The 1996 National Trade Estimate Report on Foreign Trade Barriers (NTE) is the eleventh in an annual series that surveys significant foreign barriers to U.S. exports.
In accordance with section 181 of the Trade Act of 1974 (the 1974 Trade Act),
as amended by section 303 of the Trade and Tariff Act of 1984 (the 1984 Trade
Act), section 1304 of the Omnibus Trade and Competitiveness Act of 1988 (the
1988 Trade Act) and section 311 of the Uruguay Round Trade Agreements Act (1994
Trade Act), the Office of the U.S. Trade Representative is required to submit to
the President, the Senate Finance Committee, and appropriate committees in the
House of Representatives, an annual report on significant foreign trade
The statute requires an inventory of the most important foreign barriers
affecting U.S. exports of goods and services, foreign direct investment by U.S.
persons, and protection of intellectual property rights. Such an inventory
facilitates negotiations aimed at reducing or eliminating these barriers. The
report also provides a valuable tool in enforcing U.S. trade laws, with the goal
of expanding global trade, which benefits all nations.
The report provides, if feasible, quantitative estimates of the impact of
these foreign practices upon the value of U.S. exports. Information is also
included on actions being taken to eliminate any act, policy, or practice
identified in the report.
SCOPE AND COVERAGE
Previous reports were based upon information compiled within USTR, the U.S.
Departments of Commerce and Agriculture, and other U.S. government agencies, and
supplemented with information provided by members of the private sector trade
advisory committees and U.S. embassies abroad. This same process, supplemented
by responses to an announcement in the Federal Register, was used in preparing
the 1995 report.
Trade barriers elude fixed definitions, but may be broadly defined as
government laws, regulations, policies, or practices that either protect
domestic products from foreign competition or artificially stimulate exports of
particular domestic products. This report classifies foreign trade barriers into
nine different categories. These categories cover government-imposed measures
and policies that restrict, prevent, or impede the international exchange of
goods and services. They include:
- Import policies (e.g., tariffs and other import charges, quantitative
restrictions, import licensing, customs barriers);
- Standards, testing, labeling, and certification (including unnecessarily
restrictive application of sanitary and phytosanitary standards, refusal to
accept U.S. manufacturers' self-certification of conformance to foreign product
standards and environmental restrictions);
- Government procurement (e.g., "buy national" policies and closed bidding);
- Export subsidies (e.g., export financing on preferential terms and
agricultural export subsidies that displace U.S. exports in third country
- Lack of intellectual property protection (e.g., inadequate patent,
copyright, and trademark regimes);
- Services barriers (e.g., limits on the range of financial services offered
by foreign financial institutions, regulation of international data flows, and
restrictions on the use of foreign data processing);
- Investment barriers (e.g., limitations on foreign equity participation and
on access to foreign government-funded research and development (R&D)
programs, local content and export performance requirements, and restrictions on
transferring earnings and capital);
- Anticompetitive practices with trade effects tolerated by foreign
governments (including anticompetitive activities of both state-owned and
private firms that apply to services or to goods and that restrict the sale of
U.S. products to any firm, not just to foreign firms that perpetuate the
- Other barriers (barriers that encompass more than one category, e.g.,
bribery and corruption, or that affect a single sector).
The NTE report covers significant barriers, whether they are consistent or
inconsistent with international trading rules. Many barriers to U.S. exports are
consistent with existing international trade agreements. Tariffs, for example,
are an accepted method of protection under the General Agreement on Tariffs and
Trade (GATT). Even a very high tariff does not violate international rules
unless a country has made a "bound" commitment not to exceed a specific rate. On
the other hand, where measures are not consistent with international rules, they
are actionable under U.S. trade law and through the World Trade Organization
This report discusses the largest export markets for the United States,
including 42 nations, Taiwan, Hong Kong, and two regional bodies. Some countries
were excluded from this report due primarily to the relatively small size of
their markets or the absence of major trade complaints from representatives of
U.S. goods and services sectors. However, the omission of particular countries
and barriers does not imply that they are no longer of concern to the United
In prior reports, most non-market economies also were excluded, since the
trade barriers in those countries were qualitatively different from those found
in other economies. However, as the economies of the republics of the former
Soviet Union and most economies of the countries of Central Europe evolve away
from central planning toward a market orientation, some of them have changed
sufficiently to warrant an examination of their trade regimes. Where such
examination has revealed trade barriers, those barriers have been included in
The merchandise trade data contained in the NTE report are based on total
U.S. exports, free alongside (f.a.s.) value, and general U.S. imports, customs
value (defined in Section 402, Tariff Act of 1930, 19 U.S.C. 1401a), as reported
by the Bureau of the Census, Department of Commerce. (NOTE: These data are
ranked according to size of export market in the Appendix.) The direct
investment data are from the August 1995 issue of the Survey of Current Business
and unpublished data from the Bureau of Economic Analysis, Department of
TRADE IMPACT ESTIMATES AND FOREIGN BARRIERS
Wherever possible, this report presents estimates of the impact on U.S.
exports of specific foreign trade barriers or other trade distorting practices.
However, it must be understood that these estimates are only approximations.
Also, where consultations related to specific foreign practices were proceeding
at the time this report was published, estimates were excluded, in order to
avoid prejudice to those consultations.
The estimates included in this report constitute an attempt to assess
quantitatively the potential effect of removing certain foreign trade barriers
on particular U.S. exports. However, the estimates cannot be used to determine
the total effect upon U.S. exports to either the country in which a barrier has
been identified or to the world in general. In other words, the estimates
contained in this report cannot be aggregated in order to derive a total
estimate of gain in U.S. exports to a given country or the world.
Trade barriers or other trade distorting practices affect U.S. exports to
another country because these measures effectively impose costs on such exports
that are not imposed on goods produced domestically in the importing country. In
theory, estimating the impact of a foreign trade measure upon U.S. exports of
goods requires knowledge of the (extra) cost the measure imposes upon them, as
well as knowledge of market conditions in the United States, in the country
imposing the measure, and in third countries. In practice, such information
often is not available.
Where sufficient data exist, an approximate impact of tariffs upon U.S.
exports can be derived by obtaining estimates of supply and demand price
elasticities in the importing country and in the United States. Typically, the
U.S. share of imports is assumed to be constant. When no calculated price
elasticities are available, reasonable postulated values are used. The resulting
estimate of lost U.S. exports is approximate, depends upon the assumed
elasticities, and does not necessarily reflect changes in trade patterns with
third countries. Similar procedures are followed to estimate the impact upon our
exports of subsidies that displace U.S. exports in third country markets.
The task of estimating the impact of nontariff measures on U.S. exports is
far more difficult, since there is no readily available estimate of the
additional cost these restrictions impose upon imports. Quantitative
restrictions or import licenses limit (or discourage) imports and thus raise
domestic prices, much as a tariff does. However, without detailed information on
price differences between countries and on relevant supply and demand
conditions, it is difficult to derive the estimated effects of these measures
upon U.S. exports. Similarly, it is difficult to quantify the impact upon U.S.
exports (or commerce) of other foreign practices such as government procurement
policies, nontransparent standards, or inadequate intellectual property rights
In some cases, particular U.S. exports are restricted by both foreign tariff
and nontariff barriers. For the reasons stated above, it may be difficult to
estimate the impact of such nontariff barriers on U.S. exports. When the value
of actual U.S. exports is reduced to an unknown extent by one or more than one
nontariff measure, it then becomes derivatively difficult to estimate the effect
of even the overlapping tariff barriers on U.S. exports.
The same limitations that affect the ability to estimate the impact of
foreign barriers upon U.S. goods exports apply to U.S. services exports.
Furthermore, the trade data on services exports are extremely limited and of
questionable reliability. For these reasons, estimates of the impact of foreign
barriers on trade in services also are difficult to compute.
With respect to investment barriers, there are no accepted techniques for
estimating the impact of such barriers on U.S. investment flows. For this
reason, no such estimates are given in this report. The NTE report includes
generic government regulations and practices which are not product-specific.
These are among the most difficult types of foreign practices for which to
estimate trade effects.
In the context of trade actions brought under U.S. law, estimations of the
impact of foreign practices on U.S. commerce are substantially more feasible.
Trade actions under U.S. law are generally product-specific and therefore more
tractable for estimating trade effects. In addition, the process used when a
specific trade action is brought will frequently make available non-U.S.
government data (U.S. company or foreign sources) otherwise not available in the
preparation of a broad survey such as this report.
In some cases, industry valuations estimating the financial effects of
barriers are contained in the report. The methods computing these valuations are
sometimes uncertain. Hence, their inclusion in the NTE report should not be
construed as a U.S. government endorsement of the estimates they reflect.
March 31, 1996
- The current NTE report covers only those financial services-related market
access issues brought to the attention of USTR by outside sources. For the
reader interested in a more comprehensive discussion of financial services
barriers, the Treasury Department publishes quadrennially (most recently in
1994) the National Treatment Study. Prepared in collaboration with the Secretary
of State, the Office of the Comptroller of the Currency, the Federal Reserve
Board, the Federal Deposit Insurance Corporation, the Securities and Exchange
Commission, and the Department of Commerce, the Study analyzes in detail
treatment of U.S. commercial banks and securities firms in foreign markets. It
is intended as an authoritative reference for assessing financial services
- It is difficult to obtain information on specific problems associated with
bribery and corruption, particularly since its perpetrators go to great lengths
to conceal their activities. Nevertheless, a consistent complaint from U.S.
firms is that they have experienced situations that suggest corruption has
played a role in the award of foreign contracts.
This is particularly true in large infrastructure projects. Companies located
in other countries generally do not face the constraints applied to U.S. firms
under the Foreign Corrupt Practices Act (FCPA) in their dealings with government
officials in third countries. The result can be a competitive advantage in favor
of foreign firms in international transactions, particularly in the developing
Corruption takes many forms. For example, in many countries, it is seen in
government procurement and Customs practices. If left unchecked, bribery and
corruption can negate market access gained through trade negotiations and could
begin to undermine the foundations of the international trading system.
The United States is doing its part in combating this problem. We have
pressed the OECD to address bribes paid to foreign officials and we expect the
OECD to recommend in the near future that member countries prohibit the tax
deductibility of such bribes and make them subject to criminal penalties.
Additionally, the United States has worked in the Organization of American
States to obtain strong provisions in the Inter-American Convention Against
Corruption. This Convention, a direct result of the Summit of the Americas Plan
of Action, will include language modeled on the FCPA. States that become parties
will be obligated to criminalize the acts of corruption specified in the
To complement efforts in these fora, the United States has proposed that the
World Trade Organization (WTO) take up work in related areas. Several existing
WTO Agreements, such as the Customs Valuation Agreement and the Pre-shipment
Inspection Agreement, already address some problems associated with bribery and
corruption. The United States has also proposed that the WTO develop a more
comprehensive approach to government procurement, focusing on transparency,
openness and due process. In the future, the WTO may be an appropriate forum for
addressing other facets of bribery and corruption.
- This total includes as one unit the Newly Independent States (NIS),
comprising Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan,
Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.
- Free Alongside (f.a.s.): Under this term, the seller quotes a price,
including delivery of the goods alongside, and within the reach of the loading
tackle (hoist) of the vessel bound overseas.