*EPF406 03/02/00
Text: Excerpt from WTO Chapter in Trade Report to Congress
(Administration cites benefits from participation) (3020)

The Office of the U.S. Trade Representative (USTR) says that five years' experience in the World Trade Organization (WTO) supports continued U.S. participation in it.

In the Clinton administration's 1999 annual report to Congress on trade, released Marched 2, the 126-page chapter on the WTO describes the benefits from U.S. participation as well as some frustrations.

This five-year review has special importance. Under U.S. law, every five years WTO opponents in Congress can employ special procedures to force a vote on U.S. withdrawal from the WTO. Such a vote is expected in two or three months.

Under the auspices of the Geneva-based institution, the 135-plus member countries negotiate new global trade rules and try to resolve trade disputes.

The overview of the chapter says that the WTO has increased market access for U.S. goods and services abroad and has promoted protection of U.S. copyrights, patents and other intellectual property.

It praises the WTO dispute-settlement mechanism for bringing more certainty in resolution of disputes than was ever possible under the preceding General Agreement on Tariffs and Trade (GATT) system.

It also credits the WTO with a number of general achievements, including promoting global stability.

Rebutting critics, the overview says the WTO has not eroded U.S. national sovereignty, prevented the United States from setting high environmental and health standards or hurt developing countries.

"Taken as a whole, the multilateral trading system has promoted the rule of law, created new opportunities for worldwide economic growth, and created opportunities for Americans," it says.

Following are terms and abbreviations used in the text:

-- WTO: World Trade Organization.

-- GATT: General Agreement on Tariffs and Trade.

Following is the overview excerpted from Chapter 2 of the report, which is called "The President's 1999 Annual Report on the Trade Agreements Program":

(begin text)

Overview

The World Trade Organization is the result of fifty years of American leadership and commitment to an open world trading system, governed by the rule of law. This work dates back to the foundation of the General Agreement on Tariffs and Trade, or GATT, in 1948: an event reflecting the personal experiences of Presidents Roosevelt and Truman and their European counterparts in the Great Depression and World War II. These leaders had seen the Smoot-Hawley Act in America and similar protectionist policies overseas deepen the Great Depression and contribute to the political upheavals of the 1930s. Fifteen years later, they realized that by reopening world markets they could promote growth and raise living standards. In tandem with a strong and confident security policy, as open markets gave nations greater stakes in stability and prosperity beyond their borders, they believed a fragile peace would strengthen.

The work they began has now entered into its sixth decade, and the faith they placed in open markets and the rule of law has been abundantly vindicated. Through eight Rounds of negotiations, and as 112 new Members joined the 23 founders of the GATT, we abandoned the closed markets of the Depression era and helped to foster a fifty-year economic boom, during which the world economy grew six-fold and per capita income tripled. The United States, as the world's largest exporter and importer, benefits perhaps most of all: the efficiency of our industries and the high living standards of our families reflect both the gains we receive from open markets abroad, and the benefits of our own open-market policies at home.

The creation of the World Trade Organization on January 1, 1995, was the next step in the evolution of the multilateral trading system since the GATT's founding. The WTO was established as part of the results of the Uruguay Round, the last set of trade negotiations conducted under the auspices of the GATT. The Uruguay Round was completed with President Clinton's leadership at the end of 1993.

Extension of the GATT to the WTO was part of the President's broader overall strategy to strengthen the American economy, to help create higher-wage jobs and to raise living standards. The record shows how successful this strategy has been: we are now celebrating the longest economic expansion in American history, with 14.4 million new jobs since the WTO entered into force in 1995.

Congress debated and then approved the results of the negotiations in the Uruguay Round Agreements Act (URAA), which was signed into law on December 8, 1994. This Act required a series of annual reports on the operation of the WTO, culminating in a review after the fifth year. The five-year review contained in this chapter confirms how vital U.S. participation in the global trading system is to America's long-term economic and strategic interests, continued prosperity and strengthening the rule of law around the world. This chapter describes the WTO's operations in 1999 and its activities and accomplishments since its creation in 1995.

While work remains -- both to create new economic opportunities through trade liberalization and to improve the WTO itself -- the WTO is the continuation of 50 years of successful trade policy. It is fundamentally important to the remarkable record of growth and job creation America has built in the past five years. Continued U.S. participation and leadership in the WTO is essential to safeguard U.S. interests in the future.

The WTO is a crucial vehicle for maximizing the advantages from, and managing our interests in, a global economy. To ensure that Americans receive fair treatment in the global economy, the United States has negotiated a framework of clear, transparent rules that: prohibit discrimination against American products; safeguard Americans against unfair trade; and afford commercial predictability. As the world's largest exporter and importer, we need such a system more than any other country.

Consider the alternative -- no one would suffer more than America's workers, businesses and farm families in a world of closed markets, abusive trade practices, and the rising international tensions trade conflicts can cause in difficult times.

Thus, over the past fifty years, through eight negotiating Rounds, Americans have led in opening markets and developing the rules of today's WTO. And the past five years since the creation of the WTO have clearly demonstrated its benefits. American exports have risen by well over $200 billion [$200,000 million], contributing to the economic growth we have enjoyed and expanding high-skill, high-wage job opportunities.

Key WTO Accomplishments in the Past Five Years Include:

-- Market Access: The Uruguay Round negotiations cut tariffs substantially, by a full third in the manufacturing sector.

It offered agricultural exporters opportunities through the first enforceable commitments to reduce barriers and limit the use of export subsidies. U.S. services providers, from accounting and other professional services to finance, telecommunications and others, gained real export opportunities for the first time in the history of the trading system. New entrants into the global marketplace, particularly small and medium-sized enterprises, also benefit from these new market openings and innovations.

-- Intellectual Property Rights Protection: In the 21st century, economies will rely on innovation and ingenuity to promote economic development and investment -- both human and capital. This is why WTO Member governments agreed to a far-ranging set of rules to protect and enforce intellectual property rights, including copyrights, patents and trademarks. To ensure that innovation and technology continue to serve as engines of growth in rich and poor countries alike, the WTO provides strong protection and a system of rules that applies to all.

-- Dispute Settlement: The WTO created a set of procedures that can settle trade disputes promptly, eliminating many of the shortcomings of the earlier GATT system where the process could be prolonged indefinitely. Improvements to the system are still warranted, notably with respect to the transparency of the dispute procedures. Since the WTO's creation in 1995 the United States has filed more complaints -- 49 to date -- than any other WTO Member, and we are involved as a third party in a number of other cases. Our overall record of success is very strong. The United States has prevailed in 23 of the 25 complaints acted upon so far, either by successful settlement or panel victory. These favorable rulings and settlements have involved an array of sectors within manufacturing, agriculture, services, and intellectual property.

-- Expansion of the Rule of Law: In the past five years, the 50 year-old trading system has been transformed from a limited set of rules and disciplines that applied to the United States and a few of our trading partners, to a system with specific rules applicable in full to all Members. Thus the WTO eliminates the potential for "free riders" on the benefits of an open trading system.

-- Creation of a Dynamic Forum for Trade Liberalization: The WTO is a system responsive to rapid changes in the 21st century world economy. After its creation in 1995, the WTO first set in motion and then realized agreements in financial services, basic telecommunications services and information technology. These opened new markets and produced gains larger in scope than the results of the Uruguay Round. The WTO has laid the groundwork for further advances by setting a built-in agenda to continue to liberalize and reform areas like agriculture and services, and initiating further work on electronic commerce and other emerging trade issues.

-- High Technology and Telecommunications: The WTO has kept the trading system at the cutting edge of technological development, benefiting both business and consumers -- whether in electronic commerce, or telecommunications goods and services.

According to the FCC [Federal Communications Commission], rates paid by U.S. consumers for international service have declined significantly since the Agreement on Basic Telecommunications came into effect.

From 1996 to 1998, the average price of an international long distance call dropped from 74 cents per minute to 55 cents per minute. On highly competitive routes, such as the U.S.-UK [United Kingdom] route, prices fell even more dramatically, to as low as 10 cents per minute. Although aggregate data for 1999 are not yet available, all indications are that the trend toward lower rates has continued and that the current average price is well below 55 cents per minute.

-- Global Membership: Growing in membership from 119 in 1995 to 135 in 1999, with another 30 applicants seeking to negotiate entry, the WTO is becoming more universal. The fall of the Berlin Wall brought new urgency to integrate former command economies into the trading system. Despite much more stringent requirements for membership than were used in the GATT, acceptance of WTO rules has become an integral part of a country's successful strategy for growth and development -- making WTO membership a key element in the reformist policies of newly emerging market economies in Central and Eastern Europe, and of countries in Asia and in the Middle East. Consistent with the Administration's initiatives for Africa, an important new dimension is that many more African nations now participate meaningfully in the system.

-- Force for Global Economic Stability: The WTO has also strengthened the world's ability to address economic crises. During the financial crisis of 1997 and 1998, for example, the respect WTO members showed for open market commitments helped to prevent a cycle of protection and retaliation similar to that of the Depression era, ensuring affected countries the access to markets they needed for recovery, and minimizing damage to American farmers and manufacturing exporters.

-- Greater Openness and Accountability: In its first five years, the WTO has taken steps to ensure greater transparency in its operations, by making a majority of its documents available to the public, by creating a user-friendly Internet website, and by reaching out to the non-governmental community (through symposia and other means) to solicit their views. All WTO Ministerial meetings held thus far -- in Singapore, Geneva and Seattle -- have included participation by non-governmental organizations (NGOs).

These initial steps lay the foundation for further enhancing the openness and accountability of the WTO, which remains a critical U.S. objective, including in particular for WTO dispute settlement.

As these points indicate, the WTO -- including the 50 plus years of the trading system it represents -- has become an important institution for managing our interests in the global economy. Other institutions, such as the World Bank, International Monetary Fund and International Labor Organization, as well as domestic policies also play an important role in addressing the variety of issues arising from globalization. As the challenges of globalization have increased in all facets of economic activity, the WTO and its system of rules have become much more vital for securing, managing and promoting America's interests in the world economy. That makes it imperative for the United States to exercise leadership and vision to strengthen and improve the WTO and to utilize its provisions to open markets and safeguard America's trade interests and economic future in the 21st century.

As trade has become more important to the U.S. domestic economy and in our relations with other countries, it is only natural that the WTO should be subject to greater scrutiny. In 1970, trade (exports plus imports) was valued at 13 percent of U.S. GDP [gross domestic product]; in 1999 it exceeded 30 percent of GDP. While the WTO can respond by doing a better job in explaining its practices and procedures to the public, and by reforming procedures outmoded in this era of rapid communication, it is also not surprising that a new organization such as the WTO encounters some misconceptions.

Contrary to the criticisms that have been made:

-- The WTO has not eroded the sovereign right of the United States to pass its own laws: The United States benefits by having a set of rules to hold other countries accountable for their trade actions. But neither the WTO nor its dispute settlement panels have any power to compel the United States to change its laws and regulations. Only the United States can decide how it will respond to WTO dispute settlement reports; and only the Congress can change U.S. law. In the relatively few cases where the United States has defended one of its statutes or regulations and has not prevailed, we have responded in a manner that did not infringe upon U.S. sovereignty, or alter any statute.

-- The WTO has not limited the ability of the United States to set its own high environment and health standards: The WTO agreements explicitly recognize the right of all WTO Members to establish the levels of environment, health, safety and consumer protection they deem appropriate, even when such levels of protection are higher than those provided by international standards. No WTO panel has ever declared that a U.S. environmental or health or safety statute is inconsistent with a WTO agreement. Generally, all the WTO's rules require is that authorities opt for a less trade-restrictive regulation when they can, and avoid discriminating by imposing a higher standard for foreign products than for domestic products.

-- The WTO has not relegated U.S. interests to a bloated international Secretariat of faceless bureaucrats: The WTO is a "member-driven" organization. WTO Members like the United States take responsibility for monitoring compliance with the Agreements and setting the course for the Organization. The WTO is staffed by a Secretariat of international civil servants headed by a Director-General.

Unlike many other institutions, the Secretariat does not operate with a high degree of independence, and serves at the direction of the membership. The WTO is not a specialized UN [United Nations] agency, reflecting the strong views of its Members that it should not be included in the UN structure. And like the earlier GATT, the WTO takes decisions by consensus, despite the fact that there are highly limited provisions for voting in certain instances.

-- The WTO has not hindered the development prospects of poorer countries: The WTO's system of rules helps countries to move from failed inward-looking policies of import substitution and protectionism to policies based on openness, competition and outward-oriented growth. The former policies perpetuated poverty and inequality, and indirectly abetted anti-democratic forces. With the WTO, trade has become a key part of the solution to long-term structural problems resulting from decades of mismanagement. The record is clear: developing nations that have adopted an outward orientation and abided by the rules-based system have been most successful.

Much work lies ahead, of course. We intend to work at the WTO to further open markets to American goods and services; to enforce the commitments our trading partners have made; reform the WTO to improve transparency and access to civil society; and to ensure that it contributes to our work to promote environmental protection and internationally recognized core labor standards worldwide.

Much of this work will be complex and difficult. WTO Members were, for example, unable to launch a new Round of trade negotiations in 1999, reflecting the fact that these issues are complex and often lead to negotiating deadlock.

But after five years, the record of the WTO is one of success. American workers and companies depend on open markets around the world; American living standards, especially for the poorest, depend on our own open market policies. The WTO is our strongest guarantee that these policies will remain in place. The United States is the world's largest exporter -- which in turn accounts for 11.7 million American jobs. The institution and its rules provide the best possible foundation for a world which is open, responsive to the rule of law, and able to offer new opportunities and higher living standards to its people.

The record of the past fifty years should give us a great deal of confidence. Taken as a whole, the multilateral trading system has promoted the rule of law, created new opportunities for worldwide economic growth, and created opportunities for Americans. This amply justifies the decision Congress took five years ago to support creation of the WTO as a successor to the GATT. It should remind us how significant will be the rewards of success as we take up the challenges of the new century.

(end text)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: usinfo.state.gov)
NNNN