Trade Policy Review of the USA: The WTO Secretariat Report, Volume Five: 2006

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2 Trade Policy Review of the USA: The WTO Secretariat Report, Volume Five: 2006 ร งสรรค ธนะพรพ นธ บรรณาธ การ เอกสารข อม ลหมายเลข 28 ธ นวาคม 2551 ได ร บท นอ ดหน นจากสำน กงานกองท นสน บสน นการว จ ย (สกว.) โครงการ WTO Watch (จ บกระแสองค การการค าโลก)

3 เอกสารข อม ลหมายเลข 28 Trade Policy Review of the USA: The WTO Secretariat Report, Volume Five: 2006 บรรณาธ การ ร งสรรค ธนะพรพ นธ จำนวน 340 หน า ISBN พ มพ คร งท หน ง ธ นวาคม 2551 จำนวน 500 เล ม ร ปเล ม ย วด ไขม เพชร เจ าของ โครงการ WTO Watch (จ บกระแสองค การการค าโลก) ห องเลขท 14 ช น 4 คณะเศรษฐศาสตร มหาว ทยาล ยธรรมศาสตร เลขท 2 ถนนพระจ นทร เขตพระนคร กร งเทพฯ โทรศ พท และ โทรสาร ได ร บท นอ ดหน นจาก สำน กงานกองท นสน บสน นการว จ ย (สกว.) ช น 14 อาคารเอสเอ มทาวเวอร เลขท 979 ถนนพหลโยธ น แขวงสามเสนนอก เขตพญาไท กร งเทพฯ พ มพ ท ห างห นส วนจำก ด สามลดา โทร โทรสาร

4 คณะกรรมการโครงการ WTO Watch ศ.ร งสรรค ธนะพรพ นธ ผศ.ดร.ว ศาล บ ปผเวส รศ.สมพร อ ศว ลานนท รศ.ดร.สมบ รณ ศ ร ประช ย ค ณย วด ไขม เพชร ประธานกรรมการ กรรมการ กรรมการ กรรมการและเลขาน การ ผ ช วยเลขาน การ

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6 คำนำ การประเม นนโยบายการค าระหว างประเทศ (Trade Policy Review) เป นกลไกท ภาค สมาช ก GATT ม ฉ นทมต ให สร างข นเม อการประช ม การค าพห ภาค รอบอ ร กว ย ( ) ดำเน นไปได คร งทาง ท งน เป นผล จากมต ท ประช ม ณ นครมอนทร อ ล (Montreal) ประเทศคานาดาในเด อน ธ นวาคม 2531 โดยท ต อมาปรากฏใน Article III ของ Marrakesh Agreement Establishing the World Trade Organization ในเด อนเมษายน 2537 ย งผลให การประเม นนโยบายการค าระหว างประเทศเป นกลไกหล ก ขององค การการค าโลกท จ ดต งข นเม อ 1 มกราคม 2538 เป นต นมา เหต ใดจ งต องม การประเม นนโยบายการค าระหว างประเทศ ของภาค สมาช กองค การการค าโลก Annex 3 ของ Marakesh Agreement กล าวถ งว ตถ ประสงค ของการประเม นนโยบายการค าระหว างประเทศของ ภาค สมาช กองค การการค าโลก 2 ประการ กล าวค อ ประการแรก เพ อด แลให ภาค สมาช กปฏ บ ต ตามกฎกต กา และพ นธะผ กพ นท ม ต อองค การการค าโลก ท งน เพ อให ระบบการค าพห ภาค ดำเน นอย างราบร น ม ความโปร งใสมากข น และเอ ออำนวยให ภาค สมาช ก ร บร และเข าใจนโยบายการค าระหว างประเทศของภาค สมาช กด วยก น โดยท ม ได ใช เป นกลไกในการบ งค บให ภาค สมาช กปฏ บ ต ตามข อตกลง หร อใช ในกระบวนการไกล เกล ยข อพ พาท รวมท งม ได ใช ในการบ งค บให ภาค สมาช กยอมร บพ นธะผ กพ นใหม ในด านนโยบาย ประการท สอง เพ อประเม นว า นโยบายและจาร ตปฏ บ ต ด าน การค าระหว างประเทศของภาค สมาช กหน งๆ ม ผลกระทบต อระบบการค า พห ภาค อย างไรบ าง

7 หน วยงานท ม หน าท ร บผ ดชอบในการประเม นนโยบายการค า ระหว างประเทศของภาค สมาช ก ค อ Trade Policy Review Body (TPRB) ท งน โดยใช คณะมนตร ท วไปขององค การการค าโลก (WTO General Council) ทำหน าท TPRB ประกอบด วยภาค สมาช กองค การการค าโลกท ก ประเทศ ท งน เพ อให กระบวนการประเม นนโยบายการค าระหว างประเทศม ความโปร งใสและเป นธรรม รวมท งการม ส วนร วมของภาค ท กประเทศ ความถ ในการประเม นนโยบายการค าระหว างประเทศม ข อ กำหนดใน Annex 3 ของ Marakesh Agreement โดยย ดความสำค ญของ การค าระหว างประเทศเป นเกณฑ กล าวค อ (1) ภาค สมาช กท ม การค าระหว างประเทศมากท ส ดในโลก 4 อ นด บแรก (ป จจ บ น ได แก สหภาพย โรป สหร ฐอเมร กา ญ ป น และ สาธารณร ฐประชาชนจ น) จะม การประเม นท ก 2 ป (2) ภาค สมาช กท ม การค าระหว างประเทศมากเป นอ นด บ ถ ดไป 16 ประเทศ จะม การประเม นท ก 4 ป ท ก 6 ป (3) ภาค สมาช กนอกเหน อจาก (1) และ (2) จะม การประเม น (4) ภาค สมาช กท ด อยพ ฒนามากท ส ด (The Least Developed Countries) อาจกำหนดระยะเวลาการประเม นยาวนานกว าปกต ได การประเม นนโยบายการค าระหว างประเทศของภาค สมาช ก องค การการค าโลก เน นประเด นนโยบายและจาร ตปฏ บ ต โดยพ จารณา ครอบคล มถ งสภาวการณ ทางเศรษฐก จ และความจำเป นในการพ ฒนา ข อม ลท ใช ในการประเม นมาจาก 2 แหล ง แหล งท หน งมาจากร ฐบาลภาค สมาช กท ถ กประเม น ซ งต องนำเสนอรายงานว าด วยนโยบายการค า ระหว างประเทศของประเทศของตน อ กแหล งหน งมาจากสำน กเลขาธ การ องค การการค าโลก ซ งต องนำเสนอข อม ลและรายงานนโยบายการค า

8 ระหว างประเทศของภาค สมาช กด งกล าว องค กรประเม นนโยบายการค า ระหว างประเทศ (TPRB) จะประช มเพ อพ จารณาข อม ลจากแหล งท งสอง ในการน TPRB กำหนดต วผ ทรงค ณว ฒ 2 คนล วงหน าเป นผ นำการอภ ปราย โดยท ภาค สมาช กองค การการค าโลกท กประเทศม ส ทธ เข าร วมประช ม ภายหล งการถกอภ ปรายใน TPRB สำน กเลขาธ การองค การการค าโลก เป นฝ ายนำข อม ลและผลการถกอภ ปรายเข ยนเป นรายงาน โดยเป น ผ ร บผ ดชอบข อม ลและความเห นท ปรากฏในรายงานแต เพ ยงผ เด ยว หล งจากน นจ งม การเผยแพร รายงานการประเม นนโยบายการค าระหว าง ประเทศฉบ บท เข ยนโดยสำน กเลขาธ การองค การการค าโลก และฉบ บท นำเสนอโดยร ฐบาลภาค สมาช กท ถ กประเม น รวมท งรายงานการประช ม TPRB และข อสร ปของประธาน TPRB ด วย โครงการ WTO Watch ม แผนงานท จะพ มพ Trade Policy Review ของประเทศไทย และประเทศมหาอำนาจ อ นประกอบด วยสหร ฐ อเมร กา สหภาพย โรป ญ ป น และสาธารณร ฐประชาชนจ น Trade Policy Review ของประเทศไทยปรากฏในเอกสารข อม ลหมายเลข สาธารณร ฐประชาชนจ นปรากฏเป นเอกสารข อม ลหมายเลข 22 เอกสาร Trade Policy Review of the USA แยกพ มพ เป น 2 ส วน ส วนแรกได แก Trade Policy of the USA: The U.S. Government Reports, ส วนท สองได แก Trade Policy of the USA: The WTO Secretariat Reports ด วยเหต ท รายงานส วนหล งน ม ความยาวมาก จ งแยกพ มพ ออกเป น 5 เล ม โดยแยกพ มพ เป นรายป (1996, 1999, 2001, 2004 และ 2006) โครงการ WTO Watch หว งเป นอย างย งว า เอกสารข อม ล ช ดน จะเป นประโยชน ในการศ กษานโยบายการค าระหว างประเทศของสหร ฐ อเมร กา และพ ฒนาการของนโยบายด งกล าว ร งสรรค ธนะพรพ นธ ต ลาคม 2551

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10 สารบ ญ 2006 Trade Policy Review of the USA...1 SUMMARY OBSERVATIONS...3 I. RECENT ECONOMIC DEVELOPMENTS...17 II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICY...40 III. TRADE POLICIES AND PRACTICES BY MEASURE...67 IV. TRADE POLICIES BY SECTOR REFERENCES APPENDIX TABLES รายช อเอกสารโครงการ WTO Watch ประว ต บรรณาธ การ...330

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12 TRADE POLICY REVIEW The United States Report by the WTO Secretariat 2006

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14 Trade Policy Review of the USA 2006 WORLD TRADE WT/TPR/S/ February 2006 SUMMARY OBSERVATIONS 1. The United States has undergone solid economic growth since its last Trade Policy Review in early This has been aided by the openness and transparency of its trade regime, which has supported the continuous drive for change and efficiency characteristic of the U.S. economy as a whole. During the period under review, the United States made incremental changes to its trade regime, including liberalization on an MFN and preferential bases. Trading partners benefited as the United States remained the world's largest single importer and a key engine of global growth. Nonetheless, market access barriers and other distorting measures, notably subsidies, persist in a few but important areas. Addressing these distortions would benefit U.S. consumers and taxpayers, and help strengthen the global economy.

15 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 (1) ECONOMIC DEVELOPMENTS 2. Since the last Review of the United States in early 2004, accommodative fiscal and monetary policies have supported the solid performance of its economy. Imports have helped to keep U.S. prices down in a context of strong private consumption, while large inflows of foreign capital have financed wide current account deficits. However, in the context of wide fiscal and current account deficits, a low savings rate, and signs of overheating in the housing market, the authorities have more recently adopted measures to curtail spending and tighten monetary policy. 3. The United States is the world's largest import market and its economy has continued to support global growth by maintaining its market largely open. In turn, this openness is one of the factors that foster U.S. growth, as it allows U.S. producers and consumers to access required goods, services, and capital from abroad at the best conditions. It is therefore important to maintain this openness by pre-empting possible protectionist sentiment. Achieving this may require efforts in the United States, including through a reduction in public sector absorption, and in the rest of the world, through increased spending. (2) TRADE POLICY DEVELOPMENTS 4. The United States continues to pursue a policy of advancing open markets and the rule of law, as part of a broader 4

16 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch global security objective. In this context, the United States places the multilateral trading system at the core of its international trade relations. Multilateral trade negotiations are a stated priority of the Administration, in particular, the successful completion of the Doha Development Agenda before the end of The United States has made a large number of proposals in various committees and other bodies, and participates actively in the dispute settlement system. In this respect, it has made progress in implementing several WTO rulings calling for changes to U.S. legislation but a few rulings have not yet been fully implemented. 5. The Administration views the Trade Promotion Authority (TPA), a successor to "fast-track" authority, as an essential instrument in attaining its trade objectives; in 2005 it requested and obtained the extension of this authority. The TPA legislation brings greater predictability to U.S. trade negotiations while promoting a wide array of U.S. objectives. The expiry of TPA thus represents an important future milestone in the U.S. trade agenda: Congress must be advised of the range of proposals advanced in the negotiations that may be in the final agreement and could require changes in trade legislation 180 days before signature (by 31 December 2006), and of the Administration's intention to sign any new agreement under TPA by 1 April 2007 at the latest. Any agreement must be signed by the United States before TPA expires on 1 July The United States pursues a strategy of trade liberalization through negotiations at the multilateral, regional, and 5

17 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 bilateral levels. In pursuit of this strategy, the United States has increased the number of countries with which it has concluded free-trade agreements (FTAs), from three at the start of the current Administration in early 2001 to 15 by late Of these, six FTAs had been implemented: with Israel, NAFTA, Jordan, Chile, Singapore, and Australia. As of January 2006, agreements with 12 other countries were being negotiated. The United States considers that FTAs are a step toward, and may help advance, multilateral liberalization. However, the increasing number of FTAs in which the United States participates raises concerns about administrative resources being distracted away from the multilateral system, trade or investment diversion, and interests being created that could complicate multilateral negotiations. 7. The United States grants unilateral preferences to developing countries under a number of schemes; these preferences may be conditional on compliance with various U.S. policy objectives. In February 2005, the United States requested waivers in the WTO for three of its preference schemes (AGOA, ATPA, and CBERA). In late 2005, the matter was under discussion in the Council on Trade in Goods. (3) MARKET ACCESS IN GOODS 8. Since its previous Review, the United States has taken additional steps to incorporate security considerations into its import procedures, notably by promulgating regulations in relation to the Trade Act of 2002 and the Bioterrorism Act. The new 6

18 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch regulations implement requirements to, among other things: transmit information pertaining to U.S.-bound cargo prior to departure; notify the Food and Drug Administration of all U.S. bound food consignments; and register food manufacturing and handling facilities that export to the United States. An assessment of the economic impact of the new regulations would be valuable to ascertain their actual costs and benefits. 9. The United States accords MFN tariff treatment to all but one WTO Member (Cuba). All except two tariff lines are bound. Applied MFN tariffs are at the bound rates, lending predictability to the U.S. tariff regime. In 2004 (the latest year for which ad valorem equivalents were available), the average applied MFN tariff was 4.9%, marginally lower than in 2002; in both 2004 and 2005 the average rate excluding AVEs, was 4.2%. Close to 38% of all tariff items entered the United States duty free in 2004, compared with 31% in The average applied MFN tariff on agricultural products was 9.7%, compared with 4.0% on other products. Tobacco, whey, sour cream, peanuts, and footwear, among others receive tariff protection in the % range. The share of non-ad valorem tariffs declined to 10.6% in Tariff quotas cover around 2% of all tariff lines. High out-of-quota tariffs are one of the main forms of import protection for certain agricultural products. Imports are subject to additional charges including a merchandise processing fee and a fee on port use, both ad valorem. 10. Additional tariff preferences became effective during the period under review as a result of the entry in force of FTAs 7

19 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 with Australia, Chile, and Singapore. The United States did not exclude any product from tariff elimination in the context of the FTAs with Chile and Singapore; its FTA with Australia excluded a small number of goods from tariff elimination, such as dairy and sugar products. The different origin requirements contained in these and other U.S. FTAs add complexity to the trade regime. 11. Most non tariff restrictions are maintained for noncommercial purposes, including a ban on imports of marine mammal products, shrimp, and tuna from countries found not to be in compliance with U.S. environmental provisions. 12. Anti-dumping (AD) duties continue to be an important, albeit declining, measure applied on certain imports into the United States, and to generate an element of uncertainty for foreign exporters. As at June 2005, 274 AD measures were in force, affecting mainly iron and steel, chemicals, pharmaceuticals, agricultural, and forestry products. However, anti-dumping investigation initiations decreased in 2004 and the first half of This should mitigate concerns that investigation initiations may affect exporters to the U.S. market, as most investigation initiations involve the imposition of preliminary duties. Moreover, the trade coverage of AD duties has been declining in recent years: investigations initiated in 2002 and 2003 covered an import value of some 0.1% of total U.S. imports in each year, compared with 0.85% of imports for initiations in U.S. exporters are the target of about 55 AD measures imposed in some 13 foreign markets. 8

20 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch 13. Certain U.S. AD and countervailing (CV) rules and methods have been found to be WTO inconsistent, leading to changes in U.S. statutes. One case addressed during the period under review led to the repeal of the Anti-Dumping Act of Another case concerns the Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd Amendment, which channels proceeds from AD and CV duties to successful petitioners and resulted in the disbursement of over US$1 billion between 2001 and 2004, about half of which went to five companies. By early February 2006, legislation to repeal the Byrd Amendment had been passed by both houses in Congress, and was awaiting signature by the President, which was expected at an early date. 14. The United States notified to the WTO the termination in December 2003, over a year ahead of expiry, of the safeguard measures on ten steel products, which the DSB had found inconsistent with WTO rules. Since then, the United States has introduced no general safeguard measures. However, under the safeguard mechanism for textiles and clothing contained in the Report of the Working Party on the Accession of China, in 2005 the United States applied transitional safeguards on certain textiles and clothing products from China. In November 2005, the United States and China reached an understanding with respect to the application of increasing yearly quotas on Chinese exports to the U.S. market covering various textiles and clothing products during Technical regulations, standards, and sanitary and phytosanitary measures play an important role in ensuring safety 9

21 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 and quality. Some WTO Members have raised concerns about specific U.S. technical regulations and sanitary and phytosanitary measures, but none have been followed by formal dispute settlement. There is no information on the extent to which U.S. (voluntary) standards are based on standards developed by international organizations. (4) EXPORT MEASURES 16. A central objective of U.S. trade policy is to expand markets for U.S. exporters. In this respect, trade statutes such as the Section 301 family of laws are aimed at monitoring foreign measures that may affect U.S. exports or impair U.S. rights under trade agreements. The application of these statutes to WTO Members must conform with WTO dispute settlement provisions in areas covered by multilateral rules. 17. A number of export assistance schemes are in place. The United States provides insurance and export financing through its official export credit agency (the Export-Import Bank). A duty drawback programme is in place. The United States adopted legislation to repeal the U.S. tax code's extraterritorial income provisions, which had been found to be inconsistent with WTO rules. A compliance panel concluded that the new legislation failed to implement fully previous WTO rulings on U.S. tax provisions. 18. Export restrictions and controls are maintained for national security or foreign policy purposes, or to ensure sufficient 10

22 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch domestic supply. Exports controls can result from U.S. domestic policy decisions or U.S. participation in non-binding export control regimes, as well as in the context of United Nations embargoes. During the period under review, the level of controls on commercial exports to Iraq was reduced, licensing requirements for the export of some items to Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia were terminated, and controls on exports to Cuba and Syria were tightened. (5) OTHER MEASURES AFFECTING TRADE 19. As the United States is among the world's largest producers, exporters, and importers, domestic support although not targeted at exports may significantly affect trade. Assistance to domestic producers takes the form of federal and sub-federal tax exemptions, financial outlays, and credit programmes. In its latest notification to WTO, in October 2003, the United States listed 45 federal and 330 sub-federal programmes providing subsidies. The agriculture and energy sectors received the largest number of notified federal subsidy programmes. During the period under review, the American Jobs Creation Act of 2004 introduced tax deductions, including a one-time tax break to U.S. companies that repatriate foreign earnings. Assistance to business is also available through the Trade Adjustment Assistance for Firms programme, part of a broader scheme that provides assistance to businesses, workers, and farmers adversely affected by import competition. 11

23 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: In agriculture, overall government support is well below the OECD average. Government payments to agricultural producers as a share of net farm income fell from 48% in 2000 to 16% in This decline occurred despite an increase in the share in total government payments of counter-cyclical and loan programme payments since the enactment of the Farm Security and Rural Investment Act of Under both programmes, assistance increases when prices fall; some of this assistance may affect international trade when supported output finds its way into markets. Ad hoc emergency payments supplement other government payments and government-sponsored crop insurance. Certain imported agricultural products must meet quality and other requirements comparable to those established for domestic products under marketing orders. 21. In July 2005, the Department of Agriculture announced that it had sent to Congress proposed statutory changes to comply with the panel and Appellate Body decisions on the WTO compatibility of a number of U.S. agricultural support measures for upland cotton. The Department of Agriculture also announced that from 2005 it would use a "risk-based fee structure" in its export credit guarantee programmes, in response to a finding by the WTO that such programmes had been provided at premium rates. In early February 2006, Congress passed legislation eliminating the Step 2 export subsidies on upland cotton effective 1 August The President was expected to sign this legislation into law forthwith. 12

24 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch 22. Competition policy enforcement has remained focused on the activities of international cartels. Other areas addressed by the antitrust agencies include anticompetitive mergers and non-merger enforcement in key sectors, such as health care and energy. Changes to competition policy legislation, including penalties for violating the Sherman Act, took effect in The U.S. economy's good performance has been linked to regulatory reform efforts in a broad range of industries, but it has also been noted that competition policy could be improved by eliminating antirust exemptions, enhancing competition at the sectoral level and clarifying assignments of responsibility among different enforcement officials. 23. U.S. policy with respect to market access for government procurement is to grant reciprocal national treatment. The United States participates in the WTO plurilateral Agreement on Government Procurement (GPA), which covers a substantial share of the procurement at the federal level. The United States maintains a number of domestic purchasing requirements for procurement not covered by the GPA, NAFTA, the WTO plurilateral Agreement on Trade in Civil Aircraft, and FTAs that cover government procurement. For example, the Buy American Act restricts the purchase of supplies and construction materials by government agencies to those defined as "domestic end-products", in accordance with a two-part test that must establish that the article is manufactured in the United States, and that the cost of domestic components exceeds 50% of the cost of all the components. The Trade Agreements Act of 1979 waives the application of the Buy Ameri- 13

25 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 can Act to the end-products of designated countries, which now include the parties to the previously mentioned agreements, CBERA beneficiaries and least developed countries. U.S. procurement policy also seeks to increase the participation of small and other businesses through set-asides and other preference programmes. Some States apply domestic or State-specific preferences. 24. The United States is a major producer of goods and services that embody knowledge and other intellectual developments. It is committed to a policy of promoting increased IPR protection, and is advancing this protection through a variety of mechanisms, including FTAs, intellectual property agreements, and memoranda of understanding. Various regulatory changes took place during the period under review, particularly in the areas of patents, trade marks, copyright, and enforcement. The U.S. Patent Office is implementing a programme to expand the quality review of patent applications, among other things. The United States has yet to implement the DSB ruling with respect to Section 211 of the U.S. Omnibus Appropriations Act of The United States maintains a liberal foreign investment regime, providing generally open market access and national treatment, with some sector-specific restrictions, such as in energy, mining, and fishing as well as air, maritime, and financial services. The few restrictions to national treatment apply in areas such as official support programmes. Also in a limited number of cases, foreign direct investment is subject to reporting requirements or review to take account of national security concerns. 14

26 (6) ACCESS CONDITIONS IN SERVICES เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch 26. There have been only relatively minor changes in U.S. legislation with respect to financial services since the last Review of the United States. Among the changes, a new rating system became effective on 1 January 2005 to enhance the supervision of financial conglomerates that include a bank. The United States grants, in general terms, open market access and national treatment to foreign banks. In insurance, firms are regulated primarily at the State level, but steps towards uniformization have continued. 27. The U.S. telecommunications market is open to foreign participation and highly competitive. In December 2004, the Federal Communications Commission adopted new regulations that redefine the extent to which incumbent firms are required to make elements of their network available to other carriers. 28. No significant policy or legislative changes have taken place with respect to maritime transport since The Jones Act reserves cargo service between two points in the United States for ships that are registered and built in the United States and owned by a U.S. corporation, and on which 75% of the employees are U.S. citizens. Domestic passenger services are subject to similar requirements. The U.S. international maritime transport market is generally open to foreign competition although some cargo preferences are in place; most international maritime transport takes place in foreign vessels. 15

27 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: There have been no significant legislative changes with respect to the air transport sector. Market access restrictions remain in the form of U.S. ownership and control requirements. The provision of domestic air services is permitted only by U.S. carriers. The Fly America Act requires government-financed transportation to be, in principle, on U.S.-flag air carriers. Financial problems have continued to affect several U.S. airlines. 16

28 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch I. RECENT ECONOMIC DEVELOPMENTS (1) OVERVIEW 1. Since the last Review of the United States in early 2004, the performance of its economy has been strong. This has had global consequences because the United States is the world's largest import market and a key supplier of goods and services. The U.S. economy has also remained amongst the world's most competitive, and has continued to support global growth by maintaining its market largely open. This openness is one of the factors that contributes to U.S. competitiveness, as it allows U.S. producers and consumers to access required goods, services, and capital from abroad at the best conditions. In this respect, imports have helped to keep U.S. prices down in a context of strong private consumption, while large inflows of foreign capital have financed wide current account deficits. 2. U.S. economic growth has been supported by accommodative fiscal and monetary policies. However, the fiscal deficit, low rate of savings, and widening current account deficit are sources of concern. Additionally, signs of overheating in the housing market may have further implications for monetary policy. As a response to these concerns, measures to curtail spending, reduce the fiscal deficit, and tighten monetary policy have been adopted. 17

29 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 (2) OUTPUT AND EMPLOYMENT 3. U.S. economic growth has been strong and steady since its last Review. After low growth in 2001 and 2002, economic expansion gathered pace in the second quarter of 2003, supported by strong private domestic consumption, private investment, and defence purchases (Table I.1). Growth solidified in 2004 spurred by productivity gains, high corporate profits and expanding exports. Preliminary figures for 2005 indicate a slightly slower growth rate but GDP growth in the United States is expected to outpace that of most other industrial countries (section (7) below). 4. Private consumption growth outpaced GDP expansion during 2001 to mid 2003, fell behind in 2004 and kept pace with GDP growth in the first three quarters of Private consumption has been bolstered by changes in wealth between 2000 and 2005, and partly because of an increase in disposable income, mainly through tax cuts. Consumer spending has also received impetus from the wealth effect triggered by mortgage refinancing. 1 Government spending, which supported growth during the period, trended downwards until the first quarter of Imports of goods and services expanded strongly in 2004 (section (5) below). Exports grew faster than GDP in 2004 and the first two quarters of 2005, making a positive contribution to overall growth. Export growth moderated in the third quarter of Residential investment has been another GDP component underpinning growth. Housing activity has been ex- 18

30 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch tremely robust since 2003, growing by over 10% in 2004 and at similar rates in the first two quarters of Gross private investment recovered strongly after 2002, growing by 11.9% in 2004 and by 8.6% in the first quarter of In the second quarter of 2005, however, there was a downturn in inventory investment, with a negative effect on gross fixed investment; investment gathered strength again in the third quarter, when the negative effect of inventories was less pronounced. 6. The personal savings rate has declined consistently since 2000, dropping below 1% in the first quarter of 2005, and becoming negative thereafter. 3 This rate is low by international standards, and well below its long-run trend. 4 Gross national savings as a whole have remained stable during the period under review, although at levels (13.5% of GDP in the third quarter of 2005) well below those posted at the beginning of the decade, while the share of gross domestic investment in GDP has increased, leading to a widening of the savings-investment gap. This widening gap is reflected in the worsening of the deficit of the current account of the balance of payments. This situation responds in part to high foreign investor demand for U.S. bonds and other long-term paper, which is keeping long-term interest rates low even as shortterm rates increase. This has discouraged domestic savings by making them less interesting due to their low yield. The Administration adopted measures in 2005 aimed at raising the personal saving rate, such as lowering tax rates on dividends and capital gains. 19

31 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: Employment has increased moderately. The unemployment rate declined from 6% in 2002 to 4.9% in September The IMF attributes the drop in official levels of unemployment in recent months largely to lower levels of participation Labour productivity continues to show solid growth, although this has moderated since 2002; private non-farm-business productivity grew by 3.4% in 2004, but expanded less rapidly in the first half of 2005, before picking up strength in the third quarter(table I.1). Productivity gains remain well above the increases of the past two decades, which is partly due to a more efficient use of the capital stock as well as a reduction in costs, and labour shedding. The authorities note that the openness of the economy may have also played a role in triggering productivity gains. Salaries have not increased beyond labour productivity gains: average changes in weekly earnings were 1% and 1.5% in 2003 and (3) MONETARY AND EXCHANGE RATE POLICIES 9. Under the Federal Reserve Act of 1913, the Federal Reserve is responsible for setting monetary policy in the United States. The Act specifies that, in conducting monetary policy, the Federal Reserve System and the Federal Open Market Committee (FOMC) should seek "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." 6 The Federal Reserve controls three tools of monetary policy: open 20

32 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch market operations, the discount rate, and reserve requirements. It uses these tools to influence the demand for and supply of balances and in this way alters the federal funds rate. Unlike some other central banks, the Federal Reserve does not set a specific inflation target. 10. During the period under review, monetary policy has remained accommodative, although it has been progressively tightened to contain inflationary pressures. During 2004, the FOMC decided raised interest rate five times, raising the target for the federal funds rate from 1.25% at the beginning of the year to 2.25% at its end. The increases in the target continued in the first half of 2005, with the rate rising to 3.5% in August The increase in the rate led to an increase in nominal market interest rates and laid the foundations for a decline in the rate of expansion of the monetary aggregates M1 and M2 (Table I.2). Real interest rates also rose, as did treasury note rates. 11. The dollar depreciated against both the euro and the pound sterling during It depreciated slightly in the first quarter of 2005 before gaining some ground in the second quarter; the depreciation against the yen was more moderate, but mirrored the dollar's movements against other major currencies. The exchange rate of the Chinese yuan remained stable until the appreciation of the yuan in mid The dollar depreciated both in real and nominal effective terms over the period (Table I.2). The rise in short-term interest rates may have contributed to the solidity of the dollar in the second quarter of

33 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: Higher oil prices, the possible lagged effect of previously expansionary monetary and fiscal policies, and the depreciation of the dollar vis-à -vis the euro, may have had an effect on inflation. In the twelve months to December 2004, the CPI rose 3.3%, compared to an increase of 1.9% in the twelve months to December 2003; although inflation figures since 2002 have been heavily influenced by movements in energy prices, particularly since 2004, underlying or core inflation has remained subdued. The CPI increased somewhat more rapidly in the second and third quarters of The risk of acceleration of inflation led to a policy response by the Federal Reserve as mentioned above. (4) FISCAL POLICY 13. The results of the fiscal accounts worsened in 2003 and 2004; the federal government deficit reached US$412 billion or 3.6% of GDP in 2004 (Chart I.1), and the total government deficit accounted for 4.6% of GDP. The deterioration in absolute terms of the Federal Government's fiscal balance partly reflects the effect of tax cuts and increased spending on defence and social security. 8 State and local government deficits widened significantly between mid 2000 and mid 2003, before narrowing somewhat. The structural federal government balance, which excludes cyclical economic activity and had been in surplus in FY , continued to be in deficit in 2004.The federal government deficit as a percentage of GDP narrowed in FY 2005 to 2.6% of GDP (see below). 22

34 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch 14. Fiscal deficits have undermined the declining trend in public debt, which returned to increase in FY The share of public debt in GDP rose to almost 63% in FY 2005 (Table I.3) The Administration has been conducting a policy of fiscal stimulation. In 2001, Congress approved a ten-year Budget Plan, containing tax cuts estimated at US$1.35 trillion over FY and projecting an overall US$5.6 trillion federal government surplus over the same period. 10 Further tax cuts were proposed in February 2003, with an estimated cumulative cost of US$1.3 trillion over FY Among other things, the Jobs and Growth Tax Relief Reconciliation Act, of May 2003, accelerated certain previously enacted tax reductions, and lowered personal income tax brackets and the general tax rate on capital gains; the estimated cost of the measures was US$350 billion through FY The Working Families Tax Relief Act of 2004 extended tax relief for working families; the estimated cost of the reductions was US$146 billion for Since the FY 2005 Budget the Administration's policy has been of spending restraint, particularly in the non-defence area. The President's 2006 Budget proposed reforms that would produce savings of US$85 billion over five years; Congress agreed to US$35 billion of these savings. Additionally, Congress passed a 2006 Budget Resolution that restrains overall discretionary spending to an increase of 2.1%, less than the 2.4% projected rate of inflation. This constitutes an important measure to rein in spending, since discretionary spending has been one of the main 23

35 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 triggers of the fiscal deficit. As a consequence of the changes in discretionary spending, baseline projections of discretionary spending by the Congressional Budget Office (CBO) have declined by US$31 billion for FY 2005 and by more than US$1 trillion for the period The CBO estimated a federal Government fiscal deficit of US$333 billion, or 2.7% of GDP for The aim is to achieve a deficit of 1.1% of GDP by 2009, below the historical average for the past 40 years (2.3%). The final result for 2005 was a deficit of US$319 billion, or 2.6% of GDP, below both the CBO's initial and revised estimates. 14 The overall Government deficit was an estimated 3.5% of GDP in Higher receipts from income, corporation and social security and Medicare payroll taxes explain part of the decrease in the deficit projected for FY Outlays increased by 7.9% in FY Despite their sharp increase in FY 2005 (14.6%), receipts as a percentage of GDP remain below their 40-year historical average of 18.2% and are expected to remain so until at least Outlays are projected to fall, due mainly to decreases in social security and farm programme payments. Under the CBO baseline scenario, the fiscal accounts are expected to show a deficit until FY 2015, although on a declining scale The IMF considers that, despite recent measures towards fiscal consolidation, there is a case for a bolder reduction of the deficits, including measures to bolster revenue. 18 The IMF has noted that recent fiscal consolidation reflects mainly cyclical gains, and that U.S. budget projections assume unprecedented 24

36 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch compression of non-defence discretionary spending, take no account of funding for operations in Iraq and Afghanistan after 2006, or of the growing scope of the Alternative Minimum Tax. The IMF recommends balancing the budget excluding Social Security by early in the next decade; this would support national saving, domestic investment, and the external position, and would lower the federal debt ratio. The U.S. authorities consider that the Administration has made substantial progress in improving spending efficiency and see no need to strengthen their fiscal objective. 19 In the context of this review they expressed concern about the potential for lower U.S. growth in the face of a unilateral reduction in the fiscal imbalance. (5) BALANCE OF PAYMENTS 19. The deficit in the current account of the balance of payments continued to expand through 2004, reaching a record US$668 billion, or 5.7% of GDP (Table I.4 and Chart I.2). In the first three quarters of 2005, the current account deficit reached US$593 billion, which is equivalent, at an annualized rate, to slightly over 6% of GDP. The IMF expects the deficit to stabilize at 6% of GDP in Both exports and imports of goods expanded in 2004 (Table I.4); this pattern seemed to be recurring for Imports were boosted by the relatively strong performance of the U.S. economy The faster increase in imports than exports triggered an increase in the trade deficit on goods in 2004, to US$665 billion. 25

37 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: The surplus in services was maintained in 2004 with export growth in services tending to lag behind the rate for services imports. The income balance remained in surplus in 2004 and into the first-quarter of 2005, as income receipts grew more than income payments. The surplus reflects an increase in earnings on U.S. direct investment abroad, triggered partly by the depreciation of the U.S. dollar against key currencies. 22. The surplus in the capital and financial accounts declined considerably in The net inflow of foreign capital into the United States expanded dramatically, almost doubling from 2003 to 2004 (Table I.4). Net foreign direct investment inflows in the United States increased in 2004, while net foreign purchases of stocks fell to US$102.4 billion, approximately two-thirds the 2003 level. Net purchases of U.S. Treasury Securities by non-u.s. investors fell sharply, to US$4.6 billion, following two years of strong net purchases. 23. The depreciation of the U.S. dollar against major currencies has not improved the current account deficit. This may stem from the enlarged capacity of the United States to fund deficits due to strong demand for dollar-denominated assets abroad, triggered partly by the higher real rates of return on U.S. dollar investments compared with investments in other major currencies. The Chairman of the Federal Reserve Board has noted that it may also be caused by exporters to the United States absorbing the exchange rate depreciation through compressed gross profit margins to avoid rising prices and losing market share. 21 Other factors 26

38 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch cited by the IMF as having an effect on pass-through include the declining share of commodities as a proportion of overall U.S. trade and productivity growth allowing exporters to the United States to preserve profit margins despite currency fluctuations The U.S. current account deficit has been linked to several factors: the fiscal deficit, a drop-off in private saving rates, the surge in productivity growth, the slowdown in foreign demand, and the narrowing of risk premiums on global-denominated assets. The results of a simulation conducted using the Federal Reserve Board staff's macroeconomic model led the Federal Reserve to conclude that many of those factors are not unrelated and may be part of a broader evolution of the global economy, requiring a global adjustment, since government policies such as budget-cutting or encouragement of private saving are unlikely, by themselves, to correct the current account deficit, much as they might be desirable for other reasons. 23 The simulation accorded the greatest roles to increased productivity growth, which has made the United States a magnet for foreign saving, and to the slump in foreign domestic demand, which has led to an excess of saving in foreign economies. It found that larger fiscal deficits increase the Government's draw on available credit and dampen private consumption and investment spending, thereby limiting the deterioration of the current account. 25. Observers have expressed concern with respect to the sustainability of the current account deficit. The Federal Reserve has noted that, "although views differ as to when a correction 27

39 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 will take place, nearly all agree that the current trajectory of the U.S. current account deficit is unsustainable", since the deficit is causing the net indebtedness of the U.S. economy to rise more rapidly than U.S. income. 24 The IMF, noting that the counterpart of the current account deficit has been massive foreign capital inflows, has stated that "financial flows in the United States have departed from long-term trends and appear unsustainable, with foreign savings and corporate profits increasingly financing government and household spending". 25 (6) DEVELOPMENTS ON TRADE AND INVESTMENT (i) Merchandise trade 26. The upturn in the economy has had a strong impact on merchandise imports, which expanded by 15% in In general, imports of primary products grew at a considerably faster rate than imports of manufactures (28% versus 15%). There was a particularly sharp increase in imports of fuels between 2002 and Among manufactures, the strongest import growth was iron and steel. Exports also expanded sharply, reaching a historical peak in Exports of mining products, fuels (especially coal), and chemicals displayed particularly strong growth in that year (Tables AI.1 to AI.4) U.S. trade patterns are amongst the most geographically diversified of all major WTO Members. NAFTA partners continued to account for the largest share among export destina- 28

40 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch tions in 2004, with 23% of U.S. exports going to Canada and 13.5% to Mexico. Exports to non-nafta partners in the Americas increased in value terms during the period, particularly Brazil, Colombia, and Venezuela. Exports to the European Union, the second largest export market for U.S. products, also increased in value terms, although market share declined slightly. Among the United States' Asian partners, exports to China, and Singapore, showed strong growth in value and percentage terms. The share of U.S. exports to Africa advanced strongly in value, but the percentage share of overall exports to Africa remained the same. 28. Merchandise imports from Canada and Mexico were higher over (up 14% and 13% respectively) in value terms, although the shares of both decreased. Canada remained the United States' largest supplier, accounting for 17% of imports in Imports from non-nafta partners in the Americas increased, though import share remained stable during the period. Imports from China expanded 29%, to almost 14% of total U.S. imports in Imports from Japan rose 10% in 2004, but import share declined. (ii) Trade in services 29. Data for U.S. trade in services are estimated and published by the Bureau of Economic Analysis (BEA). 27 In 2004 (the latest year for which figures are available), the surplus in crossborder services trade amounted to US$65.3 billion. 28 The U.S. surplus in trade in services has been shrinking since From

41 Trade Policy Review of the USA: The WTO Secretariat Report,Volume Five: 2006 to 2003 imports of private services increased 8%, while exports increased 5%. 30. The largest surplus in services trade continues to be in royalties and licence fees, which represent receipts and payments for intellectual property rights (see Chapter III(4)(v)), closely followed by other private services, such as education, financial services, insurance and business, professional and technical services (Table AI.5). Transport exports, consisting of travel and passenger fares, were affected by a sharp reduction in travel in 2003, because of the commencement of the war in Iraq and the outbreak of severe acute respiratory syndrome. In imports, the largest increases were in the other transportation, which consists of freight charges and port services, and in other private services. There was also a large increase in insurance. 31. The main trading partners for U.S. services exports in 2003 were the United Kingdom (11.7% of the total), Japan (10.1%), Canada (9.1%), Germany (6.0%), and Mexico (5.6%). The main partners for imports were the United Kingdom (13.4%), Canada (8.4%), Japan (7.61%), Bermuda (7.2%), and Germany (7.2%) Services sold abroad by U.S. companies through their world-wide affiliates to foreigners reached US$477.5 billion in 2003, the most recent year for which data were available. 30 Affiliates in Europe accounted for some 56% of the total, followed by the Asia Pacific region, and Latin America. The value of services sold by foreign multinationals through their U.S. affiliates to U.S. persons was US$381.4 billion. Most sales by affiliates are local. In 30

42 เอกสารข อม ลหมายเลข 28 โครงการ WTO Watch 2003, sales of U.S. multinationals through their world-wide affiliates increased by 13% over the previous year, while foreign multinationals' sales through their U.S. affiliates to U.S. persons rose by 4%. (iii) Foreign direct investment 33. Foreign direct investment in the United States increased by US$115.6 billion in 2004, to US$1.53 trillion. 31 Net equity capital inflows decreased for the fourth consecutive year, however, declining US$17 billion from 2003 to a total of US$68.7 billion in Equity capital inflows, which reflect new acquisitions and additional funding to existing affiliates, reached a peak of US$259.6 billion in 2000 and have been decreasing since then. The largest acquisitions by foreign investors were in finance and insurance. The capital inflows to the United States in 2004 reflected merger and acquisition activity, reinvested earnings and a decrease of intercompany debt outflows. 34. U.S. direct investment abroad increased 15% in 2004 to US$2.06 trillion, growing from US$1.71 trillion in These outflows consisted mostly of equity outflows for the purpose of acquiring or establishing foreign affiliates, or reinvested earnings. Net equity capital outflows were US$80.7 billion in 2004, up from US$19.2 billion in The largest movements in net equity capital outflows were in the Asia Pacific region, with media, medical equipment and supplies manufacture featuring significantly. There was also a significant inflow of inter-company debt, most of it attributable to borrowing by U.S. parent companies from their 31

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