RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/56 
1 June 1999  
 
(99-2176) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
UNITED STATES 
 
Report by the Secretariat 
 
  
 
This report, prepared for the Trade Polic y Review of the United States, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from the Government of the United States on 
its trade policies and practices. 
 
Document WT/TPR/G/56 contains the policy statement submitted by the 
Government of the United States 
 
 
 
Note: This report is subject to restricted circul ation and press embargo until the end of the meeting 
of the Trade Policy Review Body on United States. United States WT/TPR/S/56 
 Page iii 
 
 
 CONTENTS 
 
  Page  
SUMMARY  OBSERVATIONS ix 
 (1) M AIN ECONOMIC DEVELOPMENTS  ix 
 (2) T RADE POLICY REGIME :  FRAMEWORK AND OBJECTIVES  x 
 (3) T RADE AND TRADE -RELATED POLICIES , PRACTICES AND MEASURES  xi 
 (i) Import measures xi 
 (ii) Export measures xii 
 (iii) Internal measures xii 
 (4) T RADE POLICIES IN SERVICES  xiii 
 (5) O UTLOOK  xiv 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AIN ECONOMIC DEVELOPMENTS  1 
 (2) M ACROECONOMIC POLICIES  6 
 (i) Monetary and exchange rate policies 6  (ii) Fiscal policy 7 
 (iii) Saving-investment gap 8 
 (3) M
AIN DOMESTIC STRUCTURAL POLICY ISSUES  9 
 (i) Taxation 9 
 (ii) Social security and related measures 10  (iii) Labour market policies 11 
 (iv) Competition policies 12 
 (4) T
RADE PERFORMANCE  12 
 (i) Composition of merchandise trade 13 
 (ii) Pattern of merchandise trade 13 
 (iii) Composition of trade in services 13  (iv) Direction of trade in services 14 
 (v) Foreign direct investment 17 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 19 
 (1) O
VERVIEW  19 
 (2) T RADE POLICY OBJECTIVES  19 
 (3) D EVELOPMENT AND ADMINISTRATION OF TRADE POLICY  20 
 (i) Main trade laws and authority 20 
 (ii) Agencies involved in trade policy formulation and implementation 20 
 (iii) "Fast-trac k" procedures 23 
 (4) T RADE RELATIONS AND AGREEMENTS  26 
 (i) WTO 26 
 (ii) Other Multilateral agreements 31 
 (iii) Regional agreements 31 
 (iv) Preferential agreements 36  (v) Bilateral agreements 42 
 (5) B
ILATERAL INVESTMENT TREATY PROGRAMME  43 WT/TPR/S/56 Trade Policy Review 
Page iv 
 
 
     P a g e  
III. TRADE POLICIES AND PRACTICES BY MEASURE 45 
 (1) O VERVIEW  45 
 (2) B ORDER MEASURES  46 
 (i) Tariffs 46 
 (ii) Rules of origin, marking and labelling 54 
 (iii) Non-tariff measures 55  (iv) Contingency measures 59 
 (3) M
EASURES AFFECTING EXPORTS  78 
 (i) Export prohibitions and licensing 78  (ii) Export subsidies 80 
 (iii) Duty and tax conce ssions affecting exports 81 
 (iv) Export finance, insurance and guarantees 82  (v) Section 301 and related measures 84 
 (4) I
NTERNAL MEASURES  96 
 (i) Taxation 96  (ii) Non-tax measures affecting investment 102 
 (iii) Trade-related intellectual property rights 107 
 (iv) Standards, sanitary requirements, and environmental regulations 121 
 (v) Government procurement 131 
 (vi) Corporate governance 141  (vii) Competition policies 142 
Annex III.1:   Textiles  159 
Annex III.2:   Agriculture 163 Annex III.3:   Steel  174 
IV. TRADE POLICIES IN SERVICES 179 
 (1) O
VERVIEW  179 
 (2) F INANCIAL SERVICES  180 
 (i) Introduction 180 
 (ii) Recent developments 181  (iii) International agreements 189 
 (iv) Financial market integration 190 
 (3) T
ELECOMMUNICATIONS SERVICES  192 
 (i) Introduction 192 
 (ii) Market structure 193 
 (iii) WTO Basic Telecommunications Agreement 193 
 (4) T RANSPORTATION SERVICES  197 
 (i) Introduction 197 
 (ii) Maritime transport services 199 
 (iii) Air transport services 203 
 (5) PROFESSIONAL SERVICES  210 
 (i) Introduction 210 
 (ii) Legal services 213 
 (iii) Accounting services 216  (iv) Architectur al services 219 
 (v) Engineering and integrated engineering services 220 United States WT/TPR/S/56 
 Page v 
 
 
     P a g e  
REFERENCES   223 
APPENDIX TABLES  229 
 
 
 
 
 
CHARTS  
 
 
I. ECONOMIC ENVIRONMENT I.1 Composition and direction of merchandise trade, 1993-97 15 
I.2 Composition and direction of trade in services, 1993-97 16 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES DRAFT 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Share of specific duties, by HS section, 1999 49 III.2 Simple average applied MFN tariff rates, by HS section 51 
III.3 MFN tariff distribution, 1999 52 
III.4 Anti-dumping case activity, 1980-98 67 
III.5 Anti-dumping duty orders in effect on 1 January 1999 70 
III.6 Countervailing duty case activity, 1980-98 71 III.7 Countervailing duty orders in effect on 1 January 1999 72 
III.8 Subsidy programmes by sector, 1996 and 1998 105 
  
 
 
  
 
TABLES  
 
I. ECONOMIC ENVIRONMENT 
I.1 Selected macroeconomi c indicators, 1990-98 2 
I.2 Shares of GDP and employment by sector, 1990-97 6 I.3 Current and capital accounts 8 
I.4 Inward and outward FDI flows, 1995-97 17 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
II.1 Comparison of 1974 and 1988 proclamation authority/"fast-track" legislation 
 with proposed 1998 legislation 24 II.2 Model schedule for a NAFTA Chapter 19 panel review as per  
 the Rules of Procedures 35 WT/TPR/S/56 Trade Policy Review 
Page vi 
 
 
     P a g e  
II.3 Model schedule for NAFTA Chapter 20 Arbitral Panel as per the 
 Rules of Procedures  35 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Structure of applied MFN tariffs in the United States 47 
III.2 MFN tariff escalation, based on simple applied MFN tariff averages, in the United States 52 
III.3 U.S. tariff preferences by agreement, and import volumes, 1999 53 III.4 Duties applied on imports of broom corn brooms, 1996-99 60 
III.5 Duty-free imports of broom corn brooms, 1996-99 61 
III.6 Distribution of U.S. wheat gluten import quantitative limits 62 III.7 Anti-dumping investigations, 1980-98 68 
III.8 Anti-dumping and countervailing duty investigations initiated between 
 1 January 1996 and 31 December 1998, by product and country 69 
III.9 Countervailing duty investigations, 1980-98 72 
III.10 Suspension agreements in effect on 1 January 1999 73 
III.11 Eximbank activities 83 III.12 Section 301 initiated cases 1996-98 87 
III.13 Selected major federal tax expe nditures in income tax, ranked by  
 total 2000 revenue loss, 1998-2000 99 
III.14 Tax expenditure for selected sectors, 1997-2004  101 
III.15 Royalties and licence fees, 1993-98 107 III.16 Summary of patent examining activities, 1993-98 109 
III.17 U.S. patent applications by non-U.S. residents, ten main countries, FY 1993-97 110 
III.18 Summary of trademark examining activities, 1993-97 112 III.19 Section 337 investigations, 1996-98 120 
III.20 U.S. commitments under the WTO Plurilateral Agreement on Government Procurement 134 
III.21 United States threshold calculations u nder the Agreement on Go vernment Procurement 
 for the period 1998-99 134 
III.22 Antitrust division activities and case results, 1990-98 151 
III.23 Fines of US$10 million or more applied by the Department of Justice due to  Sherman Act Violations, 1997-98 152 
III.24 Summary of mergers reported and actions taken (fiscal years 1990-98) 154 
III.25 Principal FTC anti-trust actions, fiscal year 1998 155 
Annex table III.2.1 Protection in selected agricultural sectors, 1999 164 
Annex table III.2.2 In-quota tariff use 1996-98 165 
Annex table III.2.3 Transfers associ ated with agricultural policies 170 
IV. TRADE POLICIES IN SERVICES 
IV. Trade in financial services, 1993-97 181 
IV.2 Operations of FBOs in the United States, 31 March 1998 184 
IV.3 Trade in transportation services, 1993-97 198 
IV.4 New/expanded bilateral aviation agreements negotiated since 1993 206 IV.5 Trade in professional services, 1993-97 211 
IV.6 Summary of U.S. commitm ents in legal services 215 United States WT/TPR/S/56 
 Page vii 
 
 
 APPENDIX TABLES  
 
  Page  
I. ECONOMIC ENVIRONMENT 
AI.1 Exports by group of products, 1990-97 231 
AI.2 Imports by group of products, 1990-97 233 
AI.3 Exports by destination, 1990-97 235 AI.4 Imports by origin, 1990-97 236 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES DRAFT 
AII.1 List of trade and investment agr eements entered by the United States 
 between 1996 and 1998 237 
AII.2 Status of selected notification requir ements to the WTO, as circulated to  
 WTO Members on 1996-03.99 239 AII.3 Disputes in which the United States has been involved as a complainant, 1996-1999 242 
AII.4 Disputes involving complaints against the United States, 1996-1999 249 
AII.5 NAFTA disputes involving the United States under Chapters 19 and 20  initiated or terminated between 1996 and end-February 1999 253 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
AIII.1 Anti-dumping duty orders in effect on 1 January 1999 by country and products 255 
AIII.2 Countervailing duty orders in effect on 1 January 1999 258 AIII.3 Calendar of Sunset Reviews, July 1998-December 1999, and results available 
 as of 30 April 1999 259 
AIII.4 Bilateral intellectual property agreements signed by the United States,   as at 31 December 1998 262 
AIII.5 Exclusion and cease and desist orders issued by the USITC in  
 section 337 investigations, 1996 and 1997 266 AIII.6 Federal Trade Commission:  Consent Orders Issued and Civil Penalty Actions FY 1997 267 
 
 United States WT/TPR/S/56 
 Page ix 
 
 
 SUMMARY OBSERVATIONS 
 
(1) M AIN ECONOMIC DEVELOPMENTS  
1. During the period under review (1996-
98), U.S. economic performance has continued 
to be outstanding, even in the wake of the financial turmoil that erupted in Asia in July 1997 and subsequently spread to other parts of the world.  Since 1991, the United States has 
enjoyed the second longest period of sustained 
economic growth since records began in 1854, with real GDP growth averaging over 2.8% during the years 1992-96 before accelerating to 3.9% in 1997 and 1998.  The main factors contributing to this impressive growth have 
been private consumption and especially 
investment, both of which outstripped GDP growth in 1998, thereby drawing in imports.  In real terms, imports too grew much faster than GDP, not only in 1998, but in the 
previous two years, while exports, after 
experiencing similarly rapid growth in 1996 and 1997, barely increased in 1998.  In addition, the unemployment rate fell to 4.5% at the end of 1998 and consumer price inflation to 1.6%, their lowest levels since the 
1960s.  These extremely beneficial economic 
developments have followed the considerable trade and investment liberalization that resulted from the Uruguay Round Agreements and the North American Free Trade 
Agreement (NAFTA) with Canada and 
Mexico. 
2. This outstanding macroeconomic 
performance has been greatly facilitated by a large and growing current account deficit, 
which, in 1998, reached a record level of 
US$233 billion (2.7% of GDP);  the previous record of US$168 billion (3.6% of GDP) was in 1987.  The trade deficit has enabled the U.S. economy to sustain its strong rate of growth in the face of domestic constraints on its 
productive capacity and a labour market that is 
at its tightest for nearly 30 years.  Imports, often at lower prices, have provided a safety valve, helping to satisfy domestic demand.  They have also contributed to lower domestic 
prices and wider choice for U.S. consumers.  
U.S. producers too have benefited from lower costs and wider choice of inputs, which have 
increased their competitiveness, resulting in more jobs and higher wages, especially in exporting activities, where average wages are 
higher than for other jobs.  Competition from 
imports also helps enhance productivity.  Indeed, labour productivity grew at an average annual rate of 2.4% during the period 1996-98, more than double the rate of improvement in 
1990-95;  total factor productivity (TFP) 
increased by an average annual rate of 1.2% in 1996-97, compared to 0.1% per annum during the period 1990-95.  In general, imports have 
helped subdue inflationary pressure that might otherwise have emerged as a result of the very 
strong growth of domestic demand and low 
unemployment rate, thereby supporting low market interest rates. 
3. On the other hand, the widening of the 
current account deficit has provoked 
allegations in the United States that some 
foreign producers are engaging in "unfair" trading practices to the detriment of U.S. producers.  Such allegations have, in turn, led to a certain protectionist pressure from some sectors, aimed at persuading the U.S. 
Government to implement unilateral measures 
(notably anti-dumping actions and section 301 investigations) to curb imports of some products from specific countries and to move to further open foreign markets to U.S. 
exporters;  by and large, the Administration 
has resisted such pressure, much to the benefit of the multilateral trading system. 
4. The current account deficit reflects the 
gap between national saving and domestic 
investment.  That gap has widened since 1995 
as national saving has failed to keep pace with investment.  While national saving rose as a proportion of GDP from 16.3% in 1995 to 17.2% in 1998, domestic investment climbed from 17.4% to 18.9%.  National saving has 
risen, despite the sharp decline of personal 
saving as a consequence of U.S. consumers increased willingness to spend.  After its steady decline from 5.7% in 1992, a rate that was already low by international standards, 
personal saving as a percentage of disposable 
income is now close to zero;  indeed, it was WT/TPR/S/56 Trade Policy Review 
Page x 
 
 
 negative in the latter part of 1998.  The 
current, historically low personal saving rate is probably due in large measure to the positive "wealth effect" of the rise in the value of 
personal equity portfolios relative to personal 
incomes owing to the rise in U.S. stock market prices to record levels;  the "wealth effect" involves the tendency for consumption to rise by a fraction of the capital gains on existing 
assets owned by households;  as unrealized 
capital gains add to wealth but are not included in income or saving, personal saving properly measured may not have fallen as dramatically as would appear.  Still, the decline in personal saving has been more than 
offset by stronger corporate saving and the 
turnaround in the Government's budget from a persistent deficit (government dissaving) to a surplus (government saving) in 1998.  At the same time, business investment in plant and 
equipment has been up sharply as a 
consequence, among other factors, of the ready availability of external financing and the marked reduction in government borrowing, which has left more resources available for private use. 
5. An additional source of funds for 
domestic investment has been capital inflows from abroad.  Indeed, the shortfall of national savings relative to dom estic investment was 
made up by foreign investors who have 
continued to be attracted to the United States 
by its liberal investment regime, profitable investment opportunities and its attractiveness as a safe haven following the financial crisis that erupted in Asia.  Foreign investment has 
thus enabled the U.S. economy to grow faster 
than would have been the case had it relied solely on domestic saving.  Foreign investment has also contributed to the recent marked improvement in labour productivity, which remains higher than in most other countries, 
thus reflecting the extremely efficient nature 
of the U.S. economy.  As a consequence, average living standards in the United States, as measured by a per capita GNP, are at US$28,740, among the highest in the world. (2) T
RADE POLICY REGIME :  
FRAMEWORK AND OBJECTIVES  
6. No major changes in the United States' 
trade policy regime have taken place since the 
last U.S. Trade Policy Review in 1996.  "Fast-
track" Congressional consideration of legislation implementing U.S. trade agreements expired in 1994;  none the less, the Uruguay Round Agreements Act gave the 
President authority to modify U.S. duties to 
the extent necessary to complete the "zero-for-zero" tariff negotiations begun during the Uruguay Round;  regulatory changes may be effected in the U.S. trade regime as necessary and trade negotiations may be started, and 
completed, without "fast-track" provisions. 
7. The United States has been an active 
participant in WTO activities in the period under review, as witnessed by its participation in the WTO negotiations on 
telecommunications and financial services, as 
well as in the first round of the Information Technology Agreement (ITA) tariff reductions, the WTO Guidelines for the Negotiation of Mutual Recognition Agreements on Accountancy, and two 
agreements to expand the coverage of the 
Agreement on Pharmaceuticals.  The United States is hosting the WTO's Third Ministerial Conference, to take place in Seattle in November 1999.  The United States has used 
extensively the WTO dispute settlement 
mechanism in the 1996-98 period.  It has been a party in 78 disputes;  of which 48 as plaintiff, and 30 as defendant.  The United States participates in the Working Groups on 
Competition Policy, Investment, and 
Electronic Commerce. 
8. No new regional arrangements were 
concluded by the United States in the 1996-98 period.  In the context of the North America Free Trade Agreement (NAFTA), however, a 
second round of accelerated tariff reductions 
was put in place with Mexico, on 1 August 1998.  All tariffs covered by the NAFTA were eliminated between the United States and Canada on 1 January 1998.  In addition, 
NAFTA rules of origin with respect to United States WT/TPR/S/56 
 Page xi 
 
 
 automobiles were modified in 1998.  
Negotiations started within the Asia-Pacific Economic Cooperation (APEC) to push forward an agenda of tariff cuts in eight 
sectors, which are expected to be brought to 
the WTO.  Negotiations towards a Free Trade Area of the Americas (FTAA) were given a push forward in the Santiago Summit in April 1998.  A joint plan between the United States 
and the European Union for a Transatlantic 
Economic Partnership (TEP) was concluded in November 1998. 
9. The United States concluded 63 
bilateral trade, investment, and intellectual property rights agreements between 1996 and 
1998, 53 of which entered into force on 31 
December 1998.  The scope of these agreements varies considerably:  some address a trade practice by a U.S. trading partner;  some are market-opening agreements;  some 
are sector or area specific, mostly for the 
protection of investment or intellectual property rights;  and others are mutual recognition agreements on standards.  Some of these agreements are with countries that are not Members of the WTO and are aimed at 
setting disciplines similar to those already in 
existence in the multilateral trading system. 
10. The United States grants unilateral 
preferential market access to products from selected developing countries, under schemes 
such as the Generalized System of Preferences 
(GSP), the Andean Trade Preferences Act (ATPA), and the Caribbean Basin Economic Recovery Act (CBERA).  An initiative to grant wider preferences to African countries, is 
being considered by Congress.  The GSP was 
renewed for a year in 1998, up to 30 June 1999. 
(3) T
RADE AND TRADE -RELATED 
POLICIES , PRACTICES AND 
MEASURES  
11. The United States maintains liberal 
trading and investment regimes.  Furthermore, policies, practices and measures relating to trade and investment are, by and large, transparent.  In this regard, not only does the 
United States make information readily available on the objectives and nature of its 
policy measures, but various independent bodies, such as the U.S. International Trade Commission and the General Accounting 
Office, evaluate the economic effectiveness 
and welfare effects of such measures;  reports of these bodies are made public. 
(i) Import measures 
12. Most imports either enter the United 
States duty free or are subject to very low 
tariffs, all except two of which are bound.  Zero tariffs apply to nearly one third of national tariff lines and the simple average applied MFN tariff rate has declined from 6.4% in 1996 to 5.7% in 1999;  the average 
can be expected to fall to 4.6% once the 
Uruguay Round and ITA tariff cuts are fully implemented.  As a result of the NAFTA, even lower preferential tariff rates apply to Canada and Mexico, two of its main trading partners, 
and developing countries have the GSP 
scheme available for most  of their exports to 
the United States.  Notwithstanding the low overall level of tariff protection, 5% of MFN tariffs involve rates exceeding three times the overall average;  such tariff "peaks" affect 
some agricultural and food products as well as 
textiles, clothing and footwear.  One in seven duties are specific (non- ad valorem );  in the 
interests of transparency, the U.S. authorities publish reliable estimates of their ad valorem  
equivalents, which show that specific duties 
account for 86 of the top 100 MFN tariffs. 
13. The non-tariff border measures 
(NTMs) currently applied by the United States involve some import prohibitions, import 
licensing and quantitative restrictions.  The 
importation of certain goods may be prohibited or subject to licensing in order to ensure the security of the United States, to safeguard consumer health and well-being, or to preserve domestic plant and animal life and 
the environment.  In addition, some 
commodities, notably textiles and clothing, are subject to import quotas or restraints under bilateral trade agreemen ts and arrangements. 
14. The United States, like other WTO 
Members, has several types of contingency WT/TPR/S/56 Trade Policy Review 
Page xii 
 
 
 measures at its disposal, namely 
countervailing and anti-dumping duties, and safeguards.  These measures are designed to counteract trade practices such as export 
subsidies and the dumping of products onto 
the U.S. market.  Although still important, the use of such measures by the United States has declined in recent years.  In 1996-98, the total number of anti-dumping investigations 
initiated declined to 72 (from 102 in 1993-95), 
while the number of duty orders issued fell from 82 to 25.  Countervailing duty investigations initiated during the period under review totalled 18, up from 14 in 1993-95;  nevertheless, the number of duty orders issued 
declined substantially.  The number of 
safeguard investigation initiations increased in 1996-98, but their number and scope remains limited. 
(ii) Export measures 
15. Export controls and licensing apply 
mainly to dual-use and encryption products.  As in the case of import controls, export controls are intended, inter alia , to preserve 
national security, support foreign policy, ensure non-proliferation, and in some cases, to 
fulfil international obligations of the United 
States.  Export subsidies are aimed at certain agricultural products;  export finance, insurance, guarantees and duty drawback schemes are available;  the United States also 
has foreign trade zones.  U.S. legislation 
(sections 301-306 of the Trade Act of 1974) provides for the review of foreign country practices that may impede U.S. exports of goods and services or impair U.S. rights under 
international trade agreements;  action may be 
taken provided that it is consistent with WTO provisions.  Investigations under section 301 of the Trade Act of 1974 decreased during 1996-98;  17 investigati ons were initiated.  
Most were brought to the WTO, the rest were 
generally settled bilaterally.  No sanctions 
were applied as a result of investigations initiated since 1996. (iii) Internal measures 
16. The United States is not only open to 
international trade and foreign investment, its markets are relatively free from regulations 
and other internal government measures that 
can unduly distort competition in domestic goods, services and factor markets.  Moreover, taxes are low by international standards and the tax system is relatively neutral insofar as 
different economic activities are concerned.  
Nevertheless, potential distortions to competition may arise as a consequence of various forms of assistance provided by federal and state governments to some sectors (notably agriculture), or to certain types of 
investment, including those related to R&D 
and environmental protection.  Assistance is provided through the tax system in the form of tax expenditures;  however, in recognition of the fact that these measu res are alternatives to 
other policy instruments, such as spending or 
regulatory programmes, and Congress's insistence on transparency in this regard, detailed estimates of tax expenditures are published annually in the U.S. Government's Budget.  Internal policies, practices and 
measures, including those pertaining to 
investment, usually provide national treatment for foreign firms and investors.  Preferences for domestic supplies are available for government procurement under the "Buy-
American" provisions. 
17. Competition in U.S. domestic markets 
is further fostered by the Government's inclination to take strong action against anti-competitive private practices that are found to 
be detrimental to domes tic consumers.  In 
addition to actions aimed at counteracting trade practices such as dumping, the United States rigorously enforces its own antitrust laws, as witnessed by the large number of ongoing investigations into and actions taken 
to combat price-fixing, predatory pricing and 
exclusionary pacts involving major U.S. companies.  The United States also enforces laws protecting intellectual property rights (IPRs) so as to ensure  adequate returns for 
investment in innovation.  Accordingly, the 
United States grants exclusive rights that United States WT/TPR/S/56 
 Page xiii 
 
 
 confer a limited, temporary monopoly power 
while, at the same time, seeking to promote competition.  IPR and competition policies thus have the common goal of enhancing 
economic performance and consumer welfare. 
(4) T
RADE POLICIES IN SERVICES  
18. Services are by far the largest 
contributor to output and employment in the U.S. economy and the sector's importance has 
continued to grow during the period under 
review.  The sector accounted for 76.5% of GDP and 79.3% of total employment in 1997;  the sector's average annual nominal growth rate (6%) during the period 1995-97 exceeded that of the U.S. economy as a whole (5.6%).  
Services are also playing an increasingly 
important role in U.S. trade.  In 1998, services accounted for 28.0% of total U.S. exports and 16.5% of total imports.  Furthermore, whereas U.S. merchandise trade resulted in a deficit of 
US$248 billion in 1998, its trade in services 
generated a surplus of US$78.9 billion.  The dynamism of the services sector has been fostered by the rapid development of information technology, and the emergence of electronic commerce is likely to enhance the 
importance of services in the U.S. economy. 
19. The provision of services through 
commercial presence has assumed greater significance in recent years.  While a majority of U.S. sales of services abroad prior to 1996 
involved cross-border transactions rather than 
commercial presence, the values of sales through the two channels were about equal in 1996;  that is, US$224 billion for cross-border exports compared to US$221 billion for 
exports through commercial presence.  By 
contrast, U.S. purchases of services from affiliates of foreign firms located in the United States were US$161 billion in 1996, considerably more than cross-border imports, which were US$142 billion.  These trends 
reflect the growing importance of GATS 
commitments made by the United States and other WTO Members to secure further market access in foreign markets, particularly by means of commercial presence (which requires foreign direct investment in one form or 
another). 
20. In this context, the successful 
conclusion of negotiations on basic 
telecommunications and financial services at 
the WTO in 1997 was probably the principal achievement since the last Review as far as services are concerned.  The United States played a vital role in the success of these 
negotiations, by improving its own initial 
offers and by encouraging other WTO Members to improve theirs.  In telecommunications, the United States made commitments covering the entire range of basic telecommunication services, granting 
foreign firms access to local, long-distance, 
and international services, using any means of technology, on a facilities-based or resale basis.  Nevertheless, some restrictions on foreign ownership remain.  In financial 
services, the United States removed its prior 
broad MFN exemption, which it had taken in the 1995 negotiations, and bound commitments on market access and national treatment for all subsectors;  however, it introduced an MFN exemption in the 
insurance sector but this can be applied only in 
a specific instance. 
21. Transportation is one service sector 
that remains somewhat insulated from international competition.  As in many other 
countries, cabotage policies restrict the 
provision of domestic services in both maritime and air transport to U.S.-carriers.  In  addition, while the provision of international services is generally open to foreign 
competition, support measures such as 
subsidies and cargo preference requirements are in place to encourage the use of U.S. carriers, especially in maritime transport.  With regard to international aviation services, the conclusion of a number of bilateral open 
skies agreements has promoted the growth of 
air traffic in recent years. 
22. In the case of professional services, 
the U.S. federal system reserves the governance of professions to individual states;  WT/TPR/S/56 Trade Policy Review 
Page xiv 
 
 
 each state has its own licensing regulations 
and licensing board to administer the regulations.  Although the absence of a uniform regulatory regime at the national level 
and divergent market access conditions at the 
state level may add to the complexity of market entry for foreign service providers, such diversity is not necessarily more of a disadvantage to foreign professionals than it is 
to American professionals.  A number of 
efforts have been made to accomplish greater uniformity across states in recent years.  These include the use of model laws for licensing regulations, and uniform or multiple jurisdiction examinations through national 
coordinating professional bodies.  Additional 
efforts include the conclusion of mutual recognition agreements with foreign professional bodies. 
(5) O
UTLOOK  
23. The U.S. economy's outstanding 
growth and productivity performance during the period under review, accompanied by the lowest levels of unemployment and inflation in 30 years, has followed the conclusion of the Uruguay Round and subse quent multilateral 
negotiations at the WTO.  This suggests that 
trade and investment liberalization support strong economic performance.  Consequently, any major upsurge in protectionist measures 
could impair such performance.  Resort to protectionist measures could slow the inevitable transition of the flexible work-force 
to more productive endeavours, which has 
greatly enhanced labour productivity in recent years.  It could also dampen profit expectations and reduce the attractiveness of the United States to foreign investors, thereby 
possibly prompting a major correction of the 
U.S. stock market.  Such a correction could reduce consumption - possibly reversing the recent decline in personal saving - and imports, thus perhaps jeopardizing the still fragile recovery of countries most affected by 
the financial crisis, which erupted in 1997. 
24. The U.S. Government has largely 
resisted protectionist pressures and has instead declared its support for new multilateral trade negotiations;  it has also begun preparations to 
request "fast-track"  authority from Congress 
once again.  These developments constitute positive signs of the present Administration's desire to build support for a new multilateral agenda in advance of the WTO's Third Ministerial Conference to be held in Seattle in 
November 1999, notwithstanding pressures to 
the contrary. 
 
  
 
 
  