United States Summary

Because the United States is one of the world's largest and most open trade regimes, its trade policies have a profound effect on the overall condition of international trade. While the US has been among the most progressive of trade liberalizers in the past fifty years with an average tariff rate hovering around 5%, barriers to trade persist in a number of important sectors--chiefly agriculture, steel and textiles--imposing burdens on US consumers and taxpayers, and trading partners abroad.

After a long period of expansion, the US has experienced relatively slow economic growth in recent years. Although this economic environment has quietly impinged on the progress of trade policy by stimulating demand for broader protection and government support, US market openness has largely maintained, and continues to be a primary engine for global growth.

Progress in Agricultural Reforms

The agricultural sector is far and away the largest recipient of US domestic support: direct payments contribute to one half of total US farm income. [1] The Bush administration's 2002 Farm Bill mandated a substantial increase in government aid to the farm sector, and consequently attracted broad criticism by the international trading community. The bill was viewed as a major setback for the progress of the Doha agenda, and called into question US commitments to the development goals of the Doha round. In August 2003, prior to the Cancun ministerial meeting, the US and the EU presented a draft framework for the liberalization of farm trade. Primarily viewed as a compromise between the two trade superpowers, the de-emphasis on export subsidies (commonly held as the most pressing issue in agricultural negotiations) as well as a compromised stance on special and differential treatment for developing countries, the proposal was met with consternation by many Doha agenda hopefuls. The limited reform embodied by the proposal has been credited as a primary cause of the breakdown in negotiations.

Since Cancun, the US has communicated intent to keep multilateral talks alive and progressive. In January 2004, USTR Robert Zoellick addressed a letter to all WTO trade ministers, outlines possible ways out of the present impasse. While the US has remained firm on its statement that it will not open its agricultural markets without mutual action by developing countries, the letter advocated for the elimination of all export subsidies. [2] This represented a major departure from the pre-Cancun EU-US joint text on agricultural reform, in which the US abandoned its aggressive pro-liberalization approach. Because export subsidies are aimed at aiding domestic performance in the world market, they have a particularly distorting affect on world market prices. The portion of US farm support invested in export subsidies is particularly low; it therefore is not surprising that the US has taken this seemingly dramatic stance. True progress in agricultural reforms, however, will require movement by the US in other areas of agricultural support, such as direct payments and special and differential treatment.

Rise in Bilateral and Regional Trade Agreements

While the US openly considers the multilateral trading system to be the core of its commitment in international trade relations, the recent slowdown in multilateral negotiations, especially since the breakdown of the talks in Cancun, has led the US to focus on bilateral and regional trade agreements. By some accounts, US leverage in such agreements creates a climate for "competitive liberalization" - as countries vie for access to preferential trade with the US, a broad-scale trend towards liberalization will develop - which could advance the overall interests of global trade. [3] However, regional agreements often draw negotiating resources away from the multilateral arena. In addition, it has the capacity to create vested interests which can complicate and impede future multilateral negotiations.

The most significant regional agreement is the Free Trade Area of the Americas (FTAA): if passed, the FTAA would be the world's largest free trade agreement, representing 800 million people and $13 trillion in combined GDP. In November 2003, a FTAA ministerial was held in Miami, which concluded in a weak agreement, stating that signatory countries would have the right to determine their own degree of commitment to the nine areas under negotiation. In addition to the FTAA, negotiations are under way to put into place the Central America Free Trade Agreement (CAFTA). Recently, the US has successfully completed bilateral agreements with Chile, Jordan, Singapore, Australia, and Morocco.

Antidumping and Recent Trade Disputes

The US holds that countervailing duties should be levied in addition to regular duties to offset the effects of foreign subsidies upon an export of merchandise to the US found to threaten or materially injure an American industry. Indeed, the US has been among the most active of nations in making use of antidumping and countervailing measures. Its antidumping practices have, however, been at the center of a number of recent trade disputes brought against the US.

The most recent case challenged safeguard measures (30% import tariffs) for steel imports enacted by the US in March 2002; in May 2003, the Dispute Settlement Panel ruled that the tariffs violate WTO rules. After the EU threatened to impose $2.2 billion in retaliatory tariffs on the US (strategically tailored against production in electorally important states) the Bush administration agreed to end US tariffs on foreign steel. More recently, the EU began the process for a new round of trade sanctions against the US, in retaliation to its Byrd Amendment, which mandates the disbursement of portions of anti-dumping duties levied on their foreign competitors to US firms. In January 2003, the WTO Appellate Body ruled that the US had until December 2003 to bring the amendment into compliance with WTO rules. The EU is presently seeking authorization for its retaliatory duties for this matter. The EU has also appealed to the WTO to challenge US methods of damage calculations for anti-dumping duties, specifically a practice called "zeroing." "Zeroing" involves calculating average dumping margins by stating negative dumping margins as zero instead of the actual negative amounts. The EU, which used zeroing before losing a WTO case over imports of Indian bed linen, claims that as a result of this methodology, the US calculates an amount of dumping in excess of the actual dumping practiced, and is seeking the establishment of a panel to investigate the WTO compatibility of this practice.

Tariff Liberalization beyond the Built-in Agenda

Many of the accords signed during the WTO's Uruguay Round (1986-1994) specify future dates for continuing review or negotiations of specific sectors or subject areas, including agriculture and dispute settlement understanding. The U.S. seeks to move beyond this built-in agenda and negotiate tariff liberalization in non-agricultural goods. It wants to remove tariff peaks, defined as duty rates of more than 15%, and disparities; provide recognition (credits) for autonomous liberalization initiatives; address non-tariff barriers; and bind tariffs at applied rates. In a recent bold move, the US proposed elimination of all tariffs on consumer and industrial goods by 2015.

In the service sector, the US will ask for more substantive commitments to expand the scope and depth of the General Agreement on Trade in Services (GATS). Its objectives include greater liberalization in a broad range of sectors; stronger discipline to ensure that trade in biotechnology products is transparent and predictable, as well as other rules that anticipate the development of future technologies. In addition, the US advocates full transparency in service transactions and government procurement, as well as nondiscrimination against particular modes of service delivery, such as through electronic commerce. The U.S. favors continuing the moratorium on e-commerce duties to allow this technology to grow unfettered.

Labor and Environment

The U.S. wants to expand the WTO's focus beyond the core issues. It seeks the establishment of a work program on trade issues that relate to labor standards and greater cooperation between the WTO and the International Labor Organization. The U.S. recommends pursuing trade liberalization initiatives with positive environmental externalities, such as the elimination of fishery subsidies that encourage over-fishing.

Offshoring and the future of US Trade Policy

Offshore outsourcing, or "offshoring," has recently emerged as a contentious topic for US trade policy. Set in a period of high unemployment and slow job creation in the US, the loss of jobs to lower-cost locations has the American public concerned. A bill passed by senate in January 2004 restricting the outsourcing of US government contracts overseas is representative of the potential for protectionist sentiment surrounding this issue. Such tendencies are liable to elevate tensions between the developed and developing world, and could be detrimental to the climate of the Doha Development round. While surely not the sole determinant of its successful and timely conclusion, offshoring joins agriculture as an issue area which particularly impedes the United States' capacity for leadership in the Doha round's progress. (See our page on offshoring.)

[1] WTO Trade Policy Review - United States 2004
[2] < a href="http://www.ictsd.org/ministerial/cancun/docs/Zoellick-letter.pdf" target="blank">Zoellick letter to trade ministers
[3] WTO Trade Policy Review - United States 2004

Last updated April 2004