United States Statement on Administrative Action, November 1993

268 Pages·019.94 MB·English

'&E NORfl'la AMENCAN F'REE TRADE AGREEMEN"
IMPLEmmATION ACI'
STATEMENT OF ADMZNISTRAIIVE ACTiON
This statement of Administratr'.v e Action is submitted to the Congres m compfiance
with section 1103 of ihc Omnibus ?kade and Compctitivenas Act of 1988 ("1988 U"a)n d
accompanics the imp1exntnt;ng bill for tht N d Am - Fr# ?'rade
("NAFTA"u r "Agreement"). The bili appmves and makcs mtoxy changes nX@'cd or
appropriate to implemcni ih Agreernent, which the President Signed on Decennbex 17,1992,
on bchaifof the United Statesunderthe authority of stctioIlllO2 ofthe 1988 Act.
For case of refmncc, this Statcment g d y fo llows the q a n h t ha f the
NAFTA, with úit cxccptian of grouping the general provisions of thc Agnwient (i.e.,
om,
chapters Two and Twenity-Two ofthe Agnx;nitnt) at the beginniag ofthe discussion,
For ea& chapter of the NAFTA, the Sratement first briefly summ&eS the most
important provifions of the Agreement. Ncxt, the Qtatement desdbcs ihe pertllieait
pvisions of thc irnpbeniing biii, expiaining how the bill changes or af#cis existing law
and stathg why &ose provisions am quircd 02 appropriate to io3plcment the NAFTA.
F M y , t he Statcrncnt dwcebcs tht adnllaishat'i vcactionpraposcdto~~tbc
particular cbaptcr ofthc NAFTA, e q W g h ow tkproposed adim Csiangts e;rriSting
administrative practice and stating why the changes are rr;quind M appmpnatr: wilxlplcmcnt
the Agnmnerit,
The Statement addresses cexíain pnMsions of Tiiíc V as wcii as Titic Vi of the
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implerncnting biil wbich make various changa in U.S. iaw ihat am appmpriatc (rathcr
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than reqiiircd) to impianeat the NAFTA following the ctiscuss'i on ofNAFi'AQapter
Twenty-01~.
It should be noted that this Stattment does not, fm the mos paa, discuss thosc many
instanaes in which U.S. iaw or adnwvstrat iVGpractiaWillrunainUnchangadundertEte
NAFTA. in many cases, U.S. iaws and rcgulations are alrtady in OMlfOIlLilty with tbe
obiigations imposed by the Agnement. in ather cases, U.S. iaws and ieglllaitions are
"granáfathercü' (i.e., cxemptcd) fn>m the obligations of thc NAFTA. in addition, some
pmvisions of tbe NAFTA impoSt obiigaíiom only w rnrviAn or Mexico.
Inafewinstances whm then: bave been frequtnt qucstions fnnn *pub& ortk
Congress, the Statemcnt notcs examples of specific stahites, regulations practíces that do
llot havt to be changcü as a resuit of the Agreemtnt. Because this Statement is designcd to
dtscribe citrmgts in U.S. laws and reguiations proposcd to implcmesf the NAFTA, however,
the Statement CoIlCentratts 0x1 &ose changa and generaiiy does not attempt to tnumeratt
instances~whichnochangckiexistinglaworpractiCew~bertquirad.
Aithough the impíemcnthg biii is vol.uminouS, a caxdid readhg of this Statement
makcs cicar that thc NAFTA rcquircs comparativcly fcw Sik"ficaat changes in U.S. law OT
rcgulation. Much of tht bulk of thc legislation is taken up with amadmcnts or a.d.di tíons to
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U.S. iaw such as Title Vi, the "Customs Mocimbtion Act," that the Admmmmbn ,
working with fhe CongTeSs, considered to be destrabl, rather than necessary, to impi#nmt
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the NA-F TA. othcr parts of the bill such tho~ec stabushing NAFTA'S "des of origin" for
goods set OW parts of tbt NAFI'A itself. Still O&= bill prwisionS, simply
to Mexico treatment uxrcníly mjoycd by Canada underthe Unitcd States- rarurtn Fme-
- Trade Agraement Im-a Act of 1988.
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In summary, it apptars that Mexican qnd Canadian Statlr tnurpnses will not thrcatcn
U.S. benefits under tht NAFTA. and, indeed. wiii have thiir behavior disciplintd by thc
NAFTA in a varlety of significant reJpccts. Also. the NAFTA will provide useful and
&fic disciplines ovcr sales and pracurcmcnt activities by such enterpnses that should
diminate tht patenual for disadvantaging U.S. intensts.
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STATEMENT CONCERM"G 3TATE TRADING ENTERPFUSES
Both Mcxico and Canada havc a vancty of sfau cnterprises operating in domestic and
intcmational cornmerce. hltxico has had a refatively higher -oponion of such enterprises,
but it has drasticatiy rcduced the numbu and impomce of such tnterpnscs thmugh
extensive pnvatization, as is detailcd in thc ITC's Janw 1993 rtpon ("Potentiai Impact on
the U.S. Economy and Selected lndustnes of the Nonh Amencan F m T rade A,onxmcnt,"
USXTC Publ. 2596, at 1-6). Howcvn, Mcxico continutt to maincain smte monopolies in
hydrocarbons and eiectrícity. Canada has "+CrownC orporations" in cncrgy and other mar&
segments.
Thcre are sevcrai mons why sute enterprisa in Mexico and Canada are not iikeiy
to impaír U.S. benefits under the NAFrA. NAFTA Chaptef Fiftttri (Compctition Policy,
Monopolies and Sta@ Enterpriscs) imposes significanr; disciplines on state cnterpnsef.
Amclc 1503 q u i m d i enrcrprists omcd or controlied by a feded. statt or provincial
government to act in a manner consistcnt with the invesrment and tlnancial servi-
provisions of the NAFTA uhencver thcy cxerdse any dciegatcd governmcntal aurhority.
Tht article aiso requihs al1 such enterprises to act in a nondiscriminatory manncr in thcir
sdes of goods or scrvicer to businases in that country owned by investors from orhcr
NAFTA countries, with ont limitad cxccption for sales by the Mexican @cultural s m
enterpnse, Compania Nacional de Subsistencias Popular# ("Conasupo"),o f rnaitt, beans
and powdercd milk. This limitcd txception is to pennit Conasupo to se11 thtse staples in
accordance with cenaín consumer subsidy pmgrams of Mexico. Houever, thc rolc of
Conasupoas eithcr a purchascr or sclltr of these commodities. has steadily decreased, and
tradt libcralization undcr tht NAFTA is cxpccted to acceltrate this trend.
Aniclt 1502 imposes additional disciplines on ccrrah or't'iciaiiydesígnatod
monopolies. includins statc cnterpriscs that are opcratcd as monopolies by thc Parties'
national govtmments. The disciplines impoxd by Arcicfc 1502 apply 10 both cumt and
future monopolies that are owncd by a NAFTA country's federal govcmment. such as
Mcxico's statf oil and gas monopoly, Pctruitos Mexicanos ("PEMEX'), and Murico's nace
clectricity monopiy. Comision Federal de Electricidad ("CFE"). They also will apply to
any p~vately-owncdm onopolies that a NAFTA country may designate in the futun.
Artklc 1502 quim Mcxico and Canada to irnpose several spccific disciplines on its
state-owned and privately-uwncd monopolics. First, in excrcising any dciegated
govcrnmental authority in connection with thc monopoly good or service (such as the power
to gmt impon lictnses), such monopolies must act in a manar consistent with the
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governmcnt's NAFTA obiigations. Under Anícle 1106, this obiigation -a s weii as the
similar obligation discusscd above imposed on state cntcrpnses generally may be cnforced
through NAFTA'S ¡nvenor-statc arbitmtion pnxtduhs.
Furthcrmon, whcn buying ur sellíng a rnonapoiy good or sewia in the monopoli&
market. covcrcd monopolies must follow commcrciai considcrations, consistcnt with the
tcms of thcir govcrnmcnd mandatcs. and must not discriminate zgainst goods or busin#=
from othcr NAFTA counuics. In addition, tach NAFTA povernmcnt must cnsure that such
monopolies do not use their monopoiy posiuons to engage in mticompeutive practices in
non-rnonopoly markets. such as through thc discnminatory provision of the monopoly good
or sede, cross-subsidization or prcdatory conduct. (Articlt .l-m contains a similar
discipline on rhe btfiavior of pubk rclccommunicatiuns 1l-anspcur ntrwork or strvict
monopolies.) In the agnculturt sector. punuant to Amcle 702.1, tht Govtrnments of
Canada and the United Statcs, including their respective public entities. are stiil prohibitcd
from scliig agricultural goods for txport to cacfi other at a pñce belaw acquisition pnce
plus certain other costs.
As indicad. Mexico alrcady has grcatly pared back the numbcr and scope of its
"parastatai" cnterpnses. and pnvate finns now operate forma sute enterpnses in thc
tcltcommunications. banking and aviation sectors. Pnvate enterpnses. including Amencan
and Canadian investors and exporten. dso will be allowcd significant participation in
fonntrly reserved Mexican markcis for pcnochemicals and el&city. Whh regad & !hese
new ínvtstmmt oppanunities in the energy sector, Note 40. appcnded to Anncx 602.3 to
Chapur Six (Energy and Basic Petrochcrnicais) and Anicle f 101(2) of Chaptcr Ekwcn
(Investment), provides that once Mtxico permits invcstments in arcas otheNvise reserved to
thc Stau, such investmmts wiil be entitlcd to the prottctions of Chaptcr Eleven. These
protccrions include "nationaf trcatment". satkguards qainst unjusrifiablrr txpmphtions, and
invtstor-statc arbitration procedurcls. in addition, Anide 1108(1), together with Section B(2)
of Annex 111, makc clcar rhar Mwrican mcasurts pcrtaining to invcstmcnt in rcscrvcd
activitia may nat be made more resuictivc in the future, and once libcralized. may not
subsequently be rnade more restrictivc.
An& 2004 of thc Agrccmtnt. which specifically provides for dispute settitment of
ciaims that rcasonably cxpectcd benefits accruing under most pam of tht Agrecmmt are
bcing nullified or impaind. could be invokad if the U.S. deurmined that Mexican or
Canadian smte cnttrpnrcs wen advently affccung, nullifying, or impairing cxpectcd bcnefits
undcr thc NAFTA-
Rtgarding purchases and sales by stau trading enteipnses. ;he NAFTA rquires
non-discnminatory sales by a party's sute cnterpnxs within :he pany's temtory (se
Articles 1502 and 1503). with the one limitcd exccption for Mexico notd abovc for sales by
Conasupo of maizc. beans and powdcnd milk. The NAFTA also rcquirts
non-dismiminatory pmurcmcnr of any pmduct or scrvicc far which a t'cdcraily-owncd sl;dlt
cnterpnse has monopoly procurcment rights undtr local law k,a government-authorited
monopsony) (seA rtick 1502(3)(b) and (c)).
Also. and vcry importantly, Chaprcr Ten and irs Annexes rcquirit non-discriminatory
procuremcnt of variou goods and serviccs by al1 state enterprisa listed therein, including,
inur aiia, the Canadian National Railway Company and CFE in Mexico.
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STATEMENT CONCERMNG EXCHANGE UTES
The intcmationaJ cconornic and fínancial policy of thc Unid States iS ~iInItc pral part
of o v d lU .S. economic poiicy. We Ilstd a hdthy world eca;~omyw, ith an opm anb
expanding trading system, in order to achim sustainable pwth of the U-S. econoby with
sansfactory job d o n . A n essential conditioa for a healay wwfd tconomy iS a stable
internationai mollLctBry systern.
Althoygh not a member of thc G-7, Mexico is a majm U.S. aadulg parni#. The
Unitd Staw has a vital i n m i n the sable gmwth ami opwrrncss of MWBCQ'St co13omy.
Thcn are close ongoing bilateral consuitations OD a xaingc of issues which Iliclude
macroeconomic policies and, as appmpiatc, wr~hangcr att pobk~T. bN AFTA stm@cm
tht institutionai rtlationships among thc Unittd Síates, Macico and Canada by praviding
additionai channets for commupicafiap.
By cnafing a ~ e3n vironmtnt in whicb goods. Servicts and capital mow more fntiy,
the NAFTA shouid herease tbc pmspecrs for non-inflationary growth h the U.S. and
MeWcan CcoLlomits and tbus atS0 prospts for a rnm stabie exchanp ratc bctwccn our
cumds. ladttd. anticipuion of the NAFTA has been a sigdhnt factor in cncouraping
the cmcrgtnce of a positive U.S. tradc: balance with Mwllco w@e also heiping to slow tht
dcprcdation of tñc peso.
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STATEhZENT AS TO HOW NAFTA ACHIEVES
CONGRESSIONAL NEGOTIATING OBJECTn7ES
A. INTRODUcTlON
"he North Amencan Frec Trade Agreement (NAFTA) makes pmgEs in achicving
the applicablc purposu, poiicies, and objeztivcs of Ti& 1 of the Omnibus Trade and
Compctitiveness Act of 1988 ("applicable objeCtives'). This Statcment describes how and to
what exmt d n app licabie objcxtives are achicvtd in the NAFTA.
Coupled with the suppltmental agreements on environmenial and labor coopexation
and containing rules on invtstment, vade in scMccs and inteIlectuai property pmtcction, the
NAFTA srands as the most comprchcnsivc tradc agrcemcnt cye~n cgotiatcd by thc Unitcd
Smtes. It provides for reciprocity in our trade relations with our kargest and ihírd-larga
trading pmcrs. It secures access for U.S. cxports to long-prottcted Mexican mar- in
manufactunng, agricuitun and serviccs, refininarts most non-Mff banicrs, and provides for
swíft and efftctivc settlcmmt of disputes.
In view of the fact &hatt he NAFTA mftts or excctds thc Mtcria that Congres iaid
out for judging vade agrcxrnents, and because ihe Aprntnt is ovcrwhelmingiy in the
national inttnst, Presidcnt Ciinton snongly believcs that the agreemcnt must be appn>vtd.
B. O V k UT RADE NEGOTIATINC OBJEcTlVES
Thc overall U.S. trade negotiating objwtivcs are to obtain: (1) more opcn, quitable,
and rtciprocai market acccss; (2) the reduction or climination of barricn and other trade
distoning policics and practices; and (3) a more cffdvt system of intcmational trading
disciplines and proctdures.
Wrthout guestion, ihe NAFTA achieves more open arces for USOim dm tu the
Mexican and conadicur markets. Todíty, without tht NAFTA, U.S- uports to Mexico do
nur receive mc~rocaíi a mm ament, and Mexican nananjl irrniem am ineguifrrzblr,
TIre NAFTA coma these prvblems.
~odayU .S. exports to Mutico facc tañffs two and a haif times our own and are
subjtcted u) numerous non-tariff baniers. In contrast, fuIly 50 pcrccnt of Mexico's exports
to the Unitcd Statts entcr duty-frce. Mexico has no intemational obligation to provide
similar treatmcnt; in fact, Mtxico retains h e r ipht under GAT" to mise rnost of its tariffs to
50 penmt.
Under NAFX'A, half of the products the ünited Statcs currently exports to Mwrico
can be sold in Mexico complttely duiy fr# on iht day tht agrccmcnt enten into fom, niis
s b w ill increase td mon than twct-t)iuds within five y=-. Thus, shortly aftcr NAFTA
goes into cffcct, many of our,yon cumpctirivc products such as acnw- quiprnnit,
stmiconductors, mmputers, medid devices, Al lmmotives, most tdecommu-n ications and
clecaonic equipmcnt, and auto paru, machine mls, and paper producrs wiii ~ V C
duty-frrx access to tht Mtxican marka
Mcxico's oviffs on aii orha industxhl goods u41 bc pfiastd out within 10 years.
Mullcan tariffs wiU be climinated on ail products, including agncultural commodítis, within
15 y-. If the United Sram and Mexico a-, iariffs on U.S. wrports to Mtxico may be
removed ahead of schedule to accclcrate tht pace of achieving fra nade.
Beiwem the United $tata and Canada, tariffs Will continuc U) be tliminated in
accardanct with thc schedule of the CFTA. At ihe trid of NAFTA'S fifte#i year transition
pcnod, al] nade among the thr# counnits in NAFTA-onginating products wiii be duty-h.
Witb NAFTA, tht largest bamcr to U.S. farm otports, Mtxico's rtsfictivc import
Iiccnsing regime, will end immediately.
Mexican impon quotas on phanaccutical inputs and a Mnety of used quipmcnt,
such as computtn, tractors. and indusmal rnachincry, will be removed tithtr immtdiattly or
within IO-y-ca rs.
NAFTA immcdiaiely curtaiis Mexican trade balancing requiremmts tñat cumtly
rquirc forcign car and light truck manufacturen to purchase and se11 outside of Mtxico
twice thc Valw of their sales into Mcxico. The sharp nduction of the trade baiancing
rquirements, coupied witii an imrncdiart halving of the Mexican tanff MI U.S. autos and the
reducrion of Murican locai antcnt requiremuits, rtprcscnts a rnajor mket opening for the
U.S. auto indusuy and iu worken. The agrrxmcnt dso immediarely opens a large quota fm
U.S. commerciai truck cxporu, and lihs al1 limits on Mexican purchases af U.S. mcks ahcr
five ytars. Witfiin un ytars, di nstrictions on tracie in automotive products will be
Climinated.
NAFTA wilt o p M cxican govmment p~uTtmc.nI,i ncluding procurcmcnt by statc-
owncd cnergy pctroicum and eitcmc companies, lo competitivc bidding by U.S. firms. The
NAmA expands U.S. acccfs to Canadian govcrnmmt procurcmcnt.
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