WTO Issues Trade Policy Review of U.S.
In its ninth Trade Policy Review1 of the U.S., the World Trade Organization states that in light of economic uncertainty prevalent in early 2008, U.S. welfare would best be promoted by exploiting the adjustment capacity of the U.S. economy and continuing to reduce barriers to market access and other distorting measures, including those that result from high levels of assistance in agriculture and energy.
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Among other things, the WTO provides its assessment of the U.S. economic environment and trade developments since its last review in 2006.
WTO's Assessment of the U.S. Economic Environment Since 2006
After a prolonged period of expansion, the short-run growth prospects of the U.S. economy deteriorated appreciably from late 2007. In late 2007, gross domestic product (GDP) growth slowed considerably, reflecting the negative effects of the housing downturn and credit turmoil. Although inflation remained relatively subdued, an upward tendency became perceptible in late 2007, mainly a consequence of higher oil and food prices.
During the period under review, both U.S. imports and exports continued to expand, on average, faster than GDP. As a share of GDP, the U.S. current account deficit fell from just over 6% in 2005 and 2006 to some 5.3% in 2007, but still represents a savings-investment gap.
Trade Developments Since Last Review
Since its last review, the U.S. has had the following trade-related developments (partial list):
FTAs. In early 2008, the U.S. had free trade agreements (FTAs) with 14 countries; FTAs with another six countries had been completed but were not yet in force.
TPA. Trade promotion authority, which the Administration views as an important tool for achieving U.S. trade objectives, expired on July 1, 2007.
Tariffs. The simple average applied Most-Favored-Nation (MFN) tariff was 4.8% in 2007, and the applied MFN rate for agriculture (WTO definition) was 8.9%. Around 2% of all lines are subject to tariff quotas; high out-of-quota tariffs are one of the main forms of import protection for certain agricultural products.
Subsidies. In its latest notification to the WTO, covering fiscal years 2003 and 2004, the U.S. lists around 430 programs providing subsidies, of which 42 at the federal level and the rest at the sub-federal level. Agriculture and energy are by far the largest recipients of notified federal support.
Supply chain security. Stating that security considerations have continued to drive significant changes relating to customs procedures, the WTO notes that the SAFE Port Act of 2006 codified and expanded existing cargo and supply-chain security programs, and established additional filing requirements for importers.
AD/CV duties. Antidumping (AD) measures remain a key trade policy instrument for the U.S. At the end of 2007, the U.S. maintained some 232 AD measures, affecting imports from 39 trading partners. At the end of 2007, the U.S. maintained no safeguard measures, but 31 countervailing (CV) orders were in place.
Byrd Amendment. The Continued Dumping and Subsidy Offset Act of 2000 (the Byrd Amendment) was repealed in 2005, but AD and CV duties assessed before October 2007 continue to be distributed to U.S. producers who supported the petition for investigation.
WTO rulings. The U.S. has made progress in implementing several WTO rulings calling for changes to U.S. legislation, but rulings relating to intellectual property rights and AD duties have not yet been fully implemented.
Fruit/vegetable imports. A new approval process for first-time imports of fruits and vegetables subject to designated phytosanitary measures became effective in August 2007. The new process is expected to accelerate import approval times, which can be as long as three years.
Foreign trade income. In May 2006, the U.S. repealed the "grandfathering" provisions that allowed U.S. firms to exclude certain "foreign trade" income from their taxable income for certain transactions, after the WTO had found them to be prohibited subsidies.
1All WTO members are reviewed under the Trade Policy Review Mechanism, with the frequency of each country's review varying according to its share of world trade.
WTO press release with link to the U.S.' Review and U.S. report to the WTO (dated 06/09/08 - 06/11/08) available at http://www.wto.org/english/tratop_e/tpr_e/tp300_e.htm
Concluding remarks by Chairperson of U.S. Trade Policy Review (dated 06/09/08 - 06/11/08) available at http://www.wto.org/english/tratop_e/tpr_e/tp300_crc_e.htm
BP Note
The European Commission (EC) states that the European Union (EU) has used the WTO review of U.S. trade policy to raise concerns about rising levels of protectionism in the U.S., in particular: (1) mounting restrictive import requirements for security purposes that are imposing considerable burdens on EU exporters; and (2) the fact that the U.S. has not opted for a more reform-oriented agricultural policy in the new 2008 Farm Bill.
According to another EC press release, a number of important trade issues were to be addressed at the U.S.-EU Summit held in Brdo, Slovenia on June 10, 2008.
EC press release on using the U.S. Trade Policy Review (dated 06/11/08) available at http://ec.europa.eu/trade/issues/newround/doha_da/pr110608_en.htm)
EC press release on the U.S.-EU Summit (dated 06/10/08) available at http://ec.europa.eu/trade/issues/bilateral/countries/usa/pr100608_en.htm)