foreign markets in order to take advantage of the lower value
of the dollar and increase export sales.
SECRET
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SECRET
-- Our private sector advisors have already begun to
identify a number of areas where foreign tariffs remain a signif-
icant barrier to trade -- in such diverse areas as carpeting,
ferrous and non-ferrous metals, furniture, chemicals, paper, tele-
communications, and agriculture. we will similarly have to
reduce some of our own tariffs.
Another area where tariff negotiations are necessary is
to get commitments from developing countries to "bind" their
tariffs under GATT rules so that they are not free to increase
them without justification.
-- With regard to non-tariff barriers, we seek total
elimination of GATT illegal quantitative restrictions, without
concessions by other trading partners. We also seek the pro-
gressive phase-out of quantitative restrictions maintained under
GATT rules. This includes the U.S. Section 22 waiver on agricul-
tural products and the MFA. In addition, we seek to reduce the
trade-distorting effects of other non-tariff barriers.
10. Strengthening the GATT as an Institution
-- An important area of the negotiations will be to develop
ways to improve the functioning of the GATT system and to streng-
then the GATT as an institution that is viable, credible and
responsive to the changing conditions of international trade and
the trading community.
-- Specifically, we seek:
o some specific improvements in the procedures of
the dispute settlement process to ensure that countries have
every opportunity to resolve their differences effectively and in
a timely manner. It makes little sense to improve the trading
rules without also improving the enforcement mechanism.
0 other improvements in the functioning of the
system, including greater ministerial involvement, improved and
strengthened notification and surveillance requirements, and an
enhanced "steering" mechanism to guide GATT operations.
SECRET
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MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL
FROM: President's Strike Force on Trade
SUBJECT: Strike Force Recommendations
JUN ! 16
The Strike Force unanimously approved the recommendations summarized
below. Background papers based on the detailed issue papers
approved by the Strike Force are attached.
Taiwan Insurance
In order to get Taiwan to provide U.S. insurers with national
treatment, the U.S.G. should initiate special consultations with
Taiwan under the mantle of the GSP process. Such consultations were
requested and agreed to by Taiwan at the April GSP review. The
Strike Force recommends continuing on the current course and
reviewing progress at the end of the third quarter.
Trade-Related Performance Requirements (TPRs)
In order to develop an international discipline on TPRs in the new
round, the U.S.G. should make our trade and investment partners
aware of our concerns, with a view towards bringing these countries
to the negotiating table
The U.S.G. should initiate actions to discourage the further
proliferation of TPRs including: closely monitoring actions of our
trading partners and making clear our intention to take action as
appropriate against new requirements, including use of section 307
of the 1984 Trade and Tariff Act.
Washington agencies should develop plans by September for the
elimination of existing TPRs. Priority countries for such plans
include: Brazil, Mexico, Taiwan, and India.
The Administration should issue a policy statement on TPRs that
makes clear its opposition to TPRs and its strategies of seeking
international discipline in the new round and bilateral actions.
The Strike Force has prepared a draft statement. (Attached)
Latin American Pharmaceutical/Intellectual Property Rights Issues
For Brazil, which has the most egregious pharmaceutical practices,
the U.S.G. should initiate consultations on all intellectual
property rights issues including pharmaceuticals as well as
consultations on other pharmaceutical issues. The Strike Force
should review these consultations at the beginning of October, 1986.
For Argentina, Chile, Mexico, and Venezuela, the U.S.G. should,
where the pharmaceutical problems involve intellectual property
rights, initiate consultations on overall intellectual property
rights issues. The U.S.G. should also initiate consultations on
other pharmaceutical concerns in conjunction with the intellectual
property rights consultations.
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JUN 91
BARRIERS TO INSURANCE IN TAIWAN
ISSUE
Taiwan severely restricts access to its insurance market and denies
national treatment for U.S. insurers.
BACKGROUND
The 1978 U.S.-Taiwan trade agreement stated that U.S. insurance
firms were to be permitted to open branch offices in Taiwan. Their
operations were to be restricted to insuring only U.S. citizens or
100% U.S.-owned companies.
A USTR side letter to the 1978 agreement made clear that U.S.
acceptance of the agreement was based on the expectation that Taiwan
would relax these restrictions and move toward national treatment
for U.S. insurance companies.
After much prodding by the AIT and the AMCHAM, the Ministry of
Finance finally implemented the 1978 commitment on insurance in
1981. Because of the severe restrictions placed on U.S. insurers
under the 1978 agreement, however, U.S. companies with branches in
Taiwan report underwriting little business.
The U.S. reopened the insurance issue in 1985. During the October
1985 economic consultation between AIT and CCNAA, the U.S. sought:
o as a first step, permission for U.S. insurers to issue marne and
property insurance in 1985 for joint venture in which foreigners
have equity participation, and
Although the U.S. made significant progress on the first objective,
CCNAA provided no timetable for further liberalization.
Preliminary GSP consultations were held in December 1985. During
general review follow-up consultations April 30, Taiwan agreed to a
U.S. request to hold special bilateral consultations on insurance in
July 1986 so as to reach a specific understanding by December 1986
on steps to achieve full national treatment for U.S. insurance
companies in Taiwan.
OPTIONS CONSIDERED
In addition to the GSP review and special consultations, the Strike
Force considered the possibility of a 301 action. While a 301
action could be justified, it was felt that consultations would
probably be effective and should be tried before taking stronger
action.
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? c I IAL JUN 9 06
TRADE RELATED PERFORMANCE REQUIREMENTS
ISSUE
Trade Related Performance Requirements (TPRS) are a serious and
growing problem. They are especially prevalent in NICs and
developing countries but also exist in developed countries. TPRS,
e.g. to export, to transfer technology or to source locally, whether
imposed as a condition for the right to invest or as a precondition
for receiving certain subsidies or benefits, can distort
international trade and investment flows.
BACKGROUND
Currently there is no binding international agreement or discipline
with respect to TPRs with the limited exception of a finding under
GATT article 23 that local content requirements are a violation.
Reducing or eliminating TPRS is complicated by the presence of
existing U.S. investment made in conformity with such requirements.
Abrupt withdrawal of such requirements may simply open the way to
foreign competition not encumbered by the need to meet an export or
local content requirement.
The basic strategy of the United States has been to seek a
multilateral discipline on investment including TPRs in the New
Round. Both to support this strategy and to deal directly with TPRs
the United States has available mechanisms to act on a bilateral
basis to prevent the further proliferation of TPRs and to eliminate
existing ones.
The tools available include: bilateral consultations, GSP review,
section 307 of the Trade Act of 1984, section 301 and GATT.
Section 307 gives the USTR authority to consult and impose import
restrictions on countries with export performance requirements. In
order to act, the USTR must show that there is an adverse impact on
the economic interests of the United States. Section 301 can also
be used against performance requirements. The GATT action could be
useful for dealing with local content but is its effectiveness is
limited by the wide range of exceptions provided to LDCs.
The U.S.G. is on record in the 1983 Investment Policy Statement as
opposing TPRS, but has taken few actions against TPRs. The recent
decision to use section 307 against Taiwan was the first use of that
authority and one of the few times the U.S. has taken an aggressive
position on TPRs.
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May 30, 1996
POLICY STATEMENT ON TRADE-RELATED PERFORMANCE REQUIREMENTS
In 19$3,-the President released a major statement on
international investment. That statement enunciated the
fundamental premise of U.S. government policy -- that foreign
investment flows which respond to private market forces will
lead to more efficient international production, and thereby
benefit both home and host countries.
It also highlighted three other important points. First, the
statement highlighted the concern with the increasing use of
governmental measures to distort or impede international
investment flows. Secondly, it underlined U.S. Government
support for the concept of national treatment which extends to
foreign investors treatment at least as favorable as that
extended to domestic investors. And finally, the statement
specified the multilateral and bilateral steps the
Administration nas taken, and will take, to help liberalize
international investment flows.
Measures which distort or impede investment flows include
trade-related performance requirements, fiscal or financial
incentives, and discriminatory treatment of foreign
investment. The 1983 statement provides that the United States
reserves the right to take action against countries which use
performance requirements and similar policies.
Examples of trade-related performance requirements are local
content requirements and export performance requirements.
Local content requirements artificially displace imports, much
as import quotas do. Export performance requirements like
export subsidies can artificially increase the supply of
products in world markets, often at the expense of home country
production and exports. The effects of these performance
requirements are direct and identifiable: these requirements
distort trade and investment flows. These harmful effects
result whether the requirements are placed on foreign investors
from the United States or third countries.
The United States' objectives are to prevent the further spread
of these requirements, and to seek their reversal. The primary
United States strategy is to establish multilateral discipline
for such requirements as well as address other investment
issues, through the upcoming trade round negotiations.
The impact of trade-related performance requirements on trade
is identical to the impact of practices which are already
explicitly covered by international trade rules. Accordingly,
the disciplines which emerge should be consistent with the
treatment the international trade rules give to the practices
they mirror.
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-2-
In addition to this multilateral approach, the United States is
also proceeding on a bilateral basis. One element of the
United States' bilateral strategy is to discourage the further
proliferation of trade-related performance requirements. The
United States, through its embassies and contacts with private
business, will monitor carefully the policies of other
countries to determine if new or expanded trade-related
performance requirements are proposed.
A second element of the United States' bilateral strategy is
directed at reducing and/or eliminating existing trade-related
performance requirements. The United States has been
discussing trade-related performance requirements with
countries having such requirements, including in the context of
the GSP review.
The Overseas Private Investment Corporation (OPIC) has recently
taken steps to support of the U.S. government's bilateral
approach to trade-related performance requirements. OPIC is
tightening the Corporations Policy guidelines with respect to
performance requirements imposed on OPIC assisted U.S.
investment.
To deal specifically with export performance requirements, the
United States has availaole, in addition to other trade policy
instruments, section 307 of the Trade and Tariff Act of 1984.
Under that provision, when the USTR, with interagency advice,
concludes that a country's EPRs adversely affect the economic
interests of the United States, it may undertake consultations
or negotiations aimed at reducing or eliminating the EPRs. In
addition, the USTR may impose import restrictions on products
and services of a country having EPRs which adversely affect
the United States. Restrictions would not be placed on goods
or services of U.S. foreign investments made prior to the 1984
Act.
We intend to use section 307 authority and other tools as
appropriate in pursuing our objectives with respect to
trade-related performance requirements.
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June 9, 1986
LATIN AMERICAN PHARMACEUTICALS/ INTELLECTUAL PROPERTY RIGHTS
The Strike Force originally considered these issues separately,
but the final recommendations treat them as one issue.
Latin American Pharmaceuticals
ISSUE
Unfair and restrictive trade and investment practices by
Argentina, Brazil, Chile, Colombia, Mexico, and Venezuela impair
the interests of the U.S. pharmaceuticals industry. U.S.
pharmaceutical companies claim that these practices undermine the
viability of their investments and erode possibilities for future
growth.
BACKGROUND
The United States has a world trade surplus in pharmaceuticals.
Annual exports to the six Latin American countries were
approximately $200 million. Brazil is the largest Latin American
market, and has the largest potential for future U.S.
pharmaceutical sales. Foreign investors, the majority of whom
are U.S. firms, provide the overwhelming majority of
pharmaceutical production in the six countries.
The potential for U.S. exports and investments is increasingly
diminished because of unfair and restrictive trade and investment
practices, including lack of intellectual property rights (IPR)
protection, price controls, import restrictions and market
reserve policies. Of these, lack of IPR protection is of the
greatest concern to U.S. industry.
The six Latin American governments in question have long shared
common misgivings about the role of multinational investors;" both
the public and private sectors view MNCs as exploitative and any
USG trade action regarding this issue is likely to engender a
strong public backlash. Brazil, which is one of the most
egregious offenders, has been unresponsive to USG requests for
greater equity in its pharmaceutical policy. Because Brazil is
the largest pharmaceutical market in Latin America, action taken
against it could have the greatest impact on regional efforts
regarding pharmaceuticals.
OPTIONS CONSIDERED
The Strike Force agreed that a coordinated strategy covering all
six Latin American countries would be more effective than dealing
with each nation independently. Brazil is the critical country;
it is the largest market and the country of greatest concern.
Three options were identified for Brazil; these approaches could
be taken in concert with consultations with the other five
countries.
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CONFIDEN11AL
1. Initiate Bilateral Consultations on Pharmaceuticals with
Brazil;
2. Self-initiate a Section 301 action against Brazil; or
3. Initiate consultations with Brazil on Pharmaceuticals and
take separate action on Brazil intellectual property rights.
The Strike Force recommended Option Number 3 for two reasons: 1)
the primary problem in the pharmaceutical area is lack of
adequate patent protection; and 2) addressing the pharmaceutical
issue through action on IPR would avoid the likely adverse
political reaction to strong U.S. action on pharmaceuticals.
For the other five countries the Strike Force decided that it
would be more effective and less confrontational to initiate
consultations on all intellectual property rights issues, not
just those relating to pharmaceuticals. This would make the
recommendations for the other five countries consistent with
those for Brazil.
Brazil: Intellectual Property Rights
ISSUE
Inadequate protection of intellectual property rights threatens
U.S. competitiveness in Brazil.
BACKGROUND
U.S. industry seeks: explicit copyright protection for computer
software; increased GOB enforcement of its IPR laws; patent
protection for pharmaceuticals and their processes; unencumbered
protection for trademarks; and a less arbitrary patent licensing
system.
While we have not yet held special consultations with Brazil on
our IPR concerns, since 1983 the USG has consistently raised IPR
issues during Sub Group and Investment Working Group
consultations with the GOB to no avail. In addition, IPR is an
ongoing item in our GSP consultations with Brazil. U.S.
officials have visited Brazil to explain the IPR protection
requirements of the GSP renewal program.
OPTIONS CONSIDERED
The Strike Force considered three basic options:
o Consultations
o Section 305
o Section 301
Because of the lack of a past history of specific IPR
consultations and the current situation with the informatics 301,
the Strike Force decided it was premature to consider a 301
action at this time.
nruir 1nrilT1A1
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