*EPF312 06/16/2004
Fact Sheet: U.S.-Morocco Free Trade Agreement
(USTR office summarizes agreement signed June 15) (3200)

Following is a fact sheet summarizing key elements of the U.S.-Morocco Free Trade Agreement signed on June 15, as provided by the Office of the U.S. Trade Representative:

(begin fact sheet)

SUMMARY OF THE
U.S.-MOROCCO FREE TRADE AGREEMENT

Market Access for Goods

Morocco is an expanding economy strategically situated at the crossroads of Europe, the Middle East and Africa. More than 95 percent of two-way trade in consumer and industrial products will become duty-free immediately upon entry into force of the Agreement, with all remaining tariffs on traded products to be eliminated within nine years. This is the best market access package to date of any U.S. free trade agreement signed with a developing country.

Upon implementation of the Agreement, 98 percent of current U.S. non-agricultural (non-textile) imports from Morocco will be duty-free. This includes all products for which Morocco currently enjoys duty-free access under the Generalized System of Preferences (GSP) program.

Tariffs on the remaining two percent of U.S. imports from Morocco will be eliminated through equal annual cuts over a nine-year period. Among the products subject to this longer tariff phase-out are: sardines, rubber footwear, ceramic and porcelain products, metals, ball bearings and other machinery parts, and cathode ray tubes.

Morocco will provide immediate duty-free access to 92 percent of Moroccan non-agricultural, non-textile imports from the United States, including imports of many goods of significant commercial interest to the United States. For example, most U.S. exports of civil aircraft, capital intensive machinery, chemicals, construction, and medical equipment will enjoy immediate duty-free access upon entry into force of the agreement. And during the course of the FTA negotiations, Morocco agreed to become a participant in the WTO Agreement on the Expansion of Trade in Information Technology (ITA). As a new member, Morocco recently eliminated tariffs on a significant number of IT products.

For the remaining 8 percent of non-agricultural, non-textile imports from the United States, Morocco has made the following commitments:

-- Morocco will eliminate tariffs over a two-year period on certain mineral fuels, ferrous and non-ferrous metals, chemical and pharmaceutical products, rubber, motor vehicles and parts, and machinery.

-- Morocco will eliminate tariffs over a five-year period on certain forest products, household goods and appliances, building products, precious stones and metals, ferrous and non-ferrous metals, chemical and pharmaceutical products, rubber, motor vehicles and parts, recreational equipment, and machinery.

-- Morocco will eliminate tariffs over a nine-year period on certain fish, mineral fuels, cosmetics, fertilizers, motor vehicles and parts, footwear, leather goods, forest products, paper, building products, household goods and appliances, electric and non-electric machinery, ferrous and non-ferrous metals, and furniture.

In addition, Morocco has committed to eliminate tariffs on a small number of used goods (tires, machinery, and vehicles) over the course of ten years. The United States does not currently export any of these products to Morocco.

Market Access for Agriculture

As a result of the Agreement, U.S. farmers and ranchers will gain new tools to compete with Canada, the EU and others in Morocco's market. Our beef and poultry producers will get new access to a market that was formerly closed. TRQs for durum and common wheat could lead to five-fold increases in U.S. exports over recent levels. Almond exports could double under a new TRQ. Moroccan tariffs on sorghum, corn, soybeans, and corn and soybean products will be cut significantly or eliminated immediately. Morocco also will lift its duties immediately on cranberries, pistachios, pecans, whey products, processed poultry products, and pizza cheese. Tariffs on other products will be phased out in five years, including on walnuts, grapes, pears, and cherries.

Market Access for Services

The Agreement creates substantial market access opportunities for U.S. service providers, subject to very few exceptions. The Agreement uses the so-called "negative list" approach, meaning that all sectors are covered unless specifically excluded. Key service sectors that the Agreement opens to U.S. participation include:

Banking, Insurance, Securities and Other Financial Services: The Agreement generally will provide U.S. financial service suppliers with the right to establish wholly-owned subsidiaries or joint ventures in Morocco (foreign equity in insurance agency and brokerage limited to 51 percent). In addition, banks and insurance companies will have the right to establish branches (four-year phase-in required for most insurance branching rights).

Regarding cross-border rights (for example, supply through electronic means), the United States negotiated the ability for U.S.-based firms to supply key markets including reinsurance, reinsurance brokerage, and, subject to a two-year phase-in, marine, aviation and transport (MAT) insurance and brokerage. The Agreement will also allow U.S.-based firms to offer services cross-border to Moroccans in areas such as financial information and data processing, and financial advisory services.

Audiovisual Services: The Agreement requires national treatment [and MFN treatment] for audiovisual services supplied by U.S. firms, subject to a few narrow exceptions that should not have any significant impact on trade in this sector. The Agreement provides sufficient flexibility for Morocco to promote its cultural interests without taking a broad cultural exception.

Express Delivery: The Agreement provides important benefits to the express delivery industry, including a clear definition of express delivery services, commitments to provide MFN and national treatment, and provisions to facilitate customs clearance, which is essential to the efficient operation of express carriers.

Computer and Related Services: The Agreement ensures full market access and national treatment for computer and related services with no reservations. The negative list approach for application of services disciplines assures that new services in this rapidly evolving sector will be covered by the Agreement.

Engineering and Environmental Services: The Agreement provides protections for cross-border trade in engineering and environmental services, including a prohibition on the maintenance of local presence through representative offices or domicile in Morocco as a condition to supply such services.

Telecommunications: The FTA contains a full range of market access commitments on telecommunication services, consistent with the regulatory regimes of the U.S. and Morocco. Each government must ensure reasonable and non-discriminatory access to the telecom network, thereby preventing local firms from having preferential or "first right" of access to telecom networks. U.S. phone companies also gained the right to interconnect with former monopoly networks in Morocco at non-discriminatory, cost-based rates. U.S. firms will have the ability to lease circuits of Moroccan telecom networks on non-discriminatory terms and to re-sell telecom services of Moroccan suppliers to build a customer base. U.S. firms seeking to build a physical network in Morocco will have non-discriminatory access to key facilities, such as telephone switching facilities and submarine cable landing stations. In addition, the Agreement requires each government to maintain an independent regulator whose rulemaking will be transparent and subject to appeal.

E-commerce: The Agreement establishes high standards that will develop Morocco as a leader in the Middle East and North Africa in electronic commerce. Each government commits to non-discriminatory treatment of digital products and agrees not to impose customs duties on digital products transmitted electronically. For digital products delivered on hard media such as DVDs or CDs, customs duties will be based on the value of the media (e.g., the disc) and not on the value of the movie, music or software contained on the disc.

Market Access for Textiles

The Agreement requires elimination of tariffs for most textiles and apparel goods after 6 years, while some goods will be subject to immediate duty-free treatment. For 43 goods in the six-year basket, the Agreement provides for tariff-rate quotas (TRQs), allowing duty-free access for certain quantities of imports into both the U.S. and Morocco; the above-quota rate will gradually decrease until it is eliminated in year 6.

A textile or apparel good will generally be eligible for preferential tariff treatment under the Agreement only if all processing after fiber formation (e.g., yarn-spinning, fabric production, cutting, and assembly) takes place in the territory of one or both of the Parties. The Agreement provides for a temporary transitional Tariff Preference Level (TPL) for the first 10 years of the Agreement, to allow apparel made in either the United States or Morocco from non-originating yarns or fabric to be traded at the preferential tariff rate, in order to provide U.S. and Moroccan producers an opportunity to develop and expand business contacts. The TPL is set at 30,000,000 square meters equivalent (sme) for the first four years of the Agreement, and then declines by 14 percent per year over the remaining six years it is in effect. Yarns and fibers present in less than 7 percent by weight of a textile article are disregarded as de minimis, except in the case of elastometric yarn. Lastly, the Agreement contains a provision which permits the use of Sub-Saharan African cotton in the production of certain yarns and fabrics, without disqualifying those goods from preferential treatment, up to an annual level of 1 million kilograms.

The Agreement includes a special textile safeguard mechanism that permits a Party to re-instate duties for a limited period of time if imports from the other Party cause serious damage, or actual threat thereof, to domestic production. The special textile safeguard mechanism is available for a good until ten years after tariffs have been eliminated on that good.

The Agreement requires the Parties' customs authorities to cooperate in implementing the Agreement. The Agreement provides for exchanges of information and documents and provides each Party the right to conduct verifications, including through visits by Customs authorities, and deny entry or to deny preferences, as the case may be, if origin cannot be established.

Investment

The Agreement will improve the bilateral investment climate and provide important protections for investors, and is consistent with the investment objectives regarding investor-state dispute settlement in the Bipartisan Trade Promotion Authority Act of 2002 (TPA). The Agreement will provide a secure, predictable legal framework for U.S. investors operating in Morocco and provides a basic set of substantive protections that Moroccan investors in the United States currently enjoy under the U.S. legal system. All forms of investment are protected under the Agreement, including enterprises, debt, concessions, contracts and intellectual property. The Agreement guarantees U.S. investors in almost all circumstances treatment no less favorable than Moroccan investors or any other foreign investor, except in certain sectors that are specifically exempted. This so-called "negative list" approach is the most comprehensive way to protect U.S. investors in Morocco.

Among the rights afforded to U.S investors are due process protections and the right to receive a fair market value for an investment in the event of an expropriation. The Agreement removes certain restrictions and prohibits the imposition of other restrictions on U.S. investors, such as requirements to buy Moroccan rather than U.S. inputs for goods manufactured in Morocco.

These investor rights are backed by an effective, impartial procedure for dispute settlement that is fully transparent. Submissions to dispute tribunals and tribunal hearings will be open to the public, and interested parties will have the opportunity to submit their views.

Intellectual Property Rights (IPR)

The Agreement requires Morocco to provide for a high level of IPR protection, consistent with U.S. law, including state-of-the-art protections for trademarks and digital copyrights, as well as expanded protection for patents and product approval information. The Agreement requires the governments to complement these protections with tough penalties for piracy and counterfeiting, and to maintain procedures for seizure and destruction of counterfeit products and the equipment used to produce counterfeit products. The governments are also required to provide for statutory and actual damages for violations. Morocco will accede to certain WIPO Internet Treaties, extend the term of protection for copyrighted works, and maintain criminal penalties for circumvention of technology protection measures and for trade in counterfeit goods.

Trademarks: The Agreement requires Morocco to accede to the Trademark Law Treaty, ensures that all trademarks can be registered in Morocco, and ensures that licensees will no longer have to register their trademark licenses to assert their rights in a trademark. The Agreement also ensures an appropriate procedure for the settlement of domain name disputes, based on the principles established in the Uniform Domain-Name Dispute-Resolution Policy. This is important to prevent "cyber-squatting" of trademarked domain names. Each Party must provide full protection for trademarks and geographical indications, including protecting preexisting trademarks against infringement by later geographical indications.

Copyrights: The Agreement contains provisions designed to ensure that only authors and other copyright owners have the right the make their works available online. Copyright owners maintain rights to temporary copies of their works on computers, which is important in protecting music, videos, software and text from widespread unauthorized sharing via the Internet. The Agreement provides that copyrighted works and phonograms are protected for extended terms, consistent with international trends. And strong anti-circumvention provisions will help to limit tampering with technologies (like embedded codes on discs) that are designed to prevent piracy and unauthorized distribution over the Internet.

The FTA requires that governments only use legitimate computer software, thus setting a positive example for private users. The Agreement also provides for protection for encrypted program-carrying satellite signals as well as the programming carried by such signals, thus addressing satellite television piracy.

The Agreement requires limitations on liability for Internet Service Providers (ISPs), reflecting the balance struck in the U.S. Digital Millennium Copyright Act between legitimate ISP activity and the infringement of copyrights.

Patents & Product Approval Information: Under the Agreement, a patent term can be adjusted to compensate for unreasonable up-front administrative or regulatory delays in granting the original patent. The grounds for revoking a patent are limited to the same grounds required to originally refuse a patent, thus protecting against arbitrary revocation. The Agreement ensures protection for newly-developed biotech plants and animals. Information submitted to a government for the purpose of product approval will be protected for a period of 5 years for pharmaceuticals and 10 years for agricultural chemicals. In addition, the Agreement contains provisions designed to ensure that government marketing-approval agencies will not grant approval to products that infringe patents. The obligations concerning IPR do not affect the ability of either Party to take necessary measures to protect public health by promoting access to medicines for all, in particular concerning cases such as HIV/AIDS, tuberculosis, malaria, and other epidemics as well as circumstances of extreme urgency or national emergency.

IPR Enforcement: The Agreement requires streamlined procedural rules for bringing copyright and trademark claims and provides for effective remedies including statutory damages, expeditious ex parte searches to gather evidence and civil remedies to seize and destroy infringing goods. It requires criminal penalties for companies that make pirated copies from legitimate products. The Agreement also requires that IPR laws be enforced against traded goods to deter violators from using U.S. or Moroccan ports or free-trade zones to traffic in pirated products. Enforcement officials may act on their own authority in border and criminal IPR cases, including with respect to in-transit merchandise, without waiting for the filing of a formal complaint, thus providing more effective enforcement.

The Agreement mandates both statutory and actual damages for piracy and counterfeiting. This serves as a deterrent against piracy, and provides that monetary damages can be awarded even if actual economic harm (retail value, profits made by violators) cannot be determined.

Customs and Rules of Origin

The Agreement promotes transparency and more efficient customs operations in Morocco. The Agreement requires transparency and efficiency in customs administration, including publication of laws and regulations on the Internet and certain procedural guarantees. In addition, the governments have agreed to share information to combat illegal transshipment of goods. Strong but simple rules of origin will ensure that only U.S. and Moroccan goods benefit from the Agreement. Rules are designed to be easy to administer and are consistent with other U.S. free trade agreements in the region.

Government Procurement

Morocco is not a member of the WTO's Agreement on Government Procurement, so the Agreement establishes important obligations between the two countries, such as prohibiting discrimination by government purchasers between U.S. and Moroccan suppliers when making covered government purchases in excess of agreed monetary thresholds. The Agreement includes disciplines on the purchases of most Moroccan central government entities, as well on the purchases of the vast majority of Moroccan regional and municipal governments. U.S. suppliers will enjoy increased certainty and a more transparent procurement environment as a result of advance public notice of purchases and timely and effective bid review procedures. Each government has committed to maintaining criminal and other penalties for bribery in government procurement.

Labor

The Agreement fully meets the labor objectives set out by Congress in TPA and labor obligations are part of the core text of the Agreement. Both governments reaffirm their obligations as members of the International Labor Organization (ILO) and commit to strive to ensure that domestic laws provide for labor standards consistent with the internationally recognized labor principles of the ILO. The Agreement makes clear that it is inappropriate to weaken or reduce domestic labor protections to encourage trade and investment. Each government is required to effectively enforce its own domestic labor laws, and this obligation is enforceable through the Agreement's dispute settlement procedures. An Annex to the Labor Chapter sets out a labor cooperation mechanism, which includes a focus on eliminating the worst forms of child labor.

Environment

The Agreement fully meets the environmental objectives set out by Congress in TPA. Environmental obligations are part of the core text of the Agreement. Each government is required to effectively enforce its own domestic environmental laws, and this obligation is enforceable through the Agreement's dispute settlement procedures. Each government commits to establish high levels of environmental protection, and to not weaken or reduce environmental laws to attract trade and investment.

The Agreement promotes a comprehensive approach to environmental protection. Provisions that promote voluntary, market-based mechanisms to protect the environment complement procedural guarantees that ensure fair, equitable and transparent proceedings for the administration and enforcement of environmental laws.

As a complement to the Agreement, the governments will soon sign a Joint Statement on Environmental Cooperation and EPA has already begun to implement a new capacity-building project in Morocco.

Transparency and Commitments to Combat Bribery

This Agreement promotes high standards of transparency. Each government must publish its laws and regulations governing trade and investment, and beginning one year after the Agreement enters into force, Morocco will be required to publish proposed regulations in advance and provide an opportunity for public comment on them. In addition, the each government must apply fair procedures in administrative proceedings covering trade and investment matters directly affecting companies from the other country. To further improve the business environment, each government will prohibit bribery, including bribery of foreign officials, and establish appropriate criminal penalties to punish violators.

(end fact sheet)

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

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