of national security. The standard of review is "national security"; the provision affects only overseas investment flowing into the United States and is not intended to authorize investigations of investments that could not result in foreign control of persons engaged in interstate commerce nor to have any effects on transactions which are outside the realm of national security. Among the actions available to the President is the ability to suspend a transaction. The President may also seek appropriate relief in the district courts of the United States in order to implement and enforce the provisions, including broad injunctive and equitable relief including, but not limited to divestment relief. Chapter 6: RECIPROCAL TRADE AGREEMENTS Reciprocal Trade Agreement Objectives and Authorities Section 1102 of the Omnibus Trade and Competitiveness Act of 19881 provided authorities for the President to enter into reciprocal bilateral and multilateral trade agreements with foreign countries to reduce or eliminate tariff or nontariff barriers and other trade-distorting measures. Section 1102 replaced similar authorities under section 102 of the Trade Act of 19742 that expired on January 3, 1988. Except for the authority to proclaim modifications in U.S. tariffs under multilateral agreements, trade agreements entered into under section 1102 were subject to congressional approval of implementing legislation under special expedited, so-called "fast track" procedures. The basic purpose of the section 1102 authorities was to provide the means to achieve U.S. negotiating objectives set forth under section 1101 of the 1988 Act and to enable U.S. participation in the Uruguay Round of multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT) launched in September 1986. The authorities were also used for the North American Free Trade Agreement (NAFTA). The authorities expired on June 1, 1993, except that on July 2, 1993, section 1102 was amended to extend the fast track procedures to April 16, 1994 for the sole purpose of concluding the Uruguay Round negotiations.3 Although the fast track procedures have now expired with respect to new agreements, certain limited, residual authority remains with respect to tariffs.4 In addition, there are special trade agreement authorities that apply in limited circumstances or to deal with specific situations: (1) trade agreements entered into under section 123 of the Trade Act of 1974,5 as amended by the 1988 Act, to grant new concessions as compensation for import relief actions or any judicial or administrative tariff reclassification; (2) withdrawal, suspension, or modification of trade agreement obligations under section 125 of the Trade Act of 1974;6 (3) agreements with major state trading regimes acceding to the World Trade Organization (WTO); (4) trade agreements and remedies under sections 1371-1382 of the Omnibus Trade and Competitiveness Act of 19887 to obtain more open foreign market access in telecommunications trade; and (5) bilateral trade agreements with certain Communist countries providing for nondiscriminatory (most-favored-nation) treatment under certain conditions. 1Public Law 100-418, approved August 23, 1988, 19 U.S.C. 2902. 2 Public Law 93-618, approved January 3, 1975, 19 U.S.C. 2112. Public Law 103-49, approved July 2, 1993, 19 U.S.C. 2902(e). *See discussion on specific trade agreement authorities which follows. Public Law 93-618, 19 U.S.C. 2133. 6 Public Law 93-618, 19 U.S.C. 2135. TRADE NEGOTIATING OBJECTIVES Section 1101 of the Omnibus Trade and Competitiveness Act of 19888 set forth overall and principal trade negotiating objectives of the United States. Any multilateral or bilateral trade agreement entered into under the authorities of the expired section 1102 of the 1988 Act was required to make progress in meeting the applicable objectives described in section 1101. Section 1124 of the 1988 Act 9 requires the Secretary of the Treasury to take action to initiate bilateral currency negotiations on an expedited basis with a foreign party to trade agreement negotiations if the Secretary advises the President during the course of those negotiations that the country satisfies the criteria under section 3004(b) of the 1988 Act relating to exchange rate manipulation. Sections 131, 135 and 315 of the Uruguay Round Agreements Act 10 provide U.S. objectives for seeking a WTO working party on worker rights; extended negotiations in financial services, telecommunications, and civil aircraft; and intellectual property right protection. More specifically, section 131 requires the President to seek the establishment of a WTO working party to examine the relationship of international trade and worker rights. Section 135 sets forth principal U.S. negotiating objectives for the extended negotiations in the WTO on financial services, basic telecommunications, and on trade in civil aircraft. Section 315 sets forth objectives for the Administration to pursue in the field of intellectual property, which include accelerating the implementation of the TRIPS agreement, seeking the enactment of effective intellectual property rights laws abroad, and securing fair, equitable and nondiscriminatory market access opportunities for U.S. intellectual property based industries. The NAFTA Implementation Act includes a provision_regarding congressional intent for future free trade agreements. In this regard, section 108 of the Act 11 sets forth considerations and preliminary procedures for possible future free trade area agreements and accession by foreign countries to NAFTA. Article 2204 of the NAFTA sets forth the basis for the accession of any country or group of countries. In the United States, accession would require congressional approval and implementing legislation. Section 108 stipulates that congressional approval of NAFTA with respect to Canada or Mexico does not constitute approval of its extension to other countries. Section 108 also requires the President to report to Congress on his recommendations for future trade agreement countries and sets forth general U.S. negotiating objectives for accession. GENERAL TARIFF AUTHORITY Since enactment of the Reciprocal Trade Agreements Act of 1934, the Congress periodically has delegated authority to the President to negotiate and to proclaim reductions in tariffs under reciprocal 8 Public Law 100-418, 19 U.S.C. 2901. Public Law 100-418, 22 U.S.C. 5304 note. 10 Public Law 103-465, approved December 8, 1994, 19 U.S.C. 3551, 3555, 3581. 11 Public Law 103-182, approved December 8, 1993, 19 U.S.C. 3317. trade agreements, subject to specific conditions and limitations, without requiring further congressional action. The most recent grant of such authority was contained in section 1102(a) of the Omnibus Trade and Competitiveness Act of 1988. Prior to its expiration, section 1102(a) granted the President authority to enter into multilateral tariff agreements with foreign countries and to proclaim reductions in U.S. rates of duty required or appropriate to carry out such agreements, subject to the following limitations: (1) Reductions of existing U.S. duties cannot exceed 50 percent of existing rates of duty, except that duties of 5 percent ad valorem or below may be reduced to zero. (2) Staging authority requires that duty reductions on any article cannot exceed 3 percent ad valorem per year, or onetenth of the total reduction, whichever is greater, except that staging is not required if the U.S. International Trade Commission determines there is no U.S. production of the article. (3) Under rounding authority, annual duty reductions may exceed the limits by the lesser of the difference between the limit and the next lower whole number or one-half of 1 percent ad valorem in order to simplify computations. Any duty reductions negotiated in a trade agreement that exceed 50 percent of an existing duty higher than 5 percent ad valorem or any tariff increases would have to be approved by the Congress under the special fast track legislative procedures that apply to nontariff agreements. 12 The Uruguay Round Agreements Act provides certain limited, residual proclamation authority to the President with respect to tariffs. Specifically, section 111(a) provides very limited authority to the President to modify duties, change duty staging, and increase duties "as the President determines to be necessary or appropriate to carry out schedule XX." In addition, section 111(b)(1) provides that, subject to consultation and layover requirements, the President may proclaim tariff modification or staged rate reduction if the United States so agrees in a WTO negotiation and if it applies to the duty on an article in a tariff category that "was the subject of reciprocal duty elimination" (so-called "zero-for-zero elimination") "or harmonization negotiations" during the Uruguay Round. Acceleration of staging on other categories of tariffs would not be permitted under this authority. Finally, section 111(b)(2) provides that the President may make modifications necessary to correct "technical errors" in schedule XX. The North American Free Trade Agreement Implementation Act of 1993 also provides some limited proclamation authority with respect to tariffs. Specifically, section 201(a) provides the President with the very limited authority to modify duties, change duty staging, and increase duties as he "determines to be necessary or appropriate to carry out or apply" the Agreement. In addition, section 201(b) provides that, subject to consultation and layover requirements, the President may proclaim: tariff modifications or continuations, or staged rate modifications if the United States, Canada, and Mexico agree; continuation of duty-free treatment; and in 12 See also the discussion on specific trade agreement authorities, which follows. creased duties "as the President determines to be necessary or appropriate to maintain the general level of reciprocity and mutually advantageous concessions with respect to Canada and Mexico provided for by the Agreement." The Uruguay Round Agreements Act also provides authority for the President to increase duties on articles from countries which are not WTO members. Section 111(c) of the Act 13 authorizes the President, after congressional consultation, to increase duties on imports from countries that are not members of the WTO, or to which the United States does not apply the WTO, if he determines that the country is not according adequate trade benefits to the United States, including substantially equivalent competitive opportunities. The maximum rate of duty that may be proclaimed is the higher of the pre-Uruguay Round most-favored-nation (MFN) rate or the MFN rate of duty that will apply under the Uruguay Round schedule XX. MULTILATERAL TRADE AGREEMENT AUTHORITY Trade negotiations prior to the Tokyo Round concentrated primarily on reducing or eliminating tariffs. Relatively little effort and progress was made to reduce nontariff barriers or other tradedistorting measures such as subsidies. Section 102 of the Trade Act of 1974 resulted from considerable concern about the growing_importance and proliferation of such practices to the detriment of U.S. export trade and the need to develop new or more adequate international trading rules and mechanisms for their discipline. The purpose of section 102 was: (1) to make clear the importance of reducing, eliminating, or harmonizing nontariff barriers and other trade-distorting measures through a congressional policy mandate and specific authority for the President to negotiate and enter into reciprocal nontariff barrier trade agreements as the major focus of the Tokyo Round of GATT multilateral trade negotiations; (2) to expedite and reduce the uncertainties of the legislative process for approval and implementation of such trade agreements, thereby encouraging and facilitating negotiations with foreign governments; and (3) to increase and formalize the role of the Congress during the negotiating process and in the development of implementing legislation. The authority applied to U.S. foreign direct investment as well as to trade in both goods and services. Section 102 of the Trade Act of 1974 authorized the President to enter into reciprocal trade agreements for 5 years, until January 3, 1980, subject to congressional consultation requirements and approval of the agreements in implementing legislation considered under special expedited fast track procedures. Section 102 authority was used successfully to approve the agreements negotiated in the Tokyo Round and to make the changes in U.S. laws necessary for their domestic implementation under the Trade Agreements Act of 1979. That law extended the section 102 authority for an additional 8 years, until January 3, 1988, to enable the President to negotiate improvements or adjustments in existing agreements and to negotiate and enter into new agreements on non-tariff measures not dealt with in the Tokyo Round. 13 Public Law 103-465, 19 U.S.C. 3521. |