From [email protected] Fri Jan  3 00:57:07 1997
Date: Thu, 16 May 1996 13:55:51 -0700 (PDT)
From: IATP <[email protected]>
To: Recipients of conference <[email protected]>
Subject: Trade News 5-16-96

TRADE NEWS
Produced by the Institute for Agriculture and Trade
Policy
May 16, 1996
Volume 5, Number 10
__________________________________________
WTO RULES AGAINST U.S.
TELECOM TALKS POSTPONED
PRESHIPMENT BODY READY
SAUDIS NEGOTIATE TO JOIN WTO
U.S. THREATENS CHINA SANCTIONS
EAST AFRICA TRADE BODY LAUNCHED
__________________________________________
WTO NEWS SUMMARY
__________________________________________

WTO RULES AGAINST U.S.

On April 29, the U.S. lost its final appeal in the first
major case brought before the World Trade Organization's
(WTO) Appellate Body, the Supreme Court of international
trade. A three judge panel ruled that regulations issued
under the U.S. Clean Air Act discriminated against
foreign oil refiners. The practical effect of the ruling
is that the U.S. Environmental Protection Agency (EPA)
will be forced to change its rules concerning the
environmental standards of imported gasoline or face
trade sanctions from the countries that filed the
complaint, Venezuela and Brazil.

The judges in the case -- from the Philippines, Japan
and New Zealand -- concluded that standards set by the
EPA constituted "unjustifiable discrimination" because
they set different rules for foreign producers than for
domestic refiners. They found that the rules were a
"disguised restriction on international trade."

In response to the ruling, acting U.S. trade
representative Charlene Barshefsky said that she was
"disappointed that the practical result of this case
remains unchanged," but "gratified" that the appellate
panel ruled for the U.S. on a number of technical
points. Administration officials noted that the panel
acknowledged that countries had the right to control air
pollution or take other steps to protect the environment
-- as long as the rules applied equally to domestic and
foreign companies.

The dispute that led to the decision began three years
ago, when Venezuela asked the U.S. for permission to
ship gasoline to the Northeast that produced more smog-
emitting chemicals than American refiners were permitted
to sell. Most of that gasoline came from the state-owned
Petroleos de Venezuela, which sells gasoline under the
Citgo name. Under the Clean Air Act, domestic producers
are required to meet standards based on the emissions of
gasoline they produced in 1990. But many foreign
producers did not keep equivalent baseline records of
their shipments at that time. So a different standard
was created: they only could ship gasoline that met an
average quality standard in the U.S. The foreign
companies argued, successfully, that the rule
effectively required them to meet a higher standard than
some American concerns were required to meet, putting
them at a competitive disadvantage.

David E. Sanger, "U.S. Defeated in Trade Case at World
Body," NEW YORK TIMES, April 30, 1996; "U.S.
Disappointed by WTO's Decision to Uphold Ruling on
Reformulated Gasoline," JOURNAL OF COMMERCE, May 1,
1996.

TELECOM TALKS POSTPONED

Last minute objections by the U.S. have forced the World
Trade Organization (WTO) to postpone the conclusion of a
53-nation negotiation on opening telecommunications
markets to international competition. American trade
negotiators complained that the liberalization offers
that other countries had made did not represent the
"critical mass" needed for a successful outcome, meaning
that not enough offers had been received to make it
worthwhile for the U.S. to open up its own
telecommunications sector.

In a statement issued in Washington, acting U.S. trade
representative Charlene Barshefsky said: "Over 40
percent of world telecom revenues and over 34 percent of
global international traffic are not covered by
acceptable offers. We will not enter an agreement on
these terms. While 10 countries, including Austria,
Germany, New Zealand, Britain and Sweden, have made
offers acceptable to the United States, a further 36
national offers -- including those of Australia,
Belgium, Mexico, Thailand and Venezuela -- need
improvement before the U.S. can make a deal." An
additional four countries have made no offer at all,
including Indonesia and South Africa.

Originally slated to conclude April 30, 1996,
negotiators now have until February 15, 1997 to finalize
a deal. "I see a strong will to save what has been
accomplished up to now," said WTO director general
Renato Ruggiero. "What is also important is that there
is a strong will to save the implementation date,"
referring to the January 1, 1998 deadline for all
members to open their telecommunications markets to
foreign competition.

Paul Lewis, "Telecom Talks at Trade Body Are Postponed
as U.S. Balks," NEW YORK TIMES, May 1, 1996; "WTO's
Basic Telecommunications Negotiations Result in
Substantial Offers: Re-examination in Early 1997," WORLD
TRADE ORGANIZATION PRESS RELEASE, May 1, 1996.

PRESHIPMENT BODY READY

On May 1, the World Trade Organization's (WTO) mechanism
for settling disputes between exporters and preshipment
inspection companies -- the Independent Entity (IE) --
became operational. The IE is constituted jointly by the
WTO, the International Chamber of Commerce (ICC), and
the International Federation of Inspection Agencies
(IFIA), and is administered by the WTO.

The IE was established in December 1995 by the WTO's
General Council pursuant to Article 4 of the WTO
Agreement on Preshipment Inspection, which calls for an
independent review procedure to resolve disputes between
an exporter and a preshipment inspection agency. The IE
became operational following confirmation from the ICC
and the IFIA that the necessary administrative and
procedural requirements had been fulfilled -- including
the translation and distribution to their affiliates and
contacts around the world of the relevant information
and forms as well as the List of Experts for Independent
Reviews.

IE's rules of procedure call for quick resolutions of
disputes. Once a complaint is filed, the IE appoints,
depending upon the agreement of the parties, either a
single independent trade expert or a three member panel,
selected from the List of Experts. The panel is required
to make a decision, by a majority vote, within eight
working days from the filing of the dispute.

"WTO Preshipment Inspection Body Becomes Operational,"
WORLD TRADE ORGANIZATION PRESS RELEASE, May 1, 1996.

SAUDIS NEGOTIATE TO JOIN WTO

Saudi Arabia has begun negotiations with the World Trade
Organization (WTO) to join the organization. The talks
are expected to last well into 1997 or beyond. The oil-
rich country, which ranks as the world's 26th largest
exporter, is seeking WTO membership mainly as a way to
expand markets for its manufactured exports, notably
petrochemicals. "It's a question of marketing our
petrochemicals, which face a lot of trade restrictions
in various European countries as well as in the U.S.,"
said a Saudi diplomat.

Saudi Arabia applied to join the GATT, the WTO's
predecessor, in July 1993 but these negotiations had
made little progress by the time the WTO was created in
January 1995. The country hopes to join the WTO as a
developing nation, which will give it more leeway in
applying some of the organization's free trade rules.
But trading partners have raised various concerns,
including access for farm goods, non-tariff barriers to
imports, and export subsidies. The U.S., which has put
Saudi Arabia on its "watch list" for violations of
intellectual property rights, is expected to press the
country to adopt tough legislation to enforce
copyrights, patents and trademarks.

Of the six members of the Gulf Cooperation Council,
Kuwait, Qatar, Bahrain and the United Arab Emirates are
already WTO members. Oman has not yet applied.

Frances Williams, "Saudis Start Talks on Joining the
WTO," FINANCIAL TIMES, May 3, 1996.

__________________________________________
REGIONAL AGREEMENTS/BILATERAL RELATIONS
__________________________________________

U.S. THREATENS CHINA SANCTIONS

On May 14, last-ditch trade talks between China and the
U.S. ended without the countries resolving their wide
differences over Chinese pirating of software, music and
movies, drawing the two nations closer to a trade war.
The U.S. accuses China of broad violations of agreements
reached last year on the piracy issue, while China
maintains that it has made significant progress in
protecting intellectual property rights.

The failure to reach agreement sets in motion a series
of punitive actions by the U.S.  The first step is
publication of a list of Chinese exports to the U.S.
totaling about $3 billion a year that could be subject
to 100 percent tariffs. By mid-June, when the sanctions
are to be imposed, the list is likely to have been
reduced to about $2 billion. China's massive textile
trade is the primary target of the Clinton
administration's trade sanctions list. The list also
prominently includes electronics and, to a lesser
extent, China's huge toy shipments to the U.S.

Chinese trade officials have vowed to retaliate with
sanctions of their own if U.S. sanctions are imposed.

Seth Faison, "U.S.-China Talks on Piracy Fail and a
Trade War Seems Closer," NEW YORK TIMES, May 15, 1996;
Helene Cooper and Kathy Chen, "China's Textiles to Top
U.S. Hit List of Sanctions Aimed at Curbing Piracy,"
WALL STREET JOURNAL, May 14, 1996.

EAST AFRICA TRADE BODY LAUNCHED

After a year of delays, the presidents of Kenya, Uganda
and Tanzania have launched a regional administrative
body to boost free trade and economic cooperation in
East Africa. The body, the East Africa Cooperation (EAC)
forum, is the successor to the East African Community,
which dissolved in 1977 amid political disputes among
the three countries. According to the permanent
secretary of Kenya's Ministry of Planning and National
Development Karega Mutahi, while government was the
primary player in the East African Community, in the EAC
it will be the private sector. Mutahi said the EAC will
seek to make the three East African currencies freely
convertible, to allow for open immigration among the
three countries, and to standardize customs
documentation and taxation. "There is complete unanimous
agreement among the heads of state for the enhancement
of free trade in the region," he said.

The three East African countries have a combined
population of more than 70 million and a combined gross
national product of about $40 billion.

Scott Straus, "Trade Body Relaunched in East Africa,"
JOURNAL OF COMMERCE, May 6, 1996.
__________________________________________
Trade News is produced by the Institute for Agriculture
and Trade Policy, Mark Ritchie, President. Editor: Orin
Kirshner. E-mail versions of Trade News are available
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