Section 402 required that any trade agreement entered into under section 102(b) with Israel provide for the reduction or elimination of duties only on articles that meet rule-of-origin requirements similar to those under the Caribbean Basin Initiative (CBI): 1. The article must be the growth, product or manufacture of Israel or foreign materials or components must be substantially transformed into a new or different article grown, produced, or manufactured in Israel. Related provisions are designed to prevent qualification of minor pass-through operations and transshipments; 2. The article must be imported directly from Israel into the U.S. customs territory; and 3. At least 35 percent of the total value of the article must consist of materials produced in Israel plus direct cost of processing operations performed in Israel, of which 15 percent may be U.S. content. Sections 403 and 406 of the 1984 Act make clear that existing trade laws available to domestic industries for relief from injurious import competition or unfair trade practices continue to apply to imports under the trade agreement with Israel. As under the CBI legislation, the President may suspend the reduction or elimination of any duty under the trade agreement with Israel and proclaim a duty as import relief under section 203 of the Trade Act of 1974 or as a national security measure under section 232 of the Trade Expansion Act of 1962. Alternatively the President may establish a margin of preference or maintain the duty reduction or elimination on Israeli articles while imposing relief on imports from other sources. The U.S. International Trade Commission must state in its report to the President on import relief investigations involving Israeli articles covered in a trade agreement whether and to what extent its injury findings and recommended relief apply to imports from Israel. Section 404 of the Trade and Tariff Act of 1984 applies a special procedure similar to that established under the CBI whereby petitions may be filed with the Secretary of Agriculture for emergency relief on perishable products from Israel pending action on a petition filed for normal import relief action. The Secretary must determine and report to the President within 14 days a recommendation for emergency action if he has reason to believe an agricultural perishable product from Israel is being imported in such increased quantities as to be a substantial cause or threat of serious injury to the U.S. industry. The President must determine within 7 days whether to take emergency action, which consists of withdrawing the reduction or elimination of duty and restoring the original rate pending final action on the import relief petition. UNITED STATES-ISRAEL FREE TRADE AREA AGREEMENT The free trade area with Israel was the first such arrangement negotiated by the United States with any foreign country aside from the bilateral free trade arrangement with Canada in the automotive sector only. Unlike the unilateral Caribbean Basin Initiative (see description in chapter 1, supra), the United States-Israel arrangement is a reciprocal free trade area. The Agreement is an adjunct to existing multilateral obligations of both parties under the General Agreement on Tariffs and Trade (GATT); existing rights and obligations between the countries under the GATT or other agreements continue to apply unless specifically modified by the terms of the Agreement. The main element of the Agreement is the reciprocal elimination of tariffs on all products traded between the two countries by January 1, 1995 and the elimination of other restrictive regulations of commerce on bilateral trade as provided under Article XXIV of the GATT for free trade areas. Duties are being eliminated by both countries over 10 years in four staging categories depending on the relative import sensitivity of articles for domestic producers. Duties on certain products were eliminated immediately as of September 1, 1985. The Agreement also prohibits the introduction of new duties or quantitative restrictions in bilateral trade unless they are permitted by the Agreement or by the GATT. The Government of Israel undertook specific commitments concerning the reduction and elimination of its export subsidy programs and limited its GATT right as a developing country to apply duties to protect infant industries. Both parties must review their veterinary and plant health rules to insure nondiscrimination and not undue trade obstruction, undertook limitations on the duration of temporary restrictions that might be imposed in serious balance-of-payments situations, and reaffirmed existing bilateral obligations on intellectual property rights. The Agreement prohibits the imposition of import licensing requirements except in certain circumstances and of export or domestic purchase performance requirements on investment. The Agreement requires both countries to waive their Buy National restrictions on government procurement contracts valued $50,000 or more for articles or services covered by the GATT Agreement on Government Procurement. The Agreement contains various safeguard provisions consistent with Title IV of the Trade and Tariff Act of 1984 to permit import relief measures under certain circumstances, and rule-of-origin requirements to ensure that free trade area benefits accrue only to the two parties. Import restrictions other than customs duties may also be maintained based on agricultural policy considerations. A Joint Committee reviews and administers the Agreement and provides for dispute settlement. UNITED STATES-ISRAEL FREE TRADE AREA IMPLEMENTATION ACT OF 1985 The United States-Israel Free Trade Area Implementation Act of 1985 approved the United States-Israel Free Trade Area Agreement and statement of administrative action submitted to the Congress on April 29, 1985 and made necessary and appropriate changes in U.S. laws for its domestic implementation. U.S. statutes prevail if a provision of the Agreement is in conflict. No private rights of action or remedies are created. Expedited legislative approval procedures apply to subsequent changes in U.S. statutes to implement requirements, amendments, or recommendations under the Agreement. The President is authorized to proclaim the modifications or continuance of existing duties or duty-free treatment to implement the schedule for U.S. duty elimination under the Agreement. Duties on certain import-sensitive articles remain unchanged until their elimination on January 1, 1995 unless Congress passes authorizing legislation under expedited procedures for gradual phaseout beginning after December 31, 1989 and elimination does not occur prior to January 1, 1995. The President may withdraw, suspend, or modify any duty or duty-free treatment or proclaim additional duties necessary to maintain the general level of concessions under the agreement. The implementing legislation also amended Title III of the Trade Agreements Act of 1979 to lower the threshold contract value to $50,000 or more on which the President may waive Buy American restrictions on eligible products or services from Israel covered by the GATT Agreement on Government Procurement. United States-Canada Trade Relations Section 102(b) of the Trade Act of 1974, as amended by section 401 of the Trade and Tariff Act of 1984, authorized the President to enter into bilateral reciprocal trade agreements with foreign countries to eliminate or reduce tariffs on bilateral trade as well as nontariff barriers if the following procedural requirements were met: (1) The foreign country requested the negotiation of a bilateral trade agreement; (2) The President gave at least 60 days advance notice of negotiations to the House Committee on Ways and Means and the Senate Committee on Finance and consulted with these committees regarding negotiation of such an agreement; and (3) Neither Committee disapproved of the negotiation of such an agreement before the end of that 60-day period. Agreements entered into under this authority were subject to further Congressional consultation requirements and approval of implementing legislation under the expedited procedures of sections 102 and 151-154 of the Trade Act. This bilateral trade agreement authority expired on January 3, 1988. In March 1985, President Reagan and Prime Minister Mulroney directed their respective trade officials to explore ways to liberalize between the two countries. On September 26, Canadian Prime Minister Mulroney proposed bilateral trade negotiations on the "broadest possible package of mutually beneficial reductions in barriers to trade in goods and services." On December 10, President Reagan notified the House Committee on Ways and Means and the Senate Committee on Finance of the Administration's desire to enter into bilateral trade negotiations with Canada under the section 102 authority. On October 3, 1987, President Reagan submitted the 90-day advance notice to the Congress of his intention to enter into a trade agreement with Canada on January 2, 1988, the day before expiration of the authority, "contingent upon successful completion of the negotiations." On January 2, 1988, President Reagan and Prime Minister Mulroney signed the United States-Canada FreeTrade Agreement on behalf of their respective governments. On July 25, 1988, the President transmitted to the Congress a copy of the Agreement, a statement of administrative action, proposed implementing legislation, and a statement of how the Agreement serves the interests of U.S. commerce. The implementing legislation passed the House on August 9 and the Senate on September 19, and was signed into law by the President on September 28, 1988. The Agreement entered into force on January 1, 1989. UNITED STATES-CANADA FREE-TRADE AGREEMENT The United States-Canada Free-Trade Agreement is one of the most comprehensive bilateral trade agreements ever negotiated and creates one of the world's largest internal markets for goods and services. It is the only bilateral reciprocal free trade area agreement other than the agreement with Israel in 1985 to which the United States is a party. The two federal governments agreed to ensure that state, provincial, and local governments take necessary actions in areas under their jurisdiction to implement the Agreement. Each party agreed to accord national interest treatment to the goods, services, and investment of the other party to the extent provided in the Agreement. The central provision of the Agreement is the phased out elimination of tariffs on all goods traded between the two countries within 10 years, by January 1, 1998, in three staging categories. Tariff elimination on particular products can be implemented faster than scheduled by mutual agreement. The Agreement contains rules of origin based primarily on changes in tariff classifications to determine that only products with sufficient content originating in either or both countries receive the benefits of preferential tariff treatment. Customs user fees and duty drawback programs must be phased out by 1994 for bilateral trade; duty waivers linked to performance requirements, except certain waivers affecting automotive trade, and duty remission programs for autos must be terminated by 1988. The Agreement eliminates and prohibits import and export quotas or other restrictions, unless specifically permitted by the Agreement or by the General Agreement on Tariffs and Trade (GATT), and liberalizes or harmonizes laws and regulations relating to technical standards. Other Agreement provisions liberalize barriers affecting agriculture, automotive products, wine and distilled spirits, energy, government procurement, services, investment, temporary entry for business persons, and financial services. Certain "cultural industries" are exempt from the Agreement. Temporary import relief actions may be taken on a bilateral or global basis under certain circumstances to safeguard domestic industries from import-related injury. Institutional provisions are included for the avoidance or settlement of disputes between the two parties concerning the interpretation or application of the Agreement. A major element of the Agreement is establishment of a mechanism for review by binational panels and extraordinary challenge committees of final antidumping and countervailing duty determinations on products of the two countries in lieu of judicial review by courts of either party using the request of either party. UNITED STATES-CANADA FREE-TRADE AGREEMENT IMPLEMENTATION ACT OF 1988 The United States-Canada Free-Trade Agreement Implementation Act of 1988 30 approved the Agreement and statement of administrative action submitted to the Congress on July 25, 1988 and sets forth the relationship between obligations under the Agreement and U.S. laws. The legislation also makes changes in U.S. laws necessary or appropriate to implement obligations under the Agreement, sets forth negotiating objectives and authorities for further U.S.-Canada trade liberalization, and specifies procedures for domestic implementation of future changes in the Agreement. Technical amendments to various provisions were included in the Customs and Trade Act of 1990.31 U.S. laws prevail over the Agreement if there is a conflict; the Agreement prevails over any conflicting State or local law. No person other than the United States has a cause of action or defense under the Agreement. Changes in U.S. law necessary or appropriate to implement an amendment to the Agreement may be approved under the "fast track" Congressional procedures during the 30-month period after the Agreement enters into force. Certain actions may be implemented by Presidential proclamation subject to prior consultation and 60 calendar day Congressional layover requirements. The President is authorized to proclaim the modifications in U.S. rates of duty necessary to implement the scheduled phaseout and elimination of all tariffs on trade with Canada within 10 years. The rules of origin set forth in the Agreement to ensure application of preferential tariff treatment only to goods originating in Canada are enacted in the statute. The legislation implements U.S. obligations under the Agreement to phase out customs user fees on Canadian goods, to eliminate drawback with certain exceptions, and to exempt Canada from the lottery ticket embargo; provides penalties and recordkeeping requirements to enforce the rules of origin; and includes a reporting and monitoring requirement on the consistency of Canadian production-based duty remission programs with the GATT and the Agreement. The legislation also implements in U.S. domestic law various provisions of the Agreement concerning particular economic sectors, including agricultural products (authority to impose temporary duties on imports of fresh fruits and vegetables, exemption of Canadian meat from any import limitations under the Meat Import Act, authority to exempt grain and grain products and sugar-containing products from Canada from section 22 import quotas); exports to Canada of Alaskan oil; exemption of Canadian uranium from U.S. enrichment restrictions; a lower contract threshold ($25,000) for exemption from Buy American restrictions on government procurement of articles from Canada covered by the GATT Agreement on Government Procurement; temporary entry of business persons; and extension of financial services. The legislation also includes procedures and criteria for the application of bilateral 30 Public Law 100-449, approved September 28, 1988, 19 U.S.C. 2112 note. 31 Public Law 101-382, approved August 20, 1990. |