Commissioned Papers (1983)

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5. - 18 - S. 2067 Amends Trade Act of 1974 to Respond to Foreign Practices Which Unfairly Discriminate Against U.S. Investment Abroad Committee on Finance Sen. Symms No action to date (identical bill - H.R. 4407, Schulze) Amends the 1974 Trade Act to expand the scope of Section 301 to include the practices of foreign governments which discriminate against U.S. foreign investments. S. 2071 The Reciprocal Trade Services and Investment Act of 1982 Committee on Finance Sen. Heinz Hearing held by the Finance Committee on March 24, 1982 on reciprocity legislation generally and S.2094 sponsored by Sen. Danforth specifically. (This bill is considered by trade commentators as the most protectionist of such proposals) Expands the 1974 Trade Act to include foreign restrictions against U.S. direct investment as an action which could trigger retaliatory action. Section 301 complaints could be initiated on grounds of non-reciprocal market access or failure by a foreign country to adhere to the principle of national treatment. Authorizes the President to: (1) enter into bilateral or multilateral negotiations to further the principles of “national treatment” or reciprocal market access with respect to goods, services and foreign direct investment; (2) adjust U.S. government procurement policies on the basis of reciprocal market access; (3) direct U.S. directors of the multilateral development banks to oppose aid to countries that violate the basic trade principles of national treatment and market access; (4) instructs federal regulatory agencies (including banking) to grant or deny applications taking into account the concept of reciprocity; (5) propose “mirror image” legislation to impose equivalent U.S. restrictions on the goods and services of countries which restrict the entry of U.S. exports. Permits either the House Ways and Means Committee, or the Senate Finance Committee, to file a resolution with the USTR requesting the President to initiate a 301 complaint procedure. Does not require the USTR to consult with a

- 19 - foreign government once a 301 investigation has begun. Current law now requires such consultations. §.2071 gives the President the option of not utilizing the consultative offices of the GATT or its dispute settlement mechanisns. Establishes a “fast track” domestic investigation procedure requiring USTR (should a case not be brought to the attention of the GATT) to make its recommendation to the President within one month. Within 120 days following an affirmative determination of a section 301 violation, the President would be required to make preliminary recommendation to Congress to secure U.S. rights under any trade agreement or to eliminate foreign restrictions on U.S. commerce. 7. §.2094 The Reciprocal Trade and Investment Act of 1982 Committee on Finance Sen. Danforth, et al (20 cosponsors)* Hearings held on March 24, 1982 Requires that the President submit to Congress an annual report on the practices of major trading countries that: (1) deny benefits to the U.S. in violation of trade agreements; (2) denies to the U.S. commercial opportunities (for products determined internationally competitive by USTR) substantially equivalent to those offered by the United States. Encourages the President to attempt to resolve trade disputes first through international dispute settlement procedures before undertaking a unilateral U.S. response. Authorizes the House Ways and Means Committee or Senate Finance Committee to file a resolution with USTR to enforce U.S. trade rights. Broadens the consultative relationship between the International Trade Commission (ITC) and USTR to include a ITC report on the foreign trade practice under investigation. Directs USTR to make recommendations to Congress within 180 days of a finding that Presidential action under Section 301 is necessary to enforce U.S. rights or to respond to an unfair foreign trade barrier. Directs the President to enter into bilateral or multilateral negotiations to eliminate restrictions on foreign direct investment. * Senators Dole, Glenn, Moynihan, Wallop, Symms, Mitchell, Grassley, Cohen, Pressler, Roth, Simpson, Boren, Inouye, Chiles, Andrews, Hollings, Riegle, Schmitt, D'Amato, Randolph |

8. ~ 20 - S. 2283 The High Technology Trade Negotiations Act of 1982 Committee on Finance Sen. Glenn No action to date Provides the President with negotiating authority to reduce barriers to trade in high technology goods and services. Authorizes the President to reduce tariffs on high technology products in exchange for equivalent concessions. Directs the Secretary of Commerce to monitor, evaluate and report to Congress on the barriers to international trade and investment in high technology goods and services. The report would include information on foreign practices regarding the organization, coordination and financing of joint R&D and market allocation and related government involvement, including tax and other incentives. Reciprocity Legislation in the House 1. H.R. 3037 The Import Relief Improvements Act of 1981 Committee on Ways and Means, Trade Subcommittee Rep. Rinaldo No action to date (Not a reciprocity bill, but protectionist because it seeks to limit Presidential discretion in import relief cases) Authorizes Congress to adopt and implement ITC recommendations regarding import relief -- should (a) the President reject the Commission's findings and recommendations or (b) take no action -~ by majority approval of a resolution in either House. In the event that either House passes a resolution disapproving of Presidentially authorized import relief measures, the ITC's recommendations for import relief become effective. H-R. 5158 Telecommunications Act of 1981 Committee on Energy and Commerce, Subcommittee on Telecommunications, Consumer Protection and Finance Rep. Wirth Hearing held on February 2, 1982 Amends the Communications Act of 1934. Section 234 of H.R. 5158 ("Equity in International Trade”) grants the Federal Communications Commission authority to regulate on a reciprocal basis the access of foreign suppliers into the U.S. market. .

3. -21- H.R. 5383 The Trade in Services Act of 1982 Committee on Foreign Affairs; Energy and Commerce, Judiciary, and Ways and Means Rep. Gibbons No action to date Establishes as a principal U.S. negotiating objective the reduction or elimination of barriers to U.S. “service sector trade in foreign markets, including the right of establishment and operation in such markets.” Amends and clarifies Section 301 providing that any interested person can file a petition with USTR requesting the President to initiate a 301 investigation. Includes sections regarding the ability of federal regulatory agencies to adjust procurement policies and entry into the U.S. market. These regulatory agencies "may impose such restrictions on the access of any foreign supplier to the United States market for such service sector as may be appropriate to promote fairness in international service sector trade.” HeR. 5514 Committee on Ways and Means Rep. Dingell No action to date Requires the President, following an affirmative determination that a foreign country is restricting or limiting the expansion of U.S. exports, with 60 days to impose reciprocal trade restrictions on that country's exports comparable to the non-tariff barriers adversely affecting and burdening U.S. exports. Requires the maintenance of such U.S. restrictions until the President determines that the foreign trade barriers are no longer in effect. H.R. 5519 Service Industries Development Act of 1982 Committees on Ways and Means, Foreign Affairs, and Energy and Commerce Rep. Florio et al. Establishes service sector issues as a major priority for U.S. trade negotiators. Creates a special service industries development program within the Department of Commerce. Amends section 301 to permit interested parties to file requests to initiate investigations. Grants to federal regulatory agencies authority to adjust procurement policies and market entry regarding foreign suppliers.

-22- Prior to making application to a federal agency, a prospective foreign supplier of services must obtain from the Secretary of Commerce an advisory opinion regarding the degree to which U.S. suppliers are given in the domestic market of the foreign Supplier. H. R. 5579 The High Technology Trade Act of 1982 Committees on Foreign Affairs, Ways and Means, Energy and Commerce, Judiciary Rep. Gibbons, et al. no action to date The purposes of the Act are to “obtain competitive opportunities for United States exports to and investments in other countries, that are substantially equivalent to the opportunities accorded to the exports and investments” of these foreign countries in the United States. Amends the Trade Act of 1974 for USTR to determine whether: (1) services from a foreign supplier to the U.S. benefit from government subsidies or are sold at unfair prices (a provision opposed by the Administration); (2) if a domestic U.S. service sector is injured, or threatened with injury, by a foreign service supplier benefiting from such subsidies or engaging in the sale of services at “less than fair value.” Requires that such subsidization or unfair pricing be considered “unjustifiable, unreasonable, or discriminatory” practices which burden or restrict U.S. commerce under Section 30l. Delegates broad authority to the President to impose duties, quotas, or other import restrictions on foreign suppliers of services to respond to unfair foreign trade practices. Expresses the sense of Congress that federal regulatory agencies consider the extent to which U.S. suppliers are accorded access to foreign markets in allowing access by foreign suppliers to the United States market. Establishes new High Technology Industry Advisory Committee, to work in consultation with the Secretary of Commerce and the USTR to analyze and report annually on foreign industrial policies. H.-R. 5596 The Trade and Investment Equity Act of 1982 Committee on Ways and Means Rep. Frenzel, et al. (32 cosponsors) No action to date Requires U.S. retaliation if the President determines that

-~23- certain foreign trade practices deny the United States trade and investment opportunities substantially equivalent to those offered by the U.S. In the event of such a determination, the President would have authority to: (1) adjust federal procurement policies on the basis of reciprocal or substantially equivalent opportunities offered U.S. firms in a particular foreign country and (2) propose “mirror image” legislation to impose equivalent restrictions against foreign roles in the U.S. Authorizes Presidential action under the 1977 Trade Act on an MFN or selective basis against, but not limited, to the products, services or investments of the foreign entity under investigation. Requires that prior to acting against unfair trade practices that the U.S. take into account its obligations under international trade agreements and where applicable first seek resolution of a dispute under GATT dispute settlement procedures. H.R. 5614 The Fair Trade with Japan Act Committee on Ways and Means Rep. Richmond No action to date Following a determination that the Japanese are discriminatory against U.S. products or that policies of the Japanese government impart to Japanese companies an unfair advantage in their domestic market, the President may restrict the importation of Japanese products according to specific formula. H.R. 5727 Amendment to the Trade Act Committee Rep. Gaydos No action to date Provides for a Presidential determination under section 126 of the 1974 Trade Act to determine whether a major industrial country has (1) failed to provide equivalent competitive opportunities for U.S. exports or; (2) violated a trade - agreement or denied the U.S. competitive opportunities in its market while securing, as the result of a trade agreement, trade concessions in the U.S. market. Authorizes the President to propose legislation terminating previously negotiated trade concessions or to impose import restrictions.

- 24 - Arguments Against Reciprocity Legislation 1. While the United States has consistently preserved in international agreements its right to take unilateral action to restrict imports, the modern history of U.S. trade negotiations favored a multilateral solution to the resolution of trade disputes. Reciprocity, as a legislative instrument, could seriously undermine the foundations of an already fragile trading System and possibly restrict export markets for U.S. goods and services. 2. Under the provisions of the GATT, foreign countries subject to unilateral trade restrictions by another country may retaliate by withdrawing trade concessions and restricting the exports of the country which acted unilaterally. 3. Reciprocity by definition implies selective retaliation and a departure from the principles of non-discrimination and Most-Favored-Nation treatment in international trade. (In the case of one imported product, it is often difficult to determine what quantity of products from one country resulted in injury to a domestic industry. ) 4. A sectoral or product oriented approach to reciprocity would be difficult to administer. Should the President decide on retaliation against a foreign trade practice, he would have to select specfic items within a product category. In addition, centers of production for many products can be transferred to

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-~ 25 = other countries and restricted goods could be composed of components from several countries, including those not subject to import restrictions. Reciprocity legislation would create a new avenue for domestic industries to seek import restraints against foreign competitors. Similarly, reciprocity injects a new concept into the administration of U.S. trade law. It would require extremely complex political determinations and economic evaluations to quantify the non-tariff barriers maintained by other countries against U.S. exports and foreign direct investment. Many of the reciprocity bills stipulate that U.S. retaliation against unfair foreign trade practices depends upon an affirmative determination under section 301 of the Trade Act of 1974. The historical record shows that U.S. presidents, from both political parties, have shown great reluctance to use section 301 authority (only one Presidential “recommendation” for retaliation in 26 cases). A number of the reciprocity bills call for U.S. negotiators to press for new bilateral and multilateral trade agreements to liberalize trade and reduce trade barriers in high technology, services and foreign investment. A senior U.S. trade official said such objectives may require a decade of multilateral negotiations.

-~ 26 - Arguments for Reciprocity Legislation l. As a result of trade negotiations in the 1970s, the U.S. substantially reduced tariff and non-tariff barriers. There are few trade concessions which the U.S. can offer in exchange for other countries reducing their trade barriers. The threat of restricted access to the U.S. market would compel foreign countries to negotiate seriously to reduce trade barriers. The objective is not to obtain special treatment for U.S. exports, but to obtain export opportunities substantially equivalent to those afforded foreign competitors in the U.S. market. Reciprocity legislation does not do violence to the principles of the GATT. The accepted rules of international trade, contained in the GATT do not address restrictions on foreign direct investment, trade in services, trade relations between Western states and the U.-S.-S.-R.- or the P.R.C. Proponents maintain that existing U.S. trade laws are inadequate to meet the competitive challenges posed by Japan and other countries which marshall national resources to achieve a commanding export share of foreign markets.

-27- 5. MFN principles are not sacrosanct. The EC and several of the MIN codes depart from MFN treatment. Service Industry Legislation in the 9/th Congress Within the Administration, and on Capitol Hill, there is a division of opinion regarding the relationship between reciprocity legislation and proposals to reduce foreign trade barriers to service sector exports. Those members of Congress, who in principle oppose reciprocity legislation favor passage of a separate bill specifically authorizing the President to begin an international negotiation on government policies which distort trade in services. The U.S. government has already compiled a comprehensive list of such barriers.* S. 1233 The Service Industries Development Act Committee on Commerce, Science and Transportation Sen. Inouye, et al. Hearings held on Oct. 20, 1981 Subcommittee on Business, Trade, and Tourism; Ordered favorably reported February 11, 1982; Placed on the Senate Legislative Calendar March 22, 1982; Senate Report No. 97-324. Establishes within the Department of Commerce a Service Industries Development Program to (1) promote competitiveness of U.S. service industries; (2) promote exports; (3) develop a data base on * U.S. Service Industries in World Markets, Department of Commerce, 1976 (update published in March 1980 by USTR); Current Developments in U.S. International Service Industries, Department of Commerce, International Services Division, 1980.

- 28 - service industries for the use of federal policy officials;* (4) examine the effects on service industries of regulatory, tax and antitrust policies; (5) document trade barriers to U.S. exports of services. H.-R. 1957 International Communications Reorganization Act of 1981 Committees on Government Operations, Foreign Affairs Rep. English, et al. Hearings held by several subcommittees, reported favorably by Government Operations on May 19, 1981 (Report No. 97-100 Part I); unfavorably by Foreign Affairs on July 14, 1981. Establishes within the Executive Branch a Committee on International Communication chaired by USTR. It would review and coordinate all policy regarding international communications including consultations with foreign authorities and multilateral agencies. All federal agencies with related responsibilities would be prohibited from acting without prior review by the Committee unless undertaken pursuant to specific rulemaking or adjudicatory procedures or authorized under the Communications Act of 1934. Other Trade Policy Issues in Legislative Format before the 9/th Congress (Trade Organization) S. 1493 Department of Commerce, Trade, and Technology Organization Act (a bill from the 96th Congress) Sen. Stevenson a Hearings but no legislative action The only one of six trade reorganization bills to highlight technology issues. Provided for a restructured Commerce Department to centralize the collection, analysis and development of trade and domestic policy regarding commercial and technological trends and issues. S. 970 International Trade and Investment Reorganization Act of 1981 Committee on Governmental Affairs Sen. Roth, et al. (Senators Heinz, Bentsen, Inouye, & Baucus) Hearings held June 4, 1981 * A recent study prepared for the Department of State concluded that insufficient and inadequately organized information on service industries handicapped U.S. policymakers.