Volume 22, No. 16 -- April 22, 2002

BXA JUMPS ON HOMELAND SECURITY BANDWAGON WITH NEW NAME

Security is the hottest buzzword in Washington.  From homeland and border security to airport and cyber security, it's where the White House pays attention and Congress puts its money.  So the Bureau of Export Administration (BXA) April 18 joined the team, changing its name to the Bureau of Industry and Security (BIS).  The new name won't mean any change in the agency's mission, organization or responsibilities, said a BXA, eh, BIS spokesman.

"The new name better reflects the breadth of the Bureau's activities in the spheres of national, homeland, economic and cyber security," said BXS Under Security Kenneth Juster.  BIX is "not just licensing and enforcement, but also defense trade advocacy and critical infrastructure protection," he said.

Following Sept. 11, BIA was assigned the lead role in Commerce's homeland security activities.  The agency's 2003 budget request asked for more fund to handle these extra tasks, including the job of reviewing all sources of government information on individuals and companies (see WTTL, Feb. 11, page 1).   BAS already had responsibility for the Critical Infrastructure Assurance Office and for implementing the Chemical Weapons Convention Protocol.  "The new name will help the Bureau to communicate with and serve the American public at a time when both security and economic issues have never been more important," said a BIS statement. [Editor's note to proofreader: Update Spell Checker.]
 

MIDDLE EAST CONFLICT SPILLS OVER INTO WTO NEGOTIATIONS

The bitter Israeli-Arab conflict has reached into the World Trade Organization (WTO) where Israel and the U.S. have blocked the effort of Middle Eastern countries to give the Arab League observer status in Doha Round negotiations.  The dispute has delayed a WTO decision on how to treat some 26 other so-called intergovernmental organizations (IGOs), including the United Nations, the World Bank and the International Monetary Fund (IMF).

The disagreement could hamper Doha-mandated talks on the relationship between the WTO and multilateral environmental agreements, WTO officials warn.  This includes the UN Environment Program (UNEP) and the International Organization of Epizooties.  Other IGOs are active participants in talks on standards, HIV/ AIDs, world health, customs rules and food safety.

Aside from the Arab League's status, there is also a controversy over the role of the Inter-national Labor Organization (ILO), which is considered an IGO.  Since the Singapore Ministerial, the WTO has been split over its relationship with the ILO and the broader issue of the linkage of trade and labor.

The disagreement over IGO status also has delayed action on the role of more than two dozen countries that are in the process of acceding to the WTO.  Observer status in the negotiating groups provides limited, but in some cases, essential treatment to organizations or countries.  Observers can attend and participate in all meetings and make proposals, but they don't have a vote on any decisions.

For developing countries, IGOs can be very important because they may represent their collected interests or provide needed technical assistance.  For example, the Organization for African Unity (OAU) provides a united voice for African nations and the World Bank often funds WTO-related programs.  Arab countries reportedly are trying to use this fact as leverage to get developing countries to support the Arab League's observer designation.

In reaction to Israel and the U.S. blocking Arab League designation as an IGO observer at the Doha Ministerial Meeting and in negotiations, Egypt has blocked the designation of all IGOs.  A report on the controversy and proposals for resolving it will be presented to a meeting of the Doha Round's Trade Negotiations Committee (TNC) April 24.
 

INDIA BLOCKS WTO PROGRESS ON MARKET ACCESS TALKS

India, which nearly derailed the launching of the Doha Round at the WTO Ministerial in Qatar in November, has resumed its obstructionist role, blocking agreement on a negotiating plan and schedule for the WTO group addressing non-agriculture market access issues.  Unlike the negotiating committees on services, agriculture and rules, the market access group has been unable to establish a schedule for when countries will make proposals on how to deal with tariffs and non-tariff barriers or present market opening offers.

The services and agriculture talks aim to make major progress by March 2003.  A similar timetable was proposed by the chairman of the market access group, but it was rejected by India, Egypt, Kenya and South Africa, sources in Geneva report.  India, however, has been the main roadblock, one source said.

Negotiators in Geneva reportedly are baffled by India's opposition because it hasn't explained its objections to the schedule or offered an alternative one.  An informal meeting of WTO representatives April 17 failed to make progress on the dispute, and it will be the subject of a full Trade Negotiating Committee meeting April 24.  Many negotiators want the committees working on the various parts of the Doha agenda to agree by March 2003 on how to address the talks for the rest of the round.  Those proposals will then go to national capitals for political approval before the next WTO ministerial in Mexico in June or September of 2003.
 

CHANGE IN NME STATUS WILL OPEN RUSSIA TO CVD COMPLAINTS

If Commerce ends Russia's nonmarket economy (NME) status under the antidumping law, Russian exports to the U.S. could become subject for the first time to countervailing duty (CVD) complaints.  The CVD law doesn't apply to communist countries because all their trade is considered subsidized, and antidumping rules for NMEs usually are invoked when subsidies are involved .  Moscow apparently considers the benefits of losing the NME tag to outweigh the risk of CVD cases, said one attorney for Russian industry (see WTTL, April 1, page 2).

Since Russia isn't a WTO member, it will need to reach an accord with Washington to become eligible for an International Trade Commission (ITC) injury ruling in any CVD case.  Under the agreement, Moscow would have to promise to abide by WTO rules on Subsidies and Countervailing Measures (SCM).  The president then could designate it a "country under the agreement."  Such an accord is likely to face the same opposition as the proposed lifting of Russia's NME status.  Russia and the U.S. also will have to decide how to treat existing suspension agreements from past antidumping cases, according to Stanimir Alexandrov, counsel with the firm of Powell Goldstein.  Alexandrov noted that Russia claims it has stopped subsidizing its industries and therefore should not be subject to CVD complaints.

Attorneys representing industries that have filed antidumping complaints against Russian imports admit it will be difficult to mount a CVD case because of the opaqueness of Russian rules and business practices.  Government and business records may not be easily obtainable to support such complaints.  On the other hand, it also will make it hard for Russia to defend its practices in a CVD case, and its failure to produce these data would allow Commerce to make a "best-information-available" (BIA) determination, which usually favors complainants.
 

JUSTER GOING TO EUROPE TO PUSH FOR TOUGHER WASSENAAR RULES

Bureau of Industry and Security (BIS) Under Secretary Kenneth Juster intends to step up U.S. efforts to get the Wassenaar Arrangement to adopt a denial-consultation mechanism and to create a "catch-all" category of controls similar to the U.S. Enhanced Proliferation Control Initiative (EPCI).  Juster will lead an interagency delegation to Europe this spring to meet with high-level officials to get support for Washington's proposals, he told BIS' Update West conference in Pasadena, Calif., April 16.

While most European members of Wassenaar support such changes, Russia has blocked their approval.  Former officials from the Clinton administration now admit it was a mistake to allow Russia to join Wassenaar, where it has opposed several U.S. attempts to tighten controls (see WTTL, Dec. 10, page 1).  One ex-State official told WTTL that Moscow has failed to live up to the agreement it made to come into Wassenaar.  As a condition for membership, Russia was supposed to stop shipping weapons and nuclear products to Iran.

The U.S. wants "bilateral consultations prior to a proposed export in situations where one member already has denied a license for essentially an identical export," Juster explained.  Such procedures exist in other multilateral export control regimes and "are essential for preventing proliferators or terrorists from shopping' among various countries until they can find one that is willing to export sensitive items or technologies that others will not," he added.

Catch-all controls would allow Wassenaar members to require licenses based on the potential end use of a product, not just its identification on the Wassenaar Control List.  "Catch-all controls provide a legal basis for countries to license the export of items that may fall outside of control list parameters but that still would make a material contribution to proliferation activities or other activities of concern," Juster said.
 

EU FARM MINISTER TO PROPOSE REVISIONS IN COMMON AGRICULTURE POLICY

European Union (EU) Agriculture Commissioner Franz Fischler is expected to open the way to early changes in the EU's Common Agriculture Policy (CAP) with a set of proposals he may make at the June or July meeting of European farm ministers.  Revisions to the CAP will be essential to the position the EU takes in agriculture negotiations in the WTO Doha Round.  At the WTO ministerial in Qatar, EU officials said they could not commit to more liberalizing goals in the round than they did because the EU had not yet decided on what changes to make in the current CAP program which runs through 2005.

In addition to its importance in the WTO talks, the future direction of the CAP is a key element of EU negotiations with 10 Central and Eastern European nations that hope to join the Union in 2004.  In January, the European Commission (EC), the EU's executive branch, proposed a plan for extending the CAP to the 10 candidate countries.  The proposal, which EU ministers will discuss in June, would include a 10-year phase-in of direct payments to farmers and support for rural development.  This support, along with possible export subsidies, could be a major budget strain on the EU, creating another incentive for reforming the CAP.

The CAP's future needs to be decided in the next 12 months to meet the schedule of WTO talks on agriculture (see WTTL, April 1, page 4).  WTO negotiators hope to reach agreement by March 2003 on the "modalities" and targets for agriculture talks.  This schedule aims to have countries make their initial offers and commitments on cutting export subsidies, domestic supports and protection before the next WTO ministerial in Mexico in June or September of 2003.

The EU wants to shift all government support away from export subsides and toward direct payments, environmental support and rural development, according to Gerald Kiely of the EC delegation in Washington.  In the meantime, however, it continues to oppose U.S. demands for the total elimination of export subsidies.  One possible approach to breaking this deadlock may be to agree on the elimination of subsidies for specific crops rather than an across-the-board ban, says Assistant U.S. Trade Representative James Murphy.  He stressed, however, that the U.S. has not made this proposal and hasn't taken a position on it.

 * * * BRIEFS * * *

STEEL: Despite angry reaction to U.S. Section 201 steel tariffs, participating countries at OECD steel talks April 18-19 in Paris agreed to accelerate work on reducing global overcapacity and identifying trade-distorting practices (see WTTL, April 1, page 4).  They also agreed to "define more precisely" what countries mean when they say they will close capacity permanently.  Participants said they will create review process for periodically updating information on changes in capacity.  Separately, EU Commission formally released proposal for retaliating against U.S. 201 action, identifying U.S. exports that could be hit with tariffs ranging from 100% to 13%.  EU claims it could impose retaliation by June 18 under WTO safeguard rules without WTO panel ruling because 201 on flat-steel products wasn't based on rising imports.  "If EU goes down this path," warned Associate USTR Josette Shiner, "this will encourage other WTO members to ignore dispute-settlement process."  Article 14 of WTO safeguard agreement says dispute-settlement rules "shall apply" to all disagreements under its provisions.

CUSTOMS: Douglas Browning, 25-year veteran of Customs Service, named deputy commissioner April 11.  He succeeds Chuck Winwood who is retiring May 3.  Browning has been acting assistant commissioner for regulations and rulings and previously was assistant commissioner for international affairs.

ZIMBABWE: State April 17 issued order suspending all current licenses and approvals for Munitions List and defense service exports to Zimbabwe and instituting policy of denial for new applications.

BORDER SECURITY: Customs April 16 released rules on how importers can apply to participate in Customs-Trade Partnership Against Terrorism (C-TPAT), which could speed clearance through border crossings and reduce inspections.  To become eligible, importers will have to conduct self-assessment of supply-chain security, complete security questionnaire, develop security program that meets C-TPAT security recommendations and sign participation agreement.

ITC: Charles Edward Bullock named administrative law judge.  He was at EPA since 1996 and for 24 years before that at Federal Energy Regulation Commission.

TRADE FIGURES: Goods exports in February plunged 16% from February 2001 to $55.1 billion, Commerce reported April 17.  Goods imports slid 8% to $92 billion.  Services exports faired better, dipping 2% to $24 billion, while services imports were flat at $18.6 billion.

SOFTWOOD LUMBER: In filing with WTO April 15 in response to complaint from Canada, U.S. defended preliminary countervailing duty and antidumping decisions on softwood lumber from Canada.  On key issue of ITA's use of cross-border reference prices for benchmarking prices, dispute centers on which part of one sentence in WTO rules applies.  Article 14(d) of SCM says determination of "adequate remuneration" in provision of goods "shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision."  Canada told WTO panel key words are "in country of provision," making cross-border comparison illegal.  U.S. brief argued operative words are "in relation to prevailing conditions," meaning U.S. prices can be applied (see WTTL, March 25, page 3).

Copyright 2002 by Gilston Communications Group. Reproduction or retransmission in any form is prohibited. Washington Tariff & Trade Letter is published weekly 50 times a year.