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USTR Issues Annual Reports on Foreign Trade Barriers, Including Technical and SPS Measures

Wednesday, April 02, 2014
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative issued April 1 its annual National Trade Estimate report, which describes significant foreign barriers to U.S. exports of goods and services, foreign direct investment and intellectual property rights protection as well as the actions being taken to address those barriers. USTR has also issued its fifth annual reports focusing specifically on technical barriers to trade, such as product standards and testing and certification requirements, and sanitary and phytosanitary barriers, which include measures used to ensure that foods and beverages are safe for consumers and to protect animals and plants from pests and diseases.

NTE. The NTE report covers the most important barriers, including those that may be consistent with international trade rules (e.g., very high tariffs), affecting U.S. exports in 58 countries, the European Union, Taiwan, Hong Kong and one regional body. This year’s report adds sections on Iraq, which is an increasingly important market for U.S. exports and services, and Uzbekistan, which is the most populous country in Central Asia. The section on Bolivia was dropped because there were no public submissions regarding this country and government-to-government engagement on trade-related matters declined in 2013.

According to USTR, this year’s report again highlights “a growing trend among our trading partners to impose localization barriers to trade – measures designed to protect, favor or stimulate domestic industries, service providers or intellectual property at the expense of imported goods, services or foreign-owned or developed intellectual property.” USTR also “continues to vigorously scrutinize foreign labor practices and to redress substandard practices that impinge on labor obligations in U.S. free trade agreements” and to that end has introduced new mechanisms to enhance its monitoring efforts in this area and implemented interagency processes for systematic information gathering and review.

SPS Report. USTR states that while many SPS measures are fully justified, too often governments cloak discriminatory and protectionist trade measures in the guise of ensuring human, animal or plant safety. As a result, this report focuses on SPS measures in 50 countries, the EU and the Southern African Development Community that appear to be unscientific, unduly burdensome, discriminatory or otherwise unwarranted and create significant barriers to U.S. exports. Among these are restrictions related to export certifications, agricultural biotechnology, bovine spongiform encephalopathy, avian influenza and maximum residue limits for pesticides.

TBT Report. Governments, market participants and other entities can use standards-related measures as an effective and efficient means of achieving legitimate commercial and policy objectives, USTR states, but when standards-related measures are outdated, overly burdensome, discriminatory or otherwise inappropriate they can reduce competition, stifle innovation and create unnecessary technical barriers to trade. This report focuses on such measures in 16 countries as well as the EU.

New Barriers. Among the most noteworthy new trade barriers identified in this year’s reports are the following.

- Nigeria applied a 70% tariff to imports of fully assembled vehicles beginning in October 2013 and has significantly raised effective tariff rates on agricultural goods such as wheat grain, wheat flour, brown rice, milled rice, raw sugar and refined sugar.

- Colombia imposed in March 2013 a one-for-one scrapping requirement based on the cargo capacity of old trucks as a condition for the sale and registration of new freight trucks, slowing the sale of $113 million worth of U.S. freight trucks imported in 2013.

- Canada changed the way in which it applies import duties to certain commercial food preparations, which will result in the cheese components of these products being subject to prohibitively high tariff rates.

- Mexico implemented on Jan. 27, 2014, a new system for licensing imports of certain steel products that is supposed to issue licenses automatically, but industry representatives have reported long delays in the review and issuance of licenses.

- India introduced new, expanded local content requirements in its national solar policy in October 2013, which the U.S. has challenged at the WTO.

- In early 2014, Indonesia passed two new laws that provide the legal framework for further sweeping trade-restrictive measures.

- Malaysia’s new National Automotive Policy maintains the country’s non-transparent import permit and gazette pricing system, excise duties that disproportionately affect imported vehicles, and special tax reductions for vehicles with Malaysian-manufactured components.

- Vietnam implemented new restrictions on digital commerce, including limitations on online advertising and stringent licensing requirements on Internet service providers, and is considering a draft decree that would impose licensing and registration requirements on providers of information technology services, including restrictions on the cross-border supply of cloud computing and data center services.

Achievements. Major achievements in 2013 in overcoming barriers identified in the NTE, SPS and TBT reports include the following.

- In November 2013 Kenya implemented the Kenya National Electronic Single Window System (Kenya TradeNet) to streamline the processing of air, land and sea cargo arrival and departure.

- The U.S. and Morocco signed a trade facilitation agreement that includes new commitments reflecting practices developed since their bilateral free trade agreement was signed in 2004.

- The Dominican Republic made substantial improvements to the administration of its tariff-rate quotas under DR-CAFTA, eliminated the use of physical import certificates and established an electronic document system minimizing the opportunity for quota holders to sell import certificates.

- China committed to adopt and publish an action plan on trade secret protection and enforcement for 2014 that is expected to include concrete enforcement actions.

- China committed not to finalize or implement a selection catalogue and rules governing official use vehicles that would have excluded vehicles produced by foreign enterprises or foreign-invested enterprises from government procurement opportunities.

- China committed that it will not require applicants to divulge source codes or other sensitive business information to demonstrate compliance with China’s ZUC encryption algorithm standard for 4G devices.

- India eliminated a requirement that private firms purchase a certain percentage of domestically manufactured electronic equipment.

- The Philippines began implementing its new copyright law and took significant enforcement efforts against pirated and counterfeit products.

- Indonesia, the Dominican Republic and Panama opened their markets to a wider variety of U.S. beef and beef products.

- The EU approved imports of U.S. beef treated with lactic acid and lifted its ban on the importation of live pigs from the U.S.

- The U.S. and Japan concluded an agreement that allows products certified as organic under either country’s requirements to be sold as organic in both markets.

- Mexico granted a three-year certification to high density polyethylene sanitation pipes manufactured in the United States.

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