U.S. Seeks Sharply Lower Barriers to Trade in Goods, Services

USTR releases fact sheets ahead of WTO Hong Kong ministerial meeting

The Office of the U.S. Trade Representative (USTR) issued fact sheets December 9 on industrial tariffs and services trade issues, ahead of the December 13-18 World Trade Organization (WTO) ministerial meeting in Hong Kong.

Following are the USTR fact sheets:

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Facts on Global Reform

Office of the United States Trade Representative
Doha Development Agenda Policy Brief -- December 2005

Liberalizing Market Access for Manufactured Goods to Promote Growth

Non-Agricultural Market Access (NAMA) Negotiations in the WTO

Market access for manufactured goods (or in WTO parlance -- non-agricultural goods) reflects the terms and conditions for entry of goods that have been agreed by Members, including tariffs and non-tariff measures. Tariff commitments are set out in each Member's schedules of concessions on goods. The schedules represent commitments not to apply tariffs above the listed ceiling rates, known as “bound” rates, and would reflect any tariff reductions undertaken in the Round. Non-tariff measures are dealt with under specific WTO agreements or through bilateral or plurilateral commitments applicable to all Members that are also bound in schedules.

WTO Members are seeking to lower tariffs on manufactured goods through the negotiations launched at the Doha Ministerial Conference in November 2001 (commonly referred to as the Doha Development Agenda or DDA). For manufactured goods, the DDA calls for tariff-cutting negotiations on all manufactured goods with the aim “to reduce, or as appropriate, eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries.” The DDA also requires Members to take fully into account the special needs and interests of developing and least-developed countries.

U.S. Position

The United States is seeking an ambitious result in the NAMA negotiations that will obtain new real market access in developed and advanced developing markets by cutting high tariffs more than low tariffs. That means pushing for reductions into current applied tariff rates from ceiling rates or “bound” rates. Many developing countries have bound rates well in excess of their regularly applied rates. The United States is working towards setting the ground rules for the market access negotiations at Hong Kong. These modalities include: 1) the tariff reduction formula; 2) industry sectoral tariff-cutting initiatives; 3) addressing non-tariff barriers; and 4) flexibilities from tariff reductions for developing countries. The Doha Round is the best opportunity the United States will have for the next decade to cut global duties and eliminate barriers facing U.S. exports of manufactured goods.

Benefits to American Producers

In 2004, U.S. exports of manufactured goods rose to $710 billion -- almost 11 times the level of U.S. agricultural exports. This figure is up 13 percent from 2003 and up 81 percent from 1994. Further reductions in tariffs will help boost U.S. exports. Also, America’s tariffs are already among the lowest in the world, with a simple average of 3.0 percent, compared to a WTO-allowed average of 30 percent. An ambitious result in the NAMA negotiations will help to level the playing field for U.S. producers of manufactured goods.

Lower global tariffs would lower prices for many goods purchased by Americans. A study by the University of Michigan estimates that a one-third cut in global barriers to goods and services would mean $2,500 a year in increased income to the average American family of four. Further, a 50 percent cut in U.S. import taxes on everyday household items would save Americans $9 billion annually.

Benefits to Developing Countries

The economics are clear -- countries that engage in increased international trade and have more open economies have been shown to have higher growth rates than more closed economies. For example, the World Bank has reported that per capita real income grew three times faster in the 1990s for developing countries that lowered trade barriers (5.0 percent per year) than for developing countries that did not (1.4 percent per year).

Trade among developing countries is growing rapidly at 10 percent per year, double the growth rate of world trade. According to recent WTO data, developing countries’ share of world merchandise trade rose sharply in 2004 to 31 percent, the highest since 1950, and developing countries now contribute almost 20 percent of world exports. Furthermore, South-South trade now accounts for over 40 percent of developing country exports.

Over 70 percent of the duties paid by developing counties are paid to other developing countries, largely a function of high tariff rates. An ambitious NAMA result will help to lower barriers between both developed and developing countries, but also between developing countries, providing new opportunities for small traders, as well as larger traders, to find export niches and diversify trade.

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Facts on Global Reform

Office of the United States Trade Representative
Doha Development Agenda Policy Brief -- December 2005

U.S. Seeks to Expand Trade in Services

Services Negotiations in the WTO

The WTO’s General Agreement on Trade in Service (GATS) negotiations cover all forms of services trade and all services sectors. There are four major elements of the negotiations:

1. Market access: Members are negotiating to expand market access beyond existing GATS commitments, which cover roughly one-third of services sub-sectors. In addition, members are seeking to improve the quality of commitments by removing limitations and expanding coverage of modes of supply.

2. Domestic regulations: Negotiations focused on clarifying and enhancing existing provisions on licensing, qualifications, technical standards and transparency.

3. Rules: There is currently a discussion of proposals to develop as appropriate new disciplines on subsidies, procurement and emergency safeguards.

4. Development: Members are seeking to increase participation of developing countries in trade, particularly Least Developed Countries.

U.S. Position

Market access negotiations will require the greatest commitment of time and resources by members in order to fulfill the mandate of achieving progressive liberalization. In pursuit of this goal, WTO members must come forward with new and improved commitments that substantially increase sectoral coverage, provide truly meaningful market access and nondiscriminatory treatment, and provide effective coverage of those sectors of greatest importance, particularly to developing countries.

Currently, the United States covers more than 60 percent of services sectors while WTO members average 35 percent coverage.

The primary market access objective of the United States is to achieve meaningful liberalization across a broad range of service sectors, with a particular focus on key infrastructure services that will create meaningful new commercial opportunities and significantly expand global services trade. These key services include, but are not limited to, financial, telecommunications, computer, express delivery, distribution and energy services.

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Facts on Global Reform

Office of the United States Trade Representative
Doha Development Agenda Policy Brief -- December 2005

Opening Services Markets for Development

Services Critical to Economies in Developing World

The services sector is the largest and fastest growing sector in the world economy and generally accounts for more than 50 percent of global GDP [gross domestic product], but it accounts for only 20 percent of total world trade -- a reflection of the potential growth that could be unleashed by significant services liberalization in the Doha round. Between 1980 and 2004, world cross-border services trade grew from $363 billion to $1.8 trillion.

-- From 1990 to 2002, global foreign direct investment in services increased from $950 billion to over $4 trillion, with services accounting for 60 percent of the world’s stock in foreign direct investment. The stake of developing countries increased substantially during 1990-2002. During this time, outward investment from developing countries rose from just 1 percent to 10 percent of the global outward stock of foreign direct investment, while the share of inward foreign direct investment in services increased from 17 percent to 25 percent.

-- In developing countries, the service sector accounts for the largest share of total economic output. According to data published by the World Bank, the service sector accounted for 54 percent of middle-income economies' total GDP in 2000, and 44 percent of GDP for low-income countries. World Bank data also indicate that service sector GDP is the fastest-growing component of total GDP in both low- and middle-income economies. Moreover, service sector GDP in such economies is growing faster than the world average.

-- A substantial share of workers in developing economies is employed in the services sector. Between 1960 and 1999, the share of workers in Latin America and the Caribbean that were employed in service industries increased from 31 percent to over 50 percent. Likewise, more than half of workers in East Asia are employed in the services sector.

Benefits from Open Trade in Services

Removing barriers to global services trade will strengthen prospects for economic growth in the developing world, create jobs, diversify economies, and develop human capital in knowledge-based industries.

-- The World Bank estimates that nearly $900 billion in annual income gains would be realized by developing countries from elimination of their barriers to trade in services.

-- Services liberalization enhances the gains from liberalization in goods and agriculture by making the infrastructure of modern economies -- express delivery services, reliable communications, financial services, transportation services and others -- more widely available. In addition to creating jobs and supporting growth in the service sector, services trade supports manufacturing and agriculture by reducing production costs, enhancing productivity gains and facilitating product distribution.

-- For poor countries, services trade offers innovative opportunities to jump-start growth and development, and to tackle endemic poverty. Services promise poorer countries a chance to leap over the industrial revolution and directly enter the information revolution.

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Facts on Global Reform

Office of the United States Trade Representative
Doha Development Agenda Policy Brief -- December 2005

Temporary Entry of Service Suppliers (Mode 4)

Temporary Entry Issues in the WTO Negotiations

The General Agreement on Trade in Services (GATS) is the first and only set of multilateral rules governing international trade in services. Negotiated in the Uruguay Round, it was developed in response to the huge growth of the services economy over the past 30 years and the greater potential for trading services brought about by the communications revolution.

The agreement covers all internationally-traded services: for example, banking, telecommunications, tourism, professional services, etc. It also defines four ways (or “modes”) of trading services. “Mode 4” refers to individuals temporarily traveling from their own country to supply services in another (e.g. highly skilled professionals or consultants), officially “presence of natural persons.”

U.S. Position

The U.S. recognizes the importance of Mode 4 services, both to our domestic industry and to our trading partners. Commitments made by the United States on Mode 4 services are among the best among all Members. U.S. Mode 4 commitments apply to all 110 subsectors, and cover:

-- Services salespeople – with no numerical limitation
-- Intracorporate transferees – with no numerical limitation
-- Professionals and specialists – 65,000/year
-- Persons engaged in establishment – with no numerical limitation

It is important to note that the U.S. commitments for professionals and specialists do not contain restraints based on sector or commercial presence. The commitments provide for an initial period of stay up to 3 years, which in practice may be renewed to a maximum of 6 years.

Given the quality and breadth of our existing commitments, and the high level of market access provided elsewhere in our revised offer, in comparison with the relatively low level of commitments made by most other Members, we do not find it necessary to further improve our Mode 4 commitments at this time.

Transparency

The United States has taken note of concerns raised by some Members about ease of access to information concerning U.S. policies and procedures for the temporary entry and stay of foreign service suppliers. We are currently developing an Internet-based resource that will bring together in one place the relevant information on laws, regulations, policies and procedures affecting services supplied through Mode 4.

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