through an import surcharge. If the President determines that import restrictions are contrary to the national interest, he may refrain from imposing them but must inform and consult with Congress.

Section 122(d) requires that import restrictions be applied on a nondiscriminatory basis; it also requires that quotas aim to distribute foreign trade with the United States in a manner that reflects existing trade patterns. If the President finds, however, that the purposes of the provision would best be served by action against one or more countries with large and persistent balance of payment surpluses, he may exempt all other countries from such action. This section also expresses the sense of Congress that the President seeks modifications in international agreements to allow the use of surcharges instead of quotas for balance of payments adjustment purposes. If such international reforms are achieved, the President's authority to exempt all but one or two surplus countries from import restrictions must be applied in a manner consistent with the new international rules.

Section 122(e) provides that import restrictions be of broad and uniform application as to produce coverage, unless U.S. economic needs dictate otherwise. Exceptions under this section are limited to the unavailability of domestic supply at reasonable prices, the necessary importation of raw materials and similar factors, or if uniform restrictions will be unnecessary or ineffective (i.e., if products already are subject to import restrictions, are in transit, or are subject to binding contracts). The section prohibits the use of balance of payments authority or the exceptions authority to protect domestic industries from import competition. Any quantitative restriction imposed may not be more restrictive than the level of imports entered during the most recent representative period, and must take into account any increase in domestic consumption since the most recent representative period.

The President is authorized to modify, suspend, or terminate any proclamation issued under the section, either during the initial 150-day period or during any subsequent extension by act of Congress.

Background

Anticipating that oil-consuming nations would face large balance of payments deficits in an era of rapidly increasing oil prices, and believing that neither a reduction in the price of oil nor the necessary international monetary cooperation were certain to take place, Congress considered it necessary to authorize the President to impose surcharges or other import restrictions for balance of payments purposes, even though Congress assumed that under existing circumstances such authority was not likely to be used.47 The Senate Committee on Finance indicated it was necessary to give the President explicit authority to impose such measures for balance of payments reasons, in light of judicial action striking down the use of the Trading with the Enemy Act for such pur

47 Senate Report 93-1298 at 87-88.

poses. 48 President Nixon had invoked that law in 1971 when he imposed a temporary 10 percent import surcharge to redress a balance of payments deficit.

The use of surcharges for balance of payments purposes had gained de facto acceptance among industrialized member countries of the General Agreement on Tariffs and Trade (GATT) during the two decades preceding the 1974 Trade Act, but explicit GATT rules had never been adopted. GATT Article XII authorizes restrictions on the quantity or value of goods imported by a country facing a balance-of-payments deficit. GATT rules do not, however, explicitly sanction the use of surcharges for balance-of-payments purposes, nor do they establish a means to deal with countries running persistent balance-of-payments surpluses. The Texts Concerning a Framework for the Conduct of World Trade, 49 negotiated during the Tokyo Round of GATT multilateral trade negotiations, elaborated on the rules which apply to countries' use of import restrictions for balance-of-payments purposes. The so-called Framework Agreement did not fundamentally alter GATT rules in this area, however.

When it passed the Trade Act of 1974, Congress urged the President to enter into negotiations to develop new rules and required that U.S. surcharges measures, if imposed, conform to any new international standards.50 The Omnibus Trade and Competitiveness Act of 1988 called for the negotiation of rules to address large and persistent global current account imbalances, including the imposition of greater responsibility on surplus countries to undertake policy changes aimed at restoring current account equilibrium.51 Section 122 authority has never been invoked.

Product Standards

U.S. policy regarding the application of standards and certification procedures to imported products is based on the multilateral Agreement on Technical Barriers to Trade under the General Agreement on Tariffs and Trade (GATT), and its U.S. implementing legislation under title IV of the Trade Agreement Act of 1979.52

Differences in product standards, listing and approval proceducers, and certification systems often can impede trade and can be manipulated to discriminate against imports. Imports may be tested to determine whether they conform with domestic standards under conditions more onerous than those applicable to domestic products. Certification systems, which indicate whether products conform to standards, may limit access for imports or may discriminate by denying the right of a certification mark on imported products. Prior to the 1979 Agreement, however, there was virtually no multilateral cooperation or supervision to promote interna

48 The decision of the Customs Court was subsequently reversed on appeal. U.S. v. Yoshida International Inc., 526 F.2d 560 (C.C.P.A. 1975).

49 MTN/FR/W/20/Rev. 2, reprinted in House Doc. 96-153, pt. I, at 619.

50 Senate Report 93-1298 at 88.

51 P.L. 100-418, section 1101(b5); 19 U.S.C. 2901.

52 Public Law 96-39, approved July 26, 1979, 19 U.S.C. 2531-2573.

tional harmonization and to discourage nationalistic discriminatory practices.

AGREEMENT ON TECHNICAL Barriers to TRADE

The Agreement on Technical Barriers to Trade, 53 commonly referred to as the Standards Code, was one of the agreements on nontariff measures concluded during the 1973-79 Tokyo Round of GATT multilateral trade negotiations. The Code went into force on January 1, 1980. The Code does not attempt to create standards for individual products, or to set up specific testing and certification systems. Rather, it establishes, for the first time, international rules among governments regulating the procedures by which standards and certification systems are prepared, adopted and applied, and by which products are tested for conformity with standards. The Code was a major U.S. negotiating objective during the Tokyo Round, particularly given the formation of a European regional electrical certification system closed to outside suppliers.

The Standards Code seeks to eliminate national product standardization and testing practices and certification procedures as barriers to trade among the signatory countries and to encourage the use of open procedures in the adoption of standards. At the same time, it does not limit the ability of countries to reasonably protect the health, safety, security, environment, or consumer interests of their citizens. Generally, U.S. standards-setting processes have followed these basic norms, whereas other countries' standards-related activities have generally been closed to participation from foreign countries; these signatories are obliged to change their practices in order to comply with Code principles.

The Code's provisions are applicable to all products, both agricultural and industrial. They are not applicable to standards involving services, technical specifications include in government procurement contracts, or standards established by individual companies for their own use. The Code addresses governmental and non-governmental standards, both voluntary and mandatory, developed by central governments, state and local governments, and private sector organizations. Only central governments, however, are directly bound by Code obligations, whereas regional, state, local, and private organizations are subject to a second level of obligation whereby signatories "shall take such reasonable measures as may be available to them" to ensure compliance.

The Code is prospective, applying to new and revised standardsrelated activities. If a signatory country believes, however, that an existing regulation developed and put into effect before the Code came into force conflicts with the basic tenets of the Code, then that signatory may use the Code's dispute settlement mechanism to help resolve the problem.

The Standards Code contains the following key provisions obligating signatories to follow several general principles pertaining to standards-related activities:

(1) The most important and fundamental principle obligates signatory governments not to develop, intentionally or unin

53 MTN/NTM/W/192 Rev. 5, reprinted in House Doc. No. 96-153, pt. I, at 211.

tentionally, product standards, technical regulations, or certification systems which create unnecessary obstacles to foreign trade. The Code recognizes nations' sovereign right to formulate standards and certification systems to protect life, health and environment, but such regulations should be as least disruptive as possible to international trade.

(2) The second fundamental principle is that national or regional certification systems are to grant access to foreign or non-member signatory suppliers under conditions no less favorable than those granted to domestic or member country suppliers, a major change in most signatory policies. Signatories can no longer refuse to give their national certification marks to imported products, provided that the imported products fully meet the technical requirements of the certification system. Also regional certification bodies must be open to suppliers from all Code signatories.

(3) Signatories must provide foreign imported products the same treatment as domestic goods with respect to standards, technical regulations, and testing and certification procedures, i.e., an extension of the national treatment provision of GATT which prohibits discrimination against imported products.

(4) When developing new or revising existing product standards or technical regulations, governments are to use existing or proposed international standards as the basis where it is appropriate. Other signatories may request an explanation if a government fails to follow this principle.

(5) Whenever appropriate, signatories are encouraged to specify technical regulations and standards in terms of performance rather than design or descriptive characteristics. If a foreign product must be tested to determine whether it meets domestic standards before it can be imported, the Code provides a number of criteria that signatories are to follow to ensure non-discriminatory treatment. For example, foreign goods should not have to undergo costlier or more complex testing than domestic products in comparable situations. In addition, signatories are obligated to use the same methods and administrative procedures on imported as well as domestic goods. The Code does not obligate signatories to recognize test results or certification marks from another country. It does, however, encourage signatories to accept, whenever possible, test results, certifications or marks of conformity from foreign bodies, or self-certification from foreign producers even when the test methods differ from their own, provided that the importing country is satisfied that the exporting country's products meet the required standards.

Another important element of the Standards Code is the obligation of signatories to open up the process of developing or applying standards and certification procedures to each other. Governments must make available proposed mandatory or voluntary standards and certification procedures for comment during the drafting stage by other signatories before they become final regulations. Each signatory government must establish an inquiry point to respond to all reasonable questions from other signatories concerning their central, local, and state government standards and certification. procedures.

Finally, the Code establishes a Committee of Signatories which meets periodically to oversee implementation and administration of the agreement, as well as to discuss any new issues or problems which arise. The Committee may set up panels of experts or working parties as required to conduct Committee business or handle disputes.

TITLE IV OF THE TRADE AGREEMENTS ACT OF 1979

Congress approved the Agreement on Technical Barriers to Trade under section 2 of the Trade Agreements Act of 1979. Title IV of that Act implements the obligations of the Standards Code in U.S. law. 54 Since U.S. practices were already in conformity with the Code, title IV did not amend, repeal, or replace any existing law. It does ensure that adequate structures exist within the Federal Government to inform the U.S. private sector about the standards-related activities of other nations, facilitate the ability of the United States to comment on foreign standards-making and certifications, and process domestic complaints on foreign practices.

Section 402 of the 1979 Act requires all Federal agencies to abide by the above-described principles and provisions of the Code. In addition, section 403 states the "sense of Congress" that no State agency and no private person should engage in any standards-related activity, i.e., development or implementation of product standards or certification system, that creates unnecessary obstacles to foreign trade, and requires the President to "take such reasonable measures as may be available" to promote their observance of Code obligations.

The U.S. Trade Representative (USTR) is designated to coordinate U.S. trade policies related to standards, and discussions and negotiations with foreign countries on standards issues, and to oversee implementation of the Standards Code. The Departments of Agriculture and Commerce are required to work with the USTR on agricultural and non-agricultural issues respectively and to establish technical offices to fulfill a number of functions, particularly supplying notices to interested parties of proposed foreign government standards and receiving and transmitting private sector comments. The Department of Commerce maintains the National Center for Standards and Certification within the National Bureau of Standards as the national inquiry point required under the Code. Finally, title IV contains provisions concerning administrative and judicial proceedings regarding standards-related activities. No private rights of action are created by title IV; private parties can petition the U.S. Government to invoke provisions of the Code against practices of other signatories.

Government Procurement

U.S. policy on government purchases of foreign goods and services is based on the Buy American Act of 1933,55 the multilateral Agreement on Government Procurement under the General Agreement on Tariffs and Trade (GATT), and its implementing legisla

54 19 U.S.C. 2531-2573.

55 Act of March 3, 1933, ch. 212, title III, 47 Stat. 1520, 41 U.S.C. 10a-10d.