After months of bureaucratic positioning within the Department of Foreign Affairs and International Trade (DFAIT) in Ottawa, officials received an exploratory mandate from the political level. The Canada Gazette notice requesting submissions on a possible free trade agreement with Costa Rica appeared March 11. Implying an urgency alien to DFAIT, submissions were requested "preferably" by March 31.
Coming in the midst of the Free Trade Area of the Americas negotiations, the bogged down EFTA FTA process, global initiatives to launch a new WTO round, and the recently initiated services and agriculture negotiations in Geneva, one has to wonder what the strategic purpose is behind a bilateral with Costa Rica.
In 1999, Canada imported Costa Rican goods valued at $176M. Exports to Costa Rica amounted to $56M. In the same year, Atlantic Canada exports were over $16M, principally newsprint ($14.6M) and frozen french fries ($1.3M). The region's newsprint exports have doubled since 1995. Bananas, unroasted coffee, and pineapple account for the bulk of the region's $10.6M of imports from Costa Rica.
The prospect of a bilateral agreement of this magnitude, therefore, does not seem credible unless the strategic purpose is to embrace all of Central America in due course. This might apply in view of the Memorandum on Trade and Investment between Canada and the Central American countries inked two years ago.
The Gazette notice identifies trade in goods, services, and investment, as well as rules of origin, competition policy, trade facilitation, environment, basic workers' rights, human rights, and other social concerns as potential negotiation elements. Some of these dimensions are reflected in both the NAFTA and Canada - Chile FTA. Proposals to incorporate core labour rights and other social concerns could represent a subtle maneuver vis-à-vis the WTO. It may be recalled that Costa Rica agreed to chair an informal (and short-lived) working group in Seattle to develop text on labour standards. The Costa Rican trade minister reported text to the Committee of the Whole on the final day. In addition, Costa Rica associated itself with the EU on investment and competition policy.
No mention is made of procurement, trade remedies, dispute settlement, intellectual property, or institutional arrangements, though it is difficult to envision a contemporary FTA that lacks such chapters. Costa Rica not only maintains prohibitive tariffs and SPS restrictions, it also suffers from inadequate enforcement of existing multilateral obligations. These factors will need to be adequately addressed during the negotiations.
In the event, Canada has an opportunity to extend duty free access to substantially all Costa Rican products, in keeping with the current discussions on confidence building measures in Geneva.
USTR has released the latest report on foreign barriers to trade, investment, and intellectual property. The report also sets out the trade policy agenda for the US over the course of 2000 (TPM January 14 issue). The annual litany of barriers to US trade often reads like a case of sour grapes: USTR cites the fact that Costa Rican law requires exclusive use of the metric system, but concedes that in practice Costa Rican officials do not challenge U.S. and European commercial and product standards. In Panama, "The judicial system can pose a problem for investors due to poorly trained personnel, huge case backlog, lack of independence and vulnerability to outside influence." Where's USAID when you really need it?
On the other hand, Hungary and Poland get cited but other countries, such as the Czech Republic and the three Baltic States do not warrant mention.
With a serious case of myopia, USTR seems to regard barriers in the People's Republic of China as the exclusive preserve of the central government. There is very little mention of the impact of decentralization of power and authority to the Chinese provinces over the last thirty years, including significant discretion in respect to foreign trade and investment. There is little doubt that genuine market access improvements in China will depend in large measure on the support of provincial authorities in many sectors. This -- perhaps more than any other single factor -- discounts the near term value of Chinese market access commitments.
Canadian barriers to US exports include the usual suspects: state trading, supply management, broadcasting, intellectual property, and investment issues. Unlike in its China survey, USTR does see barriers at the subnational level in Canada. While Quebec, Ontario, British Columbia, Alberta, PEI, and Newfoundland are named in repect to specific issues, all provinces are potentially targeted in several areas. In terms of coverage, the key issues cited are wine and spirits, insurance, engineering services, and procurement. USTR also puts down a marker against future provincial measures associated with e-commerce.
CANADA: Provincial Barriers
From US National Trade Estimate, March 2000, pp. 30 - 36
|Wine & Spirits
||PEI, Ontario, Alberta, Newfoundland, Quebec
A 22 March report from Brussels mentions that prior to the publication of the European Commission's 8th annual report on State Aids for the 1996-98 period, Competition Policy Commissioner Mario Monti met with members of the European Parliament's Economic and Monetary Affairs Committee. He told them that, despite the annual figure falling from EUR 106bn in the previous period to EUR 93bn (mainly as a result of the decline in aid in Italy and to the German Länder), the level of assistance was "still too high if the single market is to operate effectively".
Confirming the EC's new approach with Member States, he said state aids could only be justified in "exceptional" circumstances. While the bulk of assistance had gone towards manufacturing and indeed had increased in the cohesion countries (Greece, Ireland, Portugal and Spain), he said the intention in future was to reorient policy towards financing research and environmental measures.
Needless to say, Mr. Monti faces an enormous challenge in holding the line with Member States on this question. This position somehow must be squared with significant initiatives at the Union level related to tradable services, including e-commerce. This is possibly an early indication that the EU will be increasingly evasive on the issue of service sector disciplines on subsidization to be discussed in Geneva.
The USTR/Department of Commerce Subsidies Enforcement Report to Congress was tabled in February, and took note of the lapsing of provisional articles in the WTO Subsidies and Countervailing Measures Agreement. In part, the report states,
"…the Subsidies Committee could not reach any consensus on the grounds by which the application of Articles 6.1, 8 and 9 might be extended. The United States took the position that, irrespective of what actions might be considered or taken to address the variety of implementation concerns across WTO Agreements that various WTO Members had identified, the Article 31 issue had to be judged on its own merits - and the United States could not support vague or unreasonable proposals to expand the application of the green light provisions to include practices such as export subsidies. Other developed countries expressed similar views, whereas a handful of developing countries expressed doubts that there could be any basis acceptable to them to extend the application of Articles 6.1, 8 and 9. As a result, the Committee was unable to take a decision on this matter by the end of 1999, and the provisions automatically lapsed as of January 1, 2000, as stipulated by Article 31 of the Agreement.
Pursuant to the requirements of the URAA, USTR plans to submit by no later than June 30, 2000, a separate report to the Congress identifying the provisions of U.S. law that are affected by these developments."
"As set forth in section 251 of the URAA, the green light provisions of U.S. countervailing duty law - which make non-countervailable certain kinds of industrial research, regional development and environmental compliance subsidies that meet the criteria of Article 8 of the Agreement and the complementary sections of U.S. law - will no longer have effect as of July 1, 2000, unless new legislation is enacted before that date thereby altering that status."
According to senior officials at the EC, revival of Article 8 definitely would entail expanding non-actionability to cover developing country subsidies. The US and other developed countries are not disposed to accept such broadening, and therefore the prospects are poor for resolution in Geneva before the summer.
The struggle to secure Permanent Normal Trade Relations status for China will move to the floor of the US House of Representatives in a matter of weeks.
The House has scheduled a vote for the week of May 22 - 26. The announcement had been delayed while the White House lobbied to secure the necessary 218 votes to ensure passage. Apart from a zealous oversell of US benefits of access to China, the extraordinary energy expended to corral House votes reflects President Clinton's low credibility on trade policy issues.
As matters stand, it appears that the US Administration has 230 affirmative votes, giving it at best a 13-vote margin. Democratic defections are not out of the question, but the White House has been deploying a variety of inducements to hold the line.
Implementation oversight by Congress, as well as promises of establishing a China monitoring unit at USTR are design to quell concerns related to trade, environment, and labour.
The US Senate, where the bill is assured easy passage, will put it to a vote the first week of June. Reports suggest about 70 of the 100 Senators will back the bill.
The March 28, 2000 edition includes a notice for USTR, Trade Policy Staff Committee (TPSC), requesting written public comments on general U.S. negotiating objectives as well as country and item-specific export priorities for agriculture and services. The TPSC also seeks public comment on country-specific export priorities for tariffs and non-tariff measures for non-agricultural products. The comment period closes May 12, 2000.
This exercise is further to formulating U.S. positions and objectives for U.S. participation in the mandated WTO negotiations on agriculture and services and further negotiations on market access for non-agricultural products should consensus emerge among WTO Members to launch negotiations in this area. Although not part of the WTO mandated negotiations, USTR has received expressions of interest in further negotiations on non-agricultural market access, including tariffs and non-tariff measures for specific products and countries.
For agriculture, topics for negotiating objectives include reforms in each of the areas of market access, domestic support, export competition, and other rules and disciplines affecting trade in
agricultural products, including biotechnology.
For services, topics for negotiating objectives include removal or reduction of barriers to U.S. services exports under existing GATS disciplines; establishment of new GATS disciplines to ensure effective market access, e.g., proposed disciplines on domestic regulations on services, possibly addressing transparency and necessity; and clarification of sectoral definitions in the Agreement.
Services sectors under consideration in the negotiations include: (1) business services, including professional and related services (including legal, accounting, auditing and bookkeeping, taxation, medical, dental, veterinary, engineering, architectural, and urban planning services), computer and related services, research and development services, real estate services, rental and leasing services, and advertising and management services; (2) communication services (including telecommunications services, audiovisual services, postal services, and express delivery or "courier" services); (3) construction and related engineering services; (4) distribution services (including wholesale, retail, and franchising services); (5) educational and training services; (6) environmental services; (7) energy services; (8) financial services, including insurance and insurance-related services, banking and securities services; (9) health-related and social services; (10) tourism and travel-related services; (11) recreational, cultural and sporting services; and (12) transport services.
In seeking views on broader negotiations for non-agricultural market access, USTR is clearly signaling that the US will be pressing once again for an industrial barriers table in the context of a new round of negotiations.
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