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Increasing US protectionism or mere ‘warts’ in open regime?

by Chakravarthi Raghavan

Geneva, 14 Sep 2001 - The United States maintains one of the most open and transparent trade and investment regimes, although in a “few important” areas significant barriers to market access persists, the WTO secretariat has said in a report on the United States for the once-in-two-year trade policy review of the majors. The US policies were last reviewed in 1999.

The report lists, though viewing them as the secretariat has acknowledged it does in judging the trade policies of the US and EU, as “warts” in otherwise open trade regimes, the rise in government subsidies to the agri-food producers, the increase in anti-dumping actions and the rising share of this focussing on steel products, the significant barriers to foreign competition in areas like textiles and clothing, transport and other service sectors.

“The new Administration’s response to these policy challenges will be important to global trade and welfare,” the secretariat says.

President George W. Bush, who took office in January, has been describing himself as a “free trader”, pushing for the Free Trade Area of the Americas (and now with help from the IMF), and pushing the Mercosur to negotiate an agreement with the US.

However, in terms of practical actions, he has in fact been increasing several of the measures accentuating the significant barriers - including on agricultural aid, anti-dumping in the steel sector, and trying to promote ‘grey area’ agreements on steel (that is in fact taboo under the WTO). The ‘warts’ in the US and EC trade policy physiognomy are spreading, while in the name of meeting the threat of a global recession, both are attempting to launch a new round with new issues that would accentuate their neo-mercantile (rather than ‘free trade’) policies to open up foreign markets for their corporations - an overall posture that the WTO refuses to recognise.

In response to sharp media questions last year (in relation to the trade policy report on the EU) about the ‘white-washing’ of the US and EU trade policies and restrictions, the director of the secretariat division producing it, Mr. Clemens Boonekamp (SUNS #4710), had acknowledged a differing approach adopted by the secretariat in the assessment of trade policies of the EU and the US, and that of others, particularly the developing countries. The EU and the US have open systems, though there are warts and the secretariat reports point to them. But the EU member states and the US are critical to the functioning of the multilateral trading system (MTS) and the secretariat reports look in detail on how these countries serve the MTS. In the case of the smaller economies and developing countries, the emphasis is how the trade mechanism, the trade policy regime, can assist those countries in achieving sustainable development (and thus advocates more liberalisation).

Judged by the overview chapter of the secretariat on the US trade policy, this approach continues to guide the secretariat. The full secretariat report will be available only on Monday. As a counter to the way the embargoed trade policy reports that used to be made available in advance to the media but with governments of leading countries breaking the embargo and putting out their own viewpoints first, the WTO media office no longer provides the full reports in advance of the completion of the country’s trade policy review, though delegations get it in advance. The report on the US (both the secretariat’s and the government’s) would be available only on Monday, along with the Trade Policy Review Body chair’s conclusions.

However, in the overview chapter (obtained from other sources), the secretariat says that the barriers “directly affect global trade” as the US is both the world’s largest single economy and trader. Reducing such remaining barriers would be in line with traditional US support for liberalisation and pro-competitive policies, further increasing high efficiency of its economy and benefiting domestic consumers and tax-payers. It would also lessen “distortions” in global markets, frictions with trading partners and strengthen the multilateral trading system.

“These considerations are particularly poignant in the face of the present global economic downturn and possible protectionist pressures that might result.”

The overview of the secretariat notes that the US agri-food sector was the largest recipient of government outlays, with these tripling between 1997 and 2000, “exceeding the decline in the value of the agricultural output.”

In 2000, nearly $30 billion was made available in direct payments to farmers and ranchers, and as a result “direct payments amount to over one-half of net farm income.”

In addition, subsidised crop insurance programmes have been expanded, while assistance to non-agricultural sectors, notably fisheries, lumber and timber, aeronautics and ship-building, is provided mainly in the form of tax incentives.

In 1999 and 2000, US competition policy enforcement efforts led to imposition of record fines against international price-fixing cartels, and the US views the relationship between trade and competition policy as of increasing importance, “but questions whether the WTO is, at this time the appropriate institution in which to develop multilateral cooperation rules.”

In the area of IPRs, the American Investors Act of 1999 aims to reduce patent processing delays, while the Technology Transfer Commercialisation Act of 2000 includes provisions for a federal agency to grant licences for federally owned inventions only to licensees agreeing to manufacture substantially the licence-related products within the US.

At the same time new legislation to restructure and extend the scope of the compulsory licensing of the transmission and broadcasting of television through satellite was also introduced in 2000.

In the area of services and access conditions, the US is going beyond its WTO commitments in expanding access through investments. In financial services, while the US continues to maintain national treatment towards foreign banks, in other financial services sectors, domestic regulations may complicate foreign market access - with public interest and investor protection being given as the rationale.

In insurance, sub-federal regulation limits competition from suppliers based in other US States and a fortiori from abroad unless they establish a commercial presence in each State where they wish to conduct business.

The Maritime transport sector continues to rank among the most protected sectors of the US economy. In the air transport sector, where the US relies mainly on bilateral Open Skies Agreements to liberalise trade, the Overview acknowledges that such agreements however do not fully liberalise the markets they cover; in particular, foreign ownership and control of US carriers remain restricted and the provision of domestic air services is permitted only to US carriers.

In the case of professional services, the US Federal system reserves governance of professionals to individual states, and each has its own licencing regulations and licensing board to administer them.

The absence of a uniform national regulatory regime, and divergent market access conditions across States complicate inter-State supply and foreign market access. – SUNS4967

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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