The Year in Trade 2017

Operation of the Trade Agreements Program
69th Report

August 2018

Publication Number: 4817

United States International Trade Commission

Commissioners

David S. Johanson, Chairman

Irving A. Williamson

Meredith M. Broadbent

Rhonda K. Schmidtlein

Jason E. Kearns

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Catherine DeFilippo
Director, Office of Operations

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William Powers
Director, Office of Economics

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Address all communications to
Secretary to the Commission
United States International Trade Commission
Washington, DC 20436

This report was prepared principally by:

Project Leader
Joanne Guth, Office of Economics

Deputy Project Leader
Tamara Gurevich, Office of Economics

Office of Economics
Justino De La Cruz, Pamela Davis, Stephanie Fortune-Taylor, Alexander Hammer, Lin Jones, Grace Kenneally,
Alissa Tafti, Edward Wilson, and Heather Wickramarachi

Office of General Counsel
William W. Gearhart

Office of Industries
Arthur Chambers, Natalie Hanson, Tamar Khachaturian,
Sarah Oliver, and Laura Rodriguez

Office of Investigations
Brenna Cole, Mary Messer, and Salvatore Mineo

Office of Tariff Affairs and Trade Agreements
Donnette Rimmer and Daniel Shepherdson

Office of Unfair Import Investigations
David Lloyd

Office of Analysis and Research Services
Maureen Letostak, David Lundy, and Laura Thayn

Editorial Review
Judy Edelhoff and Peg Hausman

Statistical Review
Russell Duncan

Content Reviewer
Janis Summers

Administrative Support
Nabil Abbyad and Meryem Demirkaya

Help Desk and Customer Service Division (CIO)

Under the direction of
Arona Butcher, Chief
Country and Regional Analysis Division
Office of Economics

Preface

This report is the 69th in a series of annual reports submitted to the U.S. Congress under section 163(c) of the Trade Act of 1974 (19 U.S.C. 2213(c)) and its predecessor legislation. Section 163(c) states that “the International Trade Commission shall submit to the Congress at least once a year, a factual report on the operation of the trade agreements program.”

This report is one of the principal means by which the U.S. International Trade Commission provides Congress with factual information on trade policy and its administration for 2017. The trade agreements program includes “all activities consisting of, or related to, the administration of international agreements which primarily concern trade and which are concluded pursuant to the authority vested in the President by the Constitution” and by congressional legislation.

Contents

Executive Summary

The level of U.S. imports and U.S. exports of goods and services depends on many factors, including the strength of the U.S. and global economies. Growth in these economies contributes to growth in cross-border trade. The rate of global economic growth increased in 2017, rising from 2.5 percent in 2016 to 3.3 percent in 2017. Economic growth in the United States also increased in 2017: U.S. real gross domestic product (GDP) grew 2.3 percent in 2017, compared to an increase of 1.5 percent in 2016. Overall global economic growth was fueled by growth of advanced economies such as the United States and top trading partners including the European Union (EU), Canada, and Japan. Some emerging and developing economies—e.g., China, South Korea, and Taiwan—also contributed to global economic growth. India and Mexico, however, grew at a slower rate in 2017 than in 2016.

Both U.S. exports and U.S. imports of goods increased in value in 2017. The value of U.S. merchandise exports totaled $1,546.7 billion in 2017, up 6.6 percent ($95.7 billion) from $1,451.0 billion in 2016. The value of U.S. merchandise imports totaled $2,342.9 billion in 2017, up 7.1 percent ($155.1 billion) from $2,187.8 billion in 2016. The largest increase in both U.S. imports and U.S. exports was in energy-related products. In particular, the increase in the value of U.S. imports of crude petroleum was due to the increase in the price of U.S. crude, whereas the increase in the value of U.S. exports of crude was driven by increases in both the price and volume of U.S. crude exports, resulting in a decline in the sector’s deficit to $4.5 billion. The agricultural sector was the only goods sector to experience a trade surplus in 2017, with $5.7 billion more in exports than imports. The trade deficit in the other sectors of the U.S. economy increased. Overall, U.S. imports increased more than U.S. exports in terms of value, resulting in an increase in the U.S. merchandise trade deficit from $752.5 billion in 2016 to $811.2 billion in 2017 (figure ES.1).

U.S. two-way cross-border trade in private services, which excludes exports and imports of government goods and services n.i.e., increased 5.0 percent to $1,277.7 billion in 2017. U.S. exports of private services grew 3.8 percent to $761.7 billion in 2017, while U.S. imports of private services grew 6.8 percent to reach $516.0 billion in 2017. As a result, the U.S. surplus in private services fell from $250.4 billion in 2016 to $245.7 billion in 2017.

Figure ES.1 U.S. trade balance in goods and services, 2003–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, “ Table 1.2: U.S. International Transactions, Expanded Detail ,” March 21, 2018.

Note: Underlying data can be found in appendix table B.1 .

In 2017, the U.S. dollar depreciated 6.3 percent against a broad trade-weighted index of major foreign currencies, including against some major emerging-market currencies, such as the Mexican peso and the Chinese yuan. Between January 1 and December 31, 2017, the U.S. dollar depreciated by 12.0 percent against the euro, 9.4 percent against the United Kingdom (UK) pound, 6.5 percent against the Chinese yuan, and 6.1 percent against the Mexican peso.

Key Trade Developments in 2017

Administration of U.S. Trade Laws and Regulations

Safeguard actions: The U.S. International Trade Commission (the Commission) conducted two new safeguard investigations during 2017, both under the global safeguard provisions in sections 201–204 of the Trade Act of 1974. The first investigation concerned imports of crystalline silicon photovoltaic cells (CSPV cells); the second, imports of large residential washers (washers). Both investigations were conducted following receipt of a petition from a domestic producer of each article. The Commission made affirmative injury determinations in each investigation and, to address the serious injury, recommended remedy measures to the President.

Section 301: There were two ongoing investigations in 2017 under section 301 of the Trade Act of 1974. The first investigation was instituted in 1987 and concerned various EU meat hormone directives, which prohibit the use of certain hormones that promote growth in farm animals. Following a successful challenge at the World Trade Organization (WTO), the United States imposed additional duties on certain imports from the EU in 1999. In 2012, the United States and the EU signed a provisional settlement, and the United States lifted the additional duties. In December 2016, representatives of the U.S. beef industry filed a request with the Office of the U.S. Trade Representative (USTR) asking that the additional duties be reinstated, and USTR initiated a process to consider whether to reinstate the additional duties.

The second investigation was self-initiated by the USTR in August 2017. The investigation is considering whether a wide variety of acts, policies, and practices by the government of China related to technology transfer, intellectual property, and innovation are actionable under section 301 of the 1974 Trade Act. Under the statute, USTR generally has up to 12 months from the date of initiation to determine whether the statutory requirements under section 301 have been met and, if so, what action to take. The China technology transfer 301 investigation was ongoing at the end of 2017.

Special 301: In the 2017 Special 301 Report , USTR examined the adequacy and effectiveness of intellectual property rights (IPR) protection in more than 100 countries. The 2017 Special 301 Report listed 11 countries on the priority watch list (Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Thailand, Ukraine, and Venezuela) and 23 countries on the watch list. In December 2017, USTR issued the 2016 Out-of-Cycle Review of Notorious Markets report , which highlighted over 25 internet-based markets and 12 countries with physical marketplaces (e.g., shops) that reportedly engage in or facilitate substantial copyright piracy and trademark counterfeiting.

Antidumping duty investigations: The Commission instituted 58 new antidumping investigations and made 54 preliminary determinations and 36 final determinations during 2017. Antidumping duty orders were issued by the U.S. Department of Commerce (USDOC) in 33 of the final investigations on 15 products from 16 countries.

Countervailing duty investigations: The Commission instituted 26 new countervailing duty investigations, and made 17 preliminary determinations and 16 final determinations during 2017. Countervailing duty orders were issued by the USDOC in 11 of the final investigations on 9 products from 5 countries.

Sunset reviews: During 2017, the Commission instituted 32 sunset reviews of existing antidumping duty and countervailing duty orders and suspension agreements that had been in effect for five years, as required by law. The Commission completed 46 reviews, resulting in the continuation of 45 antidumping duty and countervailing duty orders for up to five additional years.

Section 129 investigations: Section 129 of the U.S. Uruguay Round Agreements Act established a procedure by which the Administration may respond to certain adverse WTO panel or Appellate Body reports. On December 18, 2017, USDOC initiated a section 129 proceeding in connection with the recommendations and rulings of the WTO Dispute Settlement Body (DSB) in United States—Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea (DS464). The section 129 proceeding is expected to be completed in 2018.

Section 337 investigations: During calendar year 2017, there were 130 active section 337 investigations and ancillary proceedings alleging unfair import practices, such as patent infringement. Seventy-four of these active investigations were instituted in 2017. Of the 74 new proceedings, 59 were new section 337 investigations and 15 were new ancillary (secondary) proceedings relating to previously concluded investigations. The Commission completed a total of 64 investigations and ancillary proceedings under section 337 in 2017, and issued 5 general exclusion orders, 12 limited exclusion orders, and 30 cease and desist orders.

Commission proceedings in 2017 involved a wide variety of products. As in prior years, technology products were the single largest category, with about 38 percent of the active proceedings involving computer and telecommunications equipment and another 6 percent involving consumer electronics. In addition, pharmaceuticals and medical devices were at issue in about 13 percent of the active proceedings and automotive, transportation, and manufacturing products were at issue in about 10 percent of the active proceedings.

National Security Investigations: In April 2017, the U.S. Secretary of Commerce initiated two new investigations under the national security provisions of section 232 of the Trade Expansion Act of 1962, the first such investigations since 2001. The first investigation concerned imports of steel and the second concerned imports of aluminum. Both investigations were in progress at the end of 2017.

Trade Adjustment Assistance (TAA): In fiscal year (FY) 2017, the U.S. Department of Labor (USDOL) received 1,037 petitions for TAA, down 30.8 percent from the 1,498 petitions received in FY 2016. The USDOL certified 844 petitions covering 94,017 workers as eligible for TAA, and denied 234 petitions covering 32,038 workers. In FY 2016, the latest data available, USDOC certified 68 petitions as eligible for assistance under the TAA for Firms program, and approved 75 adjustment proposals.

Trade Preference Programs

Generalized System of Preferences (GSP): U.S. imports under GSP increased 11.9 percent, reaching $21.2 billion in 2017. These imports accounted for 9.9 percent of total U.S. imports from GSP beneficiary countries and 0.9 percent of total U.S. imports. The top five beneficiary countries (India, Thailand, Brazil, Indonesia, and Turkey) accounted for 74.5 percent of GSP imports.

Based on the 2016/2017 GSP Annual Review directed by USTR, new duty-free status under the GSP program was extended to all GSP beneficiaries for 23 categories of travel goods (including luggage, backpacks, handbags, and wallets) that had become eligible for duty-free treatment when exported by least-developed beneficiary developing countries and African Growth and Opportunity Act (AGOA) countries in 2016. On December 22, 2017, Argentina’s GSP eligibility was reinstated after a nearly six-year suspension. Ukraine’s GSP eligibility was partially removed on December 22, 2017, due to failure to adequately protect IPRs. Also, in June 2017, USTR self-initiated a country practice review of Bolivia’s eligibility for GSP benefits because of worker rights issues.

Nepal Trade Preference Act (NTPA): The NTPA was implemented in December 2016 to improve Nepal’s export competitiveness and help Nepal’s economic recovery following a 2015 earthquake. In 2017, the first full year that the NTPA was in effect, U.S. imports from Nepal under NTPA were $2.3 million, accounting for 2.5 percent of total U.S. imports from Nepal.

African Growth and Opportunity Act (AGOA): In 2017, 38 sub-Saharan African (SSA) countries were eligible for AGOA benefits. An additional two countries—The Gambia and Swaziland—were re-designated as eligible for AGOA benefits effective December 22, 2017, bringing the total as of yearend 2017 to 40 SSA countries. Of these countries, 27 were also eligible for AGOA textile and apparel benefits for all or part of 2017. Togo, the host of the 16th annual AGOA Forum held on August 8–10, 2017, became eligible for apparel benefits on August 22, 2017. Also, USTR initiated an out-of-cycle review of AGOA eligibility for Rwanda, Tanzania, and Uganda on June 20, 2017.

In 2017, imports entering the United States exclusively under AGOA (excluding GSP) were valued at $12.5 billion, a 32.4 percent increase from 2016. The increase in U.S. imports under AGOA in 2017 can be attributed to an increase in the value and quantity of imports of crude petroleum. An additional $1.3 billion from AGOA beneficiary countries entered the United States duty-free under GSP. In total, AGOA and GSP preference programs accounted for 55.4 percent of total imports from AGOA beneficiary countries in 2017.

Caribbean Basin Economic Recovery Act (CBERA): At yearend 2017, 17 countries and dependent territories were eligible for CBERA preferences, and 8 of those countries were designated eligible for Caribbean Basin Trade Partnership Act (CBTPA) preferences. In 2017, the value of U.S. imports under CBERA (including CBTPA) increased by 10.3 percent to $961 million, mainly reflecting an increase in U.S. imports of methanol and polystyrene from Trinidad and Tobago and The Bahamas, respectively, which are both major imports under CBERA. U.S. imports under CBERA of crude petroleum continued to decline as U.S. production increased. Trinidad and Tobago was the leading supplier of U.S. imports under CBERA in 2017, followed by Haiti.

Haiti initiatives: While the value of U.S. imports of apparel from Haiti increased 2.1 percent to $866.7 million in 2017, the value of such imports entering under the Haitian Hemisphere Opportunity through Partnership Encouragement Act of 2006 and 2008 (HOPE Acts) increased 7.9 percent to $577.0 million. The latter accounted for just over two-thirds of total U.S. apparel imports that entered from Haiti duty-free, with the remainder entering under CBERA. Garments of manmade fibers accounted for a growing share of U.S. apparel imports from Haiti, in contrast to the declining share accounted for by cotton apparel. The main factors in the overall level of U.S. apparel imports from Haiti are trade preferences under the HOPE Acts, proximity to the U.S. market, low labor costs, and a recent infusion of foreign investment in Haiti.

World Trade Organization (WTO)

WTO developments: The 11th Ministerial Conference of the World Trade Organization was held December 10–13, 2017, in Buenos Aires, Argentina. As a result of this conference, the ministers decided to open negotiations on possible disciplines on fisheries subsidies; WTO members agreed to continue their moratorium on collecting customs duties on electronic commerce transactions; and members agreed to continue their moratorium on certain forms of dispute settlement cases—so-called nonviolation and situation complaints—involving IPRs. While members agreed at the Ministerial Conference to consider establishing a formal working group to discuss micro, small, and medium-size enterprises, they were unable to reach agreement on the issue of public stockholding of foodstuffs for food security purposes, as well as a number of issues involving ongoing negotiations in the Doha Development Agenda.

In other WTO developments, WTO membership remained at 164 in 2017, with South Sudan requesting WTO observer status in November 2017. Roberto Azevêdo was reappointed as WTO Director-General for a second term of four years, which began in September 2017. On February 22, 2017, the WTO Agreement on Trade Facilitation entered into force, after ratification by a two-thirds majority of WTO members. WTO members that participated in the 2012–15 negotiations to expand the so-called WTO Information Technology Agreement implemented their second set of tariff reductions for over 200 information technology products on July 1, 2017. Negotiation for an agreement on trade in environmental goods remained at an impasse in 2017.

WTO dispute settlement: During 2017, WTO members filed 17 requests for WTO dispute settlement consultations in new disputes, which was about the average for the five preceding years. The United States was the complainant in 3 of the 17 requests filed during 2017, and the named respondent in 4. Two of the 3 new requests filed by the United States during 2017 concerned measures maintained by the Canadian province of British Columbia governing the sale of wine in grocery stores. The third request was related to subsides paid by China to producers of primary aluminum. The United States was the named respondent in 4 new disputes—3 filed by Canada on U.S. countervailing duty and antidumping measures, and 1 filed by Turkey on U.S. countervailing duty measures.

Four new dispute settlement panels were established during 2017 in which the United States was either the complainant or the respondent. The United States was the complaining party in two disputes involving China, and the responding party in two disputes filed by India and Turkey, respectively.

In the President’s 2018 Trade Policy Agenda and 2017 Annual Report , the United States summarized its concerns about the WTO dispute settlement process. In particular, the report described longstanding concerns that WTO dispute settlement panels and the Appellate Body have been adding to or diminishing the rights and obligations of WTO members under the WTO Agreement by not applying the WTO Agreement as written. The report also described a number of other concerns, including concerns raised at 2017 WTO Dispute Settlement Body meetings about service on the Appellate Body by persons who are no longer Appellate Body members. Since the summer of 2017, U.S. officials have had the view that this issue must be resolved before the United States will consider supporting new appointments to the Appellate Body.

OECD, APEC, TiSA, and TIFAs

Organisation for Economic Co-operation and Development (OECD): The OECD ministerial council meeting was held in Paris, France, on June 7–8, 2017. Discussions centered on how to share the gains from globalization more broadly. In 2017, the OECD Trade Committee focused its work on broad areas involving trade and the digital economy, as well as on trade and investment matters. At the September 2016 G20 Summit, the OECD was tasked by G20 ministers with actively facilitating the work of the Global Forum on Steel Excess Capacity. November 2017 marked the Global Forum’s first ministerial meeting .

Asia-Pacific Economic Cooperation (APEC) : Under Vietnam’s leadership in 2017, cooperation among APEC member economies focused on “Creating New Dynamism, Fostering a Shared Future.” According to APEC, this cooperation pursued the following four priorities: “promoting sustainable, innovative and inclusive growth; deepening regional economic integration; strengthening micro, small and medium enterprises’ (MSMEs) competitiveness and innovation in the digital age; and enhancing food security and sustainable agriculture in response to climate change.”

APEC highlights in 2017 included the completion of three major reports: two on digital trade and electronic commerce (e-commerce), and one on the investment climate for global value chains (GVCs). Other important highlights included (1) projects and a workshop on facilitating MSMEs’ use of IPRs and promoting MSMEs’ participation in the global economy through GVCs and e-commerce; (2) case studies on environmental services; and (3) efforts to advance the realization of the Free Trade Area of the Asia Pacific through capacity building and an information-sharing mechanism.

Trade in Services Agreement (TiSA): In 2017, the 23 participants conducted no new rounds of trade negotiations, and as of the end of 2017, none were scheduled for 2018.

Trade and Investment Framework Agreements (TIFAs) : TIFAs provide a framework to expand trade and investment and a forum to resolve trade and investment issues between the United States and various trading partners. By yearend 2017, the United States had entered into 57 TIFAs, including a new TIFA with Paraguay on January 13, 2017. A number of TIFA Council meetings took place in 2017, including those with Central Asia, Afghanistan, Cambodia, Indonesia, Laos, Malaysia, Nepal, the Philippines, Thailand, and Vietnam.

U.S. Free Trade Agreements

U.S. free trade agreements (FTAs) in force in 2017: The United States was party to 14 FTAs involving a total of 20 countries as of December 31, 2017. Starting with the most recent agreement, the FTAs in force during 2017 were Panama (which entered into force in 2012); Colombia (2012); South Korea (2012); Oman (2009); Peru (2009); several countries of Central America and the Dominican Republic (CAFTA-DR), which includes the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua (2006–07) and Costa Rica (2009); Bahrain (2006); Morocco (2006); Australia (2005); Chile (2004); Singapore (2004); Jordan (2001); Canada and Mexico (1994); and Israel (1985).

FTA merchandise trade flows with FTA partners: In 2017, total two-way (exports and imports) merchandise trade between the United States and its 20 FTA partners was $1.5 trillion, which accounted for 39.0 percent of total U.S. merchandise trade with the world. U.S. trade with the NAFTA countries (Canada and Mexico) continued to contribute the most to all U.S. trade with FTA partners, accounting for $1.1 trillion, or 75.1 percent. U.S. exports to the NAFTA countries rose 5.8 percent to $525.4 billion. U.S. imports from the NAFTA countries rose 7.4 percent to $614.0 billion from 2016 to 2017. As a result, the U.S. merchandise trade deficit with its NAFTA partners increased by 17.6 percent to $88.6 billion.

U.S. trade with non-NAFTA FTA partners was valued at $378.0 billion in 2017, which was a 3.7 percent increase from 2016. U.S. exports to these FTA partners increased 8.8 percent to $195.0 billion, while U.S. imports from these partners increased 3.7 percent to $183.0 billion from 2016 to 2017. As result, the U.S. merchandise trade surplus with these countries recovered to its 2015 level, rising 333.9 percent to $12.0 billion in 2017.

The value of imports that entered into the United States under FTAs and subject to FTA duty reductions and eliminations totaled $385.1 billion in 2017, a rise of 2.8 percent from 2016. Imports subject to FTA duty reductions and eliminations accounted for nearly half (48.3 percent) of total imports from FTA partners in 2017 and 16.5 percent of total U.S. imports from the world. (The majority of U.S. imports from FTA partners that do not enter under an FTA generally enter free of duty under normal trade relations rates, although some also face duties.) Imports under the FTA with Chile, which grew $1.3 billion (26.6 percent), represented the largest percentage increase, while imports from Mexico accounted for the greatest change in value, rising by $11.9 billion (7.0 percent). Imports under FTAs with Peru and Bahrain also increased significantly, by 24.5 percent ($651 million) and 16.5 percent ($82 million), respectively.

FTA negotiations: In January 2017, the United States formally withdrew from the recently signed Trans-Pacific Partnership agreement with 11 Pacific Rim partners. Also in January 2017, U.S. and EU officials issued a joint report on the status of negotiations towards a Transatlantic Trade and Investment Partnership (TTIP). The report highlighted areas that still needed “significant work.” No TTIP negotiations were held in 2017.

Developments with FTAs already in force: U.S. officials met with a number of partners representing member states of the 14 U.S. FTAs in force during 2017. Discussions with U.S. partners focused largely on the topics of labor issues and environmental provisions included in most of these agreements. Under the U.S.-Korea FTA, two special sessions of the Joint Committee were held in 2017 to discuss possible amendments and modifications to the agreement.

NAFTA developments: On May 18, 2017, USTR notified Congress that the President intended to initiate negotiations with Canada and Mexico to modernize NAFTA. The negotiations began on August 16, 2017, in Washington, DC, with two primary goals: (1) to update NAFTA with modern provisions on digital trade, intellectual property, cybersecurity, good regulatory practices, and treatment of state-owned enterprises; and (2) to rebalance NAFTA and reduce the U.S. trade deficit with Canada and Mexico. By the end of 2017, five negotiating rounds had been completed.

At the end of 2017, two complaint files remained active under Articles 14 and 15 of the North American Agreement on Environmental Cooperation. One, which was submitted in 2016, involved Mexico, and another, submitted in 2017, involved Canada. In 2017, there were three submissions under review at the North American Agreement on Labor Cooperation, two involving Mexico, and one involving the United States.

NAFTA dispute settlement: In 2017, there were 5 active Chapter 11 cases (investor-state disputes) filed against the United States, 4 of them filed by Canadian investors and 1 filed by Mexican investors; 11 filed by U.S. investors against Canada; and 4 filed against Mexico—3 by U.S. investors and 1 by Canadian investors. At the end of 2017, the NAFTA Secretariat listed six binational panels active under Chapter 19 (Review and Dispute Settlement in Anti-dumping and Countervailing Duty Matters); these are reviews of final determinations made by national authorities in antidumping and countervailing duty cases. Two of the reviews concern cases filed by the United States contesting Mexico’s determinations; three concern cases filed by Canada contesting U.S. determinations; and the sixth concerns a case filed by Mexico contesting U.S. determinations.

Trade Activities with Major Trading Partners

This report reviews U.S. bilateral trade relations with its largest trading partners each year. This year, the report covers the following eight trading partners: the EU, China, Mexico, Canada, Japan, South Korea, India, and Taiwan (ordered by the value of their two-way merchandise trade). For each trading partner, the chapter summarizes U.S. bilateral trade, including two-way merchandise and private services trade (figure ES.2). Each partner description is followed by summaries of the major bilateral trade-related developments during 2017.

Figure ES.2 U.S. goods and services trade with major bilateral trading partners, 2017

Source: USITC DataWeb/USDOC (accessed April 26, 2018); USDOC, BEA, Interactive data, International Transactions, Services, & IIP, International Transactions, Tables 1.2 and 1.3, March 21, 2018 (accessed April 26, 2018).

Note: Underlying data can be found in appendix table B.2 .

European Union

The EU as a single entity continued to be the United States’ largest merchandise trading partner in 2017. U.S. two-way (exports plus imports) merchandise trade with the EU increased 4.7 percent to $718.5 billion in 2017, accounting for 18.5 percent of total U.S. merchandise trade. U.S. exports to the EU were $283.5 billion, which ranked the EU as the top U.S. export market for the second year in a row, surpassing Canada. U.S. merchandise imports from the EU were $434.9 billion, second to those from China. Both U.S. exports and U.S. imports with the EU increased in 2017, but U.S. imports grew more, widening the U.S. merchandise trade deficit with the EU from $146.8 billion in 2016 to $151.4 billion in 2017. Leading U.S. exports to the EU included civilian aircraft, engines, and parts; medicaments (medicines); refined petroleum products; crude petroleum; and certain immunological products. Leading U.S. imports were passenger motor vehicles, medicaments, parts of turbojets and turbopropellers, light oils, and airplanes and other aircraft.

The EU was also the United States’ largest trading partner in terms of private services in 2017, accounting for 33.4 percent of total U.S. trade in private services. U.S. services imports increased more than U.S. services exports, shrinking the U.S. trade surplus in services with the EU from $61.7 billion in 2016 to $49.9 billion in 2017.

Among the important U.S.-EU trade developments in 2017 were a bilateral agreement on insurance and reinsurance measures, the first annual review of the functioning of the U.S.-EU Privacy Shield, and an updated mutual recognition agreement on good manufacturing practices in pharmaceutical products. Under the framework of the Transatlantic Economic Council, the eighth workshop for small- and medium-sized enterprises was held. As noted earlier, TTIP negotiations remained dormant in 2017.

China

In 2017, China remained the United States’ largest single-country trading partner based on two-way merchandise trade, accounting for 16.4 percent of total U.S. merchandise trade. U.S. two-way merchandise trade with China amounted to $635.9 billion in 2017, an increase of 10.0 percent from the $578.2 billion recorded in 2016. The U.S. merchandise trade deficit with China remained higher than the U.S. trade deficit with any other trading partner in 2017, amounting to $375.2 billion. Its $28.2 billion increase (8.1 percent) relative to the year before reflected a $42.3 billion increase in U.S. merchandise imports from China that outpaced a $14.8 billion increase in U.S. merchandise exports to China in 2017. Leading U.S. exports to China in 2017 were civilian aircraft, engines, and parts; soybeans; small passenger motor vehicles; petroleum; and semiconductors. Leading U.S. imports from China were cellphones; portable computers and tablets; telecommunications equipment; computer parts and accessories; and tricycles, scooters, and related toys.

In 2017, China continued to be the United States’ fourth-largest single-country trading partner based on two-way services trade of $73.0 billion. U.S. services trade with China amounted to 5.7 percent of total U.S. cross-border services trade in 2017. The U.S. cross-border trade surplus in services with China increased $600 million in 2016 to $38.2 billion. However, the rate of growth in the United States’ services imports from China outpaced that of the United States’ services exports to China. From 2016 to 2017, U.S. services exports to China grew by $1.9 billion, or 3.6 percent, while U.S. services imports from China grew by $1.4 billion, or 8.6 percent.

In 2017, the most prominent bilateral trade issues were discussed in the context of a newly formed U.S.-China Comprehensive Economic Dialogue (CED). Major topics addressed by U.S. and Chinese officials in the CED in 2017 included China’s protection and enforcement of IPRs; Chinese technology transfer policies and practices; and the implementation of China’s new Cybersecurity Law and China’s new Standardization Law .

Canada

In 2017, Canada was the United States’ second-largest single-country trading partner after China for the third consecutive year. The value of U.S. merchandise trade with Canada rose 7.0 percent to $582.4 billion in 2017, accounting for 15.0 percent of total U.S. merchandise trade with the world. Both U.S. merchandise exports and imports with Canada increased in 2017 from the previous year, but imports outpaced exports, resulting in a $6.5 billion increase in the U.S. merchandise trade deficit with Canada to $17.5 billion. Leading U.S. exports to Canada in 2017 included passenger motor vehicles; motor vehicles for goods transport; civilian aircraft, engines, and parts; crude petroleum; and light petroleum oils. Top U.S. imports from Canada included crude petroleum, passenger motor vehicles, natural gas, and coniferous sawn wood.

Canada remained the second-largest single-country U.S. trading partner for services in 2017, after the United Kingdom. Two-way services trade with Canada grew in 2017 to $90.8 billion, while the U.S. surplus in services increased to $25.8 billion, up from $23.8 billion the year before.

In 2017, a major focus of U.S.-Canada trade relations was the renegotiation of NAFTA, which began on August 16, 2017. In addition, lacking a successor agreement to replace the U.S.-Canada Agreement on Softwood Lumber—which expired in October 2015—the United States initiated antidumping and countervailing duty investigations on certain U.S. imports of softwood lumber from Canada in 2017. In response, Canada initiated dispute settlement proceedings against the United States in the WTO and NAFTA. In other developments, the Canada-United States Regulatory Cooperation Council continued to meet in 2017 to address regulatory issues that hinder cross-border trade and investment.

Mexico

In 2017, Mexico was the United States’ third-largest single-country two-way merchandise trading partner. Total two-way merchandise trade increased 6.4 percent to $557.0 billion in 2017, which accounted for 14.3 percent of U.S. trade with the world. U.S. merchandise exports to Mexico totaled $243.0 billion in 2017, and U.S. merchandise imports from Mexico totaled $314.0 billion. The resulting merchandise trade deficit of $71.0 billion was up $6.7 billion from 2016. In 2017, leading U.S. exports to Mexico were light oils; computer parts and accessories; refined petroleum products; processors and controllers; and internal combustion diesel engines. Leading U.S. imports from Mexico included passenger motor vehicles; computers; motor vehicles for goods transport; crude petroleum; telecommunications equipment; and color TV reception apparatus.

Mexico was the United States’ sixth-largest trading partner in services after Germany. U.S. services exports to Mexico increased 3.9 percent ($1.2 billion) and imports from Mexico increased 7.0 percent ($1.7 billion) in 2017, resulting in a narrowing of the U.S. services trade surplus with Mexico to $6.6 billion in 2017.

A major focus of U.S.-Mexico trade relations in 2017 was the renegotiation of NAFTA. Joint efforts to modernize border procedures and facilities also continued in 2017. After the successful conclusion of a pilot program to address cross-border trucking between the United States and Mexico under NAFTA, the Federal Motor Carrier Safety Administration (FMCSA) started accepting applications from Mexico-domiciled motor carriers interested in conducting long-haul operations beyond the U.S. commercial zones. In 2017, reports from the FMCSA showed that the safety records of Mexican-owned or Mexico-domiciled motor carriers surpassed those of U.S. carriers.

Japan

In 2017, Japan remained the United States’ fourth-largest single-country trading partner in terms of two-way trade, accounting for 5.3 percent of total U.S. merchandise trade. The value of U.S. merchandise trade with Japan grew 4.6 percent, from $195.3 billion in 2016 to $204.2 billion in 2017. At the same time, the U.S. merchandise trade deficit with Japan was fairly stable, rising by $38 million in 2017 to $68.8 billion, as U.S. imports increased more than U.S. exports. Leading U.S. exports to Japan were civilian aircraft, engines, and parts; liquefied propane; corn; semiconductor manufacturing machines; and medicaments. Leading U.S. imports from Japan were passenger motor vehicles, parts for airplanes or helicopters, motor vehicle gearboxes, and parts for printers.

In 2017, Japan was once again the United States’ third-largest single-country trading partner based on two-way services trade. U.S. services exports to Japan rose by $1.9 billion, or 4.2 percent, to $45.4 billion in 2017, while U.S. services imports from Japan rose by $1.2 billion, or 3.0 percent, to $27.5 billion. As a result, the U.S. surplus in services trade with Japan grew to $17.1 billion from $16.0 billion the year before.

Economic dialogue between the United States and Japan in 2017 focused on a variety of trade issues, including agricultural trade developments and the efficiency of the Japanese regulatory review process for medical devices and pharmaceuticals. According to USTR, one of the Administration’s top trade policy goals was to resolve Japanese import barriers for U.S. lamb, beef, horticultural products, and processed foods.

Republic of Korea

The Republic of Korea (South Korea) continued to be the United States’ sixth-largest single-country merchandise trading partner in 2017, accounting for 3.1 percent of U.S. trade with the world. Two-way merchandise trade was valued at $119.4 billion, up from $112.2 billion in 2016. U.S. merchandise exports to South Korea were valued at $48.3 billion in 2017, while U.S. merchandise imports from South Korea totaled $71.2 billion. This resulted in a trade deficit with South Korea of $22.9 billion in 2017, down 17.0 percent from 2016. Leading U.S. exports to South Korea included machines for semiconductor or integrated circuit manufacturing; civilian aircraft, engines, and parts; processors or controllers; passenger motor vehicles; and crude petroleum. Leading U.S. imports from South Korea included passenger motor vehicles, cellphones, computer parts and accessories, refined petroleum products, and microchips.

In 2017, South Korea became the United States’ 9th-largest single-country services trading partner based on two-way trade, up from 10th-largest in 2016. U.S. services exports to South Korea increased 10.0 percent in 2017 to reach a new high of $22.8 billion. U.S. services imports from South Korea also increased in 2017, by 7.2 percent, to reach $9.4 billion. Because U.S. services exports grew more than U.S. services imports, the U.S. services trade surplus with South Korea increased by 12.0 percent, from $12.0 billion in 2016 to $13.4 billion in 2017.

In 2017, U.S. trade relations with South Korea occurred within the framework of the U.S.-Korea FTA, which entered into force on March 15, 2012. The United States and South Korea held two special sessions of the Joint Committee in 2017 to discuss possible amendments or modifications to the agreement, and in December 2017, it was announced that negotiations would begin in January 2018.

India

In 2017, India was the United States’ ninth-largest single-country trading partner based on two-way merchandise trade, maintaining this position since 2016. U.S. two-way merchandise trade with India increased by 9.8 percent to $74.3 billion in 2017, accounting for 1.9 percent of U.S. merchandise trade with the world, the same as in 2016. U.S. merchandise exports to India were $25.7 billion in 2017 and U.S. merchandise imports from India were $48.6 billion, resulting in a U.S. merchandise trade deficit with India of $22.9 billion in 2017, down from $24.3 billion in 2016. Leading U.S. exports to India in 2017 were nonindustrial diamonds; nonmonetary gold; civilian aircraft, engines, and parts; bituminous coal; and almonds. Leading U.S. imports from India in 2017 were nonindustrial diamonds, certain medicaments, frozen shrimp, light oils, and gold jewelry.

India was the United States’ seventh-largest single-country trading partner for services and was the only country among the top ten services trading partners with which the United States had a services trade deficit in 2017. The services trade deficit with India increased 5.3 percent to $5.8 billion in 2017.

In 2017, the U.S. Trade Representative and the Minister of Commerce and Industry of India met for the 11th meeting of the India and the United States Trade Policy Forum, where a wide variety of topics were addressed. IPR protection remained one of the top bilateral trade issues between the two countries in 2017.

Taiwan

In 2017, Taiwan became the United States’ 11th-largest single-country trading partner, dropping from the 10th position in 2016. U.S. two-way merchandise trade with Taiwan increased 4.5 percent to $68.2 billion from $65.2 billion in 2016, continuing to account for 1.8 percent of the United States’ total merchandise trade with the world. The U.S. merchandise trade deficit with Taiwan in 2017 was $16.7 billion, a 26.7 percent increase from its 2016 trade deficit of $13.2 billion. The top U.S. exports to Taiwan in 2017 were civilian aircraft, engines, and parts; machines for semiconductor or integrated circuit manufacturing; processors or controllers; computer memories; and machines for semiconductor boules or wafer manufacturing. The top U.S. imports from Taiwan were microchips; telecommunications equipment; processors or controllers; computer parts and accessories; and portable computers and tablets.

U.S.-Taiwan two-way services trade fell 8.8 percent to $17.2 billion in 2017, accounting for 1.4 percent of all U.S. services trade. U.S. services exports to Taiwan fell by 18.4 percent to $9.2 billion, while imports rose 5.5 percent to $8.1 billion, resulting in a 68.6 percent decline in the U.S. services trade surplus with Taiwan to $1.1 billion in 2017. The drop in U.S. services exports to Taiwan was due to a reduction in charges for the use of intellectual property and maintenance and repair services.

The primary forum for bilateral discussions on trade and investment issues is the U.S.-Taiwan Trade and Investment Framework Agreement (TIFA). While there was no TIFA Council meeting in 2017, U.S. and Taiwan officials followed up on issues raised in the 2016 TIFA Council meeting. The main issues under discussion remained IPRs, agriculture, medical devices, and pharmaceuticals.

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Chapter 1
Introduction and Overview of U.S. Trade

Scope and Approach of the Report

This report provides factual information on the operation of the U.S. trade agreements program and its administration for calendar year 2017. Section 163(c) of the Trade Act of 1974 (19 U.S.C. 2213(c)) states that “the International Trade Commission shall submit to the Congress at least once a year, a factual report on the operation of the trade agreements program.” Section 1 of Executive Order 11846 defines the trade agreements program to include “all activities consisting of, or related to, the negotiation or administration of international agreements which primarily concern trade,” [1] and section 163(a) of the Trade Act of 1974 sets out the types of information that the President is to include in his annual report to the Congress on the operation of the trade agreements program. [2] This report seeks to provide information on the activities defined in the Executive Order and, to the extent appropriate and to the extent that there were developments to report and information was publicly available, the elements set out in section 163(a).

Organization of the Report

This first chapter gives an overview of the international economic and trade environment within which U.S. trade policy was conducted in 2017. It also provides a timeline of selected key trade activities. Chapter 2 covers the administration of U.S. trade laws and regulations in 2017, including tariff preference programs such as the Generalized System of Preferences (GSP). Chapter 3 focuses on U.S. participation in the World Trade Organization (WTO), including developments in major WTO dispute settlement cases during 2017. Chapter 4 covers 2017 developments at the Organisation for Economic Co-operation and Development (OECD) and Asian-Pacific Economic Cooperation (APEC), as well as negotiations on an agreement on trade in services and developments with trade and investment framework agreements. Chapter 5 describes U.S. negotiation of and participation in free trade agreements (FTAs) in 2017, and chapter 6 covers trade data and trade relations in 2017 with selected U.S. trading partners.

Sources

This report is based on primary-source materials about U.S. trade programs and administrative actions pertaining to them. These materials chiefly encompass U.S. government reports, Federal Register notices, and news releases, including publications and news releases by the U.S. International Trade Commission (USITC or the Commission) and the Office of the United States Trade Representative (USTR). Other primary sources of information include publications of international institutions, such as the International Monetary Fund, World Bank, OECD, WTO, United Nations, and foreign governments. When primary-source information is unavailable, the report draws on professional journals, trade publications, and news reports for supplemental factual information.

Like past reports, The Year in Trade 2017 relies on data from the U.S. Census Bureau (U.S. Census) of the U.S. Department of Commerce (USDOC) for the U.S. merchandise trade statistics presented throughout the report. Most tables in the report present U.S. merchandise trade statistics using “total exports” and “general imports” as measures, [3] except for data on imports that have entered the United States with a claim of eligibility under trade preference programs and FTAs. Such data require an analysis of U.S. “imports for consumption”—goods that have been cleared by U.S. Customs and Border Protection to enter the customs territory of the United States with required duties paid. [4] Also, much of the trade data used in the report, including U.S. services and merchandise trade data, are revised over time, so earlier years’ trade statistics in this report may not always match the data presented in previous reports. Most of the merchandise trade data used in this report can be accessed using the USITC’s DataWeb database ( https://dataweb.usitc.gov ).

Chapters 1 and 6 also offer data on services trade. The information on services trade is based on data for cross-border trade in private services, which exclude government sales and purchases of goods and services not included elsewhere. The source of these data is the Bureau of Economic Analysis (BEA) of the USDOC.

Overview of the U.S. and Global Economies in 2017

U.S. Economic Trends in 2017

The level of U.S. imports and exports of goods and services depends on many factors, including the strength of the U.S. and global economies. The United States had a $19.4 trillion economy in 2017. [5] The U.S. economy grew faster in 2017 than in 2016: U.S. real gross domestic product (GDP) increased 2.3 percent in 2017, compared to the growth rate of 1.5 percent in 2016 (figure 1.1). [6] The largest factors behind the higher growth rate were the following four industries: professional and business services; finance, insurance, real estate, rental, and leasing; manufacturing; and retail trade. [7]

Figure 1.1 U.S. real gross domestic product, percentage change, 2013–17

Source: USDOC, BEA, “ Real Gross Domestic Product ,” March 26, 2018.

Note: Underlying data can be found in appendix table B.3 .

Global Economic Trends in 2017

The global economic growth rate rose from 2.5 percent in 2016 to 3.3 percent in 2017 (figure 1.2). [8] The advanced economies grew faster in 2017 than in 2016. The change in the growth rate of emerging and developing economies was small—0.1 percentage point from 2016 to 2017—and was primarily due to the relatively unchanged high rate of growth of the Chinese economy. Among the United States’ top eight trading partners, only India and Mexico showed slower growth rates in 2017 than in 2016 (figure 1.2). [9]

Figure 1.2 Economic growth trends in the world, the United States, and major trading partners, 2015–17

Source: IMF, World Economic Outlook , October 2017 (accessed March 26, 2018).

Note: Underlying data can be found in appendix table B.4 .

Worldwide growth can be attributed to the strengthening of domestic demand in advanced economies and in China. Canada showed one of the larger improvements in terms of growth, doubling its real GDP growth rate from 1.5 percent in 2016 to 3.0 percent in 2017 due to increased domestic demand. [10] On the other hand, India’s growth rate slowed down, decreasing from 7.1 percent in 2016 to 6.7 percent in 2017. This was attributed to changes in government policies, such as the introduction of a goods and services tax, as well as a currency exchange initiative. [11] South Korea’s economy continued to grow modestly, increasing its growth rate from 2.8 percent in 2016 to 3.0 percent in 2017. Despite this increase, South Korea’s rate of growth was below the world average in 2017. [12]

Overall world trade volume for goods and services increased by 4.2 percent in 2017, compared to a 2.4 percent increase in 2016. [13] Both advanced and emerging economies showed increased growth rates in imports and exports in 2017, but emerging economies’ trade flows grew at a higher rate. [14] In 2017, exports from emerging economies grew 4.8 percent, up from 2.5 percent in 2016. This is compared to 3.8 percent for advanced economies, up from 2.2 percent in 2016. Imports grew by 4.4 percent, up from 2.0 percent, in emerging economies, and by 4.0 percent, up from 2.7 percent, in advanced economies over the same period. [15]

Exchange Rate Trends

The U.S. dollar depreciated relative to the broad dollar index, falling 6.3 percent between January and December of 2017. ^[16] This trend was driven by the depreciation of the U.S. dollar against major world currencies (figure 1.3). Between January 1 and December 31, 2017, the U.S. dollar depreciated by 12.0 percent against the euro; 9.4 percent against the United Kingdom (UK) pound; 6.8 percent against the Canadian dollar; 6.6 percent against the Indian rupee; 6.5 percent against the Chinese yuan; 6.1 percent against the Mexican peso; and 4.2 percent against the Japanese yen. ^[17]

Figure 1.3 Indexes of U.S. dollar exchange rates for selected major foreign currencies, daily, 2017

Source: Federal Reserve System, “ Foreign Exchange Rates ” (accessed March 26, 2018).

Note: This figure shows the units of the foreign currency per unit of the U.S. dollar. A decrease in the index represents a depreciation of the U.S. dollar relative to the foreign currency, and an increase in the index represents an appreciation of the U.S. dollar relative to the foreign currency.

The depreciation of the dollar was partly driven by changes in the economic performance of major U.S. trading partners. As reported by some major U.S. investment banks, during 2017 the euro and pound were recovering from an earlier drop caused by uncertainty over the Brexit vote. At the same time, the German and French economies were experiencing increased growth. These factors boosted demand for the euro among global investors. On the other hand, 2017 was a year of uncertainty over the current monetary and trade policy of the United States. This uncertainty led to a reduction in demand for the U.S. dollar, causing depreciation of the U.S. dollar relative to other major foreign currencies. ^[18] The broad fall of the U.S. dollar in 2017 contrasts with its mixed performance against major currencies in 2016. ^[19]

U.S. Trade in Goods in 2017

The value of U.S. merchandise exports was $1,546.7 billion in 2017, a 6.6 percent increase from the 2016 level (figure 1.4 and appendix table A.1). U.S. merchandise imports totaled $2,342.9 billion over the same period, a 7.1 percent increase from the 2016 level (figure 1.4 and appendix table A.2). [20] U.S. imports increased more than U.S. exports, leading to a $59.4 billion increase in the U.S. merchandise trade deficit to $796.2 million in 2017. [21] The agricultural sector was the only sector that experienced a trade surplus in 2017, exporting $5.7 billion in agricultural products in excess of imports.

Figure 1.4 U.S. merchandise trade with the world, 2015–17

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Underlying data can be found in appendix table B.5 .

Energy-related products had the largest absolute and relative (percentage) increase in imports and exports: exports rose 45.5 percent in 2017, and imports increased by 25.5 percent over the same period (table 1.1). A number of factors contributed to the rise in exports and imports. First, both U.S. production of and demand for crude petroleum increased in 2017. However, the increase in production exceeded the increase in demand, lowering demand for U.S. imports and increasing U.S. exports in volume terms. Domestic production of petroleum products increased from 8.7 million barrels per day in 2016 to 9.3 million barrels per day in 2017. [22] Over the same period, domestic consumption of petroleum products increased from 19.7 million barrels per day to 19.9 million barrels per day. [23] Second, another factor contributing to the increase in the value of exports of U.S. crude was the removal of the U.S. government ban on most exports of U.S. crude to countries other than Canada in December 2015, which increased the volume of U.S. exports. [24]

Third, an increase in the price of crude petroleum contributed to the increase in both exports and imports. Indeed, the increase in the value of U.S. imports of crude was primarily driven by the increase in the price of U.S. crude. International price benchmarks for crude petroleum that declined in 2016 recovered slightly in 2017. [25] While the volume of U.S. imports of crude petroleum increased by 1.0 percent, export volumes increased by 88.6 percent, nearly doubling from 2.16 billion barrels in 2016 to 4.08 billion barrels in 2017. [26]

U.S. Merchandise Trade by Product Category

Exports

Transportation equipment continued to be the largest U.S. export sector in 2017, accounting for 21.0 percent of all U.S. exports. It was followed by electronic products (17.3 percent of exports) and chemical and related products (14.7 percent of exports) (table 1.1 and appendix table A.1). The top export products were civilian aircraft, engines, and parts; refined petroleum products; light oils; crude petroleum; soybeans; and nonmonetary gold (appendix table A.3).

Table 1.1 U.S. merchandise trade with the world, by USITC digest sector, 2016–17 (million dollars)

Sector	2016	2017	change 2016–17	% change 2016–17	2016	2017	change 2016–17	% change 2016–17
	Exports				Imports
Agricultural products	148,683	153,116	4,433	3.0	139,153	147,406	8,253	5.9
Forest products	37,707	39,698	1,991	5.3	43,118	44,856	1,738	4.0
Chemicals and related products	218,089	227,270	9,181	4.2	259,846	268,112	8,266	3.2
Energy-related products	98,418	143,236	44,818	45.5	157,826	198,096	40,270	25.5
Textiles and apparel	21,656	22,082	426	2.0	120,265	121,423	1,158	1.0
Footwear	1,368	1,430	62	4.5	25,634	25,654	20	0.1
Minerals and metals	128,684	136,452	7,769	6.0	183,522	200,714	17,192	9.4
Machinery	128,097	135,945	7,848	6.1	179,537	196,414	16,878	9.4
Transportation equipment	320,022	325,434	5,412	1.7	418,286	434,894	16,608	4.0
Electronic products	260,407	268,278	7,870	3.0	449,951	484,271	34,321	7.6
Miscellaneous manufactures	47,754	49,138	1,383	2.9	124,973	130,453	5,481	4.4
Special provisions	40,125	44,655	4,530	11.3	85,695	90,610	4,915	5.7
Total	1,451,011	1,546,733	95,722	6.6	2,187,805	2,342,905	155,100	7.1

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

Exports in all merchandise sectors increased in 2017. [27] The largest increase in both value and percentage terms occurred in the energy-related products sector (up $44.9 billion to $143.2 billion). It was followed by chemicals and related products (up $9.2 billion to $227.3 billion) and electronic products (up $7.9 billion to $268.3 billion). At the product level, there were both increases and decreases in top exports. The largest increases at the product level were all in the energy-related products sector, [28] including exports of crude petroleum (up $12.4 billion to $21.8 billion), refined petroleum products (up $10.4 billion to $48.0 billion), light oils (up $5.5 billion to $29.8 billion), bituminous coal (up $5.3 billion to $9.5 billion), and liquefied propane products (up $4.7 billion to $12.2 billion). The largest declines were in passenger motor vehicles, where exports declined by $4.0 billion to $59.3 billion. [29] It was followed by medicaments in measured doses, exports of which declined by $2.1 billion to $17.1 billion (appendix table A.3).

Imports

Electronic products and transportation equipment continued to be the two top import sectors in 2017, accounting for 20.7 percent and 18.6 percent of total 2017 U.S. imports, respectively (table 1.1 and appendix table A.2). Passenger motor vehicles were the largest U.S. import product, valued at $186.4 billion in 2017. They were followed by crude petroleum ($132.9 billion), cellphones ($55.9 billion), medicaments ($50.3 billion), and telecommunications equipment ($47.4 billion) (appendix table A.4).

The value of U.S. imports in all 11 sectors increased in 2017 (table 1.1 and appendix table A.2). [31] The largest increase in both value and percent terms occurred in the energy-related products sector. Imports of energy-related products grew by $40.3 billion (25.5 percent) from $157.8 billion in 2016 to $198.1 billion in 2017; U.S. crude petroleum imports alone grew by $31.1 billion to $132.9 billion. Growth in these products was followed by a $34.3 billion increase in imports of electronic products, from $450.0 billion in 2016 to $484.3 billion in 2017; a $17.2 billion (9.4 percent) increase in imports of minerals and metals to $200.7 billion in 2017; and a $16.9 billion (9.4 percent) increase in imports of machinery to $196.4 billion in 2017. The smallest increase in imports between 2016 and 2017, both in value ($20 million) and percentage terms (0.1 percent), was in the footwear sector (table 1.1 and appendix table A.2).

U.S. Merchandise Trade with Leading Partners

Table 1.2 shows U.S. trade with major trading partners, ranked by total trade (exports plus imports) in 2017. In 2017, the European Union (EU) remained the United States’ top trading partner in terms of two-way merchandise trade, followed by China, Canada, and Mexico. Ranked by exports, the EU was the leading market for U.S. exports at $283.5 billion (18.3 percent of total exports). Canada was the second largest, just shy of the EU value at $282.5 billion (18.3 percent) (figure 1.5). Ranked by general U.S. imports, China was the leading source of imports into the United States at $505.6 billion (21.6 percent of imports), followed by the EU at $434.9 billion (18.6 percent) (figure 1.6). [32]

Table 1.2 U.S. merchandise trade with major trading partners and the world, 2017 (million dollars)

Trading partner	U.S. total exports	U.S. general imports	Trade balance	Two-way trade (exports plus imports)
EU	283,517	434,933	-151,416	718,451
China	130,370	505,597	-375,228	635,967
Canada	282,472	299,975	-17,504	582,447
Mexico	242,989	314,045	-71,057	557,034
Japan	67,696	136,544	-68,848	204,239
South Korea	48,277	71,164	-22,887	119,441
India	25,700	48,631	-22,931	74,332
Taiwan	25,754	42,492	-16,737	68,246
All others	418,969	405,632	13,337	824,600
Total	1,546,733	2,342,905	-796,172	3,889,638

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

U.S. merchandise exports to nearly all leading trading partners increased from 2016 to 2017 (table 1.3). Exports declined only to Taiwan (down by $283 million or 1.1 percent). The largest increase in value was a $15.7 billion increase in exports to Canada ($282.5 billion in 2017, up from $266.8 billion in 2016). It was followed by a $14.8 billion increase in exports to China ($130.4 billion in 2017, up from $115.6 billion in 2016). In percentage terms, the largest increase in exports between 2016 and 2017 was to India (18.7 percent), followed by South Korea (14.1 percent) and China (12.8 percent).

Table 1.3 U.S. merchandise trade with major trading partners and the world, 2016–17 (million dollars)

Sector	2016	2017	change 2016–17	% change 2016–17	2016	2017	change 2016–17	% change 2016–17
	Exports				Imports
EU	269,617	283,517	13,901	5.2	416,377	434,933	18,556	4.5
China	115,602	130,370	14,767	12.8	462,618	505,597	42,979	9.3
Canada	266,797	282,472	15,674	5.9	277,756	299,975	22,220	8.0
Mexico	229,702	242,989	13,287	5.8	294,056	314,045	19,989	6.8
Japan	63,236	67,696	4,460	7.1	132,046	136,544	4,497	3.4
South Korea	42,309	48,277	5,967	14.1	69,881	71,164	1,283	1.8
India	21,652	25,700	4,048	18.7	46,032	48,631	2,599	5.6
Taiwan	26,037	25,754	-283	-1.1	39,248	42,492	3,244	8.3
All others	416,059	439,958	23,899	5.7	449,791	489,524	39,733	8.8
Total	1,451,011	1,546,733	95,722	6.6	2,187,805	2,342,905	155,100	7.1

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

Figure 1.5 Leading U.S. export markets, by share, 2017

Source: DataWeb/USDOC (accessed March 14, 2018).

Note: Underlying data can be found in appendix table B.6 .

Figure 1.6 Leading U.S. import sources, by share, 2017

Source: DataWeb/USDOC (accessed March 14, 2018).

Note: Underlying data can be found in appendix table B.6 .

U.S. merchandise imports from all of the major trading partners increased in 2017. The largest rise in value was a $43.0 billion increase in imports from China (up 9.3 percent), a $22.2 billion increase in imports from Canada (up 8.0 percent), and a $20.0 billion increase in imports from Mexico (up 6.8 percent).

U.S. Trade with Free Trade Agreement Partners

In 2017, two-way total merchandise trade (total exports plus general imports) between the United States and its FTA partners amounted to $1,517.5 billion, accounting for 39.0 percent of total U.S. merchandise trade with the world ($3,889.6 billion). [33] This was somewhat higher than in 2016, when two-way merchandise trade between the United States and its FTA partners totaled $1,424.1 billion, or 39.1 percent of total U.S. merchandise trade.

The value of U.S. imports entered under FTAs was $385.1 billion in 2017, a 2.8 percent increase from the 2016 value of $374.4 billion. These imports accounted for 48.3 percent of total imports from FTA partners in 2017 and for 16.5 percent of total U.S. imports from the world.

U.S. Imports under Trade Preference Programs

The value of U.S. imports entered under trade preference programs with developing countries was much smaller than that of U.S. imports claiming eligibility under FTAs. U.S. imports under trade preference programs increased from $29.3 billion in 2016 to $34.7 billion in 2017; they accounted for 1.4 percent of total U.S. imports during 2017, whereas in 2016 they accounted for 1.3 percent of imports. Imports that claimed eligibility under the U.S. Generalized System of Preferences program totaled $21.2 billion in 2017; imports under the African Growth and Opportunity Act totaled $12.5 billion; imports under the Caribbean Basin Economic Recovery Act and the Caribbean Basin Trade Partnership Act totaled $1.0 billion; imports under the Haiti initiatives totaled $0.6 billion; and imports under the Nepal Trade Preference Program totaled $0.002 billion ($2 million). [34]

U.S. Trade in Services in 2017

Total U.S. cross-border trade in private services (hereafter “services”) grew by 5.0 percent between 2016 and 2017. [35] During that period, U.S. exports of services increased by 3.8 percent from $733.6 billion to $761.7 billion, while U.S. services imports grew at a rate of 6.8 percent from $483.1 billion to $516.0 billion. [36] The U.S. surplus in cross-border services trade decreased 1.9 percent in 2017 to $245.7 billion (figure 1.7). U.S. exports in 9 of the 10 largest services export categories grew in 2017, while U.S. exports of travel services declined. The services export categories with the highest growth rates in 2017 included research and development services (15.0 percent), insurance services (9.0 percent), and financial services (8.4 percent). U.S. imports of services grew in all of the top 10 services import categories.

Figure 1.7 U.S. cross-border trade in private services with the world, 2015–17

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, Table 1.2, “U.S. International Trade in Services,” March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

U.S. Services Trade by Product Category [37]

Exports

U.S. travel services exports, valued at $203.7 billion in 2017, accounted for the largest share (26.7 percent) of total U.S. cross-border services exports in 2017 (appendix table A.8). [38] Other large U.S. services export categories included charges for the use of intellectual property not included elsewhere (n.i.e.) ($127.9 billion or 16.8 percent of total exports), financial services ($106.4 billion or 14.0 percent), and professional and management consulting services ($78.7 billion or 10.3 percent). [39] After experiencing slow growth of 0.2 percent in 2016, total U.S. services exports grew by 3.8 percent in 2017. The fastest-growing category of services exports was research and development services, which grew 15.0 percent in 2017, compared to 7.6 percent growth in 2016. [40] In several services categories, exports increased in 2017 following a decrease in 2016. These include financial services (8.4 percent in 2017, compared to -4.3 percent in 2016); [41] air passenger fares (0.9 percent in 2017, compared to -7.6 percent in 2016); technical, trade-related, and other business services (6.2 percent in 2017, compared to -12.1 percent in 2016); and air transport (5.6 percent in 2017, compared to -0.8 percent in 2016). The only category that experienced a decline in export growth in 2017 was travel services (-1.1 percent, compared with 0.3 percent in 2016). [42]

Imports

Categories that accounted for the largest shares of U.S. cross-border services imports in 2017 included travel services (with $135.2 billion or 26.2 percent of total U.S. imports), insurance services ($49.7 billion or 9.6 percent), charges for the use of intellectual property n.i.e. ($48.4 billion or 9.4 percent), and professional and management consulting services ($42.9 billion or 8.3 percent) (appendix table A.9). Technical, trade-related, and other business services [43] experienced the fastest import growth (9.9 percent) in 2017, followed by travel, computer services, financial services, and charges for use of intellectual property n.i.e. (with growth rates of 9.4 percent, 9.2 percent, 9.2 percent, and 8.9 percent, respectively). All of the top 10 services import segments experienced positive growth in 2017, including those segments which experienced a decline in 2016. These include professional and management consulting services (which increased 6.8 percent in 2017, following a decline of 0.6 percent in 2016); sea transport (up 5.7 percent, following a decline of 5.9 percent in 2016); financial services (up 9.2 percent, following a decline of 0.4 percent in 2016); and technical, trade-related, and other business services (up 9.9 percent, following a decline of 9.4 percent in 2016).

U.S. Services Trade with Leading Partners

The EU was the largest export market for U.S. services in 2017, as well as the largest foreign supplier of U.S. services imports (table 1.4). [44] In that year, the EU accounted for $238.4 billion (31.3 percent) of total U.S. services exports and $188.5 billion (36.5 percent) of total U.S. services imports (figures 1.8 and 1.9). [45] After the EU, the top markets for U.S. services exports were Canada, China, and Japan, while the top sources of imports were Canada, India, and Japan. The United States maintained a services trade surplus with every major services trading partner except for India, with which it posted a $5.8 billion deficit in 2017. [46] The two segments that accounted for the largest shares of U.S. services imports from India in 2016 (latest data available) were computer services (53.2 percent), and research and development services (13.5 percent). The United States posted trade deficits with India in these two services segments. [47]

Table 1.4 U.S. cross-border trade in private services with major trading partners and the world, 2017 (million dollars)

Major trading partner	U.S. exports	U.S. imports	Trade balance	Two-way trade (exports plus imports)
EU	238,425	( a )188,496	49,929	426,921
Canada	58,307	32,515	25,792	90,822
Japan	45,421	28,353	17,068	73,774
China	55,585	17,421	38,164	73,006
Mexico	32,795	26,150	6,645	58,945
India	22,763	28,562	-5,799	51,325
Brazil	25,132	6,469	18,663	31,601
South Korea	22,835	9,424	13,411	32,259
Australia	21,909	7,192	14,717	29,101
Singapore	17,843	7,499	10,344	25,342
Taiwan	9,195	8,053	1,142	17,248
All others	211,519	155,881	55,638	367,400
Total	761,729	516,015	245,714	1,277,744

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, tables 1.2 and 1.3, March 21, 2018.

a U.S. imports from the EU in 2017 are overstated because the data include government goods and services n.i.e.

Figure 1.8 Leading U.S. export markets for private services, by share, 2017

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, tables 1.2 and 1.3, U.S. International Trade in Services, March 21, 2018.

Note: Data are preliminary. Because of rounding, figures may not add to 100 percent. Underlying data can be found in appendix table B.8 .

Figure 1.9 Leading U.S. import sources for private services, by share, 2017

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, tables 1.2 and 1.3, U.S. International Trade in Services, March 21, 2018.

Note: Data are preliminary. Because of rounding, figures may not add to 100 percent. Underlying data can be found in appendix table B.8 .

Timeline of Selected Key Trade Activities in 2017

The following timeline presents selected key trade events between the United States and its trading partners in 2017. Some of these developments are presented in more detail in chapters 2 through 6.

Source: Compiled from official and private sources, including the U.S. Department of Commerce, U.S. Department of State, U.S. Department of Transportation, U.S. Department of Treasury, U.S. Trade Representative, White House, Federal Register , Regulations.gov, Asia-Pacific Economic Cooperation, World Trade Organization, European Commission, Global Affairs Canada, and Inside U.S. Trade .

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Chapter 2
Administration of U.S. Trade Laws and Regulations

This chapter surveys activities related to the administration of U.S. trade laws during 2017, covering import relief laws, laws against unfair trade practices, national security investigations, trade adjustment assistance programs, and tariff preference programs. Tariff preference programs encompass the U.S. Generalized System of Preferences, the Nepal Trade Preference Act, the African Growth and Opportunity Act, and the Caribbean Basin Economic Recovery Act, including initiatives aiding Haiti. [48]

Import Relief Laws

Safeguard Actions

This section covers safeguard actions under provisions administered by the Commission, including the global safeguard provisions in sections 201–204 of the Trade Act of 1974, [49] and the safeguard provisions in various bilateral free trade agreements (FTAs) involving the United States.

The Commission conducted two new safeguard investigations during 2017, both under the global safeguard provisions in sections 201–204 of the Trade Act of 1974. These were the first investigations conducted by the Commission under the global safeguard provisions since 2001. The first investigation concerned imports of crystalline silicon photovoltaic cells (CSPV cells), [50] and the second concerned imports of large residential washers (washers). [51] Each investigation was conducted following receipt of a petition from a domestic producer of the article. [52] The Commission made affirmative injury determinations in each investigation and, to address the serious injury, recommended a remedy measure to the President. The Commission submitted its reports on CSPV cells and washers to the President in November 2017 and December 2017, respectively. As of the end of 2017, the Commission’s reports on both CSPV cells [53] and washers [54] were pending before the President. Under section 203 of the Trade Act of 1974, [55] the President makes the final decision on remedy, including whether to apply a remedy measure and, if so, the type, amount, and duration of the measure.

Laws against Unfair Trade Practices

Section 301

Section 301 of the Trade Act of 1974 is the principal U.S. statute for addressing unfair foreign practices affecting U.S. exports of goods or services. [56] Section 301 may be used to enforce U.S. rights under bilateral and multilateral trade agreements and to respond to unjustifiable, unreasonable, or discriminatory foreign government practices that burden or restrict U.S. commerce. Interested persons may petition the Office of the U.S. Trade Representative (USTR) to investigate foreign government policies or practices, or USTR may initiate an investigation itself.

If the investigation involves a trade agreement and consultations do not lead to a mutually acceptable resolution, section 303 of the Trade Act of 1974 requires USTR to use the dispute settlement procedures available under the agreement in question. If the matter is not resolved by the conclusion of the investigation, section 304 of the Trade Act of 1974 requires USTR to determine whether the practices in question fulfill any of three conditions: (1) they deny U.S. rights under a trade agreement; (2) they are unjustifiable, and burden or restrict U.S. commerce; or (3) they are unreasonable or discriminatory, and burden or restrict U.S. commerce. If the practices fulfill either of the first two conditions, USTR must take action. [57] If the practices fulfill the third condition—that is, if they are unreasonable or discriminatory, and they burden or restrict U.S. commerce—USTR must determine whether action is appropriate and, if so, what type of action to take. [58] The time period for making these determinations varies according to the type of practices alleged.

Section 301 Investigations

During 2017, USTR self-initiated an investigation under section 301 regarding China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. In addition, in response to a written request from representatives of the U.S. beef industry, USTR initiated a process to consider whether to reinstate additional duties that had been imposed on certain imports from the European Union (EU) under section 301.

China Technology Transfer. On August 14, 2017, the President issued a memorandum to the United States Trade Representative, directing the USTR to determine, pursuant to section 302(b) of the Trade Act of 1974, whether to investigate any of China’s laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights (IPRs), innovation, or technological development. ^[59] In accordance with the President’s memorandum, USTR initiated an investigation under section 302(b) of the Trade Act of 1974, to determine whether any acts, policies, or practices of the government of China related to technology transfer, intellectual property, or innovation are unreasonable or discriminatory and whether the acts, policies, or practices burden or restrict U.S. commerce. ^[60] USTR is investigating a wide variety of acts, policies, and practices by the government of China that allegedly require or pressure the transfer of technology and intellectual property to Chinese companies on nonmarket terms. In addition, USTR is investigating allegations of systematic Chinese government support to Chinese companies that seek to acquire or obtain cutting-edge technologies from U.S. companies in industries deemed important by the Chinese government. USTR is further considering whether the Chinese government is conducting or supporting unauthorized intrusions into U.S. commercial computer networks. As part of the investigation, USTR held a public hearing in October 2017 and solicited written public comments. Under the statute, USTR generally has up to 12 months from the date of initiation to determine whether the statutory requirements have been met and, if so, what action to take. The China technology transfer section 301 investigation was ongoing at the end of 2017. ^[61]

EU Meat Hormones. A second section 301 investigation that was active during 2017 related to a longstanding dispute with respect to EU measures concerning meat and meat products. The investigation concerned various meat hormone directives of the EU, which prohibit the use of certain hormones that promote growth in farm animals. The United States had successfully challenged the EU measures at the World Trade Organization (WTO), and in 1999, imposed additional ad valorem duties [62] of 100 percent on about $117 million in imports from the EU in retaliation. [63]

In January 2009, the USTR announced a determination to modify the list of products subject to additional duties, consistent with WTO authorization. In May 2009, the United States and the EU signed a memorandum of understanding (MOU). [64] Under the MOU, the EU agreed to establish a tariff-rate quota (TRQ) [65] with an in-quota tariff rate of zero for beef produced without growth-promoting hormones (i.e., “high-quality beef”) [66] in the amount of 20,000 metric tons (mt), [67] and the United States agreed to reduce the scope of the retaliation list. [68] The MOU further provided that the parties could enter a second phase under which the EU would increase the TRQ to 45,000 mt beginning in August 2012, and the United States would lift the remaining additional duties. [69] The United States and the EU entered into the second phase of the MOU beginning August 1, 2012, and the EU increased the TRQ for high-quality beef to 45,000 mt. [70] The MOU provided that the second phase would continue for one year. In August 2013, the United States and the EU agreed to extend the second phase of the MOU for two additional years, until August 2, 2015, thereby maintaining the TRQ for high-quality beef at 45,000 mt. [71] Although the second phase of the MOU ended in August 2015, the EU has maintained the 45,000 mt TRQ for high-quality beef. [72]

In February 2016, Congress amended section 301 to authorize USTR to reinstate any additional duties that had been previously imposed under section 301 and then subsequently terminated. [73] The amendment also allows the USTR to suspend concessions and to reinstate a section 301 action following receipt of a written request from a petitioner or any representative of the domestic industry. It requires that USTR, following the receipt of such a request, consult with the petitioner and representatives of the domestic industry and provide an opportunity for public comments. In addition, it requires that USTR review the effectiveness of any reimposed additional duties.

On December 9, 2016, representatives of the U.S. beef industry filed a request with USTR asking that the additional duties be reinstated. [74] According to the industry, the MOU has not in practice provided benefits sufficient to compensate for the economic harm resulting from the EU ban on all but specially-produced U.S. beef. On December 28, 2016, USTR issued a public notice of the request and announced a public hearing and an opportunity for public comment. [75] The public hearing was held on February 15–16, 2017, in Washington, DC. During 2017, USTR engaged in discussions with the EU about possible modifications of the TRQ for high-quality beef to address U.S. industry concerns and was considering the possible reinstatement of duties. [76]

Special 301

The Special 301 law [77] requires that the USTR annually identify and issue a list of foreign countries that deny adequate and effective protection of IPRs, or deny fair and equitable market access to U.S. persons who rely on IPR protection. [78] Under the statute, a country denies adequate and effective IPR protection if the country does not allow foreign persons “to secure, exercise, and enforce rights relating to patents, process patents, registered trademarks, copyrights, trade secrets and mask works.” [79]

Under the statute, a country denies fair and equitable market access if it denies access to a market for a product that is protected by a copyright or related right, patent, trademark, mask work, trade secret, or plant breeder’s right using laws and practices that violate international agreements or that constitute discriminatory nontariff trade barriers. [80] A country may be found to deny adequate and effective IPR protection even if it is in compliance with its obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). [81]

In addition, the Special 301 law directs the USTR to identify so-called “priority foreign countries.” [82] Priority foreign countries are countries that have the most onerous or egregious acts, policies, or practices with the greatest adverse impact (actual or potential) on the relevant U.S. products. [83] Such countries must be designated as priority foreign countries unless they are entering into good-faith negotiations, or they are making significant progress in bilateral or multilateral negotiations to provide adequate and effective IPR protection. [84] The identification of a country as a priority foreign country triggers a section 301 investigation, [85] unless the USTR determines that the investigation would be detrimental to U.S. economic interests. [86]

In addition to identifying priority foreign countries as required by statute, the USTR has adopted a practice of naming countries to a “watch list” or a “priority watch list” when the countries’ IPR laws and practices fail to provide adequate and effective IPR protection, but the deficiencies do not warrant listing the countries as priority foreign countries. [87] The priority watch list identifies countries with significant IPR concerns that warrant close monitoring and bilateral consultation. If a country on the priority watch list makes progress, it may be moved to the watch list or removed from any listing. On the other hand, a country that fails to make progress may be raised from the watch list to the priority watch list or from the priority watch list to the list of priority foreign countries.

In February 2016, Congress enacted amendments to the Special 301 statute that provided that USTR should develop an action plan for each country that has been identified as a priority watch list country and that has remained on the priority watch list for at least one year. [88] The action plan should contain benchmarks designed to assist the country to achieve, or make significant progress toward achieving, adequate and effective protection of IPRs and fair and equitable market access for U.S. persons that rely on IPR protection.

In the 2017 Special 301 review, the USTR examined the adequacy and effectiveness of IPR protection in more than 100 countries. [89] In conducting the review, the USTR focused on a wide range of issues and policy objectives, including inadequate IPR protection and enforcement worldwide, compulsory technology licensing and transfer, and the unauthorized use of unlicensed software by foreign governments. [90]

Although no country was identified as a priority foreign country in the 2017 Special 301 Report , the report identified 11 countries on the priority watch list: Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Thailand, [91] Ukraine, and Venezuela. [92] In addition, the report identified 23 countries on the watch list. [93]

In keeping China on the priority watch list, the report highlighted serious challenges with respect to adequate and effective IPR protection, as well as fair and equitable market access for U.S. persons that rely on IRP protection. [94] The report cites many longstanding concerns, such as coercive technology transfer requirements, structural impediments to effective IPR enforcement, and widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of pirated and counterfeit exports. India remained on the priority watch list in 2017 due to a lack of measurable improvement to its IPR regime, particularly with respect to patents, copyrights, trade secrets, and enforcement. [95]

As part of the annual Special 301 process, USTR also issues a separate report on so-called notorious markets. USTR defines notorious markets as online or physical marketplaces that are reported to engage in or facilitate commercial-scale copyright piracy and trademark counterfeiting. The report, 2017 Out-of-Cycle Review of Notorious Markets , was issued in January 2018. [96] The report highlights those markets where the scale of this activity is such that it can cause significant harm to U.S. IPR holders. The 2017 report listed 25 online markets and 18 physical markets in 12 countries, including markets in China and India that reportedly engage in or facilitate commercial-scale trademark counterfeiting and copyright piracy.

Antidumping and Countervailing Duty Investigations and Reviews

Antidumping Duty Investigations

The U.S. antidumping law is found in Title VII of the Tariff Act of 1930, as amended. [97] This law offers relief to U.S. industries that are materially injured by imports that are dumped, or sold at “less than fair value” (LTFV). The U.S. government provides a remedy by imposing an additional duty on LTFV imports.

Antidumping duties are imposed when (1) the U.S. Department of Commerce (USDOC) has determined that imports are being, or are likely to be, sold at LTFV in the United States, and (2) the Commission has determined that a U.S. industry is materially injured or threatened with material injury, or that the establishment of an industry in the United States is materially retarded by reason of such imports. (Such a conclusion is called an “affirmative determination.”) Investigations are generally initiated on the basis of a petition filed with the USDOC and the Commission by or on behalf of a U.S. industry, but can be self-initiated by the USDOC. [98] The USDOC and the Commission each make preliminary determinations and, if the Commission’s preliminary determination is affirmative, then each agency will make final determinations during the investigation process.

In general, imports are considered to be sold at LTFV when a foreign firm sells merchandise in the U.S. market at a price that is lower than the “normal value” of the merchandise. [99] Generally, normal value is the price the foreign firm charges for a comparable product sold in its home market. [100] Under certain circumstances, the foreign firm’s U.S. sales price may also be compared with the price the foreign firm charges in other export markets or with the firm’s cost of producing the merchandise, taking into account the firm’s “selling, general, and administrative expenses” and its profit. Under the law, this latter basis for comparison is known as “constructed value.” [101] Finally, where the producer is located in a nonmarket economy, a comparison is made between U.S. prices and a “surrogate” normal value (its factors of production, as valued by use of a “surrogate” country). [102] A “nonmarket economy country” is any foreign country that the administering authority determines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise. [103]

In all three methods, the amount by which the normal value exceeds the U.S. price is the “dumping margin.” The duty specified in an antidumping duty order reflects the weighted average dumping margins found by the USDOC, both for the specific exporters it examined and for all other exporters. [104] This rate of duty (in addition to any ordinary customs duty owed) will be applied to subsequent imports from the specified producers/exporters in the country involved, but it may be adjusted if the USDOC receives a request for an annual review. [105]

The Commission instituted 58 new antidumping investigations, and made 54 preliminary determinations and 36 final determinations in 2017. [106] As a result of affirmative final USDOC and Commission determinations, in 2017, the USDOC issued 33 antidumping duty orders on 15 products from 16 countries (table 2.1). The status of all antidumping investigations active at the Commission during 2017—including, if applicable, the date of final action—is presented in appendix table A.10. A list of all antidumping duty orders and suspension agreements (agreements to suspend investigations) [107] in effect as of the end of 2017 appears in appendix table A.11.

Table 2.1 Antidumping duty orders that became effective during 2017

Trade partner	Product	Range of dumping margins (percent)
Austria	Carbon and alloy steel cut-to-length plate	53.72
Belgium	Carbon and alloy steel cut-to-length plate	5.40–51.78
Brazil	Carbon and alloy steel cut-to-length plate	74.52
Brazil	Emulsion styrene-butadiene rubber	19.61
China	1,1,1,2 Tetrafluoroethane (R-134a)	148.79–167.02
China	1-Hydroxyethylidene-1, 1-diphosphonic acid (HEDP)	167.58–184.01
China	Ammonium sulfate	493.46
China	Amorphous silica fabric	162.47
China	Biaxial integral geogrid products	372.81
China	Carbon and alloy steel cut-to-length plate	68.27
China	Large residential washers	32.12–52.51
China	Stainless steel sheet and strip	63.86–76.64
France	Carbon and alloy steel cut-to-length plate	6.15–148.02
Germany	Carbon and alloy steel cut-to-length plate	5.38–21.03
India	Finished carbon steel flanges	11.32–12.58
India	New pneumatic off-the-road tires	4.90–5.36
Italy	Carbon and alloy steel cut-to-length plate	6.08–22.19
Italy	Finished carbon steel flanges	79.17–204.53
Japan	Carbon and alloy steel cut-to-length plate	14.79–48.67
Japan	Steel concrete reinforcing bar	206.43–209.46
Mexico	Emulsion styrene-butadiene rubber	19.52
Poland	Emulsion styrene-butadiene rubber	25.43
South Africa	Carbon and alloy steel cut-to-length plate	87.72–94.14
South Korea	Carbon and alloy steel cut-to-length plate	7.39
South Korea	Dioctyl terephthalate (DOTP)	2.71–4.08
South Korea	Emulsion styrene-butadiene rubber	9.66–44.30
South Korea	Ferrovanadium	3.22–54.69
South Korea	Phosphor copper	8.43
Spain	Finished carbon steel flanges	18.81–24.43
Taiwan	Carbon and alloy steel cut-to-length plate	2.80–8.01
Taiwan	Steel concrete reinforcing bar	3.62–6.95
Turkey	Carbon and alloy steel cut-to-length plate	3.62–6.95
Turkey	Steel concrete reinforcing bar	5.39–8.17

Source: Compiled by USITC from Federal Register notices.

Note: Antidumping duty orders become effective following final affirmative determinations by USDOC and the Commission. The rates in the table apply in addition to any ordinary customs duty owed.

Countervailing Duty Investigations

The U.S. countervailing duty law is also set forth in Title VII of the Tariff Act of 1930, as amended. [108] It provides for the imposition of additional duties to offset (“countervail”) foreign subsidies on products imported into the United States. [109] In general, procedures for such investigations are similar to those under the antidumping law. Petitions are filed with the USDOC (the administering authority) and with the Commission. Before a countervailing duty order can be issued, the USDOC must find that a countervailable subsidy exists. In addition, the Commission must make an affirmative determination that a U.S. industry is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, because of the subsidized imports.

The Commission instituted 26 new countervailing duty investigations, and made 17 preliminary determinations and 16 final determinations during 2017. USDOC issued 11 countervailing duty orders on 9 products from 5 countries in 2017 as a result of affirmative USDOC and Commission determinations (table 2.2). The status of all countervailing duty investigations active at the Commission during 2017, and, if applicable, the date of final action, is presented in appendix table A.12. A list of all countervailing duty orders and suspension agreements [110] in effect at the end of 2017 appears in appendix table A.13.

Table 2.2 Countervailing duty orders that became effective during 2017

Trade partner	Product	Range of countervailable subsidy rates (percent)
China	Biaxial integral geogrid products	15.61–152.50
China	Ammonium sulfate	206.72
China	Amorphous silica fabric	48.94–135.39
China	Carbon and alloy steel cut-to-length plate	251.00
China	Stainless steel sheet and strip	75.60–190.71
China	1-Hydroxyethylidene-1, 1-diphosphonic acid (HEDP)	0.75–54.11
India	New pneumatic off-the-road tires	4.72–5.36
India	Finished carbon steel flanges	5.66–9.11
South Korea	Carbon and alloy steel cut-to-length plate	3.62–148.02
Sri Lanka	New pneumatic off-the-road tires	2.18
Turkey	Steel concrete reinforcing bar	16.21

Source: Compiled by USITC from Federal Register notices.

Note: Countervailing duty orders become effective following final affirmative determinations by USDOC and the Commission. The rates in the table apply in addition to any ordinary customs duty owed.

Reviews of Outstanding Antidumping and Countervailing Duty Orders/Suspension Agreements

Section 751(a) of the Tariff Act of 1930 requires the USDOC, if requested, to conduct annual reviews of outstanding antidumping duty and countervailing duty orders to ascertain the amount of any net subsidy or dumping margin and to determine compliance with suspension agreements. Section 751(b) also authorizes the USDOC and the Commission, as appropriate, to review certain outstanding determinations and agreements after receiving information or a petition that shows changed circumstances. [111] Where a changed-circumstances review is directed to the Commission, the party that is asking to have an antidumping duty order or countervailing duty order revoked or a suspended investigation terminated has the burden of persuading the Commission that circumstances have changed enough to warrant revocation. [112] On the basis of either the USDOC’s or the Commission’s review, the USDOC may revoke an antidumping duty or countervailing duty order in whole or in part, or may either terminate or resume a suspended investigation.

Section 751(c) of the Tariff Act of 1930 requires both the USDOC and the Commission to conduct “sunset” reviews of existing antidumping duty and countervailing duty orders and suspension agreements five years after their publication. These reviews are intended to determine whether revoking an order or terminating a suspension agreement would be likely to lead to the continuation or recurrence of dumping or a countervailable subsidy and of material injury. [113] If either the USDOC or the Commission reaches a negative determination, the order will be revoked or the suspension agreement terminated. During 2017, the USDOC and the Commission instituted 32 sunset reviews of existing antidumping and countervailing duty orders or suspended investigations, [114] and the Commission completed 46 reviews. As a result of affirmative determinations by the USDOC and the Commission, 45 antidumping duty and countervailing duty orders were continued. Appendix table A.14 lists, by date and action, the reviews of antidumping duty and countervailing duty orders and suspended investigations completed in 2017. [115]

Section 129 Investigations

Section 129 of the U.S. Uruguay Round Agreements Act sets out a procedure by which the Administration may respond to an adverse WTO panel or Appellate Body report concerning U.S. obligations under the WTO agreements on safeguards, antidumping, or subsidies and countervailing measures. Specifically, section 129 establishes a mechanism permitting the USTR to request that the agencies concerned—the USDOC and the Commission—issue a consistency or compliance determination, where such action is appropriate, to respond to the recommendations in a WTO panel or Appellate Body report. [116]

Large Residential Washers from South Korea. On September 26, 2016, the WTO Dispute Settlement Body (DSB) adopted the panel and Appellate Body reports in United States—Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea (DS464). On September 26, 2016, the United States stated that it intends to implement the recommendations of the DSB in this dispute in a manner that respects U.S. WTO obligations, and that it will need a reasonable period of time in which to do so. On April 13, 2017, an Article 21.3(c) arbitrator determined that the requested time period for implementation would expire on December 26, 2017. [117]

On December 15, 2017, USTR requested that USDOC make a determination under section 129 of the Uruguay Round Agreements Act to address the DSB’s recommendations relating to USDOC’s CVD investigation of washers from South Korea. On December 18, 2017, USDOC initiated a section 129 proceeding. [118] The section 129 proceeding is expected to be completed in 2018. [119]

Section 337 Investigations

Section 337 of the Tariff Act of 1930, as amended, [120] prohibits certain unfair practices in the import trade. The unfair practice most frequently investigated by the Commission is patent infringement. In this context, section 337 prohibits the importation into the United States, the sale for importation, and the sale within the United States after importation of articles that infringe a valid and enforceable United States patent, provided that an industry in the United States, relating to articles protected by the patent concerned, exists or is in the process of being established. [121] Similar requirements govern investigations involving infringement of other federally registered IPRs, including registered trademarks, registered copyrights, registered mask works, and registered vessel hull designs. In addition, the Commission has general authority to investigate other unfair methods of competition and unfair acts in the importation and sale of products in the United States (such as products manufactured abroad using stolen U.S. trade secrets), the threat or effect of which is to destroy or injure a U.S. industry, to prevent the establishment of a U.S. industry, or to restrain or monopolize trade and commerce in the United States. [122] The Commission may institute an investigation on the basis of a complaint or on its own initiative. [123]

If the Commission determines that a violation exists, it can issue an exclusion order directing U.S. Customs and Border Protection to block the imports in question (“subject imports”) from entry into the United States. The Commission can also issue cease and desist orders that direct the violating parties to stop engaging in the unlawful practices. The orders enter into force unless disapproved for policy reasons by the USTR [124] within 60 days of issuance. [125]

During calendar year 2017, there were 130 active section 337 investigations and ancillary (secondary) proceedings, 74 of which were instituted that year. Of these 74 new proceedings, 59 were new section 337 investigations and 15 were new ancillary proceedings relating to previously concluded investigations. In 54 of the new section 337 investigations instituted in 2017, patent infringement was the only type of unfair act alleged. Of the remaining 5 investigations, 1 involved allegations of patent infringement and trademark infringement; 1 involved allegations of patent infringement, trademark infringement, copyright infringement, false advertising, and passing off; 1 involved allegations of trademark infringement, copyright infringement, and unfair competition; 1 involved allegations of false advertising; and 1 involved allegations of trade secret misappropriation.

The Commission completed a total of 64 investigations and ancillary proceedings under section 337 in 2017, including 1 remand proceeding, 1 modification proceeding, 2 advisory opinion proceedings, 1 enforcement proceeding, 2 declassification proceedings, and 8 rescission proceedings. In addition, the Commission issued 5 general exclusion orders, 12 limited exclusion orders, and 30 cease and desist orders during 2017. The Commission terminated 30 investigations without determining whether there had been a violation. Of these investigations, 19 were terminated on the basis of settlement agreements and/or consent orders, 10 were terminated based on withdrawal of the complaint, and 1 was terminated for other good cause shown. Commission activities involving section 337 proceedings in 2017 are presented in appendix table A.15.

The section 337 investigations active in 2017 continued to involve a broad spectrum of products. As in prior years, technology products were the single largest category, with approximately 38 percent of the active proceedings involving computer and telecommunications equipment and another 6 percent involving consumer electronics. Pharmaceuticals and medical devices became the second-largest category and were at issue in about 13 percent of the active proceedings. Automotive, transportation, and manufacturing products were at issue in about 10 percent of the active proceedings. The remaining 33 percent of active proceedings involved a wide variety of other types of articles, including arrowheads for recreational hunting, robotic vacuum cleaners, lighted mirrors, pool and spa enclosures, reusable diapers, shaving cartridges, LED lighting devices, gas spring nailers, insulated beverage containers, cases and mounts for smartphones, and food flavorings.

At the close of 2017, 65 section 337 investigations and related proceedings were pending at the Commission. As of December 31, 2017, there were 109 exclusion orders based on violations of section 337 in effect. Appendix table A.16 lists the investigations in which these exclusion orders were issued. Copies of the exclusion orders are available on the Commission’s website at https://www.usitc.gov/intellectual_property/exclusion_orders.htm . For additional detailed information about 337 investigations instituted since October 1, 2008, see the Commission’s 337Info database, found at https://pubapps2.usitc.gov/337external .

National Security Investigations

In April 2017, the U.S. Secretary of Commerce (“Secretary”) initiated investigations on imports of steel and aluminum, respectively, under the national security provisions of section 232 of the Trade Expansion Act of 1962. [126] Section 232 requires the Secretary to submit a report to the President within 270 days of institution of an investigation. The report must include the Secretary’s findings “with respect to the effect of the importation of such article in such quantities or under such circumstances upon the national security” and his recommendations for action or inaction. The statute also provides that if the Secretary finds that the imported article “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security,” he is to so advise the President in his report.

The Secretary initiated the steel investigation on April 19, 2017. On April 20, 2017, the President signed a memorandum directing the Secretary to proceed expeditiously in conducting the investigation. The President further directed that if the Secretary finds that steel is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the Secretary is to recommend the actions and steps that should be taken to adjust steel imports so that they will not threaten to impair the national security. [128] In a press release the USDOC stated that the Secretary had initiated the steel investigation for the purpose of considering overcapacity, dumping, illegal subsidies, and other factors to determine whether steel imports threaten U.S. economic security and military preparedness. The press release noted that the United States currently imposed no tariffs on imports of steel, but that it had to impose antidumping and countervailing duties in over 150 cases, with another 13 currently pending. [129] The press release also cited, among other things, military needs for specialty steel alloys that are used for armor, vehicles, ships, aircraft, and infrastructure, and the need for a healthy domestic steel industry that could guarantee military supply chains in the event of a conflict. [130] USDOC invited the public to submit comments relating to the investigation and held a public hearing on May 24, 2017. The investigation was in progress at the end of 2017 (box 2.1). [131]

The Secretary initiated the investigation on aluminum imports on April 26, 2017. On April 27, 2017, the President signed a memorandum directing the Secretary to proceed expeditiously in conducting his investigation. The President further directed that the Secretary, if he finds that aluminum is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, recommend actions and steps that should be taken to adjust aluminum imports so that they will not threaten to impair the national security. [132] In a press release published on its website, USDOC indicated that the Secretary initiated the investigation on aluminum imports “in light of the large volumes of excess global aluminum production and capacity—much of which results from foreign government subsidies and other unfair practices—which distort the U.S. and global aluminum markets.” In the release, USDOC also noted that aluminum is used in a variety of commercial, infrastructure, and defense applications. [133] USDOC invited the public to submit comments relating to the investigation and held a public hearing on June 22, 2017. The investigation was in progress at the end of 2017 (box 2.1). [134]

Box 2.1 National security investigations on steel and aluminum, developments January–March 2018

Steel investigation. U.S. Secretary of Commerce Wilbur L. Ross transmitted to the President a report on his department’s national security investigation of U.S. steel imports on January 11, 2018. Based on findings in the report, the Secretary concluded that “the present quantities and circumstance of steel imports are ‘weakening our internal economy’ and threaten to impair the national security as defined in Section 232.” He found that several important factors—including the level of global excess capacity, the level of U.S. imports, the reduction in basic U.S. oxygen furnace facilities since 2001, and the potential impact of further U.S. plant closures on capacity needed in a national emergency—supported recommending action under Section 232. To address the threat and to enable U.S. steel producers to operate at about an 80 percent or better capacity utilization rate based on available capacity in 2017, the Secretary recommended two alternative courses of action: (1) apply a quota to imports of flat, long, semi-finished, pipe and tube, and stainless steel (“subject steel”) at a level of 63 percent of each country’s 2017 import levels, or (2) apply a tariff to imports of subject steel at a rate of 24 percent ad valorem. a On March 8, 2018, the President issued Proclamation 9705, which imposed a tariff at a rate of 25 percent ad valorem on imports of subject steel, but exempted imports of subject steel from Canada and Mexico pending ongoing discussions. b The President subsequently issued Proclamation 9711 of March 22, 2018, temporarily exempting Australia, Argentina, South Korea, Brazil, and the European Union (EU) from the tariff after having found satisfactory alternative means to address the national security concern. c Aluminum investigation. Secretary Ross transmitted to the President a report on his department’s national security investigation of U.S. aluminum imports on January 19, 2018. In the report, the Secretary concluded that “the present quantities and circumstances of aluminum imports are ‘weakening our internal economy’ and threaten to impair the national security as defined in Section 232.” He further concluded, among other things, that “the U.S. Department of Defense and critical domestic industries depend on large quantities of aluminum,” that “import trends have left the United States almost totally reliant on foreign producers of primary aluminum” (i.e., unwrought aluminum that is not from recycled sources), that “the United States is at risk of becoming completely reliant on foreign producers of high-purity aluminum essential for key military and commercial systems,” and that “the domestic aluminum industry is at risk of becoming unable to satisfy existing national security needs or respond to a national security emergency that requires a large increase in domestic production.” In response, the Secretary sought to raise domestic production of primary aluminum to about 1.45 million metric tons, or about 80 percent of existing U.S. primary aluminum production capacity. To accomplish this, he recommended two alternative courses of action, one involving a global quota or tariff, the other involving a tariff on imports from certain economies. Specifically, the President: (1) would either impose a worldwide quota on imports of primary aluminum and five types of wrought aluminum (“subject aluminum”) at a level of 86.7 percent of 2017 import levels, or apply a tariff on all imports of subject aluminum at a rate of 7.7 percent ad valorem, or (2) would impose a tariff on imports of subject aluminum from a subset of economies (China, Hong Kong, Russia, Venezuela, and Vietnam) at a rate of 23.6 percent ad valorem. The Secretary stated that these five economies “are the source of substantial imports due to significant overcapacity and potential unreliable suppliers or likely sources of transshipped aluminum from China.” d On March 8, 2018, the President issued Proclamation 9704, which imposed a tariff at a rate of 10 percent ad valorem, in addition to the current rate of duty, on imports of subject aluminum, but exempted imports of subject aluminum from Canada and Mexico pending ongoing discussions. e The President subsequently issued Proclamation 9710, temporarily exempting Australia, Argentina, South Korea, Brazil, and the EU from the tariff after having found satisfactory alternative means to address the national security concern. f

a USDOC, “ The Effect of Imports of Steel on the National Security: An Investigation Conducted under Section 232 of the Trade Expansion Act of 1962, As Amended ,” January 11, 2018, 5, 7.

b Proclamation No. 9705, 83 Fed. Reg. 11625 (March 15, 2018).

c Proclamation No. 9711, 83 Fed. Reg. 13361 (March 28, 2018).

d USDOC, “ The Effect of Imports of Aluminum on the National Security: An Investigation Conducted under Section 232 of the Trade Expansion Act of 1962, as Amended ,” January 17, 2018, 5–6, 108.

e Proclamation No. 9704, 83 Fed. Reg. 11619 (March 15, 2018).

f Proclamation No. 9710, 83 Fed. Reg. 13355 (March 28, 2018).

Trade Adjustment Assistance

The United States provides trade adjustment assistance (TAA) to aid U.S. workers and firms adversely affected by import competition. [135] On June 29, 2015, President Barack Obama signed into law the Trade Preferences Extension Act (TPEA). Title IV of the TPEA—the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA 2015)—amended and reauthorized TAA for six years, until June 30, 2021. [136] The main TAA programs in effect in fiscal year (FY) 2017 were TAA for Workers, administered by the U.S. Department of Labor (USDOL), and TAA for Firms, administered by the U.S. Department of Commerce (USDOC). A third program, TAA for Farmers, administered by the U.S. Department of Agriculture (USDA), was reauthorized by Congress through the TPEA of 2015. [137] However, the U.S. Congress did not appropriate funding for new participants in this program for FY 2017. As a result, USDA did not accept any new petitions or applications for benefits in FY 2017. [138]

Selected developments in the TAA programs for workers and firms during FY 2017 are summarized below. [139]

Assistance for Workers

The provisions relating to TAA for Workers are set out in chapter 2 of title II of the Trade Act of 1974. [140] The program provides federal assistance to eligible workers who have been adversely affected by import competition. The TAA program offers a variety of benefits and services to eligible workers, including training, help with healthcare premium costs, trade readjustment allowances, reemployment assistance, and employment and case management services. [141] Current information on provisions of the TAA for Workers program, as well as detailed information on program eligibility requirements, benefits, and available services, is available at the USDOL’s Employment and Training Administration (ETA) website for TAA, https://www.doleta.gov/tradeact/ .

For petitioning workers to be eligible to apply for TAA, the Secretary of Labor must determine that they meet certain criteria relating to the reasons they were separated from their firm, including declining sales or production at their firm and increased imports of like or directly competitive articles. [142] (Workers often apply in groups based on their former firms.) Workers at firms that are or were suppliers to or downstream users of the output of TAA-certified firms may also be eligible for TAA benefits. [143]

When the Commission makes an affirmative determination in a global safeguard investigation under section 202 of the Trade Act of 1974, USDOL is required to submit a report to the President under section 224(a) of the Trade Act of 1974 on the number of workers in the relevant industry and the extent to which adjustment of workers might be facilitated through existing programs. [144] More specifically, USDOL’s report is required to address (1) the number of workers in the domestic industry producing the like or directly competitive article(s) who have been or are likely to be certified as eligible for TAA; and (2) the extent to which the adjustment of such workers to the import competition may be facilitated through the use of existing programs. [145] In 2017, USDOL submitted two such reports to the President following Commission affirmative determinative determinations in safeguard investigations on (1) imports of crystalline silicon photovoltaic cells (CSPV cells), and (2) imports of large residential washers (washers). [146] In its reports, USDOL estimated the number of workers involved in the production of either CSPV cells or washers who have been certified eligible to apply for TAA since 2012, as well as the number of additional workers likely to be covered by certified TAA petitions before the end of 2019. USDOL also found that enough funding is available to provide TAA benefits and services to these workers, and that training and benefits under various federal programs are sufficient to assist workers to adjust to the trade impact. USDOL submitted its reports on CSPV cells and washers to the President in November 2017 and December 2017, respectively. [147]

In FY 2017, $716.4 million was allocated to state governments to fund the TAA for Workers program. This funding included $391.4 million for “training and other activities,” which includes funds for training, job search allowances, relocation allowances, employment and case management services, and related state administration; $293.7 million for trade readjustment allowance benefits; and $31.2 million for reemployment trade adjustment assistance benefits. [148]

Groups of workers submitted 1,037 petitions for TAA in FY 2017, down 30.8 percent from the 1,498 petitions filed in FY 2016. [149] The USDOL certified 844 petitions covering 94,017 workers as eligible for TAA, and denied 234 petitions covering 32,038 workers. [150] The largest number of petitions certified in FY 2017 was in the West census region, followed by the Northeast, South, and the Midwest (table 2.3). [151] By state, California had the most workers certified (12,338 workers), followed by Washington (7,416 workers), Michigan (7,135 workers), Texas (5,501 workers), and Pennsylvania (4,219 workers). [152]

Table 2.3 TAA certifications, by region, FY 2017

U.S. Census region	No. of petitions certified	No. of workers covered
West	223	31,786
Northeast	222	13,414
South	212	26,126
Midwest	184	22,392
Puerto Rico	3	299
Total	844	94,017

Source: USDOL, ETA, email message to USITC staff, March 16, 2018.

The majority (57.7 percent, 487 petitions) of the TAA petitions certified during FY 2017 were in the manufacturing sector, covering 60,346 workers, followed by the professional, scientific, and technical services sector (11.6 percent, 98 petitions) and the finance and insurance sector (7.9 percent, 67 petitions) (figure 2.1). [153]

Figure 2.1 Share of TAA petitions certified by industry sector in FY 2017

Source: USDOL, ETA, email message to USITC staff, March 16, 2018.

Note: “Other” includes all industry sectors where less than 20 petitions were certified in FY 2017. Underlying data can be found in appendix table B.9 .

Assistance for Firms

The TAA for Firms program [154] provides technical assistance to help U.S. firms experiencing a decline in sales and employment to become more competitive in the global marketplace. [155] The program provides cost-sharing technical assistance to help eligible businesses create and implement targeted business recovery plans. The program pays up to 75 percent of the costs of developing the recovery plans, but firms also contribute a share of the cost of creating and implementing their recovery plans. [156] Current information on provisions of the TAA for Firms program, as well as detailed information on program eligibility requirements, benefits, and available services, is available at the USDOC’s Economic Development Administration (EDA) website for TAA, http://www.taacenters.org/ .

To be eligible for the program, a firm must show that an increase in imports of like or directly competitive articles “contributed importantly” to the decline in sales or production and to the separation or threat of separation of a significant portion of the firm’s workers. [157] The program supports a nationwide network of 11 nonprofit or university-affiliated Trade Adjustment Assistance Centers to help firms apply for certification of eligibility and prepare and implement a business recovery plan or adjustment proposal. [158] Firms generally have up to five years to implement an approved adjustment proposal. [159]

In FY 2017, the TAA for Firms program budget authorization from Congress was $16 million, while FY 2017 actual funding appropriated for the program was $13 million. [160] During FY 2016 (latest data available), EDA certified 68 petitions for eligibility and approved 75 adjustment proposals. [161]

Tariff Preference Programs

Generalized System of Preferences

The U.S. Generalized System of Preferences (GSP) program authorizes the President to grant duty-free access to the U.S. market for about 3,500 products that are imported from designated developing countries and territories. [162] Certain additional products (about 1,500 products) are allowed duty-free treatment only when imported from countries designated as least-developed beneficiary developing countries (LDBDCs). [163] The President’s authority to provide duty-free treatment under the GSP program expired on December 31, 2017. [164]

The goal of the GSP program is to accelerate economic growth in developing countries by offering unilateral tariff preferences for imports into the U.S. market. [165] An underlying principle of the GSP program is that the creation of trade opportunities for developing countries encourages broader-based economic development and creates momentum for economic reform and liberalization. [166]

Countries are designated as “beneficiary developing countries” under the GSP program by the President, although they can lose this designation based on findings of country practices that violate the provisions of the GSP statute, including inadequate protection of IPRs or of internationally recognized worker rights. [167] Complaints about such violations (country practice allegations) are usually brought to the attention of the interagency GSP subcommittee by a petition process. Some beneficiary developing countries are also designated as LDBDCs, and, as such, are eligible for GSP benefits for an additional list of about 1,500 products.

The President also designates the articles that are eligible for duty-free treatment, but may not designate articles that he determines to be “import sensitive” in the context of the GSP. Certain goods (e.g., most footwear, textiles, and apparel) are designated by statute as “import sensitive” and thus not eligible for duty-free treatment under the GSP program. The statute further provides that countries “graduate” from the program when they become “high income,” as defined by the World Bank’s per capita income tables. [168] In addition, the statute allows for ending the eligibility of certain imports, or imports from specific countries, under certain conditions.

Competitive need limitations (CNLs) are another important part of the GSP program’s structure. CNLs are quantitative ceilings on GSP benefits for each product and beneficiary developing country. [169] The GSP statute provides that a beneficiary developing country will lose its GSP eligibility with respect to a product if the CNLs are exceeded, though waivers may be granted under certain conditions. Two different measures for CNLs may apply to U.S. imports of a particular product from a beneficiary developing country during any calendar year. One CNL measure applies to imports from a beneficiary developing country that account for 50 percent or more of the value of total U.S. imports of that product. The other applies to imports that exceed a certain dollar value ($180 million in 2017). [170] The legislation to reauthorize the GSP program in 2006 provided that a CNL waiver in effect on a product for five or more years should be revoked if total U.S. imports from a beneficiary developing country exceed certain “super-competitive” value thresholds—that is, 75 percent of all U.S imports or 150 percent of the current year’s CNL dollar limit. [171]

The following developments with respect to the U.S. GSP program occurred in 2017: [172]

• Presidential Proclamation 9687 of December 22, 2017, ended the suspension of Argentina’s GSP benefits, effective January 1, 2018. [173] Argentina’s GSP benefits had been suspended in March 2012, based on Argentina’s failure to enforce arbitral awards in good faith. Argentina’s GSP benefits had previously been partially removed as the result of a country practice review of Argentina’s protection of IPRs. That earlier partial suspension was not ended by Proclamation 9687, in light of ongoing concerns with Argentina’s protection of IPR.

• Presidential Proclamation 9687 of December 22, 2017, also partially removed GSP eligibility from Ukraine, effective April 26, 2018, as the result of a country practice review of Ukraine’s protection of IPRs. This partial removal covered 147 HTS subheadings. Ukraine had previously lost its GSP eligibility in 2001, also because of its failure to adequately protect IPRs, but was reinstated in 2006.

• GSP eligibility was extended to all GSP beneficiaries for 23 HTS numbers for travel goods (including luggage, backpacks, handbags, and wallets) that had become eligible for LDBDCs and AGOA countries on June 30, 2016, as a result of the 2015/2016 GSP Annual Review.

• Additional results of the 2016/2017 GSP Annual Review included denial of two petitions to add a product (preserved or prepared pineapple and high-carbon ferromanganese) to GSP eligibility for all countries; removal of one product (glycine) from GSP eligibility for all beneficiary developing countries; granting five petitions to add products as eligible for all beneficiary developing countries (rolled or flaked cereals other than oats or barley, saturated acyclic monocarboxylic acids, certain finishing agents, cellulose nitrates in primary forms, and essential oils of lemon); and granting one CNL waiver for a coniferous wood product from Brazil. Two products were newly excluded for exceeding CNL thresholds (heterocyclic aromatic pesticides from India, and setts (small paving block), curbstones, and flagstones from Turkey). De minimis CNL waivers were granted for 100 eligible products. [174] No products that had been excluded during prior GSP reviews, but for which import levels had dropped below the threshold amounts set for the current review, were redesignated as GSP eligible.

• In an action separate from the GSP annual review, in June 2017, USTR self-initiated a country practice review of Bolivia’s eligibility for GSP benefits because of concerns about Bolivia’s implementation of its commitments to eliminate the worst forms of child labor and to afford internationally recognized worker rights, including a minimum age for the employment of children. [175] This was the first self-initiated GSP review in over 20 years. [176]

U.S. imports under GSP preferences rose 11.9 percent from $19.0 billion in 2016 to $21.2 billion in 2017. This increase accounted for 9.9 percent of total U.S. imports from GSP beneficiary countries and 0.9 percent of U.S. imports from all countries (tables 2.4 and A.2). The GSP utilization rate for 2017 (total imports claimed under GSP as a share of eligible imports from GSP countries) was 49.6 percent, a slight increase (1.3 percentage points) over 2016.

India was the leading source of imports entered under the GSP program in 2017, followed by Thailand and Brazil, continuing a pattern established in 2011 (appendix table A.17). These three countries together accounted for 57.8 percent of all U.S. imports under GSP in 2017, while the top five countries (including Indonesia and Turkey) accounted for 74.7 percent of GSP imports. U.S. imports from all five countries increased in 2017 over the previous year.

Table 2.4 U.S. imports for consumption from GSP beneficiaries, 2015–17

Item	2015	2016	2017
Total imports from GSP beneficiaries (million $)	206,534	201,586	215,201
Total imports under GSP (million $)	17,759	18,953	21,215
Imports under LDBDC provisions (million $) a	25	58	115
Imports under non-LDBDC provisions (million $) b	17,734	18,895	21,100
Imports under GSP (as a share of all imports from GSP countries)	8.6	9.4	9.9
Imports under GSP (as a share of all imports eligible for GSP) c	45.4	48.3	49.6

Source: USITC DataWeb/USDOC (accessed March 14, 2018).
Note: Because of rounding, figures may not add to totals shown. LDBDC = least-developed beneficiary developing country. The President’s authority to provide duty-free treatment under the GSP program expired on December 31, 2017.
a LDBDC-eligible products are those for which the rate of duty of “free” appears in the special rate column of the HTS, followed by the symbol “A+” in parentheses. The symbol “A+” indicates that all LDBDCs (and only LDBDCs) are eligible for duty-free treatment with respect to all articles listed in the designated provisions.
b Non-LDBDC-eligible products are those for which a rate of duty of “free” appears in the special rate column of the HTS followed by the symbols “A” or “A*” in parentheses. The symbol “A” indicates that all beneficiary countries are eligible for duty-free treatment with respect to all articles listed in the designated provisions. The symbol “A*” indicates that certain beneficiary countries (specified in general note 4(d) of the HTS) are not eligible for duty-free treatment with respect to any article listed in the designated provision.
c Not all products are eligible for GSP.

In 2017, the chemicals sector was again the top sector for imports claiming eligibility under GSP (up $720 million, an increase of 18.8 percent) (appendix tables A.18 and A.19). The minerals and metals sector ranked second in 2017, as it did in 2016 (up $795 million, an increase of 23.6 percent). Agricultural products made up the third-largest sector and also saw imports claiming GSP eligibility increase $105 million (3.3 percent) over 2016. Among the top 15 U.S. imports under GSP, all imports except one increased in 2017 (appendix table A. 20). Gold jewelry imports were the leading GSP import product by value. Those imports increased 18.9 percent from 2016, with Turkey, Indonesia, and South Africa accounting for 68.3 percent of the GSP trade. Ferrochromium was the second GSP import by value, sourced primarily from South Africa and Turkey. GSP imports of ferrochromium increased 82.4 percent over the 2016 amount. Nonalcoholic beverages (including milk-based drinks) sourced primarily from Thailand, were the third-highest GSP import in 2017 by value at $347 million. [177]

Nepal Trade Preference Program

The Nepal Trade Preference Act (NTPA) was established under Section 915 of the Trade Facilitation and Trade Enforcement Act of 2015, which was signed into law on February 24, 2016. [178] The NTPA entered into effect on December 30, 2016. [179] This program was designed to improve Nepal’s export competitiveness and help Nepal’s economic recovery following a 2015 earthquake. [180] The NTPA is scheduled to expire on December 31, 2025. [181]

The NTPA authorizes the President to provide preferential treatment to articles imported directly from Nepal into the United States if the President determines that Nepal meets certain requirements set forth in the NTPA, AGOA, and GSP statutes. [182] The NTPA originally gave Nepal duty-free access to the U.S. market for goods in 66 HTS 8-digit tariff lines, including certain luggage and flat goods in chapter 42 of the HTS, certain carpets and floor coverings in chapter 57, some apparel in chapters 61 and 62, two non-apparel made-up textile articles in chapter 63, and various headwear items in chapter 65. [183] Because of changes made to the HTS in July 2016, Nepal was eligible for duty-free treatment on 77 tariff lines, 31 of which are also duty free under GSP, when the program entered into effect in December. [184] However, the NTPA’s rules of origin differ from the GSP’s; i.e., under the NTPA, U.S. content may be counted towards part of the 35 percent value added requirement. [185]

In 2017, the first full year that the NTPA was in effect, total U.S. imports from Nepal were $91.7 million; imports from Nepal under GSP were $8.5 million (9.3 percent of total imports from Nepal); and imports under the NTPA were $2.3 million (2.5 percent of total imports from Nepal) (table 2.5). U.S. imports under NTPA and GSP as a share of all imports from Nepal that were eligible for NTPA and GSP preferences was 57.8 percent in 2017.

Table 2.5 U.S. imports for consumption from Nepal, 2015–17

Item	2015	2016	2017
Total imports from Nepal (thousand $)	86,854	88,294	91,695
Imports under GSP (thousand $)	5,469	9,426	8,498
Imports under NTPA (thousand $)	0	0	2,256
Share of total imports from Nepal
Imports under GSP (percent)	6.3	10.7	9.3
Imports under NTPA (percent)	0.0	0.0	2.5
Imports under NTPA and GSP as a share of all imports eligible for NTPA and GSP (percent)	(a)	(a)	57.8

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

a U.S. imports under NTPA were first recorded in 2017.

African Growth and Opportunity Act

Enacted in 2000, the African Growth and Opportunity Act (AGOA) gives tariff preferences to eligible sub-Saharan African (SSA) countries pursuing political and economic reform. [186] In particular, AGOA provides duty-free access to the U.S. market for all GSP-eligible products, and for more than 1,800 additional (AGOA-only) qualifying HTS 8-digit tariff-line items. While AGOA’s eligibility criteria [187] and rules of origin [188] are similar to those of the GSP program, AGOA beneficiary countries are exempt from the GSP CNLs. [189] AGOA also provides duty-free treatment for certain apparel articles cut and sewn in designated beneficiary countries on the condition that additional eligibility criteria are satisfied. [190] The current AGOA expiration date is September 30, 2025. [191]

Each year, the President must consider whether individual SSA countries are, or remain, eligible for AGOA benefits based on the eligibility criteria. The Office of the U.S. Trade Representative (USTR) initiates this annual eligibility review with the publication of a notice in the Federal Register requesting comments and announcing a public hearing. As a result of the annual review covering calendar year 2017, during the year a total of 38 SSA countries [192] were designated as eligible for AGOA benefits, 8 countries [193] were not designated as eligible because they did not meet the eligibility criteria, and 2 countries (Equatorial Guinea and Seychelles) were not designated as eligible because they had graduated from GSP. [194] No AGOA countries lost benefits in 2017, and The Gambia and Swaziland were re-designated as eligible for benefits, effective December 22, 2017. [195]

In addition to the annual review process, any interested party may submit a petition to USTR, at any time, with respect to whether a beneficiary SSA country is meeting the AGOA eligibility requirements for an out-of-cycle review. [196] On March 21, 2017, the Secondary Materials and Recycled Textiles Association filed a petition requesting an out-of-cycle review of AGOA eligibility for Kenya, Rwanda, Tanzania, and Uganda. The petition asserted that a March 2016 decision by the four countries to raise tariffs and phase in a ban on imports of used clothing and footwear imposed a significant economic hardship on the U.S. used clothing industry, and was a violation of the AGOA eligibility criteria to eliminate barriers to U.S. trade and investment. USTR proceeded with an out-of-cycle review of AGOA eligibility for Rwanda, Tanzania, and Uganda, but not Kenya, stating that Kenya took steps to reverse the tariff increases, effective July 1, 2017, and pledged not to ban imports of used clothing. [197] A public hearing was held on July 13, 2017. [198]

Those SSA countries that are designated as AGOA beneficiaries may also be eligible for duty-free treatment for certain textile and apparel articles if USTR determines the country has adopted an effective visa system and all related procedures required to protect against illegal transshipment of such articles. On August 22, 2017, USTR announced that Togo became eligible to use AGOA’s apparel provisions. [199] Including Togo, a total of 27 AGOA countries were eligible to use AGOA’s apparel benefits in 2017. [200] If an AGOA country loses its beneficiary status, but is later reinstated, then the AGOA country must update its visa system and related measures in order to, again, make use of the AGOA apparel benefits. [201]

Preferential treatment for apparel under AGOA requires apparel to be made from U.S. or SSA regional yarns and fabrics, cut and assembled in one or more AGOA countries that are eligible for the program’s apparel benefits. In addition, AGOA lesser-developed countries (LDCs) may use fabric of any origin and still qualify for duty-free treatment up to a specified annual quantitative limit, the so-called “third-country fabric cap.” [202] Of the SSA countries eligible for textile and apparel benefits, only South Africa is not considered an LDC for the purposes of this third-country fabric provision. [203] There are additional apparel provisions for the use of designated “short-supply” fabrics (fabrics not commercially available in the United States) and for folklore or handmade articles. [204]

In 2017, the value of U.S. imports that entered duty-free from beneficiary countries under AGOA was $12.5 billion, an increase of 32.4 percent from the $9.5 billion imported in 2016 (table 2.6). An additional $1.3 billion from AGOA beneficiary countries entered duty-free under GSP. In total, U.S. imports under AGOA, including GSP, were $13.8 billion in 2017, accounting for 55.4 percent of total U.S. imports from AGOA beneficiary countries and 90.0 percent of all U.S. imports from AGOA beneficiary countries that were eligible for AGOA and GSP trade preferences in 2017.

Table 2.6 U.S. imports for consumption from AGOA beneficiaries, 2015–17

Item	2015	2016	2017
Total imports from AGOA countries (million $)	19,139	20,062	24,947
Imports under AGOA (million $) a	9,268	10,626	13,811
Imports under AGOA, excluding GSP (million $)	7,984	9,451	12,512
Imports under AGOA (as a share of all imports from AGOA countries) b	48.4	53.0	55.4
Imports under AGOA (as a share of all imports eligible for AGOA) c	84.2	88.7	90.0

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

a AGOA-eligible products are those for which a rate of duty of “free” appears in the special rate column of the HTS followed by the symbol “D” in parentheses. The symbol “D” indicates that all AGOA beneficiaries are eligible for duty-free treatment with respect to all articles listed in the designated provisions. In addition, provisions of subchapters II and XIX of chapter 98 of the HTS set forth specific categories of AGOA-eligible products, under the terms of separate country designations enumerated in subchapter notes. Includes imports for which preferential tariff treatment was claimed for AGOA-eligible goods by U.S. importers under GSP, for HTS rate lines with special duty symbols “A,” “A*” (unless the AGOA beneficiary country is excluded), or “A+.”

b Imports under AGOA includes AGOA-eligible products that may be imported under both AGOA and GSP. It is up to the exporting country or importer to choose under which program it will claim preferential treatment.

c Not all products are eligible for AGOA.

Crude petroleum continued to be the leading import under AGOA, accounting for 73.2 percent of U.S. imports under AGOA in 2017. The increase in U.S. imports under AGOA in 2017 compared to 2016 can be attributed to an increase in the value and quantity of imports of crude petroleum (appendix table A.21). [205] The value of U.S. crude petroleum imports under AGOA increased 47.5 percent ($3.0 billion) from 2016 to 2017, and the quantity increased 18.2 percent (26.2 million barrels) over the same period. [206] In 2017, 87.7 percent ($8.0 billion) of imports of crude petroleum from AGOA beneficiaries came from the top two suppliers, Nigeria ($5.8 billion) and Angola ($2.2 billion). [207] Each of the top two suppliers is heavily reliant on exports of crude petroleum. Crude petroleum accounted for 95.0 percent of U.S. imports under AGOA from Nigeria in 2017 and for 99.1 percent of U.S. imports under AGOA from Angola.

Following Nigeria and Angola, South Africa was the third-largest supplier of goods under AGOA in 2017 (appendix table A.22). The most important U.S. import under AGOA from South Africa was passenger motor vehicles, [208] which accounted for 65.0 percent of U.S. imports under AGOA from South Africa ($1.2 billion) and 9.4 percent of all U.S. imports under AGOA in 2017, ranking it second among top imports under AGOA. South Africa was the only AGOA country to provide this product to the United States in 2017 (appendix table A.21).

Apparel [209] was the third-largest import under AGOA in 2017, valued at $1.0 billion, or just 8.2 percent of total U.S. imports under AGOA. Unlike crude petroleum or passenger motor vehicles, which are exported by one or two beneficiary countries, U.S. apparel imports under AGOA are exported by over a dozen beneficiary countries (table 2.7). The leading suppliers of apparel under AGOA are Kenya, Lesotho, Madagascar, and Mauritius. For a majority of the AGOA countries exporting apparel, AGOA’s textile and apparel provisions account for all or nearly all of their AGOA usage.

Table 2.7 U.S. general imports of apparel under AGOA, by country, 2015–17

FTA partner	2015	2016	2017	2016–17
		Thousand $		% change
Kenya	367,035	338,370	339,375	0.3
Lesotho	299,314	294,309	288,958	-1.8
Madagascar	39,630	93,245	147,945	58.7
Mauritius	206,746	187,416	139,633	-25.5
Ethiopia	17,445	32,798	52,445	59.9
Tanzania	27,261	36,915	40,610	10.0
Ghana	9,101	6,093	8,210	34.7
South Africa	6,584	6,422	5,285	-17.7
Rwanda	174	452	1,494	230.5
Botswana	8,251	4,766	991	-79.2
Uganda	0	30	360	1,100.0
Malawi	6,268	1,556	321	-79.4
Other AGOA	9	4	14	250.0
AGOA total	987,818	1,002,376	1,025,641	2.3

Source: U.S. Department of Commerce, Office of Textiles and Apparel (OTEXA) https://otexa.trade.gov/agoa-cbtpa/catv0.htm (accessed April 12, 2018).

Section 105 of AGOA required the President to establish the U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum (also known as the AGOA Forum) to discuss trade, investment, and development at an annual ministerial-level meeting with AGOA-eligible countries. [210] The 16th annual AGOA Forum was held in Lomé, Togo, on August 8–10, 2017. The theme of the forum was “The United States and Africa: Partnering for Prosperity through Trade.” [211]

Caribbean Basin Economic Recovery Act

The Caribbean Basin Economic Recovery Act (CBERA) was enacted in 1983 as part of the Caribbean Basin Initiative. Its goal was to encourage economic growth and development in the Caribbean Basin countries by using duty preferences to promote increased production and exports of nontraditional products. [212] The Caribbean Basin Trade Partnership Act (CBTPA) amended CBERA in 2000 and expanded the list of qualified articles for eligible countries to include certain apparel. [213] The CBTPA also extended “NAFTA-equivalent treatment”—that is, rates of duty equivalent to those accorded to goods complying with the rules of origin applicable under the North American Free Trade Agreement (NAFTA)—to a number of other products previously excluded from CBERA. These products included certain tuna; crude petroleum and petroleum products; certain footwear; watches and watch parts assembled from parts originating in countries not eligible for normal trade relations (NTR) rates of duty; and certain handbags, luggage, flat goods, work gloves, and leather wearing apparel. [214] Products that are still excluded from CBERA preferential treatment include textile and apparel products not otherwise eligible for preferential treatment under CBTPA (mostly textile products) and above-quota imports of certain agricultural products subject to tariff-rate quotas (primarily sugar, beef, and dairy products).

CBTPA preferential treatment provisions were extended in 2010 through September 30, 2020, while the original CBERA has no expiration date. [215] In the section that follows, the term CBERA refers to CBERA as amended by the CBTPA.

At the end of 2017, 17 countries and dependent territories were designated eligible for CBERA preferences [216] and 8 of those countries were designated eligible for CBTPA preferences. [217] Several countries have asked to be designated as eligible for benefits under CBERA, CBTPA, or both, including Turks and Caicos Islands, which requested eligibility under CBERA; Aruba, The Bahamas, Dominica, Grenada, Montserrat, St. Kitts and Nevis, and St. Vincent and the Grenadines, under CBTPA; [218] and Sint Maarten and Suriname, under both CBERA and CBTPA. [219]

In 2017, the value of U.S. imports under CBERA increased by 10.3 percent to $961 million from $871 million in 2016 (table 2.8). The top five imports under CBERA in 2017—methanol, T-shirts, polystyrene, sweaters, and crude petroleum—comprised 80.7 percent of imports under the program (appendix table A.23). The largest increase in the value of U.S. imports under CBERA was in methanol, which rose by 49.4 percent to $378.3 million due primarily to a 51.9 percent increase in the price. Despite this increase, imports of methanol under CBERA still were $272.5 million less in 2017 than in 2015. U.S. imports of crude petroleum declined in 2017 mostly because of a decline in volume. U.S. imports of apparel products under CBERA, entirely from Haiti in 2017, also decreased, which can be attributed to a shift from such imports entering under CBTPA provisions to entering under the HOPE Acts (discussed in the next section), as provided in certain tariff provisions of subchapter XX of HTS chapter 98. [220]

Table 2.8 U.S. imports for consumption from CBERA/CBTPA beneficiaries, 2015–17

Item	2015	2016	2017
Total imports from CBERA/CBTPA countries (million $)	7,061	5,342	5,872
Total imports under CBERA (million $)	1,542	871	961
Imports under CBTPA (million $) a	564	392	344
Imports under CBERA, excluding CBTPA (million $) b	978	479	617
Imports under CBERA (as a share of all imports from CBERA countries)	21.8	16.3	16.4
Imports under CBERA (as a share of all imports eligible for CBERA) c	58.6	44.7	41.8

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

a CBTPA-eligible products are those for which a special duty rate appears in the special rate column of the HTS, followed by the symbol “R” in parentheses. The symbol “R” indicates that all CBTPA beneficiary countries are eligible for special duty rate treatment with respect to all articles listed in the designated provisions. In addition, subchapters II and XX of chapter 98 set forth provisions covering specific products eligible for duty-free entry, under separate country designations enumerated in those subchapters (and including former CBTPA beneficiaries—El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, Costa Rica, and Panama).

b CBERA (excluding CBTPA)-eligible products are those for which a special duty rate appears in the special rate column of the HTS, followed by the symbols “E” or “E*” in parentheses. The symbol “E” indicates that all beneficiary countries are eligible for special duty rate treatment with respect to all articles listed in the designated provisions. The symbol “E*” indicates that certain articles, under general note 7(d) of the HTS, are not eligible for special duty treatment with respect to any article listed in the designated provision.

c Not all imports are eligible for CBERA; a particular tariff category may not be designated as such or a particular shipment may not meet program rules.

The top five products accounted for most CBERA imports in 2017. However, a large number of other products—particularly agricultural products—were also imported under CBERA, including yams, melamine, spices, guavas, orange juice, papayas, and various vegetable and fruit preparations, although these imports were small.

U.S. imports under CBERA accounted for 16.4 percent of all U.S. imports from CBERA countries in 2017 and 41.8 percent of U.S. imports from CBERA countries that were eligible for CBERA trade preferences. Trinidad and Tobago continued to be the leading supplier of U.S. imports under CBERA in 2017, accounting for 50.8 percent of the total value. Trinidad and Tobago was the sole supplier of top U.S. imports under CBERA, including methanol, petroleum products, and melamine. Haiti and The Bahamas were the second and third leading suppliers, accounting for 30.7 and 8.3 percent of the total, respectively (appendix table A.24).

Haiti Initiatives

Since 2006, CBERA has been amended several times to expand and enhance trade benefits for Haiti and to give Haitian apparel producers more flexibility in sourcing yarns and fabrics. [221] The Haitian Hemisphere Opportunity through Partnership Encouragement Act of 2006 (HOPE Act) [222] and of 2008 (HOPE II Act) [223] (collectively referred to as HOPE or the HOPE Acts) amended CBERA to expand the rules of origin for inputs to apparel and wire harness automotive components assembled in Haiti and imported into the United States. [224] They also provided additional trade preferences to attract new jobs to Haiti while offering incentives to encourage the use of U.S. inputs. [225] The Haitian Economic Lift Program of 2010 (HELP Act) expanded existing U.S. trade preferences (especially duty-free treatment for certain qualifying apparel, regardless of the origin of inputs [226] ) for Haiti that were established under the CBTPA and HOPE Acts and extended them through September 30, 2020. [227] On June 29, 2015, President Barack Obama signed the Trade Preferences Extension Act of 2015 into law, extending the HOPE Acts trade preferences through September 30, 2025. [228] To date, there have been no other changes to the HOPE Acts, and duty-free access to the U.S. market remains a major incentive for U.S. firms to import apparel from Haiti. [229]

The extension of trade preferences under the HOPE Acts has contributed to the overall growth in U.S. apparel imports from Haiti in recent years, together with Haiti’s low labor costs ($4.50–$6.00 per day), [230] proximity to the United States (resulting in a closer supply chain and shorter lead times), [231] and an open economy. [232] However, in 2016 U.S. imports of apparel from Haiti dipped because of an unstable retail climate in the United States that reduced U.S. demand for apparel imports [233] and the bankruptcy of a South Korean suit and overcoat manufacturer that had been producing apparel in Haiti. [234] In 2017, U.S. imports of apparel from Haiti resumed their overall growth of recent years, rising by 2.1 percent to $866.0 million (table 2.9).

Table 2.9 U.S. imports of apparel from Haiti, 2015–17

Item	2015	2016	2017
Total apparel imports from Haiti (million $)	895.5	848.5	866.0
Apparel imports under a trade preference program (million $)	892.5	842.9	854.1
CBERA/CBTPA (million $)	394.9	307.9	277.2
HOPE and HELP Acts (million $)	497.6	535.0	577.0
Share of total apparel imports from Haiti:		(Percent)
Apparel imports under a trade preference program	99.7	99.3	98.6
CBERA/CBTPA (percent)	44.1	36.3	32.0
HOPE and HELP Acts (percent)	55.6	63.1	66.6

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: These data reflect detailed U.S. general import data under trade preference programs sorted by category and published by the Office of Textiles and Apparel at the U.S. Department of Commerce (accessed June 1, 2018).

For years, Haitian apparel production has been concentrated in high-volume, commodity cotton garments that have relatively predictable consumer demand and few styling changes. Major apparel firms such as Hanes, Fruit of the Loom, and Gildan have been leading importers of cotton T-shirts and cotton undergarments into the U.S. market from Haiti. [235] As in prior years, cotton knit shirts and blouses, cotton trousers and pants, and cotton underwear dominated U.S. imports of apparel from Haiti, accounting for 35.4 percent ($305.6 million), 12.4 percent ($106.8 million), and 7.6 percent ($65.7 million), respectively, of the total value of U.S. apparel imports from Haiti in 2017. [236] However, these shares were lower than in 2016 and prior years.

In contrast, the share of total U.S. apparel imports from Haiti accounted for by manmade-fiber garments (largely knit shirts and blouses and trousers and slacks) continued to grow—rising from 34.4 percent ($292.4 million) in 2016 to 42.9 percent ($370 million) in 2017. Industry sources attribute the steady shift in U.S. imports from Haiti from cotton apparel to manmade-fiber garments to several factors: (1) greater duty savings under the HOPE/Haiti Acts for apparel of manmade fibers because of their higher tariffs (up to 32 percent ad valorem) compared to cotton apparel (for which tariffs average around 16 percent); [237] (2) the ability provided under the HOPE Acts to use specialty, manmade-fiber yarns from Asia to make apparel in Haiti; [238] (3) growing consumer demand for apparel made of synthetic blends; [239] (4) firms’ interest in diversifying their product offerings to maintain viable business operations; [240] and (5) Haiti’s recently developed capacity to produce manmade-fiber apparel—an ability that it lacked in the past. [241]

A recent infusion of foreign investment has also been a significant factor in the expansion of Haiti’s apparel production and exports. Two of five foreign investors that had developed plans in 2016 to manufacture apparel in Haiti’s Caracol Industrial Park—MAS Holdings (Sri Lanka) and Hansae (South Korea)—began producing apparel by yearend 2017. [242] Other foreign investors— Yak-jin (South Korea), Everest Textiles (Taiwan), and RSI (Taiwan)—are expected to start producing apparel (especially athleisure wear) for U.S. clients soon. [243] In addition to the Caracol Industrial Park, the development of the privately owned Lafito Industrial Free Zone (located 25 miles north of Haiti’s capital of Port-au-Prince) is underway and expected to generate thousands of new apparel jobs in the near future. [244] Moreover, Haiti has recently attracted the interest of Chinese and Vietnamese investors who are exploring opportunities to produce apparel in Haiti, suggesting the potential for continued apparel production growth. [245]

Virtually all (98.6 percent) of U.S. imports of apparel from Haiti entered free of duty under trade preference programs in 2017. These programs offer unlimited duty-free treatment for certain apparel products and limited duty-free treatment for other apparel products made from non-originating fabrics up to certain quotas, known as tariff preference levels (TPLs). These programs have helped to revitalize and expand Haiti’s apparel industry, as evidenced by continued job growth in the sector: Haiti’s apparel industry employed 47,356 people by yearend 2017 compared with 40,000 in 2016. [246]

In 2017, Haiti accounted for all (100 percent) of U.S. imports of apparel entering under the CBTPA. Just under one-third (32.0 percent) of total U.S. imports of apparel from Haiti ($277.2 million) entered under CBTPA provisions in 2017. [247] This share fell for the second year in a row, reflecting a continued shift of U.S. apparel imports from Haiti from entering under CBTPA provisions to entering under the HOPE Acts because of the additional trade preferences that the HOPE Acts offer. The value of U.S. imports of apparel entering under the HOPE Acts rose 7.9 percent, from $535.0 million in 2016 to $577.0 million in 2017, and represented two-thirds (66.6 percent) of total U.S. apparel imports that entered free of duty from Haiti, up from 63.1 percent in 2016. Of the apparel imported from Haiti under the HOPE Acts in 2017, $537.5 million or 93.2 percent entered under TPLs. [248] Almost 26.6 percent ($142.8 million) of these U.S. imports of apparel from Haiti entered under the woven apparel TPL in 2017, and 73.4 percent ($394.6 million) entered under the knit apparel and value-added TPLs the same year. [249]

Most of the remaining U.S. imports ($36.3 million) under the HOPE Acts in 2017 entered under the Earned Import Allowance Program (EIAP), a special trade program created under HOPE II in 2008 that allowed the duty-free entry into the United States of certain apparel manufactured in Haiti. [250] In contrast to a steady increase in U.S. imports entering under the EIAP in prior years, U.S. imports of apparel from Haiti under the EIAP fell 39 percent, from $59.1 million in 2016 to $36.3 million in 2017. Because the EIAP is based on using fabrics of U.S. origin and has been used predominantly by woven bottom producers in Haiti, the sharp drop in U.S. imports from Haiti under the EIAP may be attributed to several factors. Declining denim production in the United States has likely reduced the amount of U.S. fabric being sourced from Haiti, with a resulting drop in EIAP eligibility. [251] In addition, the growing shift in U.S. imports of apparel under the CBTPA to importing apparel under the tariff preference levels of the Haiti HOPE/HELP Acts , which permit the use of third-country fabrics (sourced from Sri Lanka and other countries, for example), also may have contributed to the decline in U.S. imports under the EIAP. [252]

As in previous years, no U.S. imports of apparel entered under HTS 9820.61.45 in 2017. HTS 9820.61.45 is one of the HELP provisions added in 2010 that allows for unlimited duty-free imports of certain knitted or crocheted apparel. However, U.S. imports entering under HTS 9820.63.05, a provision for home goods that was also added under HELP in 2010, rose to $2.7 million in 2017, up from $5,000 in 2016. This increase may be attributed to the new production of certain home goods in Haiti for the U.S. market, which began in 2017. [253]

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Chapter 3
The World Trade Organization

This chapter covers developments in 2017 in the World Trade Organization (WTO). These include programs and related items under the WTO General Council, as well as plurilateral agreements hosted under WTO auspices. [254] The chapter also summarizes developments in major WTO dispute settlement cases during the year.

WTO

Eleventh WTO Ministerial Conference

The WTO held its 11th Ministerial Conference (MC11) from December 10 to 13, 2017, in Buenos Aires, Argentina. The conference concluded with a number of outcomes, including a ministerial decision on fisheries subsidies and a continuation of the customs duty moratorium on electronic commerce, as well as additional commitments to continue negotiations in all areas. [255]

The Ministerial Decision on Fisheries Subsidies [256] will help fulfill commitments made under United Nations (UN) Sustainable Development Goal 14.6 [257] by opening negotiations on fisheries subsidies with the objective of reaching agreement by the next WTO Ministerial Conference, to be held in 2019. [258] These negotiations aim at developing comprehensive and effective disciplines to prohibit certain forms of fishery subsidies that have contributed to the current overcapacity and overfishing, as well as to illegal, unreported, and unregulated fishing. [259]

WTO members also agreed to several work programs—one on electronic commerce, [260] and another on small economies. [261] With respect to the former, members agreed to continue to refrain from levying customs duties on so-called e-commerce transactions. For the latter, members agreed to develop a proposal for a formal working group on micro, small, and medium-sized enterprises (MSMEs), to be presented at the 2019 WTO ministerial conference. [262]

In addition, members agreed to continue their moratorium on so-called non-violation and situation disputes in the area of intellectual property [263] under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). [264] Such cases can arise when a member brings a WTO dispute settlement challenge over an intellectual property action taken by another member, even where no agreement or market commitment has been broken, because the complainant considers the resulting situation to infringe on its own intellectual property rights. [265]

No agreement was reached at the Ministerial Conference on a number of issues under negotiation in the Doha Round, including on the public stockholding of foodstuffs for food security purposes. According to the WTO Director-General Roberto Azevêdo in his closing remarks at the Ministerial Conference, “There are some remaining topics, which our representatives should continue negotiating....Members agreed to advance negotiations on all remaining issues, including on the three pillars of agriculture, namely domestic support, market access and export competition, as well as non-agriculture market access, services, development, TRIPS, rules, and trade and environment.” ^[266] Furthermore, despite the lack of progress on issues considered essential by developing country members in achieving sustainable and inclusive growth, the Director-General noted the commitment of WTO members to advance negotiations on remaining issues in Geneva, Switzerland, in 2018. ^[267]

General Council

At the yearend meeting of the WTO General Council on November 11, 2017, the WTO Director-General reported to members on informal consultations held during the year among both large and small groupings of delegates in efforts to resolve outstanding issues concerning the General Council’s agenda. [268] In the WTO Council on Trade in Goods, three major issues were addressed in 2017: General Council waivers of obligations, enlargement of the European Union (EU), and enlargement of the Eurasian Economic Union. [269] In the Council on Trade in Services, discussions remained unsuccessful in finding ways to move forward with services negotiations. [270] In the TRIPS Council, member discussions revolved around whether negotiations on a geographical-indications register for wines and spirits (under TRIPS Article 23.4) should remain narrowly focused on wines and spirits, or whether it should extend to additional products. The TRIPS Council also considered the relationship between the TRIPS Agreement and the United Nations Convention on Biological Diversity and the protection of traditional knowledge and folklore. In particular, the council talked about proposals on disclosing sources of biological material and associated traditional knowledge. [271]

Work Programs, Decisions, Waivers, and Reviews

In addition to reviewing past decisions related to ongoing WTO work programs—in particular, those from the WTO ministerial conferences held in Indonesia in December 2013 and in Kenya in December 2015—delegates at the November 2017 General Council meeting focused on the upcoming ministerial conference to be held in Buenos Aires, Argentina, in December 2017. They also reviewed work programs undertaken as part of the Doha Development Agenda, including work programs on electronic commerce, small economies, and aid-for-trade measures. They also reviewed work directed at benefiting the least-developed country members, including the Director-General’s report on the developmental aspects of cotton. [272]

Work Program on Electronic Commerce

The Declaration on Global Electronic Commerce [273] was adopted at the May 1998 WTO ministerial conference in Geneva, Switzerland. [274] It called on the WTO General Council to establish a work program to examine trade-related issues arising from global electronic commerce (e-commerce). Discussions on e-commerce currently take place in four major WTO bodies. [275]

In July 2017, members began to develop and submit papers on various aspects of e-commerce, taking into consideration the upcoming December 2017 ministerial conference. [276] Bilateral discussions started in September 2017 between the chair of the General Council and individual WTO members in four main areas: (1) the future Work Program on Electronic Commerce; (2) the moratorium on imposing customs duties on electronic transmissions that started under the 1998 Declaration; (3) the possibility of future negotiations on e-commerce; and (4) the possible establishment of an institutional structure—such as a working group—to provide a single WTO body to help focus discussions on e-commerce. [277]

At the ministerial conference in December 2017, members agreed to extend the practice of not imposing customs duties on electronic transmissions for another two years. They also committed to begin work toward future WTO negotiations on the trade-related aspects of e-commerce. [278]

Work Program on Small Economies

Members heard the report on the standing Work Program on Small Economies during 2017, which focused on how work on global value chains can be marshalled to benefit small, vulnerable economies. The WTO Committee on Trade and Development, which chairs the work program, reported that members agreed to continue discussions on how to reduce trade costs for small economies, particularly in the area of trade facilitation. [279]

Sixth Global Review on Aid for Trade

The WTO Director-General reported on the Sixth Global Review on Aid for Trade, held in 2017. [280] He reported that issues covered included trade facilitation; connectivity infrastructure; e-commerce; gender issues; investment; the least-developed countries; MSMEs; trade and finance; and the UN Sustainable Development Goals, which affect capacity-building for countries benefiting from aid-for-trade measures. [281]

Review of the Exemption under Paragraph 3(c) of the GATT 1994 ( “ Jones Act ” Exemption)

The General Council held the 2017 biennial review of the exemption under Paragraph 3(c) of GATT 1994 concerning maritime cabotage [282] in U.S. waters (commonly known as the “Jones Act” exemption) on the same basis as the 2015 review, where statistical information was provided by the United States. [283] The General Council noted remarks by interested delegations, and indicated that under the two-year review cycle set out in paragraph 3(b) [284] of GATT 1994 the next review would take place in 2019. [285]

Review of Waivers of Obligations under Article IX:4 of the WTO Agreement

In 2017, the General Council held reviews of several multiyear waivers regarding adoption of nomenclature changes made to the Harmonized System in 2002, 2007, and 2017, into WTO members’ tariff schedules. [286] The General Council also reviewed other previously agreed waivers, including U.S. waivers related to the African Growth and Opportunity Act [287] and the Caribbean Basin Economic Recovery Act. [288]

WTO Membership

There were 164 members of the World Trade Organization in 2017. [289] There were also 23 observers to the WTO by yearend, with South Sudan requesting observer status on November 16, 2017. [290] According to USTR, six observers appeared actively engaged in the WTO accession process. [291] No accessions to the WTO took place during the year, although the General Council named a new chairman to lead discussions on the bid by Bosnia and Herzegovina to join. [292] In addition, there were eight observer organizations to the WTO. [293]

Appointment of Director-General

The General Council agreed to appoint Roberto Azevêdo as the Director-General of the WTO for a second term of four years, starting on September 1, 2017. [294]

Other Business

Informal dialogues and workshops also took place during the November 2017 General Council meeting. Various groups of delegates met to discuss MSMEs as well as Investment Facilitation for Development. Workshops focused on MSMEs and on trade and investment matters. [295]

Agreement on Trade Facilitation

The WTO Agreement on Trade Facilitation entered into force on February 22, 2017, [296] after two-thirds of WTO members, including the United States, notified the WTO that they had ratified the agreement. The agreement establishes multilateral trade rules under the WTO to reduce delays in customs and border procedures for trade in goods across national borders. [297] At yearend 2017, there were 127 WTO members that had deposited their acceptance of the agreement with the WTO. [298]

The Committee on Trade Facilitation––established as part of the Agreement on Trade Facilitation––held its inaugural session on May 16, 2017, to confirm the committee’s first chair. In July, the committee received updates on the status of ratification and notification processes, as well as on activities of the Trade Facilitation Agreement Facility. [299] At the third committee meeting in 2017—and the last one of the year—delegates reviewed a series of notifications under different articles as mandated by the Trade Facilitation Agreement. [300] The majority of these submissions were under articles 15 and 16––so-called category A, B, and C notifications. [301]

Plurilateral Agreements Already in Force

Agreement on Trade in Civil Aircraft

The Agreement on Trade in Civil Aircraft eliminates import duties on all aircraft (other than military aircraft) and other products covered by the agreement, such as aircraft engines, their parts and components, all components and sub-assemblies of civil aircraft, and flight simulators and their parts and components. It also covers disciplines concerning government procurement and financial support in the civil aircraft sector. [302] The agreement entered into force on January 1, 1980, and is one of two plurilateral agreements (along with the Agreement on Government Procurement) carried out under the auspices of the 1995 World Trade Organization [303] that commits signatories to core disciplines applicable only to those parties signing the agreement. There were 32 signatories to the WTO Agreement on Trade in Civil Aircraft in 2017, including the United States, and 20 of which were EU member states. [304] The WTO Committee on Trade in Civil Aircraft held a regular meeting on November 1, 2017, to discuss updating the agreement’s aviation product list to be compatible with the 2007 version of the Harmonized System. [305]

Agreement on Government Procurement

The Agreement on Government Procurement (GPA) covers core disciplines such as transparency, competition, and good governance in public authorities’ procurement of goods, services, and capital infrastructure. [306] In 2017, there were 19 parties that had signed the original 1994 Agreement on Government Procurement, including the United States. [307] These parties were also signatories to the 2012 Revised Agreement on Government Procurement, except for Switzerland, whose acceptance of the revised agreement was pending at yearend. The EU is a party in its own right to both the 1994 and the 2012 GPA, as are each of the 28 EU member states. Macedonia (also known as FYROM) applied for GPA accession in March 2017. [308]

Expansion of the Information Technology Agreement

The Information Technology Agreement (ITA) [309] is a plurilateral agreement that eliminates tariffs on certain information and communications technology products, such as computers, telecommunication equipment, semiconductors, semiconductor manufacturing and testing equipment, software, and scientific instruments, as well as most of the parts and accessories for these products. [310] It was concluded by 29 participants at the December 1996 Singapore Ministerial Conference. [311] In 2017, the ITA had 53 participants, accounting for 82 WTO members, including the United States. [312]

Following preliminary discussions in May 2012, a subset of ITA participants opened talks on the possibility of broadening product coverage under the original ITA, given advances in technology since the original 1996 agreement. [313] In July 2015, after 17 rounds of negotiations, participants in the ITA Expansion agreed to a list of 201 additional products on which they would eliminate customs duties. [314] These new items included products such as new-generation multicomponent integrated circuits (MCOs), touch screens, GPS navigation equipment, portable interactive electronic education devices, video game consoles, and medical equipment, such as magnetic resonance imaging products and ultrasonic scanning apparatus. [315] Because the most-favored-nation principle applies to multilateral WTO agreements, all WTO members will benefit from duty-free access to the markets of the parties to the ITA Expansion. [316]

Following needed domestic ratification procedures in the member countries, the first set of tariff reductions under the ITA expansion took place on July 1, 2016. A majority of participants had implemented their initial tariff commitments by yearend 2016. [317] On July 1, 2017, the second set of reductions took place. [318]

Selected Plurilateral Agreements under Discussion

Negotiations on an Agreement on Trade in Environmental Goods

On July 8, 2014, a group of WTO members launched plurilateral negotiations toward an Environmental Goods Agreement (EGA). The goal of these talks is to reduce customs duties on products used to treat and benefit the environment, including products that help generate clean and renewable energy, improve energy and resource efficiency, control air pollution, manage waste products, treat waste water, monitor the quality of the environment, and combat noise pollution. [319] In 2017, there were 18 participants, representing 46 WTO members, working toward an EGA: Australia; Canada; China; Costa Rica; the EU; Hong Kong, China; Iceland; Israel; Japan; South Korea; Liechtenstein; New Zealand; Norway; Singapore; Switzerland; Taiwan; Turkey; and the United States. [320]

Between 2014 and 2016, 18 rounds of negotiations were held. [321] No rounds took place in 2017. At the June and November 2017 meetings of the WTO Trade and Environment Committee, delegates were briefed that EGA participants continued to look for a way to move forward in these negotiations. A number of members participating in the negotiations (Canada, the EU, Hong Kong, Japan, South Korea, New Zealand, Norway, Singapore, Switzerland, Taiwan, and Turkey) voiced their willingness to continue talks, and invited other members to join in. [322]

Negotiations on an Agreement on Fisheries Subsidies

The establishment of international disciplines on fisheries subsidies has been under discussion in the WTO’s Negotiating Group on Rules since the Doha Development Agenda was launched in 2001, with an elaboration of the negotiating mandate in 2005. The adoption by world leaders in September 2015 of the UN’s Sustainable Development Goals (SDGs) gave renewed impetus to these talks. [323]

SDG target 14.6 set a deadline of 2020 for eliminating subsidies that contribute to illegal, unreported, and unregulated (IUU) fishing, and for prohibiting certain forms of fishery subsidies that contribute to overcapacity and overfishing. Negotiations to establish fisheries disciplines will also ensure special and differential treatment for developing and least-developed countries.

On October 12, 2017, members engaged in these negotiations circulated to the WTO Negotiating Group on Rules a draft compilation text based on proposals by seven groups participating in these talks: (1) New Zealand, Iceland, and Pakistan; (2) the EU; (3) Indonesia; (4) the African, Caribbean, and Pacific Group; (5) Argentina, Colombia, Costa Rica, Panama, Peru, and Uruguay; (6) the Least-developed Countries Group; and (7) Norway. Other members suggested additional amendments to this text, including China, Japan, India, the United States, and others, on issues such as transparency and institutional matters as well as subsidies that contribute to IUU fishing. [324]

Nonetheless, a consensus text could not be reached by the end of the WTO Ministerial Conference in December 2017. As a result, ministers issued a decision saying that they would continue to work toward a fisheries agreement, with a view toward its adoption by the 2019 WTO Ministerial Conference. [325]

Dispute Settlement Body

This section provides an overview of the WTO dispute settlement process as well as information about proceedings during calendar year 2017, particularly those in which the United States was a complaining or responding party. More specifically, this section provides (1) a tally of new requests for consultations filed by WTO members during calendar year 2017 under the WTO Dispute Settlement Understanding (DSU); (2) a table that lists the new dispute settlement panels established during calendar year 2017 in which the United States was either the complaining party or the named respondent; and (3) short summaries of the procedural and substantive issues in disputes involving the United States that moved to the panel stage during 2017, as well as summaries of panel and Appellate Body reports issued during 2017 in disputes that involved the United States. At the end of this section, U.S. concerns with the WTO dispute settlement process are described. Figure 3.1 provides a timeline for the WTO dispute settlement process prepared by the WTO. The references in the timeline are to articles in the WTO Dispute Settlement Understanding.

Figure 3.1 Timeline for the WTO Dispute Settlement Process [326]

The summaries in this section of issues and findings and recommendations in panel and Appellate Body reports are based entirely on information in publicly available documents, including summaries published online by the WTO, summaries included in USTR’s 2018 Trade Policy Agenda and 2017 Annual Report , and summaries included in USTR press releases. The summaries in this report should not be regarded as comprehensive or as reflecting a U.S. government or Commission interpretation of the issues raised or addressed in the disputes or in panel or Appellate Body reports. A table showing procedural developments during 2017 in disputes in which the United States was the complainant or respondent appears in appendix table A.25.

This section focuses on developments during 2017. Several disputes in which panels had been established and composed in 2016 were active during 2017, with decisions expected in 2018; the panel decisions in these cases will be summarized in the Commission’s report covering 2018. [327] A number of additional disputes in which dispute settlement consultations were requested in 2016 remained in the consultation phase throughout 2017 without further developments, at least as posted by the WTO on its dispute settlement website. [328]

This section also generally focuses only on developments through the panel and Appellate Body stage and does not include matters that arose after the Dispute Settlement Body (DSB) adopted panel or Appellate Body reports in the original dispute. As indicated in the flowchart in figure 3.1, dispute litigation often continues beyond the adoption of the panel or Appellate Body report, particularly when the defending party is the “losing” party. Issues may arise about the reasonableness of the time sought by the losing party to implement findings and recommendations, the adequacy of actions taken by that party to comply with the findings and recommendations, and possible compensation and retaliation. Matters may be referred to the original panel or to a new panel for further findings and recommendations on compliance and other matters, and when appropriate, the parties may seek the help of an arbitrator to resolve matters.

Appendix table A.25 sets out the timeline for procedural actions in specific active WTO dispute settlement cases, including procedural actions at the implementation, compliance, and compensation/retaliation stages. A number of disputes were still active during 2017 well after the panel or Appellate Body report had been adopted, including a dispute with respect to U.S. measures relating to the importation, marketing, and sale of tuna and tuna products; [329] as well as a dispute relating to China’s antidumping and countervailing measures on broiler products from the United States. [330]

New Requests for Consultations

During 2017 WTO members filed 17 new requests for dispute settlement consultations, which was about the average for the five preceding years. Three members—the United States, Canada, and Qatar—each filed 3 requests and accounted for slightly over half the requests filed during 2017. The Russian Federation and Ukraine each filed 2 requests, and Brazil, Indonesia, Mexico, and Turkey each filed 1 request during 2017. Three members, the United States, Canada, and the Russian Federation, were the named respondents in slightly over half the requests, with the United States the named respondent in 4 of the requests, while Canada was the named respondent in 3 requests and the Russian Federation in 2 requests during 2017. Australia, Bahrain, China, the EU, Kazakhstan, Saudi Arabia, Ukraine, and the United Arab Emirates were each the named respondent in 1 request during 2017. Two of the 3 requests filed by the United States during 2017 were against Canada, and the third was against China, while 3 of the requests in which the United States was the named respondent were filed by Canada, while the fourth was filed by Turkey. The issues presented in these disputes are described below. Unlike the trend in recent years, in which China and the EU were a named party in multiple disputes each year, either as a complainant or respondent, neither filed a new request for dispute settlement consultations during 2017, and each was named respondent in only 1 new request filed during 2017. [331]

All three complaints that the United States filed during 2017 were still at the consultation stage as of the end of 2017. The first of the complaints related to subsides paid by China to producers of primary aluminum. In the complaint, the United States alleged that China’s measures appear to be inconsistent with its obligations under Articles 5(c), 6.3(a), 6.3(b), 6.3(c), and 6.3(d) of the Subsidies and Countervailing Measures Agreement (SCM Agreement) and Article XVI:1 of the GATT 1994. The United States filed its request for consultations on January 12, 2017. [332] In the view of the United States, China appears to provide subsidies through artificially cheap loans from banks and through artificially low-priced inputs for aluminum production, such as coal, electricity, and alumina. [333] In the second and third complaints, both of which concerned measures maintained by the Canadian province of British Columbia governing the sale of wine in grocery stores, the United States claimed that the measures appear to be inconsistent with Article III:4 of the GATT 1994. [334] The United States maintains that the measures provide advantages to British Columbia wine by granting exclusive access to a retail channel (selling wine on grocery store shelves) by allowing only British Columbia wine to be sold on regular grocery store shelves. Imported wine may be sold in grocery stores only through a so-called “store within a store.” [335]

As of the end of 2017, three of the four disputes filed against the United States during 2017 were still in the consultation phase; only one had advanced to the panel stage. The first of the four disputes was filed by Turkey on March 8, 2017, and it concerned countervailing duty measures imposed by the United States on imports of certain pipe and tube products from Turkey. Turkey requested establishment of a panel. A panel was established on June 19, 2017, and composed on September 14, 2017. The issues raised in this dispute are further summarized in the next section of this chapter, which covers new panels established during 2017 in which the United States was a named party. [336]

The remaining three requests for consultations were filed by Canada, and all three related to U.S. countervailing duty and antidumping measures. Two of the requests were filed on November 28, 2017, and concerned U.S. countervailing duty measures and U.S. antidumping measures, respectively, on softwood lumber from Canada. In the countervailing duty measures dispute (DS533), Canada claimed that the measures appear to be inconsistent with Articles 1.1(a), 1.1(b), 2.1(a), 2.1(b), 10, 11.2, 11.3, 14(d), 19.1 19.3, 19.4, 21.2, 21.2, 32.1, and 32.5 of the SCM Agreement and Article VI:3 of the GATT 1994. [337] Specifically, Canada challenged the U.S. Department of Commerce (USDOC) determinations regarding benchmarks for stumpage, the log export permitting processes, and non-stumpage programs. [338] In the antidumping measures dispute (DS534), Canada claimed that the measures appear to be inconsistent with Articles 1, 2.1, 2.4, and 2.4.2 of the Antidumping Agreement and Article VI:1 and VI.2 of the GATT 1994. [339] Specifically, Canada challenged the USDOC’s application of a differential pricing methodology, including the United States’ use of zeroing when applying the average-to-transaction comparison methodology. [340]

Canada filed the third request for dispute settlement consultations on December 20, 2017. Canada framed the request more broadly to apply to certain U.S. laws, regulations, and other measures concerning antidumping and countervailing duty proceedings, and claimed that the measures appear to be inconsistent with multiple articles of the Antidumping Agreement and SCM Agreement and also with Article VI:2, VI:3, and X:3(a) of the GATT 1994. [341]

New Panels Established in 2017 That Involve the United States

As indicated in table 3.1, four dispute settlement panels were established during 2017 in which the United States was either the requesting party (complainant) or the respondent party. The United States was the complaining party in two disputes involving China, and the responding party in two disputes filed by India and Turkey, respectively. As of the end of 2017, panels had been composed in two of the four disputes (DS511 and DS523), and all were still pending.

Table 3.1 WTO dispute settlement panels established during 2017 in which the United States was a party

Case no.	Complainant	Respondent	Case name	Panel established
DS510	India	United States	United States—Certain Measures Relating to the Renewable Energy Sector	03/21/2017
DS511	United States	China	China—Domestic Support for Agricultural Producers	01/25/2017
DS517	United States	China	China—Tariff Rate Quotas for Certain Agricultural Products	09/22/2017
DS523	Turkey	United States	United States—Countervailing Measures on Certain Pipe and Tube Products	09/14/2017

Source: WTO, “ Dispute Settlement: The Disputes—Chronological List of Disputes ” (accessed May 19, 2017).

Panels Established during 2017 at the Request of the United States

China — Domestic Support for Agricultural Products (DS511)

On September 16, 2016, the United States requested consultations with China regarding certain measures through which China appears to provide domestic support in favor of agricultural producers, in particular those producing wheat, indica rice, japonica rice, and corn. The United States claimed that the measures appear to be inconsistent with Articles 3.2, 6.3, and 7.2(b) of the Agreement on Agriculture. The parties consulted on the matter on October 20, 2016, but the consultations did not resolve the matter. On December 5, 2016, the United States requested establishment of a panel, and the DSB established a panel at its meeting on January 25, 2017. Following agreement of the parties, the panel was composed on June 24, 2017. [342]

China — Tariff Rate Quotas for Certain Agricultural Products (DS517)

On December 15, 2016, the United States requested consultations with China concerning China’s administration of its tariff-rate quotas for certain agricultural products, including those for wheat, short and medium grain rice, long grain rice, and corn. The United States claimed that the measures appear to be inconsistent with Articles X:3(a), XI:1, and XIII:3(b) of the GATT 1994; and Paragraph 1.2 of Part I of China’s Protocol of Accession. On February 9, 2017, the United States and China held consultations in Geneva. After the consultations failed to resolve U.S. concerns, the United States requested establishment of a panel on August 31, 2017, and a panel was established at the DSB meeting on September 22, 2017. As of the end of 2017, the panel had not been composed. [343]

Panels Established during 2017 in Which the United States Was the Named Respondent

United States — Certain Measures Relating to the Renewable Energy Sector (DS510)

On September 9, 2016, India requested WTO consultations regarding certain U.S. measures relating to domestic-content requirements and subsidies instituted by the governments of the states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware, and Minnesota in the energy sector. India claimed that the measures appear to be inconsistent with Articles III:4, XVI, and XVI:4 of the GATT 1994; Article 2.1 of the Agreement on Trade-related Investment Measures (TRIMS); and Articles 3.1(b), 3.2, 5(a), 5(c), 6.3(a), 6.3(c), and 25 of the SCM Agreement. Consultations between India and the United States took place in Geneva on November 16–17, 2016. On January 17, 2017, India requested the establishment of a panel, and the DSB established a panel at its meeting on March 21, 2017. As of the end of 2017, the panel had not been composed. [344]

United States — Countervailing Measures on Certain Pipe and Tube Products (DS523)

On March 8, 2017, Turkey requested WTO consultations concerning countervailing duty measures imposed by the United States under four final countervailing duty determinations issued by USDOC on certain pipe and tube products from Turkey. Turkey claimed that the measures appear to be inconsistent with Articles 1.1(a)(1), 1.1(b), 2.1(c), 2.4, 10, 12.7, 14(d), 15.3, 19.4, and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994. Turkey challenged the application of measures in four final countervailing duty determinations with respect to the provision of hot-rolled steel for less than adequate remuneration. In addition, with respect to injury determinations, Turkey challenged section 771(7)(G)(i) of the Tariff Act of 1930 regarding cross-cumulation of imports. [345] On May 11, 2017, Turkey requested the establishment of a panel, and the DSB established a panel at its meeting on June 19, 2017. At the request of Turkey, the Director-General composed the panel on September 14, 2017. [346]

Panel and Appellate Body Reports Issued and/or Adopted during 2017 That Involve the United States

During 2017, a WTO dispute settlement panel or the Appellate Body issued a report in five disputes to which the United States was a party, either as a complainant or as the respondent (table 3.2). The United States was the complaining party in only one of those disputes, and was the responding party in the four other disputes. This section covers only panel and Appellate Body reports relating to the original disputes and does not include subsequent reports, such as those of a compliance panel or an arbitrator. Many of the latter reports are noted in table A.25, which contains a procedural summary of most of the dispute settlement cases which are still active in some respect.

Table 3.2 WTO dispute settlement panel and Appellate Body (AB) reports circulated and/or adopted in 2017 in which the United States was a party

Case no.	Complainant	Respondent	Case name	Date of report circulation or adoption
DS471	China	United States	United States—Certain Methodologies and Their Application to Anti-Dumping Proceedings Involving China	Appellate Body report circulated 05/11/2017; adopted 05/22/2017
DS478	United States	Indonesia	Indonesia—Importation of Horticultural Products, Animals and Animal Products	Appellate Body report circulated 11/09/2017; adopted 11/22/2017
DS487	European Union	United States	United States—Conditional Tax Incentives for Large Civil Aircraft	Appellate Body report circulated 09/04/2017; adopted 09/22/2017
DS488	South Korea	United States	United States—Anti-Dumping Measures on Certain Oil Tubular Goods from Korea	Panel report circulated 11/14/2017; adopted 01/12/2018
DS491	Indonesia	United States	United States—Anti-Dumping and Countervailing Measures on Certain Coated Paper from Indonesia	Panel report circulated 12/06/2017; adopted 01/12/2018

Source: WTO, “ Dispute Settlement: The Disputes—Chronological List of Disputes ” (accessed May 19, 2017).

Reports in Which the United States Was the Complainant

Indonesia — Importation of Horticultural Products, Animals and Animal Products (DS478)

On May 8, 2014, the United States requested consultations with Indonesia concerning certain measures it imposed on the importation of horticultural products, animals, and animal products. The United States claimed that the measures are inconsistent with Articles III:4 and XI:1 of the GATT 1994; Article 4.2 of the Agreement on Agriculture; Articles 1.2, 1.5, 1.6, 2.2, 3.2, 3.3, 5.1, and 5.2 of the Import Licensing Agreement; and Articles 2.1 and 2.15 of the Agreement on Preshipment Inspection. [347] The United States was concerned that Indonesia, through its import licensing regimes, imposed numerous prohibitions and restrictions on the importation of covered products, including (1) prohibiting the importation of certain products altogether; (2) imposing strict application windows and validity periods for import permits; (3) restricting the type, quantity, and country of origin of products that may be imported; (4) requiring that importers actually import a certain percentage of the volume of products allowed under their permits; (5) restricting the uses for which products may be imported; (6) imposing local-content requirements; (7) restricting imports on a seasonal basis; and (8) setting a “reference price” below which products may not be imported. [348] The measures at issue included import licensing regimes earlier amended by Indonesia in response to previous U.S. requests for dispute settlement consultations in January 2013 (DS455) and August 2013 (DS465). [349]

On March 18, 2015, the United States requested establishment of a panel. On May 20, 2015, the DSB established a single panel under Article 9.1 of the DSU to examine this dispute and dispute DS477, brought by New Zealand. At the request of New Zealand and the United States, on October 8, 2015, the Director-General composed the panel.

The panel circulated its report on December 16, 2016. The panel found that all of Indonesia’s import-restricting measures for horticultural products and animal products are inconsistent with Article XI:1 of the GATT 1994. The panel also found that Indonesia failed to demonstrate that the challenged measures are justified under any general exception available under the GATT 1994. [350]

Indonesia appealed the panel’s report to the Appellate Body on February 17, 2017, and the Appellate Body issued its report on November 9, 2017. The Appellate Body affirmed the finding of the panel that all of Indonesia’s measures are inconsistent with Article XI:1 of the GATT 1994 and, as Indonesia did not establish an affirmative defense with respect to any measure, affirmed that they are inconsistent with Indonesia’s WTO obligations. [351]

At its meeting on November 22, 2017, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report. On December 15, 2017, Indonesia informed the DSB that it required a reasonable period of time to comply with the DSB’s recommendations and rulings and that the 45-day deadline established by Article 21.3(b) of the DSU to reach a mutually agreed reasonable period of time might need to be extended. On January 11, 2018, Indonesia, New Zealand, and the United States informed the DSB that in order to allow sufficient time for them to discuss a mutually agreed period, they had agreed on deadlines for arbitration under Article 21.3(c) of the DSU.

Reports in Which the United States Was the Respondent

United States — Certain Methodologies and Their Application to Anti-dumping Proceedings Involving China (DS471)

On December 3, 2013, China requested consultations with the United States regarding the use of certain methodologies in antidumping investigations involving Chinese products. China claimed that the measures are inconsistent with Articles 2.4.2, 6.1, 6.8, 6.10, 9.2, 9.3, 9.4 and Annex II of the Antidumping Agreement and Article VI:2 of the GATT 1994. Specifically, China challenged USDOC’s application in certain investigations and administrative reviews of a “targeted dumping methodology,” “zeroing” in connection with such methodology, a “single rate presumption for non-market economies,” and a “NME-wide methodology” including certain “features.” China also challenged a “single rate presumption” and the use of “adverse facts available” “as such.” [353]

On February 13, 2014, China requested establishment of a panel, and the DSB established a panel at its meeting on March 26, 2014. The Director-General composed the panel on August 28, 2014. On February 23, 2015, the chair of the panel informed the DSB that the start of proceedings was deferred due to the unavailability of Secretariat lawyers and that the panel, under its adopted timetable, expected to issue its final report to the parties in June 2016. [354]

The panel circulated its report on October 19, 2016. The panel found that a number of aspects of the “targeted dumping methodology” applied by USDOC in three challenged investigations were not inconsistent with the requirements of the Antidumping Agreement, including certain quantitative aspects of USDOC’s methodology. However, the panel found fault with other aspects of USDOC’s methodology and with USDOC’s explanation of why its resort to the alternative methodology was necessary. The panel also found that USDOC’s application of the alternative methodology to all sales, rather than only to so-called pattern sales, and USDOC’s use of “zeroing” in connection with the alternative methodology, were inconsistent with the second sentence of Article 2.4.2 of the Antidumping Agreement.

In addition, the panel questioned USDOC’s use of a rebuttable presumption that all producers and exporters in China comprise a single entity under common government control—the China-government entity—to which a single antidumping margin is assigned, both as used in specific proceedings and generally. The panel found that USDOC’s use of the presumption is inconsistent with certain obligations in the WTO Antidumping Agreement concerning when exporters and producers are entitled to a unique antidumping margin or rate. However, the panel agreed with the United States that China had not established that USDOC has a general norm whereby it uses adverse inferences to pick information that is adverse to the interests of the China-government entity in calculating its antidumping market or rate. The panel decided to exercise judicial economy with respect to the information USDOC used in particular proceedings. [355]

On November 18, 2016, China appealed certain of the panel’s findings regarding USDOC’s “targeted dumping methodology,” use of “adverse facts available,” and the “single rate presumption.” The Appellate Body issued its report on May 11, 2017. The Appellate Body rejected virtually all of China’s claims on appeal and did not make any additional findings of inconsistency against the United States. [356]

On May 22, 2017, the DSB adopted the panel and Appellate Body report. On June 19, 2017, the United States stated that it intended to implement the recommendations of the DSB in a manner that respects U.S. obligations, and that it would need a reasonable period of time in which to do so. On October 17, 2017, China requested that an Article 21.3(c) arbitrator determine the reasonable period of time for implementation. [357] On January 19, 2018, the Award of the Arbitrator was circulated to members; the Arbitrator determined that the reasonable period is 15 months, expiring on August 22, 2018. [358]

United States — Conditional Tax Incentives for Large Civil Aircraft (DS487)

On December 19, 2014, the EU requested consultations with the United States with respect to conditional tax incentives established by the State of Washington relating to the development, manufacture, and sale of large civil aircraft. The EU alleged that the measures constitute specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement and alleged that such tax incentives are prohibited subsidies that are inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement. [359] More specifically, the dispute concerned legislation enacted in the State of Washington in November 2013, which amended and extended various tax incentives for the aerospace industry. The EU identified seven separate tax incentives, including a reduced business and occupation tax rate, credits against business taxation, and exemptions from various other taxes in the State of Washington. [360]

On February 12, 2015, the EU requested establishment of a panel, and on February 23, 2015, the DSB established a panel. On April 22, 2015, at the request of the EU, the Director-General composed the panel. [361]

On November 28, 2016, the panel report was circulated to members. The panel found that only the Washington State business and occupation tax incentive was a prohibited subsidy. While the panel found the six other tax incentives to be subsidies, they were not deemed to be illegal under WTO rules. [362]

On December 16, 2016, the United States appealed certain issues of law and legal interpretations in the panel report, and on January 17, 2017, the EU notified the SSB of its decision to cross-appeal. The Appellate Body circulated its report on September 14, 2017. The Appellate Body found that none of the seven challenged programs were prohibited import-substitution subsidies, and accordingly reversed the panel’s finding that the business and occupation tax rate is a prohibited subsidy under Article 3.1(b) of the SCM Agreement. Having reversed the panel’s sole finding of inconsistency, the Appellate Body made no recommendation in the dispute.

The DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report, on September 22, 2017.

United States — Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea (DS488)

On December 22, 2014, South Korea requested consultations with the United States regarding certain antidumping duty measures on oil country tubular goods (OCTG) from South Korea and the investigation methodology underlying such measures. South Korea claimed that the calculation by USDOC of the constructed value profit rate for South Korean respondents was inconsistent with U.S. obligations under Articles 2.2, 2.2.2, 2.2.1.1, 2.3, 2.4, 6.2, 6.4, 6.9, 6.10, including Articles 6.10.1 and 6.10.2, and 12.2.2 of the Antidumping Agreement and Articles I and X:3 of the GATT 1994. [365]

On February 23, 2015, South Korea requested the establishment of a panel, and a panel was established on March 25, 2015. On July 13, 2015, the parties agreed on the composition of the panel. On January 16, 2016, the chair of the panel informed the DSB that the beginning of the panel’s work had been delayed due to a lack of available experienced lawyers in the Secretariat, and that the panel expected to issue its final report to the parties before the end of 2016. On September 15, 2016, the parties agreed on a new chair following the resignation of the chair of the panel. On December 19, 2016, the chair of the panel informed the DSB that following the additional delay due to the need to appoint a new chair and the complexity of the issues raised by the parties in the dispute, the panel expected to issue its final report to the parties by June 2017.

On November 14, 2017, the panel report was circulated to members. The panel found that the United States had acted inconsistently in four respects: (1) with the chapeau (introductory paragraph) of Article 2.2.2 of the Antidumping Agreement, because USDOC did not determine profit for constructed value based on actual data pertaining to sales of the like product in the home market; (2) with Articles 2.2.2(i) and (iii), because USDOC relied on a narrow definition of the “same general category of products” in concluding it could not determine profit under Article 2.2.2(i) and in concluding it could not calculate a profit cap under Article 2.2.2(iii); (3) with Article 2.2.2, because USDOC did not determine profit for constructed value based on actual data pertaining to sales of the like product in third-country markets and with respect to Articles 1 and 9.3 as a consequence of substantive violations of Articles 2.2.2, 2.2.2(i), and 2.2.2(iii).

Finally, the panel found two of South Korea’s claims with respect to profit for constructed value to be outside its terms of reference. In the first instance, this finding applied to South Korea’s claim that the United States had violated Article 2.2.2(iii) because USDOC had determined the profit rate based on a certain company’s financial statements. In the second instance, the finding applied to South Korea’s claim that the United States had violated Article X.3(a) of the GATT 1994, because USDOC had purportedly acted contrary to its agency practice of determining profit. The panel rejected the remaining claims asserted by South Korea, including claims about the use of constructed export price and the selection of costs for calculation of constructed normal value. [367]

On January 12, 2018, the DSB adopted the panel report in this dispute. [368]

United States — Anti-Dumping and Countervailing Measures on Certain Coated Paper from Indonesia (DS491)

On March 13, 2015, Indonesia requested consultations with the United States concerning the imposition of antidumping and countervailing duty measures on certain coated paper products from Indonesia, as well as the investigation underlying those measures. Indonesia claimed that the measures are inconsistent with Articles 2.1, 2.1(c), 10, 12.7, 15.5, 15.7, and 15.8 of the SCM Agreement; Articles 3.5, 3.7, and 3.8 of the Antidumping Agreement; and Article VI of the GATT 1994. Indonesia requested establishment of a panel on July 9, 2015, and the DSB established a panel on September 28, 2015. On February 4, 2016, at the request of Indonesia, the Director-General composed the panel. [369]

With regard to the countervailing duty measures, Indonesia challenged USDOC’s determinations that Indonesia’s provision of standing timber, log export ban, and debt forgiveness program are countervailable subsidies. Indonesia claimed that USDOC determined both that the standing timber was provided for less than adequate remuneration and that the log export ban distorted prices without factoring in prevailing market conditions. Indonesia also alleged, with regard to all three subsidies, that USDOC failed to examine whether there was a plan or scheme in place sufficient to constitute a “subsidy programme” within the meaning of the SCM Agreement. Indonesia further claimed that USDOC did not identify whether each subsidy was “specific to an enterprise . . . within the jurisdiction of the granting authority,” as required by the SCM Agreement. In addition, Indonesia challenged USDOC’s “facts available” determination, in which it concluded that the government of Indonesia forgave debt.

With regard to both the antidumping and countervailing duty measures, Indonesia alleged that the USITC threat of injury determination breached both the Antidumping Agreement and SCM Agreement because it relied on allegation, conjecture, and remote possibility; was not based on a change in circumstances that was clearly foreseen and imminent; and showed no causal relationship between the subject imports and the threat of injury to the domestic industry. [370]

Indonesia also raised an “as such” claim with respect to 19 U.S.C. § 11677(11)(B) (affirmative determination by divided U.S. International Trade Commission). Indonesia contended that, with respect to threat of injury cases, the law does not consider or exercise “special care” because of the requirement that a tie vote be treated as an affirmative Commission determination. [371]

On December 6, 2017, the panel report was circulated to members. The report rejected all of Indonesia’s claims. Indonesia chose not to appeal, and the DSB adopted the report on January 12, 2018. [372]

U.S. Concerns with WTO Dispute Settlement

In recent years, the United States has expressed a number of concerns about how the WTO dispute settlement system functions, including the concern that a number of WTO dispute settlement reports have not followed WTO rules. The most recent expression of these concerns is reflected in the President’s 2018 Trade Policy Agenda and 2017 Annual Report issued in March 2018 (2018 report). [373] The 2018 report states that the most significant area of concern has been panels and the Appellate Body adding to or diminishing rights and obligations under the WTO Agreement by not applying the WTO Agreement as written. The 2018 report noted that the earlier Bush and Obama Administrations had detailed numerous examples and concerns and had proposed formal guidance in 2005 for WTO members to adopt, but that these efforts have not yielded significant results.

Concerns cited included Appellate Body interpretations that would significantly restrict the ability of WTO members to counteract trade-distorting subsidies provided through state-owned enterprises; concerns with the Appellate Body’s interpretation of the non-discrimination obligation under the Agreement on Technical Barriers to Trade, which calls for reviewing factors unrelated to any difference in treatment due to national origin; disagreement with panel and Appellate Body reports which resulted in an interpretation under which WTO rules do not treat different (worldwide vs. territorial) tax systems fairly; concerns that the Appellate Body’s non-text-based interpretation of Article XIX of the GATT 1994 and the Safeguards Agreement has seriously undermined the ability of members to use safeguards measures; and concerns that the Appellate Body in effect created a new category of prohibited subsidies that was neither negotiated nor agreed to by WTO members.

The 2018 report also cited a number of additional concerns:

(1) Concern about the Appellate Body’s decision, at least since 2011, to ignore the mandatory 90-day deadline for deciding appeals set out in WTO rules and instead assume the authority to take whatever time it considers appropriate for individual appeals. The 2018 report cited among other things the Appellate Body’s approach in appeals in compliance proceedings in 2017 involving the United States and European Union concerning large civil aircraft.

(2) Concern about service on the Appellate Body by persons who are no longer Appellate Body members. The 2018 report cited concerns expressed by the United States in August 2017 about decisions of the Appellate Body to “authorize” a person who is no longer a member of the Appellate Body to continue hearing appeals, and stated that the Appellate Body does not have the authority to deem someone a member who is not a member. Since the summer of 2017, U.S. officials have had the view at WTO Dispute Settlement Body meetings that this issue must be resolved before the United States will consider supporting new appointments to the Appellate Body. ^[374]

(3) Concern about the tendency of WTO reports to make findings unnecessary to resolve a dispute or on issues not presented in the dispute. Citing Articles 3.4, 3.7, 7.1, and 11 of the DSU, the 2018 report said that WTO panels and the Appellate Body are not to make findings that cannot “assist the DSB in making [its] recommendations.” It noted that the purpose of the dispute settlement system is not to produce reports or to “make law,” but rather to help members resolve trade disputes among them.

(4) Concern about the Appellate Body’s approach to reviewing facts, and concern about de novo review of a member’s domestic law. The 2018 report noted that Article 17.6 of the DSU limits an appeal to “issues of law covered in the panel report and legal interpretations developed by the panel.” The 2018 report expressed concern that the Appellate Body has consistently reviewed panel fact-finding under different legal standards, and has reached conclusions that are not based on panel factual findings or undisputed facts. The report also expressed concern about the Appellate Body’s review of the meaning of a member’s domestic law that is being challenged. The report said that the key fact to be proven is what a member’s challenged measure does or means, and the law to be interpreted and applied are the provisions of the WTO agreements. The report expressed concern that the Appellate Body asserts it can review the meaning of a member’s domestic measure as a matter of law rather than acknowledging that it is a matter of fact and thus not a subject for Appellate Body review. The report also expressed concern that when the Appellate Body reviews the meaning of a member’s domestic measure, it does not provide any deference to a panel’s findings of fact.

(5) Concern that the Appellate Body claims its reports are entitled to be treated as precedent. The 2018 report states that this is not consistent with WTO rules, and that WTO members established one and only one means for adopting binding interpretations of the obligations agreed to: Article IX:2 of the Agreement Establishing the World Trade Organization. [375]

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Chapter 4
Selected Regional and Bilateral Trade Activities

This chapter summarizes trade-related activities during 2017 in two major multilateral organizations—the Organisation for Economic Co-operation and Development (OECD) and the Asia-Pacific Economic Cooperation (APEC) forum. It also covers the status of negotiations for a Trade in Services Agreement (TiSA) and activities conducted under trade and investment framework agreements (TIFAs).

Organisation for Economic Co-operation and Development

The OECD provides a forum for member governments to review and discuss economic, social, and other policy experiences affecting their market economies, as well as engage with other major nonmember economies to address issues facing the global economy. In 2017, there were 35 OECD members. [376]

Ministerial Council Meeting

The OECD held its Ministerial Council Meeting on June 7–8, 2017, in Paris, France. The meeting focused on how the benefits arising from globalization might be shared more broadly. [377] Regarding trade and investment in particular, the chair of the meeting found that OECD members appeared to agree on a number of points, including (1) the need to dismantle trade barriers without reducing international standards, as done by the World Trade Organization (WTO) Trade Facilitation Agreement; (2) the need to address overcapacity in various industrial sectors—including steel, aluminum, and shipbuilding—through such measures as the recent establishment of the Global Forum on Steel Excess Capacity; and (3) the need for continued OECD work on an array of trade topics, such as export credit rules. [378]

At the 2016 G20 Summit in Hangzhou, China, ministers established a Global Forum on Steel Excess Capacity comprising 33 countries. The forum set the following aims at the summit: (1) exchange information and data on excess capacity in the steel industry between governments of steel-producing countries; (2) develop ways to strengthen the functioning of the world steel market; and, (3) with the OECD acting as facilitator in this three-year process, present a report on its work to G20 ministers in 2017. The forum held its first ministerial meeting under the German G20 Presidency on November 30, 2017, in Berlin, Germany. Its principal goals were to review the exchange of information underway, receive the initial report published in November 2017, and hear a progress report on the Forum’s upcoming work in 2018.

Trade Committee

The OECD Trade Committee met twice during 2017: April 26, for its 170th session, and November 29–30, for its 171st. The Trade Committee continued work on two broad themes: (1) trade and the digital economy and (2) trade and investment. [380]

Working Party of the Trade Committee

The Working Party of the Trade Committee met four times in 2017: March 16–17, June 15–16, October 10, and December 14–15. [381] During 2017, the Working Party focused on the following topics: global value chains and trade in value added; trade in services, especially the OECD’s Services Trade Restrictiveness Index; digital trade; data localization and local-content policies; state-owned enterprises and small and medium-sized enterprises; best practices in government procurement; and international regulatory cooperation. [382] Other topics considered during the year included measuring nontariff measures; technology transfer issues; trade and investment; and trade facilitation matters reflecting the updated OECD Trade Facilitation Indicators. [383]

Asia-Pacific Economic Cooperation

Background

Established in 1989 and composed of 21 member economies, [384] the Asia-Pacific Economic Cooperation (APEC) is a regional economic forum. Since its inception, APEC has aimed to increase prosperity in the region by supporting regional economic integration; promoting balanced, innovative, inclusive, and sustainable growth; and facilitating easy movement of goods, services, investment, and people across borders. Throughout the year, APEC organizes events, including an economic leaders’ summit, senior official meetings, policy dialogues, and workshops, to discuss various trade- and investment-related issues. APEC decisions are made by consensus, and commitments are undertaken voluntarily. Every year, one of the 21 APEC member economies plays the host to APEC’s meetings and serves as the APEC chair. [385]

APEC’s operational structure is based on both “bottom-up” and “top-down” approaches. Four core committees, including the Committee on Trade and Investment (CTI), provide strategic policy recommendations to APEC economic leaders and ministers who meet annually to set the vision of overarching goals and initiatives. The working groups under each committee are then tasked with carrying out these initiatives through a variety of APEC-funded projects. Member economies also take individual and collective actions to carry out APEC initiatives. Capacity building is a key element of APEC’s operation, playing an important role in helping reach APEC’s goals by providing skill training and technological know-how to member economies. [386]

2017 APEC Developments

In 2017, Vietnam served as the APEC chair and hosted major APEC meetings. Under its leadership, APEC highlighted the theme of “Creating New Dynamism, Fostering a Shared Future,” and sought to pursue the following four priorities:

promoting sustainable, innovative and inclusive growth; deepening regional economic integration; strengthening micro, small, and medium enterprises’ (MSMEs) competitiveness and innovation in the digital age; and enhancing food security and sustainable agriculture in response to climate change. [387]

In 2017, APEC organized various events, carrying out discussions and/or training on a wide range of topics, including labor mobility; women’s economic, financial, and social inclusion; anticorruption and transparency issues; competition policy and laws; sustainable tourism; food safety and security; energy efficiency and storage; and agricultural technology, among others. [388]

In its 2017 annual report to ministers, CTI noted the accomplishments made throughout the year. Among the highlights are: [389]

(1) Progress made in advancing global value chain (GVC) development and cooperation. These advancements included a proposal to establish a APEC Global Value Chain Partnership Platform ; the release of APEC’s Global Value Chains Investment Climate Improvement Report ; the implementation of targeted capacity-building projects to improve supply chain performance on prearrival processing, expedited shipments, electronic payment, and more; and progress made towards developing statistical measurement of trade in value added (TiVA) in the APEC region by 2018. [390]

(2) Progress made in promoting MSMEs’ participation in the global economy. This included projects for facilitating MSMEs’ integration into GVCs in services industries, such as fashion design and logistics; a workshop organized to discuss best practices for integrating small and medium-sized suppliers into the automotive GVCs; an initiative on promoting MSMEs’ global reach through electronic commerce (e-commerce); and projects facilitating MSMEs’ use of intellectual property rights.

(3) Progress made in reducing applied tariffs to 5 percent or less on the APEC list of environmental goods, as well as in implementing the Environmental Services Action Plan . The latter effort included a workshop on environmental services and a set of case studies on environmental damage remediation services, renewable energy services, and energy efficiency services. [391]

(4) Efforts made in advancing work related to the realization of the Free Trade Area of the Asia Pacific (FTAAP) through “capacity building initiatives and information sharing mechanism.” [392] These efforts included a workshop on free trade agreement (FTA) negotiation skills; a policy dialogue on regional trade agreements (RTAs) and FTAs; and a report, Trends and Developments in Provisions and Outcomes of RTAs/FTAs Implemented in 2016 by APEC Economies . [393]

Digital Trade, Internet Economy, and E-Commerce

Recognizing the growing amount of trade conducted electronically and the transformative effect of e-commerce on industries, APEC listed digital trade, the internet economy, and e-commerce as important trade and investment topics to address. In recent years, a number of working groups and initiatives have been established to promote the development and use of digital technology for economic growth in the APEC region. Examples include Initiative of Cooperation to Promote Internet Economy (2014), [394] the Ad Hoc Steering Group on the Internet Economy (2015), [395] and the Work Plan for Advancing “Facilitating Digital Trade for Inclusive Growth” (2015). [396]

In 2017, there were various developments in this area. In April 2017, the Policy Support Unit (PSU) of APEC completed a study and released a report, Facilitating Digital Trade for Inclusive Growth: Key Issues in Promoting Digital trade in APEC ­­. The report discussed opportunities as well as challenges that digital trade presents, and highlighted emerging technical and policy issues that need to be better understood for balanced regulation of the industry. The report identified the factors enabling the growth of the digital economy, including those affecting infrastructure (e.g., internet speed and cost), the supply of internet services (e.g., the availability of skilled labor such as engineers and scientists, and intellectual property rights protection), and the demand for internet services (e.g., internet access and online payment). [397]

In November 2017, PSU released another report, Promoting E-Commerce to Globalize MSMEs . Through case studies of Taiwan, China, Brunei Darussalam, and Malaysia, the report identified constraints faced by MSMEs in attempting to participate in e-commerce and digital trade. Constraints addressed included information communication technology infrastructure, logistics cost, payment services, and postal services, among others. [398]

A trade policy dialogue on facilitating digital trade was held on May 12, 2017. At the dialogue, the participants discussed barriers to digital trade, and identified issues and areas where further work should be conducted. Based on the discussion, CTI agreed on The Work Plan to Identify Building Blocks to Facilitate Digital Trade for 2018 . In addition, in 2017, senior officials also approved a number of new initiatives, including The APEC Internet and Digital Economy Roadmap and the APEC Framework on Cross-border E-commerce Facilitation . [399]

Negotiations on a Trade in Services Agreement

In 2013, a group of 20 WTO members launched negotiations on a plurilateral Trade in Services Agreement (TiSA) that might form the basis for a broader multilateral agreement. [400] Four rounds of negotiations were held in 2013, five rounds in 2014, five rounds in 2015, and seven rounds in 2016. [401] Negotiations intensified in 2016, focusing on market access and proposals for additional disciplines under the annexes. [402] However, no negotiating rounds were held in 2017. [403] As of the last negotiating round in December 2016, there were 23 participants, including Australia, Canada, Chile, Colombia, Costa Rica, the European Union, Hong Kong, Iceland, Israel, Japan, South Korea, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, Switzerland, Taiwan, Turkey, and the United States. [404]

Trade and Investment Framework Agreements

Trade and Investment Framework Agreements (TIFAs) provide principles for dialogue on trade and investment issues. By yearend 2017, the United States had entered into 57 TIFAs, including one new TIFA with Paraguay (table 4.1). These agreements cover diverse matters, including market access, labor, environment, and intellectual property rights. [405] TIFA meetings serve as a setting for the United States and other parties to the TIFA to discuss issues of mutual interest with the objective of strengthening trade and investment ties, and promoting free, fair, and reciprocal trade. [406] As part of the Trump administration’s stated goal of expanding trade with countries in the Indo-Pacific region, several of the meetings were held between the United States and Asia-Pacific trading partners. [407]

Table 4.1 U.S. trade and investment framework agreements in 2017

Type and name	Date signed
Bilateral
U.S.-Afghanistan TIFA	September 21, 2004
U.S.-Algeria TIFA	July 13, 2001
U.S.-Angola TIFA	May 19, 2009
U.S.-Argentina TIFA	March 23, 2016
U.S.-Armenia TIFA	November 13, 2015
U.S.-Bahrain TIFA	June 18, 2002
U.S.-Bangladesh TICFA	November 25, 2013
U.S.-Brunei-Darussalam TIFA	December 16, 2002
U.S.-Burma TIFA	May 21, 2013
U.S.-Cambodia TIFA	July 14, 2006
U.S.-Egypt TIFA	July 1, 1999
U.S.-Georgia TIFA	June 20, 2007
U.S.-Ghana TIFA	February 26, 1999
U.S.-Iceland TICF	January 15, 2009
U.S.-Indonesia TIFA	July 16, 1996
U.S.-Iraq TIFA	July 11, 2005
U.S.-Kuwait TIFA	February 6, 2004
U.S.-Laos TIFA	February 17, 2016
U.S.-Lebanon TIFA	November 30, 2006
U.S.-Liberia TIFA	February 15, 2007
U.S.-Libya TIFA	December 18, 2013
U.S.-Malaysia TIFA	May 10, 2004
U.S.-Maldives TIFA	October 17, 2009
U.S.-Mauritius TIFA	September 18, 2006
U.S.-Mongolia TIFA	July 15, 2004
U.S.-Mozambique TIFA	June 21, 2005
U.S.-Nepal TIFA	April 15, 2011
U.S.-New Zealand TIFA	October 2, 1992
U.S.-Nigeria TIFA	February 16, 2000
U.S.-Oman TIFA	July 7, 2004
U.S.-Pakistan TIFA	June 25, 2003
U.S.-Paraguay TIFA	January 13, 2017
U.S.-Philippines TIFA	November 9, 1989
U.S.-Qatar TIFA	March 19, 2004
U.S.-Rwanda TIFA	June 7, 2006
U.S.-Saudi Arabia TIFA	July 31, 2003
U.S.-South Africa TIFA a	June 18, 2012a
U.S.-Sri Lanka TIFA	July 25, 2002
U.S.-Switzerland TICF	May 25, 2006
U.S.-Taiwan TIFA	September 19, 1994
U.S.-Thailand TIFA	October 23, 2002
U.S.-Tunisia TIFA	October 2, 2002
U.S.-Turkey TIFA	September 29, 1999
U.S.-Ukraine TICA	March 28, 2008
U.S.-United Arab Emirates TIFA	March 15, 2004
U.S.-Uruguay TIFA b	January 25, 2007
U.S.-Vietnam TIFA	June 21, 2007
U.S.-Yemen TIFA	February 6, 2004
Regional
U.S.-Association of Southeast Asian Nations (ASEAN) TIFA c	August 5, 2006
U.S.-Caribbean Community (CARICOM) TIFA d	May 28, 2013
U.S.-Central Asian TIFA e	June 1, 2004
U.S.-Common Market for Eastern and Southern Africa (COMESA) TIFA f	October 29, 2001
U.S.-East African Community TIFA g	July 16, 2008
U.S.-Economic Community of West African States (ECOWAS) TIFA h	August 5, 2014
U.S.-Gulf Cooperation Council (GCC) Framework Agreement for Trade, Economic, Investment, and Technical Cooperation i	September 25, 2012
U.S.-Southern Africa Customs Union (SACU) Trade, Investment, and Development Cooperative Agreement j	July 16, 2008
U.S.-West African Economic and Monetary Union (WAEMU) TIFA k	April 24, 2002

Source: USTR, “ Trade and Investment Framework Agreements ,” n.d. (accessed March 22, 2018); USTR, “ United States, Bangladesh Sign Trade and Investment Cooperation Forum Agreement ,” November 25, 2013; USTR , 2018 Trade Policy Agenda and 2017 Annual Report , March 2017, 357; USTR, “ SACU ,” (accessed March 22, 2018).

Note: TICF stands for Trade and Investment Cooperation Forum, TICA stands for Trade and Investment Cooperation Agreement, and TICFA stands for Trade and Investment Cooperation Forum Agreement. All are considered TIFAs by USTR. For more information, see USTR, “ Trade and Investment Framework Agreements ” (accessed March 22, 2018).

a The United States-South Africa TIFA was amended on June 18, 2012, and replaces the original TIFA, signed on February 18, 1999.

b On October 2, 2008, the United States and Uruguay signed a TIFA protocol on trade and environment and a TIFA protocol on trade facilitation.

c The 10 countries of ASEAN are Brunei Darussalam (Brunei), Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

d The 15 members of CARICOM are Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. It also has 5 associate members: Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, and the Turks and Caicos Islands.

e The 6 parties to the U.S.-Central Asian TIFA are the United States, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

f The 19 members of COMESA are Burundi, Comoros, the Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe.

g The 6 parties to the U.S.-East African Community TIFA are the United States, Burundi, Kenya, Rwanda, Tanzania, and Uganda.

h The 15 members of ECOWAS are Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

i The 6 parties to the U.S.-Gulf Cooperation Council (GCC) Framework Agreement for Trade, Economic, Investment, and Technical Cooperation are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

j The 5 members of SACU are Botswana, Lesotho, Namibia, South Africa, and Swaziland.

k The 8 members of WAEMU are Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

Developments in TIFA Negotiations during 2017

On January 13, 2017, the United States Trade Representative (USTR) and the Paraguayan Ambassador to the United States met in Washington, DC, to sign a TIFA. The TIFA creates a forum for the countries to engage on a diverse set of bilateral economic issues, including market access and intellectual property rights protection. [408]

Developments in Existing TIFAs during 2017

During 2017, the following TIFA councils met:

Afghanistan

The United States and Afghanistan met under their TIFA on March 27–28, 2017, in Kabul, Afghanistan. Several issues were discussed, including the importance of women in increasing trade and economic growth, workers’ rights, ease of doing business, and the importance of nurturing a governing regime that will foster private sector growth. In addition, the countries discussed potential vehicles for increasing Afghanistan’s external trade and investment, including Afghanistan’s accession to the WTO, full implementation of the Afghanistan-Pakistan Transit Trade Agreement, and full implementation of the Transports Internationaux Routiers Convention (International Road Transport Convention) of the International Road Union. [409]

Algeria

On April 24, 2017, the United States and Algeria met in Algiers under their TIFA. Topics discussed included ease of doing business, market access, and investments in agriculture and pharmaceuticals. [410]

Bangladesh

Under their TICFA, the United States and Bangladesh met in Dhaka on May 17, 2017. The countries used the meeting as a forum to discuss Bangladeshi efforts to improve labor conditions. [411] Additional topics addressed included market access, intellectual property, the digital economy, and ease of doing business. [412]

Burma (Myanmar)

On July 13, 2017, government officials from the United States and Burma met to discuss the plan for moving forward under their TIFA, signed in 2013. The meeting, which was held in Rangoon (Yangon), included discussions related to intellectual property rights and enforcement, labor standards, and agriculture. [413]

Cambodia

On August 8, 2017, U.S. and Cambodian senior government officials met under their TIFA. The countries agreed to work cooperatively to address outstanding bilateral trade issues, especially those related to labor, intellectual property protection, and financial services. During the meeting, U.S. officials shared the Trump Administration’s trade priorities, including improving enforcement of trade laws, lowering the trade deficit, and opening new markets. [414]

Central Asia

On December 13, 2017, senior government officials met in Almaty, Kazakhstan, for the U.S.-Central Asia TIFA Council meeting. Topics covered included the trade, transit, and investment environment; facilitating regional private sector activity by expanding fair and reciprocal trade and creating a welcoming business environment; and Central Asian exports under the U.S. Generalized System of Preferences. [415] In 2017, U.S. and foreign officials agreed to form a new working group on intellectual property rights. [416] The Afghan government participated in the council meeting as observers, and proposed becoming a full member of the TIFA. [417]

Egypt

On December 5, 2017, the United States and Egypt held a Trade and Investment Council meeting in Cairo under their TIFA. During the meeting, both countries renewed their commitment to work cooperatively towards improving bilateral trade, especially in the areas of market access, labor regulations, and intellectual property protection and enforcement. [418]

Indonesia

The United States and Indonesia met under their TIFA on June 12–13, 2017. During the TIFA meetings in Washington, DC, and in subsequent informal meetings in both Jakarta and Washington, the countries proposed to resolve outstanding bilateral issues, including U.S. intellectual property rights concerns and agricultural import barriers. [419] As Indonesia is listed on USTR’s Special 301 Priority Watch List, the countries discussed a work plan for addressing U.S. concerns regarding intellectual property protection and enforcement. [420] The two sides also focused on making progress on agriculture, high-technology products, digital services, and financial services, and addressed several market access restrictions, including agricultural import barriers, import licensing restrictions, and localization requirements. [421]

Laos

On March 23, 2017, the United States and Laos held the inaugural meeting under their TIFA. In addition to affirming their interest in expanding bilateral trade, the countries discussed the importance of addressing vital issues in a timely manner. These key topics included digital trade; agricultural, sanitary, and phytosanitary standards; intellectual property; and illegal logging and wildlife tracking. [422] The United States also encouraged labor-related reforms. [423]

Malaysia

Under their TIFA, the United States and Malaysia met on July 17, 2017, with the goals of further strengthening trade relations and promoting fair and balanced trade. During the course of their meetings, the countries established working groups related to the environment, financial services, goods trade, labor, and intellectual property. [424]

Nepal

On April 20, 2017, the United States and Nepal held their third TIFA Council meeting in Kathmandu. Technical discussions addressed customs and trade facilitation, sanitary and phytosanitary measures, food safety, labeling requirements, standards and conformity assessment, and labor. The two sides also discussed the Nepal Trade Preference Act (NTPA), which entered into force on December 30, 2016, following the 2015 earthquakes in Nepal. [425] Under the NTPA, the United States grants duty-free treatment to imports from Nepal for products covered by 77 HTS tariff lines. During the TIFA Council meeting, the government of Nepal requested that additional products be added to the duty-free trade preference program. Both countries affirmed the importance of full implementation of the NTPA. [426]

Pakistan

Under their TIFA, the United States and Pakistan held an intersessional meeting in June. The United States used the forum to promote market access for several U.S. agricultural products, including beef, distiller’s dried grains, soybeans, pulses, and chickpeas. In addition, the U.S. side discussed the importance of intellectual property rights protection and enforcement and tax predictability for U.S. businesses. [427]

Philippines

The United States and the Philippines met under their TIFA twice in 2017: on July 11 in Manila, and on November 29 in Washington, DC. [428] The countries discussed bilateral trade issues including intellectual property protection, customs, agriculture, labor, and investment. In addition, the countries agreed to work cooperatively to advance the U.S.-Association of Southeast Asian Nations (ASEAN) trade and investment agenda. [429]

Thailand

Under their TIFA, the United States and Thailand met twice in 2017: on April 3 and June 12–13. The countries met with the goals of expanding market access and working together to address trade barriers. During the meetings, U.S. officials discussed both the importance of labor laws’ compliance with internationally recognized workers’ rights standards and the importance of enhancing trade with countries in the Asia-Pacific region via bilateral trade initiatives focused on promoting economic growth and competitiveness. [430] In December 2017, in response to the country’s improved intellectual property protections and enforcement, Thailand was moved from the Special 301 Priority Watch List to the Watch List. [431]

Tunisia

On April 21, 2017, government officials from the United States and Tunisia met in Tunis under their TIFA. Their meeting was the seventh since the TIFA was signed in 2002. The countries discussed recent bilateral strides made in support of U.S. and Tunisian agricultural industries. In addition, the United States discussed the Tunisian government’s marked progress on its economic reform program, stressing that the country’s new laws on investment, the banking sector, and bankruptcy will increase Tunisia’s attractiveness as a trading partner for U.S. firms. [432]

Turkey

The United States and Turkey met in Ankara on September 12–13 for their 10th TIFA meeting. [433] Topics discussed included agricultural and industrial goods trade, intellectual property rights and enforcement, the digital economy, government procurement, and export credit cooperation. In addition, the countries agreed to work towards improving the private sector business climate between them. To accomplish this, the governments plan to increase dialogue on subjects such as trade facilitation, export financing, innovation, advanced manufacturing, and startups. [434]

Ukraine

The United States and Ukraine met on October 3, 2017, under their Trade and Investment Cooperation Agreement (TICA). The meeting, held in Kyiv under the auspices of the U.S.-Ukraine Trade and Investment Council, was the seventh meeting since the TICA entered into force in 2008. During the meeting, the Ukraine government described its efforts to diversify its exports and improve intellectual property rights protection and enforcement. The United States acknowledged Ukraine’s efforts to reform its tax and customs authorities, and urged Ukraine to continue reforms aimed at increasing the ease of doing business in the country. [435]

Vietnam

On March 27–28, 2017, government officials from the United States and Vietnam met under their TIFA, the first such meetings since 2011. During the talks, the countries discussed bilateral issues related to several topics, and agreed to create working groups on agriculture and food safety, industrial goods, intellectual property, and digital trade. They also discussed issues related to motor vehicles, electronic payments, and labor reforms. [436] In addition, officials discussed how they could work cooperatively to build U.S.-ASEAN ties. [437] On May 30, 2017, senior officials met under the TIFA again, this time in Washington, DC. Topics included agricultural imports, including U.S. import restrictions on catfish from Vietnam, and digital trade, including electronic payment services and Vietnamese advertising on U.S. social websites. [438]

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Chapter 5
U.S. Free Trade Agreements

This chapter summarizes developments related to U.S. free trade agreements (FTAs) during 2017. [439] It describes trends in U.S. merchandise trade with FTA partners, features highlights of the status of U.S. FTA negotiations during the year, and summarizes major activities and dispute settlement developments involving the North American Free Trade Agreement (NAFTA) and other U.S. FTAs in force during 2017.

U.S. Trade with FTA Partners in 2017

The United States was party to 14 FTAs involving a total of 20 countries as of December 31, 2017. Starting with the most recent, the FTAs in force during 2017 were the U.S.-Panama Trade Promotion Agreement (TPA) (entered into force in 2012); the U.S.-Colombia TPA (2012); the U.S.-Korea FTA (2012); the U.S.-Oman FTA (2009); the U.S.-Peru TPA (2009); a multiparty FTA with the countries of Central America and the Dominican Republic (CAFTA-DR) that includes the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua (entered into force 2006–07) and Costa Rica (2009); the U.S.-Bahrain FTA (2006); the U.S.-Morocco FTA (2006); the U.S.-Australia FTA (2005); the U.S.-Chile FTA (2004); the U.S.-Singapore FTA (2004); the U.S.-Jordan FTA (2001); NAFTA, with Canada and Mexico (1994); and the U.S.-Israel FTA (1985).

U.S. Total Merchandise Trade with FTA Partners

Total two-way merchandise trade between the United States and its 20 FTA partners was $1.5 trillion in 2017, which accounted for 39.0 percent of total U.S. merchandise trade with the world. The value of U.S. exports to FTA partners totaled $720.5 billion, a 6.6 percent increase from $675.8 billion in 2016; this growth mirrored the 6.6 percent increase in total U.S. exports to the world in 2017. The value of U.S. exports to most FTA partners increased in 2017; the exception was exports to Israel. U.S. imports from FTA partners were valued at $797.0 billion, a 6.5 percent increase from $748.3 billion in 2016. The U.S. merchandise trade deficit with all FTA partners increased 5.6 percent to $76.6 billion in 2017 (tables 5.1–5.3).

U.S. trade with the two NAFTA countries (Canada and Mexico) continued to contribute the most to overall U.S. trade with FTA partners. In 2017, these countries accounted for $1.1 trillion, or 75.1 percent, of total U.S. trade with its FTA partners. From 2016 to 2017, the value of U.S. exports to NAFTA countries rose 5.8 percent ($29.0 billion) to $525.5 billion. U.S. imports from NAFTA countries rose 7.4 percent ($42.2 billion), to $614.0 billion in 2017. As a result, the U.S. merchandise trade deficit with its NAFTA partners increased by 17.6 percent to $88.6 billion in 2017.

U.S. trade with its non-NAFTA FTA partners was valued at $378.0 billion in 2017, which was a 3.7 percent increase from 2016. U.S. exports to these FTA partners increased 8.8 percent ($15.7 billion), from $179.3 billion in 2016 to $195.0 billion in 2017. At the same time, U.S. imports from these partners increased 3.7 percent ($6.5 billion) from $176.5 billion in 2016 to $183.0 billion. [440] U.S. exports increased more than imports, causing the U.S. merchandise trade surplus with its non-NAFTA FTA partners to increase 333.9 percent to $12.0 billion (tables 5.1–5.3).

Table 5.1 Total U.S. exports to FTA partners, by FTA partner, 2015–17

FTA partner	2015	2016	2017	2016–17
		Million $		% change
NAFTA	517,059	496,499	525,460	5.8
Canada	280,855	266,797	282,472	5.9
Mexico	236,204	229,702	242,989	5.8
Non-NAFTA	194,005	179,266	194,990	8.8
Israel	13,539	13,197	12,544	-4.9
Jordan	1,360	1,459	1,963	34.5
Chile	15,449	12,922	13,608	5.3
Singapore	28,474	26,725	29,753	11.3
Australia	25,034	22,160	24,601	11.0
Morocco	1,625	1,933	2,116	9.5
Bahrain	1,271	899	907	0.9
CAFTA-DR a	28,713	28,709	30,719	7.0
Oman	2,355	1,804	2,096	16.2
Peru	8,724	7,955	8,686	9.2
South Korea	43,484	42,309	48,277	14.1
Colombia	16,303	13,067	13,272	1.6
Panama	7,674	6,128	6,447	5.2
FTA partner total	711,064	675,766	720,450	6.6
World total	1,503,101	1,451,011	1,546,733	6.6
FTA partner share of world (percent)	47.3	46.6	46.6

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

a CAFTA-DR is a multiparty FTA that includes the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica.

Table 5.2 Total U.S. imports from FTA partners, by FTA partner, 2015–17

FTA partner	2015	2016	2017	2016–17
		Million $		% change
NAFTA	592,632	571,812	614,020	7.4
Canada	296,230	277,756	299,975	8.0
Mexico	296,401	294,056	314,045	6.8
Non-NAFTA	181,763	176,507	183,016	3.7
Israel	24,478	22,203	21,947	-1.2
Jordan	1,492	1,555	1,688	8.5
Chile	8,772	8,797	10,552	19.9
Singapore	18,267	17,833	19,397	8.8
Australia	10,884	9,510	10,051	5.7
Morocco	1,012	1,021	1,230	20.4
Bahrain	902	768	996	29.7
CAFTA-DR a	23,755	23,356	23,641	1.2
Oman	907	1,125	1,069	-5.0
Peru	5,053	6,252	7,283	16.5
South Korea	71,758	69,881	71,164	1.8
Colombia	14,075	13,794	13,556	-1.7
Panama	408	410	442	7.8
FTA partner total	774,395	748,318	797,036	6.5
World total	2,248,183	2,187,805	2,342,905	7.1
FTA partner share of world (percent)	34.4	34.2	34.0

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

a CAFTA-DR is a multiparty FTA that includes the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica.

Table 5.3 U.S. merchandise trade balance with FTA partners, by FTA partner, 2015–17

FTA partner	2015	2016	2017	2016–17
		Million $		% change a
NAFTA	-75,572	-75,312	-88,560	-17.6
Canada	-15,375	-10,958	-17,504	-59.7
Mexico	-60,197	-64,354	-71,057	-10.4
Non-NAFTA	12,242	2,760	11,974	333.9
Israel	-10,939	-9,007	-9,403	-4.4
Jordan	-132	-96	275	( b )
Chile	6,677	4,125	3,057	-25.9
Singapore	10,207	8,891	10,356	16.5
Australia	14,151	12,650	14,550	15.0
Morocco	613	911	887	-2.7
Bahrain	368	131	-89	( b )
CAFTA-DR c	4,958	5,353	7,078	32.2
Oman	1,448	679	1,027	51.3
Peru	3,671	1,703	1,403	-17.6
South Korea	-28,273	-27,572	-22,887	17.0
Colombia	2,228	-726	-284	60.9
Panama	7,266	5,718	6,005	5.0
FTA partner total	-63,330	-72,553	-76,586	-5.6
World total	-745,082	-736,794	-796,172	-8.1

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

a Negative percentage changes indicate an increase in the U.S. trade deficit or a decrease in the U.S. trade surplus. Positive percentage changes indicate a decrease in the trade deficit or an increase in the trade surplus.

b Not meaningful.

c CAFTA-DR is a multiparty FTA that includes the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica.

U.S. Imports Entered under FTAs

The value of U.S. imports entered under FTAs totaled $385.1 billion in 2017, which accounted for nearly half (48.3 percent) of total U.S. imports from FTA partners and 16.5 percent of U.S. imports from the world (tables 5.4–5.5). [441]

The value of U.S. imports entered under FTAs in 2017 increased $10.6 billion (2.8 percent), up from $374.4 billion in 2016. FTA imports from Chile grew 26.6 percent ($1.3 billion), which represented the largest percent increase. The growth was primarily driven by large increases in imports of copper products. [442] Imports under FTAs from Peru and Bahrain increased 24.5 percent ($651 million) and 16.5 percent ($82 million), respectively; however, they changed from smaller baselines. Imports from Mexico accounted for the greatest increase in value, rising by $11.9 billion (7.0 percent) to $182.8 billion. Combined imports from the NAFTA partners rose 3.5 percent ($10.6 billion), which was mostly due to an increase in motor vehicle imports from Mexico. [443] U.S. imports under an FTA declined the most from Oman, largely due to a 64.3 percent drop in U.S. imports of crude petroleum. [444]

Table 5.4 U.S. imports for consumption that entered under FTA provisions, by FTA partner, 2015–17

FTA partner	2015	2016	2017	2016–17
		Million $		% change
NAFTA	316,260	302,019	312,637	3.5
Canada	140,755	131,203	129,875	-1.0
Mexico	175,504	170,816	182,763	7.0
Non-NAFTA	56,851	72,428	72,416	0.0
Israel	2,908	2,750	2,693	-2.1
Jordan	1,349	1,355	1,485	9.6
Chile	4,860	4,691	5,940	26.6
Singapore	1,658	1,842	1,806	-1.9
Australia	5,122	3,703	3,914	5.7
Morocco	256	190	201	5.9
Bahrain	527	499	581	16.5
CAFTA-DR a	13,524	13,662	13,697	0.3
Oman	598	815	708	-13.1
Peru	2,731	2,659	3,310	24.5
South Korea	17,872	34,885	33,015	-5.4
Colombia	5,405	5,324	5,010	-5.9
Panama	41	53	56	5.8
FTA partner total	373,110	374,447	385,055	2.8
World total	2,226,615	2,173,617	2,330,447	7.2

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

a CAFTA-DR is a multiparty FTA that includes the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica.

Jordan remained the partner with the highest ratio of imports entered under an FTA to total imports, with a ratio of 88.0 percent (table 5.5). Other countries with notably high ratios include Oman (66.3 percent), Bahrain (58.3 percent), and Mexico (58.2 percent). CAFTA-DR countries as a whole also had a high FTA imports-to-total-imports ratio, at 57.9 percent. Each CAFTA-DR partner had large shares, except for Costa Rica, for which the ratio was 32.7 percent. The partners with the smallest shares of imports entered under an FTA to total imports continued to be Singapore (9.3 percent), Israel (12.3 percent), and Panama (12.7 percent). The imports from these countries often entered the United States free of duty under normal trade relations rates.

Table 5.5 Ratio of U.S. imports for consumption under FTAs to U.S. general imports, by partner, 2015–17

FTA partner	2015	2016	2017
		Percent
NAFTA	53.4	52.8	50.9
Canada	47.5	47.2	43.3
Mexico	59.2	58.1	58.2
Non-NAFTA	31.3	41.0	39.6
Israel	11.9	12.4	12.3
Jordan	90.4	87.2	88.0
Chile	55.4	53.3	56.3
Singapore	9.1	10.3	9.3
Australia	47.1	38.9	38.9
Morocco	25.3	18.6	16.4
Bahrain	58.4	64.9	58.3
CAFTA-DR a	56.9	58.5	57.9
Oman	65.9	72.4	66.3
Peru	54.1	42.5	45.4
South Korea	24.9	49.9	46.4
Colombia	38.4	38.6	37.0
Panama	10.0	13.0	12.7
FTA partner total	48.2	50.0	48.3

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add to totals shown.

a CAFTA-DR is a multiparty FTA that includes the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica.

Developments in FTA Negotiations during 2017

Trans-Pacific Partnership (TPP)

In February 2016, the United States and 11 other countries signed the Trans-Pacific Partnership. Although the U.S. administration worked during 2016 to prepare the signed agreement for Congressional consideration, implementing legislation was not submitted to Congress by yearend. In January 2017, newly elected President Donald Trump instructed the U.S. Trade Representative (USTR) to formally withdraw the United States from further TPP discussions. [445]

Transatlantic Trade and Investment Partnership (TTIP) Agreement

U.S. and European Union (EU) officials began negotiating a Transatlantic Trade and Investment Partnership Agreement in 2013. By the end of 2016, 15 negotiating rounds had been held. [446] In January 2017, the United States and EU issued a joint report on the status of negotiations as of the end of 2016, and highlighted areas that still needed “significant work.” These areas included (1) the most sensitive tariff lines (the final 3 percent of tariff lines); (2) market access in service sectors; (3) sanitary and phytosanitary measures; (4) mutual recognition of professional qualifications; (5) government procurement; (6) standards and conformity assessment procedures; (7) investor protection; (8) labor and environmental protection; (9) electronic commerce; (10) energy; and (11) trademarks, generic names, and geographical indications. [447] No TTIP negotiations were held in 2017 and, as of June 2018, none were scheduled for 2018.

Developments in the North American Free Trade Agreement (NAFTA) [448]

The North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico entered into force on January 1, 1994. All of the agreement’s provisions were implemented, as scheduled, by the three parties by January 1, 2008, with the exception of the NAFTA cross-border trucking provisions. [449]

Renegotiation of the NAFTA

On May 18, 2017, more than 23 years after NAFTA entered into force, USTR notified Congress that the President intended to initiate negotiations with Canada and Mexico to modernize the agreement. [450] The negotiations began on August 16, 2017, in Washington, DC, [451] with two primary goals. [452] The first is to update NAFTA with modern provisions on digital trade, intellectual property, cybersecurity, good regulatory practices, and treatment of state-owned enterprises. The second is to “rebalance NAFTA” in a way that makes it easier to reduce the U.S. trade deficit with Canada and Mexico. [453]

Within this framework, USTR has “set as its primary objective for these negotiations to improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries.” [454] To accomplish this objective, USTR is focusing on tightening rules of origin for products imported into the United States from Canada and Mexico to ensure they contain considerable regional, and U.S.-specific, content. The focus is on products for which the United States has significant trade imbalances, such as in automobiles and automotive parts. [455] In addition, USTR has proposed that all provisions in the labor and environment chapters be subject to the same dispute settlement mechanism that applies to other obligations under the agreement. [456]

In developing these objectives, USTR held numerous meetings with congressional leaders and private sector advisory committees, and held public hearings on June 27–29, 2017. [457] USTR received more than 12,000 public comments for the hearings that were reviewed and integrated into the Administration’s priorities for the renegotiation. On November 17, 2017, after four rounds of negotiations USTR updated the NAFTA negotiation objectives. [458]

By the end of 2017, five negotiating rounds had been completed (table 5.6). At the end of the third round of negotiations, USTR announced that the chapter on small and medium-sized enterprises had been completed. [459] The chapter on competition was completed in round four. The same round also saw progress in several other negotiating areas, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes. [460] Throughout the negotiations, officials from all three countries continued to engage representatives of the private sector, industry associations, and civil society, including labor groups. [461]

Table 5.6 Timetable of major NAFTA negotiations, 2017–18

Negotiation Round	Date	City
First round	August 16–20, 2017	Washington, DC
Second round	September 1–5, 2017	Mexico City
Third round	September 23–27, 2017	Ottawa
Fourth round	October 11–17, 2017	Arlington, Virginia
Fifth round	November 17–21, 2017	Mexico City
Sixth round	January 23–28, 2018	Montreal
Seventh round	February 25–March 5, 2018	Mexico City

Source: USTR, 2018 Trade Policy Agenda and 2017 Annual Report , March, 2018; USTR. “ Trilateral Statement on the Conclusion of the Fifth Round of NAFTA Negotiations ,” November 21, 2017 (accessed April 5, 2018).

NAFTA’s central oversight body is the Free Trade Commission, which is responsible for overseeing NAFTA’s implementation and elaboration, as well as activities under its dispute settlement provisions. The commission itself has not officially met since 2012. [462] However, lower-ranked officials of the three member countries have met regularly to consider approaches to expand and deepen trade and investment opportunities in North America, and in 2017, met to renegotiate the agreement. [463]

The following sections describe the major activities of NAFTA’s Commission for Labor Cooperation (CLC) and Commission for Environmental Cooperation (CEC) during 2017, as well as dispute settlement activities under NAFTA Chapters 11 and 19 in that year.

NAFTA's Commission for Labor Cooperation

The CLC, composed of a ministerial council and an administrative secretariat, was established under the North American Agreement on Labor Cooperation (NAALC). The NAALC is a supplemental agreement to NAFTA that aims to promote effective enforcement of domestic labor laws and foster transparency in administering them. The CLC is responsible for implementing the NAALC.

Each NAFTA partner has a national administrative office (NAO) within its labor ministry to act as the contact point with the other parties, the secretariat, other government agencies, and the public. [464] Another NAO function is to receive and respond to public communications on labor law matters arising in another NAALC country. The United States’ NAO is the Office of Trade and Labor Affairs in the U.S. Department of Labor (USDOL). [465] Each NAO establishes its own domestic procedures for reviewing and responding to public communications.

The NAOs and the secretariat also carry out the cooperative activities of the CLC, including seminars, conferences, joint research projects, and technical assistance. [466] As part of the renegotiations, the United States is proposing to make the labor obligations subject to the same dispute settlement mechanism as other enforceable obligations of NAFTA. [467]

As of the end of 2017, there were three submissions under review at the NAALC. One with the United States’ NAO (involving Mexico), [468] and two with the Canadian NAO (one involving Mexico and one involving the United States). [469]

In December 2017, Mexico’s executive branch submitted legislation to its Congress to amend Mexico’s Federal Labor Law by implementing constitutional reforms to the labor justice system enacted in February 2017. One of the reforms consists of transferring the authority to adjudicate labor disputes from the current tripartite Conciliation and Administrative Boards to new labor courts, while transferring the registration of unions and collective bargaining agreements to a new federal institution. The U.S. Administration is consulting with the Mexican government about the reforms through the ongoing renegotiation of NAFTA. [470]

NAFTA's Commission for Environmental Cooperation

The CEC was established under Article 8 of the North American Agreement on Environmental Cooperation. This supplemental agreement, which came into force at the same time as NAFTA, is designed to support NAFTA's environmental goals, which are to protect and improve the environment, support sustainable development, and increase cooperation in reaching these goals. [471] The CEC was established to support cooperation among the parties to reach these goals. [472]

Articles 14 and 15 of the supplemental agreement offer citizens and nongovernmental organizations a mechanism to help enforce environmental laws in the NAFTA countries. Article 14 governs alleged violations submitted for review by the CEC. It sets out guidelines about criteria for submissions and for parties that can file complaints. Article 15 outlines the CEC Secretariat’s obligations in considering the submissions and publishing findings in the factual record. [473] At the end of 2017, two complaint files remained active under Articles 14 and 15. One, involving Mexico, was submitted in 2016, and the other, involving Canada, was submitted in 2017 (table 5.7).

Table 5.7 Active files as of yearend 2017 under Articles 14 and 15 of the North American Agreement on Environmental Cooperation

Name	Case	First filed	Country a	Status
Agricultural Waste Burning in Sonora	SEM-16-001	January 22, 2016	Mexico	The Secretariat submitted a draft factual record to Council for a 45-day comment period on the accuracy of the draft.
Alberta Tailings Ponds II	SEM-17-001	June 26, 2017	Canada	The Secretariat received a response from the concerned government party and began considering whether to recommend a factual record.

Source: CEC, “ Submission on Enforcement Matters: Active Submissions ” (accessed April 9, 2018).

a Refers to the country against which an allegation was filed.

At the 24th regular session of the CEC Council on June 28, 2017, in Charlottetown, Prince Edward Island, Canada, a new trilateral cooperative work program for the CEC was announced. Its focus was primarily on improving the outcomes of interactions between trade and the environment. Panelists discussed sustainable and innovative water-related businesses, increasing resilience through cooperation, sustainable economic growth on the water’s edge, and solution-focused innovation. [474] The session also featured a dialogue with youth and the public on how innovation can accelerate clean growth and advance North American competitiveness. [475]

Under the Operational Plan of the Commission for Environmental Cooperation 2017–2018 , [476] the CEC will undertake 10 cooperative projects that bring together experts on environmental issues of regional concern. Examples include “greening” transport by reducing maritime shipping emissions; achieving legal and sustainable trade in select North American species; measuring and mitigating food loss and waste; protecting pollinators vital to food crops; advancing growth and conservation of migratory species through ecotourism; and improving cost-effectiveness and environmental protection through higher industrial energy efficiency. [477]

The United States accepted chairmanship of the CEC Council for 2018, and announced it will host the 2018 CEC Council Session in Oklahoma City. [478]

The Border Environment Cooperation Commission and the North American Development Bank were created in 1994 to address environmental issues in the U.S.-Mexico border region. [479] As of December 31, 2017, the bank had contracted a total of about $3.0 billion in loans and grants to help finance 244 projects estimated to cost a total of $9.3 billion. Of the financing contracted, 94 percent has been disbursed. [480]

NAFTA Dispute Settlement

The dispute settlement provisions of NAFTA Chapters 11 (Investment) and 19 (Review and Dispute Settlement in Antidumping/Countervailing Duty Matters) cover a variety of areas. [481] The sections below describe developments during 2017 in NAFTA Chapter 11 investor-state disputes and Chapter 19 binational reviews of final determinations of antidumping and countervailing cases. Appendix table A.26 presents an overview of developments in NAFTA Chapter 19 dispute settlement cases to which the United States was a party in 2017.

NAFTA Chapter 11 Dispute Settlement Developments

Chapter 11 of NAFTA includes provisions designed to protect cross-border investors and to make it easier to settle investment disputes. Under subpart B of Chapter 11, an individual investor who alleges that a NAFTA country has breached its investment obligations under Chapter 11 may pursue arbitration through internationally recognized channels or remedies available in the host country’s domestic courts. [482] A key feature of the Chapter 11 arbitral provisions is the enforceability in domestic courts of final awards made by arbitration tribunals. [483] In 2017, there were 5 active Chapter 11 cases filed against the United States, 4 of them filed by Canadian investors and 1 filed by Mexican investors; [484] 11 filed by U.S. investors against Canada; [485] and 4 filed against Mexico, 3 by U.S. investors and 1 by Canadian investors. [486]

NAFTA Chapter 19 Dispute Panel Reviews

Chapter 19 of NAFTA provides for a binational panel to review final determinations made by national investigating authorities in antidumping and countervailing duty cases. [487] Such a panel serves as an alternative to judicial review by domestic courts and may be established at the request of any involved NAFTA country. [488] At the end of 2017, the NAFTA Secretariat listed six binational panels active under Chapter 19 (table 5.8). The United States filed two cases contesting Mexico’s determinations; Canada filed three cases contesting U.S. determinations; and Mexico filed one case contesting U.S. determinations. [489]

Table 5.8 NAFTA Chapter 19 binational panels, active reviews through 2017

Country a	Case number	National agencies’ final determination b	Case title
Mexico
	MEX-USA-2015-1904-01	SE Antidumping Administrative Review	Ammonium sulphate
	MEX-USA-2016-1904-01	SE Antidumping Administrative Review	Ethylene glycol monobutyl ether
United States
	USA-CDA-2015-1904-01	USDOC Antidumping Administrative Review	Supercalendered paper
	USA-CDA-2017-1904-02	USDOC Antidumping Administrative Review	Certain softwood lumber products
	USA-CDA-2017-1904-03	USDOC Antidumping Administrative Review	Certain softwood lumber products
	USA-MEX-2017-1904-01	USDOC Antidumping Administrative Review	Certain circular welded non-alloy steel pipe

Source: NAFTA Secretariat, “ Status Report of Panel Proceedings—Chapter 19 Active Cases “ (accessed April 9, 2018).

a The United States filed the first two cases contesting Mexico’s determinations, while Canada filed three cases and Mexico one case contesting U.S. determinations.

b In Canada, final dumping and subsidy determinations are made by the Canada Border Services Agency (CBSA), and injury determinations are made by the Canadian International Trade Tribunal (CITT). In Mexico, all determinations are made by the Secretariat of the Economy (SE). In the United States, dumping and subsidy determinations are made by the U.S. Department of Commerce (USDOC), and injury determinations are made by the USITC. NAFTA Secretariat, “Overview of the Dispute Settlement Provisions,” accessed March 15, 2017.

Developments in Other U.S. FTAs Already in Force during 2017

In 2017, U.S. officials met with FTA partners for discussions on a variety of matters, including labor and environmental issues, enhancing trade and investment, and dispute settlement. Highlights of these consultations are presented in this section.

Thirteen of the 14 U.S. FTAs have labor provisions to protect worker rights and facilitate cooperation on labor issues. [490] The U.S. Department of Labor, which monitors reports and submissions made under the labor chapters of U.S. trade agreements, reported two developments in 2017: (1) a January 2017 submission under the U.S.-Colombia TPA, and (2) a June 2017 report issued regarding the arbitral panel decision reached under CAFTA-DR concerning Guatemala. [491] Further details are set out below.

Twelve of the 14 U.S. FTAs have investment provisions designed to protect foreign investors and their investments, as well as to facilitate the settlement of investment disputes. [492] The U.S. Department of State reported two submissions in 2017 under the U.S.-Panama TPA, [493] both on behalf of Bridgestone Licensing Services, Inc. and Bridgestone Americas, Inc. The submissions alleged that a decision by the Supreme Court of Panama related to trademark proceedings violated certain provisions of the U.S.-Panama TPA. [494]

U.S.-Australia FTA

The U.S.-Australia Joint Committee, the central body under the 2005 U.S.-Australia Free Trade Agreement, held its sixth meeting in December 2017 to review the operation of the agreement. The Joint Committee received a report from the FTA’s Committee on Sanitary and Phytosanitary Measures about its efforts to address sanitary and phytosanitary issues affecting agricultural trade between the two countries. The two sides agreed to meet again in 2018 to review the FTA’s implementation. [495]

U.S.-Bahrain FTA

The Joint Committee, the primary body overseeing the 2006 U.S.-Bahrain Free Trade Agreement, met in 2017 to review the FTA’s chapters covering customs, services, and investment; to consider possible cooperation with the broader Middle East and North Africa region; and to address matters concerning labor rights and the environment. [496]

Labor

In 2017, U.S. officials met with government officials from Bahrain, as well as with representatives from labor unions and businesses, to continue discussions on labor rights that began in 2013. Subjects addressed in these talks included Bahrain’s response to employment discrimination, enforcement of laws on freedom of association and collective bargaining, how to amend Bahrain’s labor laws to make them more consistent with international standards, as well as encouraging regular dialogue between government, labor, and business representatives. In December 2017, representatives from the two sides met in Washington, DC, to discuss possible Bahraini initiatives in remaining areas of interest, and agreed to continue discussions in 2018. [497]

Environment

During 2017, U.S. officials and experts met with Bahrain’s Supreme Council for Environment to continue efforts set out under the U.S.-Bahrain Memorandum of Understanding on Environmental Cooperation. [498] The MOU was negotiated in parallel with the U.S.-Bahrain FTA to support the dual goals of strengthening environmental protection under the FTA’s Environment Chapter and promoting sustainable development as trade expands under the FTA. Both sides look to revise the Plan of Action developed under the MOU, as approved by the Bahraini cabinet in August 2017, and expect to reconvene in 2018. [499]

CAFTA-DR

The CAFTA-DR central oversight body, the Free Trade Commission, met in 2017, and agreed to modify certain product-specific rules of origin to reflect changes in the nomenclature of the 2017 global Harmonized System of tariff classifications. [500] In addition, the United States worked bilaterally with a number of CAFTA-DR partners in 2017 on matters related to implementation of the agreement. For example, the United States worked with several partners on agricultural trade, in particular poultry tariffs and tariff-rate quotas. [501]

Labor

In January 2017, Honduras passed a new labor inspection law in an effort to bring the country into compliance with CAFTA-DR’s Labor Chapter provisions, following a Monitoring and Action Plan signed in 2015 between Honduras and the United States. [502]

On June 26, 2017, the arbitral panel decision was released in a case concerning violations of the CAFTA-DR Labor Chapter, brought by the United States against Guatemala in April 2008. The panel found that Guatemala had failed to effectively enforce its labor laws, but that violation of CAFTA-DR labor provisions could not be proven without other required evidence. [503]

Environment

CAFTA-DR officials met twice in 2017 to discuss environmental priorities under the agreement, in particular to prepare for meetings of the agreement’s Environmental Affairs Council. [504] The Council held its 11th meeting June 21–22, 2017, to discuss progress and challenges under the CAFTA-DR Environment Chapter, and focused in particular on environmental impact assessments and best practices concerning air quality and waste management laws. [505]

U.S.-Chile FTA

The U.S.-Chile Free Trade Commission, the supervisory body for the 2004 U.S.-Chile Free Trade Agreement, convened its most recent meeting in December 2016, and expects to hold its 12th meeting in 2018.

Labor

In April 2017, Chile’s most recent labor reform went into effect. It covers areas related to collective bargaining, such as an employer’s ability to replace striking with non-striking workers, as well as expanding collective bargaining rights to certain temporary workers and apprentices and removing obstacles that previously limited collective bargaining to the individual enterprise level. [506]

Environment

The Secretariat of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) announced in 2017 that Chile’s new wildlife law fully satisfied commitments made in implementing CITES international standards. The new law was supported by efforts to promote environmental protection in Chile taken with the help of the FTA’s Joint Commission for Environmental Cooperation. [507]

U.S.-Colombia TPA

The U.S.-Colombia Free Trade Commission, the oversight body under the 2012 U.S.-Colombia Trade Promotion Agreement (CTPA), worked on initiatives launched at the first Free Trade Commission meeting in November 2012. These included changes to the CTPA’s dispute settlement mechanism and updates to the CTPA’s rules of origin, including updates to reflect changes in trade nomenclature in the 2012 and 2017 Harmonized System. The Free Trade Commission expects to conclude this work in 2018. [508]

The CTPA’s Committee on Agriculture and its Committee on Sanitary and Phytosanitary Measures also met, leading to an exchange of letters in August 2017 that removed the temporary restrictions on U.S. paddy rice imported into Colombia originally agreed in 2012. [509] The CTPA’s Free Trade Commission also arrived at decisions on two other agricultural matters in November and December 2017, respectively: it (1) clarified tariff treatment for U.S. yellow corn imported into Colombia under a tariff-rate quota, and (2) clarified product coverage for U.S. variety meats imported into Colombia under a second tariff-rate quota. [510]

Labor

On January 11, 2017, the U.S. Department of Labor issued a report in response to a submission filed May 16, 2016, under the CTPA’s Labor Chapter, by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) and five Colombian workers’ organizations. [511] The report recommended that the U.S. Secretary of Labor open consultations under the TPA, and set out 19 recommendations aimed at addressing a range of labor concerns. Areas of particular focus included violence against unionists, protection of labor rights, labor law inspection, and enforcement of rights to protect freedom of association and collective bargaining in Colombia. Four meetings were held later in 2017 between the two sides regarding CTPA labor commitments––three in Washington, DC, and one in Bogotá, as well as a videoconference in April 2017. [512]

U.S.-Israel FTA

The U.S.-Israel Joint Committee was established as the central body overseeing the 1985 U.S.-Israel Free Trade Agreement. [513] On May 10, 2017, the Joint Committee signed a decision revising the rules of origin provisions in the FTA. [514] On December 5, 2017, the two countries also agreed to extend the 2004 Agreement on Trade in Agricultural Products (ATAP) through December 31, 2018, to allow time to negotiate a successor agreement. [515] This agreement provides preferential market access to U.S. agricultural products, but does not conform to the FTA’s objective of free trade in agricultural products. The ATAP was first reached in 1996, and renegotiated in 2004 to remain in effect through December 2008. Since then, both sides have extended the 2004 ATAP on an annual basis, pending a new agreement. [516]

U.S.-Jordan FTA

In 2017, the United States and Jordan continued to consult on the implementation of the 2001 U.S.-Jordan Free Trade Agreement and to work on the environmental matters set out under the 2014–2017 Work Program of the FTA’s Environment Chapter. [517]

Labor

During 2017, Jordan and the United States continued work toward completion of the Implementation Plan signed in 2016, which aims to ensure a broader scope for labor inspections to include garment dormitories. In addition, Jordan agreed to make factory-level audits publicly available in 2017. [518]

U.S.-Korea FTA (KORUS)

The fourth meeting of the KORUS FTA Joint Committee was held in Seoul on January 12, 2017. [519] Also in 2017, the following committees met under the KORUS FTA: the Automobiles Working Group, the Committee on Services and Investment, the Committee on Trade in Goods, the Committee on Technical Barriers to Trade, the Professional Services Working Group, and the Committee on Trade Remedies. [520] In November 2017, the KORUS FTA Sanitary and Phytosanitary Committee met and discussed a number of the United States’ market access requests with South Korea’s Ministry of Agriculture, Food, and Rural Affairs. According to USTR, these issues included market access for blueberries from states beyond Oregon; improvement of the cherry export program; and market access for U.S. apples and pears, which South Korea currently bans. [521]

On July 12, 2017, USTR Robert Lighthizer formally notified South Korea that the United States was calling for a special session of the Joint Committee, established under Article 22.2 of the KORUS FTA, to discuss possible amendments and modifications to KORUS and to “review progress on the implementation of the Agreement, resolve several problems regarding market access in South Korea for U.S. exports, and, most importantly, address our significant trade imbalance.” [522] This special session, which was held on August 22, 2017, in South Korea, was the first special session held under the KORUS FTA. [523] The daylong meeting was attended by USTR Lighthizer via teleconference. [524]

On September 21, 2017, South Korean Trade Minister Hyun-chong Kim formally requested the second special session of the Joint Committee. [525] The meeting was held on October 4, 2017, in Washington, DC, and was co-chaired by Ambassador Lighthizer and Minister Kim. [526] Following that meeting, South Korea began the domestic procedures required for it to begin discussions to amend the agreement. Those procedures included an assessment of the economic feasibility of the agreement, a public hearing, and reports to the National Assembly. [527] These procedures were completed in December 2017, when it was announced that negotiations on amendments and modifications to KORUS would begin on January 5, 2018. [528]

U.S.-Morocco FTA

The U.S.-Morocco Joint Committee held its fifth meeting on October 18, 2017, under the 2006 U.S.-Morocco Free Trade Agreement. The Joint Committee noted progress in the areas of agriculture, labor, and environmental matters, as well as Morocco’s commitment to allow access for U.S. automobile exports made to U.S. safety standards. [529] The two countries also agreed to further discussions on Moroccan market access for U.S. pharmaceutical products. [530]

Agriculture and Sanitary and Phytosanitary Measures

The two countries held meetings of the FTA’s Subcommittee on Agriculture as well as the Subcommittee on Sanitary and Phytosanitary Measures. [531] At the Agriculture Subcommittee meetings, and later at the Joint Committee meeting, Morocco agreed to fully tender FTA imports under its wheat tariff-rate quota in each calendar year, and to re-tender in particular situations. Morocco also agreed at the Joint Committee meeting to accelerate the phaseout of tariffs on a number of wheat, beef, and poultry products from the United States for which Morocco applied a lower duty on EU products. At the meeting of the Subcommittee on Sanitary and Phytosanitary Measures, Morocco removed its ban on U.S. beef product imports previously subject to restrictions because of bovine spongiform encephalopathy. Morocco also agreed to set import alerts for certain wheat fungal toxins (mycotoxins) at standard international levels. [532]

Labor

In August 2017, Morocco began to implement a law addressing certain domestic worker rights, an issue originally raised in 2014 by the United States under the FTA’s Subcommittee on Labor. When fully implemented, the law will provide a number of protections and benefits for domestic workers. [533]

Environment

At the FTA’s Joint Cooperation Committee meeting in 2017, the two countries continued to work on environmental matters under the 2014–2017 Plan of Action, as set out by the U.S.-Morocco Joint Statement on Environmental Cooperation. In particular, the two sides highlighted in 2017 the establishment of protocols implementing Morocco’s new legislation in support of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). [534]

U.S.-Oman FTA

In 2017, the two sides began to prepare a new Plan of Action for 2018–2021 regarding environmental matters under the 2009 U.S.-Oman Free Trade Agreement. This follows completion of the 2014–2017 Plan originally established under the U.S.-Oman Memorandum of Understanding on Environmental Cooperation. [535]

U.S.-Panama TPA

The U.S.-Panama Free Trade Commission provides the key oversight for the 2012 U.S.-Panama Trade Promotion Agreement. [536] The Free Trade Commission held its second meeting in November 2016 and expects to hold its third meeting in 2018.

Labor

Under the TPA’s Labor Chapter, representatives from the U.S. Department of Labor and Panama’s Ministry of Labor and Maritime Authority met in August 2017 to discuss labor law enforcement issues concerning child labor, wage-and-hour protections, union registration, short-term contracts, and subcontracting, as well as occupational safety and health issues. [537]

Environment

In 2017, the two sides continued efforts to establish an independent secretariat for environment matters under the agreement. The secretariat is presently situated in the Water Center for the Humid Tropics of Latin America and the Caribbean, located in Panama City, Panama. In 2017, the center’s Council hired an executive director, as well as agreed to an initial outreach plan for the Secretariat. [538]

U.S.-Peru TPA

During 2017, the U.S.-Peru Free Trade Commission continued its work as the central body overseeing the implementation of the 2009 U.S.-Peru Trade Promotion Agreement (PTPA), and is expected to meet next in 2018. [539]

Labor

In June 2017, U.S. officials visited Peru to follow up on the issues identified in a U.S. Department of Labor report released in March 2016 in response to a public submission filed under the Labor Chapter of the PTPA in July 2015. The USDOL report raised concerns about Peru’s protection of fundamental labor rights and enforcement of labor laws. U.S. officials also held videoconferences with their Peruvian counterparts to discuss these issues in August and December 2017. [540]

Environment

The two governments made progress under the 2015–2018 Work Program of PTPA’s Environmental Cooperation Agreement, signing a memorandum of understanding between the U.S. Environmental Protection Agency and the Peruvian Organization of Evaluation and Environmental Inspection to support Peru’s efforts to strengthen enforcement of and compliance with Peruvian environmental laws. [541] Nonetheless, the U.S. Interagency Committee on Trade in Timber Products from Peru determined during 2017 that Peru had made insufficient progress to stem illegal logging. As a consequence, USTR instructed the U.S. Customs and Border Protection Agency to deny future timber shipments from a Peruvian exporter, subject to verification. [542] The United States and Peru expect to hold a review in 2018 of implementation of the PTPA’s Environment Chapter in Lima, Peru, at the senior-level Environmental Affairs Council. [543]

U.S.-Singapore FTA

The United States and Singapore met in July 2017 for a comprehensive review of the FTA, as well as in March and December 2017 for a review of the FTA’s labor provisions, and in October 2017 to review the FTA’s environmental provisions. [544]

Environment

On October 4, 2017, the two sides met to review the implementation of the Environment Chapter of the 2004 U.S.-Singapore Free Trade Agreement, [545] in accordance with their Memorandum of Intent on Cooperation in Environmental Matters and as set out under the 2016–2017 Plan of Action for Environmental Cooperation. [546] Discussions centered largely on enforcement of environmental laws, particularly to combat wildlife and timber trafficking in the region. In 2017, cooperation between the two governments on environmental matters helped cut off the sale of illegal wildlife products. This work led to a July 2017 commendation from the Secretary-General of the Convention on International Trade in Endangered Species of Wild Fauna and Flora, recognizing Singapore’s 2014 actions in interdicting an illegal shipment of rosewood logs. [547]

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Chapter 6
U.S. Trade Relations with Major Trading Partners

This chapter reviews U.S. bilateral trade relations with the United States’ top trading partners in 2017: the European Union (EU), China, Canada, Mexico, Japan, South Korea, India, and Taiwan (ordered according to the value of their two-way merchandise trade). For each trading partner, the chapter summarizes U.S. bilateral trade, including two-way merchandise and private services trade, the U.S. trade balance, U.S. merchandise exports, and U.S. merchandise imports. That description is followed by summaries of the major developments in bilateral trade during 2017.

European Union

U.S.-EU Trade

The EU as a single entity is the United States’ largest two-way (exports plus imports) trading partner in terms of both goods and services. The value of U.S. merchandise trade with the 28 member states of the EU increased 4.7 percent, from $686.0 billion in 2016 to $718.5 billion in 2017. However, the EU share of U.S. trade declined slightly, from 18.9 percent in 2016 to 18.5 percent in 2017, as total U.S. trade with the world increased by more than U.S. trade with the EU. The U.S. trade deficit with the EU rose by $4.7 billion, from $146.8 billion in 2016 to $151.4 billion in 2017, but was still lower than the U.S. trade deficit with the EU in 2015 (figure 6.1).

The EU was the largest market for U.S. merchandise exports in 2017 for the second year in a row, accounting for 18.3 percent of total U.S. exports. U.S. exports to the EU increased 5.2 percent, from $269.6 billion in 2016 to $283.5 billion in 2017. Leading U.S. exports to the EU included civilian aircraft, engines, and parts; medicaments (medicines); refined petroleum products; crude petroleum; and certain immunological products.

Figure 6.1 U.S. merchandise trade with the EU, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.2 U.S. cross-border trade in private services with the EU, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. U.S. imports from the EU in 2017 are overstated because the data include government goods and services n.i.e. Underlying data can be found in appendix table B.7 .

The EU remained the second-largest source of U.S. merchandise imports, following China, in 2017. The EU accounted for 18.6 percent of total U.S. imports in 2017. U.S. imports from the EU increased 4.5 percent, from $416.4 billion in 2016 to $434.9 billion in 2017. Leading U.S. imports were passenger motor vehicles, medicaments, parts of turbojets and turbopropellers, light oils, and airplanes and other aircraft. U.S.-EU merchandise trade data are shown in appendix tables A.27 through A.30.

Two-way cross-border trade in services with the EU increased 7.2 percent to $426.9 billion in 2017 and accounted for 33.4 percent of total U.S. trade in services that year. The United States continued to register a trade surplus in services with the EU, but it declined $11.8 billion in 2017 to $49.9 billion as U.S. imports increased more than U.S. exports (figure 6.2). U.S. exports of private services to the EU increased 3.7 percent ($8.4 billion) to $238.4 billion in 2017, while U.S. imports increased 12.0 percent ($20.2 billion) to $188.5 billion. The United Kingdom (UK) was the EU’s largest services trader with the United States, with 28.5 percent of the EU total, followed by Germany and France.

Trade Developments

Among the important U.S.-EU trade developments in 2017 were a bilateral agreement on insurance and reinsurance measures, the first annual review of the functioning of the Privacy Shield, and a mutual recognition agreement on good manufacturing practices in pharmaceutical products. Under the framework of the Transatlantic Economic Council, the United States hosted the eighth workshop for small and medium-sized enterprises in Wichita, Kansas. All of these topics are described below.

In other developments, negotiations for the proposed Transatlantic Trade and Investment Partnership (TTIP) agreement between the United States and the EU remained dormant in 2017. [548] The UK continued to prepare for exiting the EU (Brexit) in March 2019. In May 2017, the Office of the U.S. Trade Representative (USTR) and the U.S. Department of Agriculture (USDA) announced that the EU had lifted rules requiring that U.S. citrus groves be surveyed for citrus canker before U.S. citrus exports to the EU would be permitted. [549] According to USTR, the EU requirement had effectively eliminated EU market access for a majority of Florida citrus groves. [550] USTR estimates that U.S. citrus producers will save $5.6 million annually with the elimination of the EU rules. [551]

During 2017, there were new developments in two long-running World Trade Organization (WTO) dispute settlement cases on civil aircraft filed by the EU against the United States. On June 9, 2017, the WTO compliance panel issued a report in the complaint by the EU regarding U.S. measures affecting trade in large civil aircraft (DS353). In the second case, on September 4, the WTO Appellate Body circulated its report in the complaint by the EU relating to U.S. conditional tax incentives for large civil aircraft (DS487). The developments in these two cases are described in more detail in chapter 3.

Agreement on Insurance and Reinsurance Measures

On January 13, 2017, the United States and EU announced conclusion of an agreement [552] on insurance and reinsurance measures. [553] Negotiations began in February 2016 following the implementation on January 1, 2016, of a new EU insurance regulatory regime [554] known as Solvency II. [555] Solvency II requires that U.S. prudential regulation be deemed equivalent to that in the EU to prevent “disadvantageous treatment” of U.S. insurers and reinsurers operating in the EU market. [556] To address this issue, on September 22, 2017, U.S. and EU officials signed a “covered agreement” on prudential measures affecting insurance and reinsurance. [557] At the same time, the U.S. Government issued a policy statement that clarified how the U.S. views implementation of certain provisions of the agreement. [558] Although some parts of the agreement will apply provisionally, the agreement is expected to fully apply after 5 years from the date of signature. [559]

According to a joint U.S.-EU statement issued at the conclusion of negotiations, the new agreement will ensure “ongoing robust insurance consumer protection” and will provide “enhanced regulatory certainty for insurers and reinsurers operating in both the U.S. and the EU.” [560] The U.S. policy statement said that the agreement “affirms the U.S. system of insurance regulation, including the role of state insurance regulators as the primary supervisors of the business of insurance.” [561]

The agreement covers three areas of insurance regulation: (1) group supervision, (2) collateral and local presence requirements for U.S. and EU reinsurers operating in the other’s market, and (3) exchange of information between U.S. and EU supervisory authorities. [562]

Under the new agreement, U.S. and EU insurance and reinsurance groups active in both the U.S. and EU markets will not be subject to certain requirements under Solvency II with respect to group supervision for their worldwide activities. Instead, U.S. and EU groups operating in the other jurisdiction will only be subject to worldwide prudential insurance group oversight by the supervisors in their home jurisdiction. [563] As a result, U.S. insurance groups operating in the EU will not have to meet EU worldwide group capital, reporting, or governance requirements. [564]

With respect to reinsurance, the agreement eliminates collateral and local presence requirements for EU and U.S. reinsurers operating in the other jurisdiction’s market subject to certain conditions (i.e., specified financial strength and market conduct requirements, such as a record of prompt payments of claims). [565] As a result, relief from collateral requirements will reduce obstacles for EU reinsurers operating in the U.S. market, and within 24 months of signature, U.S. reinsurers will be fully able to operate in the EU without establishing a branch or subsidiary. [566]

The agreement also encourages U.S. and EU insurance supervisory authorities to continue to share supervisory information on insurers and reinsurers that operate in the U.S. and EU markets. [567] To facilitate this exchange of information, the agreement contains an annex with model provisions for a possible future memorandum of understanding on information exchange. [568]

Privacy Shield

The first annual review of the U.S.-EU Privacy Shield was held in September 2017. The Privacy Shield, which became operational on August 1, 2016, provides a mechanism for companies to transfer personal data from the EU to the United States that is consistent with EU law. [569] Company participation is voluntary and requires a company to certify that it will comply with a set of principles or obligations for the handling of data transferred from the EU to the United States. [570] The Privacy Shield also contains obligations for the U.S. government if U.S. government officials request access to this personal data for national security or law enforcement purposes. [571] As of the date of the annual review, over 2,400 companies had joined the Privacy Shield. [572]

On September 18–19, U.S. and EU officials met for the first annual review of the functioning of the Privacy Shield. The meeting addressed the administration and enforcement of the Privacy Shield, and included Privacy Shield participants and other stakeholders who shared their views with government officials and informed the review process. [573] Based on the meeting, the EU released a report on October 18 that concluded that “the United States continues to ensure an adequate level of protection for personal data transferred under the Privacy Shield from the Union to organisations in the United States.” [574] In addition, the report listed a number of recommendations for improving the implementation of the Privacy Shield, including the following: [575]

• Increase proactive and regular monitoring of companies’ compliance with the Privacy Shield as well as proactive searches for false claims of company participation in the Privacy Shield by the U.S. Department of Commerce.

• Increase EU individuals’ awareness about how to lodge complaints under the Privacy Shield by the U.S. Department of Commerce and EU data protection authorities.

• Improve cooperation between U.S. and EU enforcers, including the U.S. Department of Commerce, the Federal Trade Commission, and the EU data protection authorities, to develop guidance for companies and enforcers on the interpretation of the Privacy Shield’s rules, which would provide greater legal certainty for businesses.

• Strengthen the privacy protections contained in the U.S. Foreign Intelligence Surveillance Act.

• As soon as possible, appoint a permanent Privacy Shield Ombudsperson at the U.S. Department of State, where complaints will be addressed about U.S. authorities accessing personal data for national security purposes.

• More proactive reporting by U.S. authorities of developments related to the Privacy Shield. [576]

U.S. officials welcomed the release of the report. [577] On November 29, 2017, in the first three enforcement actions under the Privacy Shield framework, the Federal Trade Commission announced settlements with companies that falsely claimed they had been certified to participate in the Privacy Shield. [578]

U.S.-EU Mutual Recognition Agreement on Pharmaceutical Inspections

On March 2, 2017, the United States and EU agreed to amend the Pharmaceutical Annex to the 1998 U.S.-EU Mutual Recognition Agreement. The purpose of amending the annex is to avoid duplicating good manufacturing practice (GMP) inspections of pharmaceutical manufacturing facilities by allowing each side to rely on the drug inspections conducted by the other’s regulatory authority. The updated annex will also allow regulators to devote more inspection resources to drug manufacturing facilities in other parts of the world where there may be greater risk. [579]

All drugs approved for use in the United States, regardless of where they are made, must comply with U.S. regulations. Because some of these drugs are either fully manufactured abroad or contain some foreign ingredients, the U.S. Food and Drug Administration (FDA) routinely inspects foreign as well as domestic drug manufacturing plants for compliance with manufacturing standards that assure that the products meet quality and product label requirements. [580] The agreement with the EU to amend the annex will permit the FDA to rely on EU inspection reports, lowering inspection costs and enabling regulators to redirect resources to other parts of the world. [581]

Since May 2014, U.S. and EU authorities have been auditing and assessing each other’s inspection systems to learn if they meet domestic requirements. In June 2017, the European Commission determined that the FDA “has the capability, capacity and procedures in place to carry out GMP inspections at a level equivalent to the EU.” [582] In October 2017, the FDA stated that it would recognize the drug regulatory authorities in 8 of the 28 EU member states (Austria, Croatia, France, Italy, Malta, Spain, Sweden, and the UK) as capable of conducting inspections of manufacturing facilities that meet FDA requirements. [583] This is the first time that the FDA has recognized another country’s inspection authority. [584] FDA expects to finish evaluating the remaining EU countries by July 15, 2019. [585]

Transatlantic Economic Council (TEC)

The Transatlantic Economic Council (TEC) was launched in 2007 to promote bilateral cooperation aimed at lowering transatlantic barriers to trade and investment. [586] On October 19, 2017, under the TEC framework, the United States hosted the eighth workshop for small and medium-sized enterprises (SMEs) in Wichita, Kansas. [587] The purpose of these workshops is to expand trade and investment opportunities for U.S. and EU SMEs and discuss trade topics of particular interest to SMEs. [588]

The following topics were discussed at the workshop: manufacturing SMEs in transatlantic trade, including export strategies, regulatory issues, and barriers to trade; SME startups, innovation, and competitiveness; transatlantic skills development for SMEs and best practices in apprenticeships and vocational training; transatlantic foreign direct investment in manufacturing; and SME export promotion resources in both the United States and the EU. [589] Also, government officials provided an update on the 2015 U.S.-EU SME Cooperation Arrangement, [590] which aims to makes it easier for regional innovation clusters and their member businesses in the United States and EU to form strategic partnerships across the Atlantic. [591]

China

U.S.-China Trade

In 2017, China remained the United States’ largest single-country trading partner based on two-way merchandise trade, accounting for 16.4 percent of total U.S. merchandise trade. U.S. two-way merchandise trade with China amounted to $635.9 billion in 2017, an increase of 10.0 percent over the $578.2 billion recorded in 2016. The U.S. merchandise trade deficit with China remained higher than the U.S. trade deficit with any other trading partner in 2017, amounting to $375.2 billion. Its $28.2 billion increase relative to the year before reflected a $42.3 billion increase in U.S. merchandise imports from China that outpaced a $14.8 billion increase in U.S. merchandise exports to China in 2017 (figure 6.3).

China was the third-largest single-country destination for U.S. merchandise exports in 2017, behind Canada and Mexico. U.S. merchandise exports to China amounted to $130.4 billion in 2017, increasing by 12.8 percent, or $14.8 billion, relative to 2016. Leading U.S. exports to China in 2017 were civilian aircraft, engines, and parts, and soybeans. Other leading U.S. exports to China included small passenger motor vehicles, petroleum, and semiconductors.

In 2017, U.S. merchandise imports from China amounted to $505.6 billion, representing 21.6 percent of total U.S. goods imports in that year. This was more than imports from any other country, and U.S. merchandise imports from China increased by 9.3 percent relative to the year before. Leading 2017 U.S. imports from China were cellphones; portable computers and tablets; telecommunications equipment; computer parts and accessories; and tricycles, scooters, and related toys. U.S.-China merchandise trade data are shown in appendix tables A.31 through A.34.

Services trade between the two countries was also significant. In 2017, China continued to be the United States’ fourth-largest single-country trading partner based on two-way cross-border services trade of $73.0 billion. U.S. services trade with China amounted to 5.7 percent of total U.S. cross-border services trade in 2017, compared to 5.7 percent in 2016 and 5.2 percent in 2015. The U.S. services trade surplus with China increased $600.0 million in 2017 to $38.2 billion, as a result of growing U.S. exports. In 2017, U.S. services exports to China grew by $1.9 billion, or 3.6 percent, while U.S. services imports from China grew by $1.4 billion, or 8.6 percent, relative to the year before (figure 6.4).

Figure 6.3 U.S. merchandise trade with China, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.4 U.S. cross-border trade in private services with China, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

Since China’s accession to the WTO in 2001, the United States has filed 22 WTO complaints against China. Those complaints are more than half of the total 40 worldwide complaints the United States filed during that time using the dispute settlement mechanism. China has filed 12 such complaints against the United States of the 17 it has filed since 2001. [592] In 2017, the United States filed 1 new complaint against China. Specifically, on January 12, 2017, the United States requested consultations with China concerning alleged subsidies that China provides to its producers of primary aluminum. [593] In 2017, China did not file any complaints against the United States, though it had filed 2 by April 4, 2018. Developments in these and other WTO dispute settlement proceedings during 2017 are described in more detail in chapter 3 and appendix table A.25.

In 2017, the most prominent U.S.-China bilateral trade issues were discussed in the context of a newly formed Comprehensive Economic Dialogue (CED). The CED supplanted both the U.S.-China Joint Commission on Commerce and Trade (JCCT) and the U.S.-China Strategic and Economic Dialogue (ED) ,and the rmat changed, please fix.es.ound. Please alphabetize under "ote or text. Reader may not know. the United States? . The JCCT had been the primary forum for high-level trade dialogue since 2003, while the ED, established in 2009, had focused on a wide range of bilateral and global political, strategic, security, and economic issues. Major topics addressed by U.S. and Chinese officials in the CED in 2017 included China’s protection and enforcement of intellectual property rights (IPRs); Chinese policies and practices that require or pressure the transfer of U.S. and other foreign technologies to China; and the implementation of China’s new Cybersecurity Law, as well as a new draft Standardization Law .

In addition, a 100-day action plan was agreed upon by U.S. President Donald Trump and China’s President Xi Jinping during their May 11, 2017, meeting. This plan called for the co-chairmen, which include U.S. Treasury Secretary Stephen Mnuchin, U.S. Commerce Secretary Wilbur Ross, and China’s Vice Premier Wang Yang, to jointly address and resolve several outstanding agricultural trade, financial services, investment, and energy related issues. [594] According to the 100-day action plan, there were several notable results: (1) China agreed to take steps to reopen its market to U.S. beef on conditions consistent with international food safety and animal health standards; (2) China agreed to allow wholly foreign-owned financial institutions from the United States to provide credit-rating services in the Chinese market by July 2017; (3) both sides agreed to resolve outstanding issues to allow U.S. imports of cooked poultry from China; and (4) the United States agreed to allow its liquefied natural gas exports to China in volumes comparable to other trade partners with which the United States has no free trade agreement (FTA). [595]

Intellectual Property Rights

The United States and China have long held consultations on IPRs, technology transfer, and innovation-related issues, particularly since China’s WTO accession and its acceptance of the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. [596] China has undertaken substantive legal and judicial reforms since 2001 aimed at protecting IPRs of domestic and foreign entities, in accordance with TRIPS. [597] However, USTR continued to find China’s 2017 IPR protection and enforcement regime to be insufficient in many regards. [598] USTR has also recommended that the Chinese government expand its efforts to combat the scope and scale of IPR infringement in online and physical marketplaces, including areas such as Beijing’s Silk Market and Hongqiao Market, and numerous locations in Guangdong Province. [599] Given the scope and scale of its reported IPR infringement activities, China remained on USTR’s Priority Watch List in its 2017 Special 301 Report .

In its 2017 Special 301 Report , USTR described recent IPR-related policy developments in China as well as ongoing IPR-related problems. The report noted some positive developments in 2017, including (1) high-level government statements and official goals aimed at developing a culture of innovation through strengthened intellectual property (IP) laws; (2) incremental gains in IPR protection reported by U.S. rights holders in China; and (3) judicial system reforms. Examples of China’s 2017 judicial system reforms included the expansion of four new specialized IP courts and the establishment of the Beijing IP Court as the base for the Supreme People’s Court’s research on case guidance and precedent. [600]

Despite these positive developments in 2017, issues remain regarding China’s progress in protecting the IPRs of foreign rights holders. According to the 2017 Special 301 Report , the volume of counterfeited products manufactured, sold, and exported from China continued to be a major concern for U.S. businesses and posed health and safety risks to purchasers. Moreover, difficulties associated with bad-faith trademark registrations in China, and the lack of unified legislation on trade secret protection, continued to be problematic in 2017. According to USTR, industry has continued to identify trade secret misappropriation as one of their greatest concerns about operating in China. [601]

Technology Transfers

In 2017, USTR also expressed concern about requirements and pressures faced by U.S. firms to transfer their technology to Chinese entities in exchange for market access. [602] Such practices have reportedly affected U.S. IP holders in a number of sectors, including information and communications technology, medical device, biotechnology, semiconductor, new energy vehicles, aviation, and high-tech equipment. [603]

On August 14, 2017, President Trump instructed U.S. Trade Representative Robert Lighthizer to investigate whether China’s laws, policies, practices, or actions may be considered unreasonable or discriminatory, or may be harming U.S. IPRs, innovation, and technical development. [604] Three days later, USTR Lighthizer, upon consultation with U.S. governmental and private sector advisory committees, launched an investigation of China under Section 301 of the Trade Act of 1974. [605] This part of the Trade Act of 1974 gives USTR authority to respond to a foreign country’s allegedly unfair trade practices. In the event of an affirmative determination on the allegations of wrongdoing, USTR has the authority to take “all appropriate and feasible action to obtain the elimination of the act, policy, or practice, subject to the direction of the President.” [606] The results of USTR’s Section 301 Investigation were released in March 2018. [607]

Cybersecurity Law

In 2017, China implemented a Cybersecurity Law drafted by the Standing Committee of the National People’s Congress in 2016. [608] According to the U.S.-China Economic and Security Review Commission, this law will tighten government control over information flows and technology products. [609] Before China’s new Cybersecurity Law went into effect, U.S. technology companies expressed concern about being compelled to disclose trade secrets to Chinese authorities. [610] Now that legislation has been implemented, U.S. stakeholders continue to express concern, stating that ambiguities in the law may be used to pressure them to disclose information about their most critical technologies. Examples of their most critical technologies that they believe may be susceptible to disclosure include source codes, design databases, behavioral and logic models, and floor plans of central processing units. [611]

China committed to keeping its Cybersecurity Law consistent with WTO agreements in 2016. [612] At that time, it stated that this law would not impose nationality-based conditions or restrictions on business’s purchase, sale, or use of information and communications technology products. [613] USTR, however, has remained critical of the law, stating that the cybersecurity-related restrictions on U.S. and foreign high technology products and services are ultimately aimed at displacing foreign firms from the Chinese market. [614]

Standards

As in years past, U.S.-China engagement in 2017 included standards as part of the bilateral dialogue. As part of its reforms in this area, Chinese authorities allowed greater foreign participation in its technical committees on related matters and also published a draft version of a Standardization Law in September 2017. [615] USTR expressed concern about the draft law , noting that it would introduce preferences for Chinese technologies in standards development in line with the government’s longer-term efforts to leverage the power of the large Chinese market to promote or compel the adoption of Chinese standards in global markets. [616] Despite such concerns, China’s September 2017 draft Standardization Law was finalized in November 2017 and put into effect in January 2018. [617]

With respect to technical standards committees, some progress was made as U.S. and other foreign firms have been increasingly allowed to participate in standards development and setting in China. [618] This greater participation has reportedly included voting in working groups on specific standards development processes. [619]

Canada

U.S.-Canada Trade

For the third year in a row, Canada was the second-largest U.S. single-country trading partner in 2017 after China, having fallen from the top position it held in 2014 and previous years. Nonetheless, the value of U.S. merchandise trade with Canada rose 7.0 percent in 2017 to $582.4 billion, accounting for 15.0 percent of total U.S. merchandise trade with the world—a share unchanged from 2016. Both U.S. merchandise exports and imports with Canada increased in 2017 from the previous year, but imports outpaced exports, resulting in a $6.5 billion increase in the U.S. merchandise trade deficit with Canada to $17.5 billion (figure 6.5).

Figure 6.5 U.S. merchandise trade with Canada, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.6 U.S. cross-border trade in private services with Canada, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Underlying data can be found in appendix table B.7 .

In 2017, Canada was the United States’ largest single-country export market for goods, taking 18.3 percent of U.S. merchandise exports. U.S. exports to Canada increased by 5.9 percent to $282.5 billion in 2017. Leading U.S. exports to Canada included motor vehicles––vehicles both for passengers and for goods transport––as well as their parts and accessories; civilian aircraft, engines, and parts; crude petroleum; and light oils.

In 2017, Canada remained the third-largest single-country import source for the United States, after China and Mexico. U.S. imports from Canada were $300.0 billion in 2017, up 8.0 percent from $277.8 billion in 2016. Energy-related products and transportation equipment accounted for nearly half of U.S. imports from Canada. Leading U.S. imports were crude petroleum, passenger motor vehicles, natural gas, coniferous wood and products, and refined petroleum products. U.S.-Canada merchandise trade data are shown in appendix tables A.35 through A.38.

Canada remained the second-largest single-country U.S. trading partner in services in 2017. It reached $90.8 billion in two-way cross-border trade in services, ranked only behind the UK at $121.6 billion. U.S. two-way trade in services with Canada grew 9.1 percent in 2017, accounting for 7.1 percent of total U.S. services trade with the world. U.S. exports of services to Canada increased 8.9 percent ($4.8 billion) to $58.3 billion in 2017, whereas U.S. services imports from Canada—while only about half the value of U.S. services exports to Canada—also increased significantly in 2017, by 9.5 percent ($2.8 billion) to $32.5 billion. Overall, the U.S. cross-border trade surplus in services with Canada grew in 2017 to $25.8 billion. While the surplus was up from $23.8 billion in 2016, it was still below its recent peak (2013) of $31.9 billion (figure 6.6).

Trade Developments

Much of the U.S.-Canada trade relationship is governed by the North American Free Trade Agreement (NAFTA). On May 18, 2017, the U.S. Administration notified Congress of its intent to renegotiate NAFTA’s terms so as to modernize and rebalance its provisions. Five negotiating rounds were held by yearend 2017. [620]

In other developments, several U.S. trade remedy cases involving Canada were active in 2017. In addition, the Canada-United States Regulatory Cooperation Council continued to meet in 2017 to address regulatory issues that hinder cross-border trade and investment.

Softwood Lumber

The United States and Canada signed the Softwood Lumber Agreement (SLA) on October 12, 2006. In it, Canada agreed to apply certain export measures—notably export charges and volume limits—on its exports of softwood lumber to the United States when the price of such products fell below a certain level. [621]

The 2006 SLA had a term originally of seven years; in 2013, however, the two countries agreed to take advantage of an option to extend the agreement for an additional two years. [622] After nine years, though, the 2006 SLA officially expired on October 12, 2015, although the agreement contained a one-year grace period (“standstill” clause) to allow renegotiation of a new agreement. During the grace period, the U.S. lumber industry was not allowed to petition for any trade remedy investigation. [623]

Absent a new agreement following the one-year standstill period, on November 25, 2016, the U.S. lumber industry petitioned the U.S. Department of Commerce (USDOC) and the Commission to initiate antidumping and countervailing duty investigations on imports of certain softwood lumber products from Canada. [624]

On November 8, 2017, USDOC published its final determination on antidumping and countervailing duties on U.S. imports of softwood lumber from Canada. [625] Subsequently, on December 7, 2017, the Commission voted unanimously that imports of softwood lumber from Canada had caused material injury to U.S. softwood lumber producers. [626]

On January 3, 2018, USDOC issued its amended final affirmative determinations for antidumping and countervailing duty investigations concerning certain softwood lumber products from Canada. [627] The amended antidumping duty rates published on four companies ranged between 3.20 percent and 7.28 percent, as well as an “all others” rate of 6.04 percent. The published amended countervailing duty rates on four companies ranged from 3.34 percent to 17.99 percent, with an “all others” rate of 14.19 percent. [628]

In response to these cases, on November 14, 2017, Canada requested establishment of a panel under NAFTA to review the softwood lumber duties issued in the case, [629] and initiated WTO dispute settlement consultations with the United States on November 28, 2017. [630]

Aircraft

In May 2005, the government of Canada first announced its support for research and development into a family of larger commercial aircraft––the Bombardier's C-series––with a C$350 million repayable contribution (US$275.2 million). The government signed contribution agreements with Bombardier in 2008. During this time, the government of Quebec contributed C$117 million (US$89.7 million) and the UK government contributed £123 million (US$228.1 million) to the C-series project. [631]

On February 7, 2017, the government of Canada announced it was making additional repayable program contributions of C$372.5 million (US$284 million) to Bombardier. These contributions support the development of the Global 7000 business aircraft through Canada’s Strategic Aerospace and Defence Initiative (SADI) as well as the Bombardier C-series aircraft. The contributions will extend over four years, with the majority allocated to the Global 7000 project. [632] SADI is a domestic support program for industrial research and pre-competitive development projects in the aerospace, defense, space, and security industries that are considered strategic. [633]

On April 27, 2017, the Boeing Company filed antidumping duty and countervailing duty petitions with the Commission and USDOC concerning imports of 100- to 150-seat large civil aircraft from Canada. Boeing alleged that imports of these aircraft from Canada are being, or are likely to be, sold in the United States at less than fair value, and that such imports are threatening material injury to the domestic aircraft industry in the United States. [634] The USDOC made its preliminary determinations concerning these aircraft in fall 2017—on September 25 for countervailing duty subsidy rates and on October 4 for antidumping margins. [635]

On October 16, 2017, Airbus and Bombardier announced the signing of an agreement to become partners on the C-series aircraft program. [636] Under the agreement, Airbus acquired a controlling interest of 50.01 percent in the C-series program, with Bombardier holding about a 31 percent interest and Quebec a 19 percent interest. [637] As part of the agreement, Airbus is to provide its expertise in procurement, sales and marketing, and customer support. [638]

On December 18, 2017, USDOC issued its final determinations in the case, finding a dumping margin of 79.82 percent and a subsidy rate of 212.39 percent regarding Bombardier. At yearend 2017, these duties had not entered into effect, pending a final injury determination by the Commission in early 2018. [639]

Canada-United States Regulatory Cooperation Council

In 2011, Canada and the United States established the Canada-United States Regulatory Cooperation Council (RCC) to advance economic growth by deepening regulatory cooperation and reducing unnecessary regulatory differences while maintaining high health, safety, and environmental standards. [640] The RCC Secretariat—involving the United States Office of Management and Budget and the Treasury Board of Canada—coordinates and monitors the Council’s work as well as provides a forum for industry, consumers, and nongovernmental organizations to discuss regulatory barriers and opportunities as stakeholders.

In 2016–17, the RCC developed 23 technical work plans that currently contain over 100 initiatives that bring together regulators from both U.S. and Canadian departments. These work plans cover issue areas addressing agriculture and food, transportation, health and personal care products, workplace chemicals, the environment, and various cross-sectoral issues. In 2017, U.S. and Canadian agencies worked together to publish these work plans, implementing many of the initiatives included in these agencies’ joint partnership statements. [641]

Mexico

U.S.-Mexico Trade

In 2017, Mexico was the United States’ third-largest single-country merchandise trading partner, following China and Canada. Merchandise trade between the two countries increased 6.4 percent to $557.0 billion in 2017, accounting for 14.3 percent of U.S. trade with the world. While both imports and exports increased in 2017, the U.S. merchandise trade deficit with Mexico rose by $6.7 billion to $71.1 billion, since U.S. imports from Mexico increased more than U.S. exports (figure 6.7).

Mexico remained the United States’ second-largest single-country export market after Canada in 2017, accounting for 15.7 percent of total U.S. exports to the world. U.S. merchandise exports to Mexico totaled $243.0 billion, an increase of 5.8 percent from 2016. In 2017, the leading U.S. exports to Mexico were light oils; computer parts and accessories; refined petroleum products; processors and controllers; and internal combustion diesel engines.

Figure 6.7 U.S. merchandise trade with Mexico, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.8 U.S. cross-border trade in private services with Mexico, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

Mexico was the United States’ second-largest single-country import source in 2017 after China and accounted for 20.3 percent of U.S. total imports. In 2017, U.S. merchandise imports from Mexico increased by 6.8 percent to $314.0 billion, driven mainly by the increased value of U.S. imports of transportation equipment. Leading U.S. imports from Mexico included passenger motor vehicles, computers, motor vehicles for goods transport, crude petroleum, telecommunications equipment, and color TV reception apparatus. U.S.-Mexico merchandise trade data are shown in appendix tables A.39 through A.42.

At the same time, the U.S. cross-border trade surplus in services with Mexico shrank 6.5 percent to $6.6 billion in 2017, largely a result of increasing U.S. services imports from Mexico (figure 6.8). U.S. exports of services to Mexico increased 3.9 percent ($1.2 billion) to $32.8 billion in 2017 whereas U.S. services imports from Mexico increased 7.0 percent ($1.7 billion) to $26.2 billion. Mexico continued to be the United States’ sixth-largest single-country trading partner for services in 2017, after the UK, Canada, Japan, China, and Germany.

Trade Developments

Most of the trade relations between Mexico and the United States are governed by NAFTA. On August 16, 2017, negotiations between the United States, Canada, and Mexico to modernize NAFTA started in Washington, DC. [642] Other major U.S.-Mexico trade developments in 2017, including work to improve U.S.-Mexico border crossings and recent results of NAFTA’s cross-border trucking provisions, are described below.

Modern Borders

In 2017, the United States and Mexico continued to make progress on cross-border improvements. On April 20, 2017, officials of U.S. Customs and Border Protection (CBP) and Mexico’s Tax Administration Service (SAT) met in Mexico City to advance the development of customs practices for both the United States and Mexico. [643] At the meeting, Mexico’s SAT and the CBP expressed their intent to enhance bilateral work in trade and travel facilitation; continue to cooperate on innovative approaches to cargo inspection for faster goods flow; improve the efficiency of their customs processes to manage risk and reduce processing times and transactional costs; promote better international standards, measures, and controls in order to enhance supply chain security; and keep working towards harmonizing data requirements to make cargo processing easier. [644]

On April 21, 2017, CBP Acting Commissioner Kevin McAleenan traveled to Mexico City with a Department of Homeland Security delegation to meet with Mexican officials. During their meetings, he praised the success of the Unified Cargo Inspection Pilot [645] at the Mariposa port of entry in Nogales, Arizona, for significantly reducing wait times for both U.S. and Mexican businesses. [646] On August 17, 2017, senior management from CBP and Mexico’s SAT, together with executives from Kansas City Southern, a transportation holding company, formally dedicated a railway processing building in Laredo, TX. Constructed by Kansas City Southern, the building enables Mexico customs officers to work collaboratively with CBP officers. According to the CBP, “The joint operations allow Mexico Customs to complete their outbound inspections and CBP to perform their inbound inspection processes simultaneously, eliminating unnecessary delays and duplication while maintaining security and facilitating lawful commerce.” [647]

In addition, on September 20, 2017, U.S. CBP together with Mexico’s SAT announced the piloting of their Unified Cargo Processing Program at the Otay Mesa Cargo Facility. The joint cargo inspections are aimed at ending separate inspections and reducing wait times at the border. [648] These efforts add to earlier cross-border projects and facilities undertaken in previous years. [649]

Cross-Border Trucking between the United States and Mexico

Under the cross-border trucking commitments in Chapter 12 of NAFTA, Mexican trucks were allowed to provide cross-border truck services throughout the United States beginning in 2000. However, the implementation of these provisions was delayed because of U.S. safety concerns. [650] To address these concerns, the U.S. Department of Transportation and the Federal Motor Carrier Safety Administration (FMCSA) launched the U.S.-Mexico Cross-Border Long-Haul Trucking Pilot Program on October 14, 2011. [651] The program successfully concluded on October 10, 2014. [652] On January 15, 2015, the FMCSA began accepting applications from Mexico-domiciled motor carriers interested in conducting long-haul operations beyond the U.S. commercial zones. [653]

In 2017, reports from the FMCSA indicated that Mexican-owned or Mexico-domiciled motor carriers continued to operate more safely than U.S. carriers on U.S. roads. For instance, FMCSA data from 2017 showed that roadside inspections of Mexican-owned or Mexico-domiciled carriers resulted in driver out-of-service rates—that is, rates of violations serious enough to halt drivers’ trips immediately [654] —of 0.75 percent, compared with a rate of 5.08 percent for all motor carriers on U.S. highways. [655] Those rates compare favorably with the 0.82 percent and 4.89 percent, respectively, in 2016. [656]

In March 2017, the International Brotherhood of Teamsters challenged the FMCSA’s statutory authority to issue permits for U.S. long-haul operations to Mexico-domiciled trucking companies, given that the FMCVSA’s inspector general had found that the 13 drivers used in the pilot program were too few to draw inferences about the safety of the entire population of Mexico-domiciled carriers expected to receive long-haul authority within the United States. In June 2017, a three-judge panel denied the petition on the grounds that the law did not mandate any particular threshold of statistical validity. [657]

Japan

U.S.-Japan Trade

In 2017, Japan remained the United States’ fourth-largest single-country trading partner in terms of two- way trade, accounting for 5.3 percent of total U.S. merchandise trade. Specifically, U.S. merchandise trade with Japan increased 4.6 percent, from $195.3 billion in 2016 to $204.2 billion in 2017. At the same time, the U.S. merchandise trade deficit with Japan rose by just $38 million in 2017 to $68.8 billion. The increase in the bilateral merchandise trade deficit was attributable to a $4.46 billion increase in U.S. exports to Japan, and a corresponding $4.49 billion increase in U.S. imports (figure 6.9).

Japan remained the fourth-largest destination for U.S. merchandise exports in 2017, accounting for 4.4 percent of global U.S. exports. Between 2016 and 2017, U.S. exports to Japan increased 7.1 percent, from $63.2 billion in 2016 to $67.7 billion in 2017. Leading U.S. exports to Japan were civilian aircraft, engines, and parts; liquefied propane; corn; semiconductor manufacturing machines; and medicaments.

Japan remained the fourth-largest source of U.S. merchandise imports in 2017, accounting for 5.8 percent of global U.S. imports. The value of U.S. imports from Japan increased 3.4 percent in 2017, from $132.0 billion in 2016 to $136.5 billion in 2017. Leading U.S. imports from Japan were passenger motor vehicles, parts for airplanes or helicopters, motor vehicle gearboxes, and parts for printers. U.S.-Japan merchandise trade data are shown in appendix tables A.43–A.46.

In 2017, Japan was once again the United States’ third-largest single-country services trading partner, accounting for 5.8 percent of total U.S. two-way services trade. U.S. cross-border services exports to Japan increased by $1.9 billion, or 4.2 percent, to $45.4 billion in 2017, while U.S. cross-border services imports from Japan increased by $0.8 billion, or 3.0 percent, to $28.4 billion. As a result, the U.S. surplus in services trade with Japan grew to $17.1 billion from $16.0 billion the year before (figure 6.10).

Figure 6.9 U.S. merchandise trade with Japan, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.10 U.S. cross-border trade in private services with Japan, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

Economic dialogue between the United States and Japan in 2017 focused on a variety of trade issues, including agricultural trade developments and the efficiency of the Japanese regulatory review process for medical devices and pharmaceuticals. According to USTR, one of the Administration’s top trade policy goals was to resolve Japanese import barriers for U.S. lamb, beef, horticultural products, and processed foods. [658]

These topics were discussed in a variety of bilateral and international forums in 2017. In February, President Trump and Japanese Prime Minister Abe agreed to hold regular bilateral discussions on trade-related matters, which came to be called the “U.S. -Japan Economic Dialogue.” Given the U.S. withdrawal from the Trans-Pacific Partnership, both leaders also agreed to explore how best to accomplish their shared objectives, both bilaterally and in light of Japan’s continuing efforts to advance progress on regional economic interests. [660] In April 2017, Vice President Mike Pence and Deputy Prime Minister Taro Aso officially started the U.S.-Japan Economic Dialogue in Tokyo and established “trade and investment issues” as one of its three principal pillars. (“Macroeconomic and financial policy” and “infrastructure and energy” cooperation were the other two pillars of the dialogue.) [661]

In October 2017, Vice President Pence and Deputy Prime Minister Aso met for a second U.S.-Japan Economic Dialogue round, where they agreed to lift Japanese import restrictions on potatoes from Idaho and to streamline Japanese noise and emissions testing procedures for U.S. automobile exports certified under Japan’s Preferential Handling Procedure system. [662] In that meeting, Japan also agreed to increase transparency in its system for geographical indications and in its pharma-related reimbursement policies. [663] In November 2017, President Trump and Prime Minister Abe met again, and reinforced their commitments to the bilateral trade negotiation process that had already begun. [664]

The United States and Japan worked together in a variety of international forums to address common trade issues. For example, at the WTO ministerial meeting in December 2017, the United States, Japan, and the EU strengthened their commitment to address overcapacity and other market-distorting practices of third countries. The United States and Japan also worked closely together in the Asia-Pacific Economic Cooperation (APEC) forum to advance common interests on such issues as digital trade. [665]

Agricultural Products

Japan remained an important market for U.S. agricultural exports in 2017. In that year, U.S. agricultural exports to Japan amounted to $12.0 billion, making Japan the fourth-largest single-country market for these goods. Bilateral agriculture trade negotiations focused on a variety of matters in 2017, including market access issues affecting U.S. rice, beef, and potato exports to Japan. [666]

In particular, U.S. officials identified some continuing market access issues connected with U.S. rice exports to Japan in 2017. For many years, USTR has considered Japan’s importation and distribution system for rice to be both highly regulated and nontransparent. This is largely due to the administration of Japan’s 682,200-metric-ton WTO tariff-rate quota (TRQ) on imported rice through a complex tendering system that is regulated by Japan’s Ministry of Agriculture, Forestry, and Fisheries (MAFF). Following Japan’s September 2017 revisions of administrative rules governing the sale, transfer, and handover of imported rice under its official tendering system, the market access issues were once again brought to the forefront of negotiations. According to USTR, the implemented rule changes will prevent Japanese imported rice from being distributed at prices below a government-imposed threshold value. Despite the fact that Japan is the United States’ second-largest export market for rice, only a small share of U.S. exported rice that reaches Japanese consumers is labeled as U.S. rice. ^[667]

U.S. officials have also called attention to increased Japanese tariffs on frozen beef in 2017. Between April and June of that year, Japanese duties on frozen beef from the United States increased from 38.5 percent to 50.0 percent ad valorem, following a Japanese safeguard action on this commodity. [668] Since 1995, Japan has maintained a safeguard on beef to protect its domestic industry from import surges. This safeguard is triggered when Japanese beef import volumes increase by more than 17 percent year-on-year from all trading partners as well as those from its non-FTA trading partners, including the United States. As both of these conditions were met in 2017, Japanese import tariffs increased to 50.0 percent. Nonetheless, in 2017, Japan remained the largest export market for U.S. beef and beef products on a value basis. In that year alone, the United States exported 303,762 metric tons of beef to Japan, or $1.9 billion in value terms. [669]

In 2017, the Japanese government lifted a previously imposed ban on the importation of chipping potatoes from Idaho. [670] Chipping potatoes are a particular type of potato whose skin can be easily rubbed off and whose low sugar content creates a gold coloration when fried (rendering them attractive to chip manufacturers). Japan stopped importing such potatoes from Idaho in 2006 after an outbreak of pests of the potato crops, called pale cyst nematode (PCN), was detected in the southeastern part of the state. [671] According to the USDA, its Animal and Plant Health Inspection Service worked closely with the U.S. potato industry and the Idaho State Department of Agriculture to eradicate PCN. [672] As a result, as of September 15, 2017, Japan reopened the market to chipping potatoes from most Idaho counties (except Bingham and Bonneville, which remain under quarantine for PCN). The lifting of this restriction represents the resumption of these exports to Japan after 11 years.

The United States supplies Japan with the vast majority (98 percent) of its imported potatoes. While this will include chipping potatoes from Idaho beginning in the 2018 agricultural season, Japanese imports of this commodity will be allowed only for half the year (February to July). According to USTR, such potato exports are still subject to a number of conditions, including Japanese restrictions on overland transportation to chipping facilities away from ports. [673]

Medical Devices and Pharmaceuticals

Japan is a major market for U.S. medical devices and pharmaceutical products. In 2017, the United States and Japan continued to address longstanding barriers to U.S. medical device and pharmaceutical exports to Japan. Some improvements have been made in the speed of Japan’s regulatory review process for medical devices and pharmaceuticals in recent years. For example, in 2017, the Japanese government initiated a “conditional early approval system” for medical devices and pharmaceuticals targeting incurable or other major diseases. With respect to medical devices, Japan has continued its efforts to track performance goals to speed up its regulatory approval period of medical devices, under its “New Collaborative Plan to Accelerated Review of Medical Devices” program. [674]

However, USTR has also encouraged Japan to improve its goals on this program by ensuring that quality-focused audits are completed within standard review periods. With respect to pharmaceuticals, Japan has brought its approval periods within comparable U.S. and European norms (in some circumstances, they are even faster). Nonetheless, USTR has continued to encourage Japan to harmonize its regulatory agencies’ efforts to international standards in clinical development, multiregional clinical trials, and risk management. [675]

Republic of Korea

U.S.-South Korea Trade

The Republic of Korea (South Korea) continued to be the United States’ sixth-largest single-country merchandise trading partner in 2017. Two-way merchandise trade was valued at $119.4 billion, up from $112.2 billion in 2016. The share of U.S. trade with South Korea remained unchanged from previous years, at 3.1 percent of U.S. trade with the world. The United States recorded a trade deficit of $22.9 billion with South Korea in 2016, a 17.0 percent decrease from the $27.6 billion deficit in 2016, as U.S. exports to South Korea increased more than U.S. imports from South Korea (figure 6.11).

U.S. merchandise exports to South Korea were valued at $48.3 billion in 2017, increasing 14.1 percent ($6.0 billion) from 2016. Leading U.S. exports to South Korea were machines for the manufacture of semiconductor devices or electronic integrated circuits, which jumped to $4.7 billion in 2017 from $1.9 billion in 2016 (a 147.5 percent increase). As in previous years, other leading U.S. exports to South Korea included civilian aircraft, engines, and parts, as well as processors or controllers. For the first time, however, crude petroleum and liquefied propane were among the top U.S. exports to South Korea (see below). Although U.S. exports of passenger motor vehicles to South Korea declined slightly to $1.5 billion in 2017 from $1.6 billion in 2016, exports of all passenger motor vehicles combined are the United States’ fourth-largest export to South Korea. [676] U.S. exports of beef to South Korea were the fifth-largest U.S. export to South Korea, with a total value of $1.2 billion in 2017, up 13.9 percent from $1.1 billion in 2016. [677] South Korea is the second-largest export market for U.S. beef, after Japan, accounting for approximately 16.9 percent of U.S. exports of beef. [678]

U.S. merchandise imports from South Korea totaled $71.2 billion in 2017, increasing 1.8 percent ($1.3 billion) from 2016. U.S. imports of passenger motor vehicles, the top import from South Korea, declined to $14.3 billion in 2017, down $1.8 billion (11.0 percent) from 2016. [679] Other top U.S. imports from South Korea included cellphones, computer parts and accessories, refined petroleum products, and microchips. U.S.-South Korea merchandise trade data are shown in appendix tables A.47 through A.50.

In 2017, South Korea became the United States’ 9th-largest single-country services trading partner in terms of two-way trade, up from 10th-largest in 2016. U.S. cross-border services exports to South Korea increased 10.0 percent in 2017 to reach a new high of $22.8 billion. U.S. cross-border services imports from South Korea also increased in 2017, by 7.2 percent, to reach $9.4 billion. Because U.S. services exports increased more than U.S. services imports, the U.S. services trade surplus with South Korea increased from $12.0 billion in 2016 to $13.4 billion in 2017, an increase of 12.0 percent (figure 6.12).

Figure 6.11 U.S. merchandise trade with South Korea, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.12 U.S. cross-border trade in private services with South Korea, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

In 2017, U.S. trade relations with South Korea occurred within the framework of the U.S.-Korea Free Trade Agreement (KORUS FTA or KORUS), as discussed below and in chapter 5. In June 2017, President Trump hosted President Moon Jae-in in Washington, DC, and in November 2017, President Trump traveled to South Korea for his third bilateral meeting with President Moon. [680] Other trade developments included the WTO dispute regarding U.S. antidumping measures on certain oil country tubular goods from South Korea, in which the panel report was circulated on November 14, 2017. [681] In the dispute regarding U.S. antidumping and countervailing duty measures on large residential washers from South Korea, the award of the arbitrator was circulated on April 13, 2017. [682]

U.S-Korea FTA

In 2017, the sixth round of tariff reductions under KORUS was implemented. [683] As outlined in KORUS, as of March 2017, U.S. law firms are allowed to form joint-venture law firms in South Korea and employ Korean-licensed lawyers. [684] Also as of March 2017, U.S. accounting firms are allowed to purchase less than a 50 percent share of Korean accounting firms.

On July 12, 2017, USTR Lighthizer formally notified South Korea that the United States was calling for a special session of the KORUS Joint Committee to discuss possible amendments and modifications to KORUS. [685] This special session, which was held on August 22, 2017, in South Korea, was the first special session held under KORUS. [686] The first special session was a daylong meeting that was attended by USTR Lighthizer via teleconference. [687] The second special session took place on October 4, 2017, in Washington, DC, and was co-chaired by Ambassador Lighthizer and Korean Trade Minister Hyun-chong Kim. [688] Following that meeting, Korea began the procedures required to begin discussions to amend the agreement. [689] These procedures were completed in December 2017, when it was announced that negotiations on amendments and modifications to KORUS would begin on January 5, 2018. [690] For more information, please see chapter 5.

Oil-related Exports

In 2017, U.S. exports of oil and gas products increased significantly, with South Korea becoming a major importer of these products. U.S. exports of crude petroleum to South Korea became the United States’ fourth-largest export to South Korea, reaching $1.1 billion in 2017, up from $181 million in 2016. At the same time, South Korea became the fifth-largest importer of U.S. crude petroleum—after Canada, China, the UK, and the Netherlands—purchasing 5.1 percent of these U.S. exports. Liquefied propane exports to South Korea have also increased steadily in recent years, rising from $227 million in 2015, to $556 million in 2016 and reaching $947 million in 2017 to become the fifth-largest U.S. export to South Korea. South Korea has become the fourth-largest importer of U.S. liquefied propane—after Japan, Mexico, and China—purchasing 7.8 percent of these U.S. exports. Additionally, U.S. exports of natural gas to South Korea reached $596 million in 2017, up from $22 million in 2016. South Korea became the second-largest importer of U.S. liquefied natural gas after Mexico, purchasing 17.2 percent of total U.S. exports. ^[691]

The increase in U.S. exports of these products to South Korea in 2017 resulted from a number of factors. These included a decline in output from the Organization of the Petroleum Exporting Countries (OPEC) and Russia in 2017; South Korea’s lack of domestic production, leading to an ongoing demand for imports; the removal of U.S. restrictions on exports of crude petroleum; and favorable spot pricing for U.S. products relative to other suppliers. ^[692] In addition, U.S. facilities for exporting these products have recently expanded or come online, allowing for an increase in U.S. exports to distant destinations. ^[693] Finally, the government of South Korea has encouraged diversification of the oil supply, providing Korean firms with tax rebates on transport costs for purchases of crude produced outside of the Middle East. ^[694]

India

U.S.-India Trade

In 2017, India was the United States’ ninth-largest single-country trading partner based on two-way merchandise trade, a position it has maintained since 2016. U.S. two-way merchandise trade with India increased by 9.8 percent to $74.3 billion in 2017. At the same time, India’s share of total U.S. merchandise trade with the world for 2017 was the same as 2016—1.9 percent. U.S. exports to India rose significantly in 2017, shrinking the U.S. merchandise trade deficit with India by 5.9 percent to $22.9 billion in 2017 (figure 6.13).

U.S. merchandise exports to India increased 18.7 percent from $21.7 billion in 2016 to $25.7 billion in 2017. Leading U.S. exports to India in 2017 were nonindustrial diamonds; nonmonetary gold; civilian aircraft, engines, and parts; bituminous coal; and almonds. While U.S. exports of nonindustrial diamonds (the leading U.S. export) decreased by $693 million (or 14.4 percent) in 2017, most other U.S. exports increased.

U.S. merchandise imports from India increased by 5.6 percent in 2017 to $48.6 billion. Leading U.S. imports from India in 2017 were nonindustrial diamonds, [695] certain medicaments, frozen shrimp, light oils, and gold jewelry. U.S.-India merchandise trade data are shown in appendix tables A.51 through A.54.

India is the United States’ seventh-largest single-country services trading partner, based on two-way cross-border services trade, with total services trade increasing 11.6 percent to $51.3 billion in 2017. India is one of only two of the top 20 services trading partners with which the United States had a services trade deficit in 2017 (the other was Italy). [696] While this trade deficit decreased in 2015 and 2016, it increased 5.3 percent to $5.8 billion in 2017 (figure 6.14).

Figure 6.13 U.S. merchandise trade with India, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.14 U.S. cross-border trade in private services with India, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

There were several active WTO dispute settlement proceedings involving the United States and India in 2017. In March 2017, the Dispute Settlement Body (DSB) established a panel in response to a request from India in a case alleging imposition of domestic-content requirements in the renewable energy sector by several U.S. states. [697] In May, the DSB established a compliance panel in response to a request by India in a case concerning prohibitions by India on the importation of various U.S. agricultural products because of concerns related to avian influenza. India claims that it has complied with DSB rulings following arbitration proceedings in 2016. [698] In December, in a case regarding certain measures that India has taken relating to solar cells and solar modules, the United States requested authorization to suspend concessions or obligations with respect to India, arguing that India failed to comply with the DSB’s rulings and recommendations issued in 2016. [699] For more information on WTO dispute settlement cases, see chapter 3.

In 2017, the United States and India continued dialogue on improving bilateral trade and investment, including the protection of IPRs and manufactured goods exports. These are discussed in detail below.

India and U.S. Trade Policy Forum

On October 26, 2017, USTR Robert Lighthizer, and India’s Minister of Commerce and Industry, Sri Suresh Prabhu, met in Washington, DC for the 11th ministerial-level meeting of the India and United States Trade Policy Forum (TPF). This meeting covered several topics, including non-science-based barriers on agricultural trade, regulatory and technical barriers to trade in technology and other products, market access for services, barriers to U.S. exports of manufactured goods (including medical devices), high tariffs in certain industrial and agricultural sectors, and IPRs. [700] Regarding digital trade, the United States expressed concern over India’s data localization requirements. [701] According to USTR, the TPF “yielded limited progress” on U.S. areas of concern. [702]

Intellectual Property

India remained on USTR’s Priority Watch List in the 2017 Special 301 Report due to continuing concerns regarding weak protection and enforcement of IPRs. [703] Of concern are patentability issues; inadequate trade secret protection; the production, domestic distribution, and export of counterfeit pharmaceuticals; and digital piracy. Patent issues that were noted as being particularly burdensome for U.S. firms include an opposition procedure that allows any third party to oppose a patent application, long wait times to receive patents, and onerous reporting requirements. [704] The report also notes that products in the pharmaceutical and agricultural chemicals sector are susceptible to the unfair commercial use of data generated during the market approval process that are supposed to be protected from disclosure. [705]

USTR’s 2017 Out-of-Cycle Review of Notorious Markets Report highlighted several markets of concern in India, including markets for counterfeit apparel and footwear, pirated media, and counterfeit and illegal pharmaceuticals. [706]

Taiwan

U.S.-Taiwan Trade

In 2017, Taiwan became the United States’ 11th-largest single-country trading partner, dropping from its position as 10th largest in 2016. U.S. two-way merchandise trade with Taiwan grew 4.5 percent to $68.2 billion in 2017 from $65.2 billion in 2016, continuing to account for 1.8 percent of total merchandise trade with the world. The U.S. merchandise trade deficit with Taiwan widened 26.7 percent to $16.7 billion in 2017, as U.S. imports rose $3.2 billion while U.S. exports fell $0.3 billion (figure 6.15).

U.S. merchandise exports to Taiwan decreased from $26.0 billion in 2016 to $25.8 billion in 2017, a 1.1 percent fall. The top U.S. exports to Taiwan during the year were civilian aircraft, engines and parts; machines for semiconductor or integrated circuit manufacturing; processors or controllers; computer memories; and machines for semiconductor boules or wafer manufacturing. The top three U.S. exports all declined in 2017 and were primarily responsible for the overall decline in U.S. exports to Taiwan.

U.S. merchandise imports from Taiwan increased from $39.2 billion in 2016 to $42.5 billion in 2017, an 8.3 percent rise. The top U.S. imports from Taiwan in 2017 were microchips; telecommunications equipment; processors or controllers; computer parts and accessories; and portable computers and tablets. U.S.-Taiwan merchandise trade data are shown in appendix tables A.55 through A.58.

From 2016 to 2017, total U.S.-Taiwan two-way services trade fell 8.8 percent from $18.9 billion to $17.2 billion, accounting for 1.4 percent of all U.S. cross-border services trade in 2017. U.S. services exports to Taiwan fell by 18.4 percent to $9.2 billion, while imports rose 5.5 percent to $8.1 billion. These trends resulted in a sharp 68.6 percent decrease in the U.S. services trade surplus, from $3.6 billion in 2016 to $1.1 billion in 2017 (figure 6.16).

Figure 6.15 U.S. merchandise trade with Taiwan, 2013–17

Source: USITC DataWeb/USDOC (accessed April 24, 2018).

Note: Underlying data can be found in appendix table B.5 .

Figure 6.16 U.S. cross-border trade in private services with Taiwan, 2013–17

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions data, tables 1.2 and 1.3, March 21, 2018.

Note: Data for 2017 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

The primary forum for bilateral discussions on trade and investment issues is the U.S.-Taiwan Trade and Investment Framework Agreement (TIFA). [707] In 2017, while there was no TIFA Council meeting, the U.S.-Taiwan trade relationship continued under the TIFA framework as well as through congressional and department-level exchanges. The key issues under discussion were IPRs, market access for medical devices and pharmaceuticals, agriculture, investment issues, and technical barriers in industries such as chemicals, cosmetics, and consumer products. [708]

U.S.-Taiwan TIFA

The most recent bilateral TIFA meeting was in October 2016, where participants discussed IPRs, agriculture, medical devices, and pharmaceuticals. In July 2017, under the auspices of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office in the United States (TECRO), the two governments held follow-up meetings to the October 2016 TIFA meetings in order to assess progress that had been made on these issues. [709]

Also, during July 2017, the two sides held the Second Medical Devices Time-to-Market Dialogue and the Transparency and Procedural Fairness Dialogue. [710] The first iterations of each of these two dialogues were held during the 2016 TIFA meetings. [711]

There are three primary issues under discussion in the Medical Devices Time-to-Market Dialogue involving product license approvals and pricing review mechanisms. First, the Taiwan Food and Drug Administration requires facilities that manufacture medical devices sold in Taiwan, regardless of their location, to reapply for registration every three years. While the renewal process can be expedited, the documentation required restricts the availability of this option for U.S. companies to only a fraction of U.S. manufacturers. [712]

Second, Taiwan’s National Health Insurance Administration (NHIA) causes delays in market availability for devices whose costs to the patient are not covered by them in full. NHIA must issue a self-pay code for these devices, which is only issued after a review of up to two months, which delays patient access to new U.S. devices. [713]

Finally, NHIA has also instituted ceilings on how much a patient can self-pay on high-end devices or new items. There is little methodological transparency in how the ceilings are set. [714]

The Transparency and Procedural Fairness Dialogue focuses on improving transparency and procedural fairness in trade and investment matters. [715] For example, the United States seeks increased transparency in Taiwan’s investment review process. [716] Taiwan limits, and sometimes prohibits, investment in certain sectors, causing lengthy and redundant review processes. [717]

Intellectual Property Rights

IPRs remained a prominent issue during bilateral discussions in 2017. On February 22, 2017, AIT and TECRO signed a memorandum of understanding to combat IP infringement and trade fraud crimes. [718] The memorandum of understanding will facilitate cooperation between national authorities from each country to investigate IPR violations and trade fraud and share best practices and information. [719]

The United States continues to share its views on amendments to Taiwan’s Copyright Act, which were approved by the Executive Yuan in October 2017 and are currently under review by the Legislative Yuan. [720] Some of the key IPR issues with the Copyright Act that remain points of concern for the United States are digital copyright protection and enforcement, licensing, the role of collective management organizations, fair use exceptions, and the use of copyrighted teaching materials. [721]

Agriculture

Although Taiwan remains the seventh-largest export market for U.S. agricultural goods, [722] the United States continues to see some of Taiwan’s agricultural policies as concerning. [723] Taiwan notified the World Trade Organization of its intent to implement a maximum residue limit on ractopamine in U.S. pork and some beef products in 2007, but it has not yet implemented one. [724] In the absence of a maximum residue limit, the subject U.S. pork and beef products cannot be imported into Taiwan. [725] Taiwan also has barriers to U.S. beef offal products. [726]

Taiwan’s biennial Agricultural Trade Goodwill Mission took place in September 2017, led by the deputy minister of agriculture for Taiwan. [727] The mission included a signing ceremony for three letters of intent to buy nearly $3 billion in U.S. soybeans, wheat, and grains. [728] Also in September 2017, U.S. Congressman Steve Daines led a mission to Taiwan, where he met with President Tsai Ing-wen and Secretary General Joseph Wu regarding expanding export markets. [729]

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U.S. Trade Representative (USTR). “Joint Statement on Upcoming Signature of the Bilateral Agreement between the European Union and the United States of America on Prudential Measures Regarding Insurance and Reinsurance.” Press release, September 22, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/september/joint-statement-upcoming .

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U.S. Trade Representative (USTR). “President Trump Determines Trade Preference Eligibility for Rwanda, Tanzania, and Uganda.” Press release, March 29, 2018. https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/title# .

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U.S. Trade Representative (USTR). “United States and Afghanistan Hold Annual Meeting under the U.S.-Afghanistan Trade and Investment Framework Agreement (TIFA).” Press release, March 28, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/march/us-and-afghanistan-hold-annual .

U.S. Trade Representative (USTR). “United States and Australia Meet to Review Implementation of Bilateral Free Trade Agreement.” Press release, December 6, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/united-states-and-australia-meet .

U.S. Trade Representative (USTR). “ United States and Bangladesh Hold 3rd Trade and Investment Cooperation Forum Agreement Council Meeting .” Press release, May 17, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/may/us-and-bangladesh-hold-3rd-trade-and .

U.S. Trade Representative (USTR). “United States and Cambodia Discuss Intensified Work Program.” Press release, August 9, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/august/united-states-and-cambodia-discuss .

U.S. Trade Representative (USTR). “United States and Egypt Agree to Further Trade Cooperation.” Press release, December 5, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/united-states-and-egypt-agree .

U.S. Trade Representative (USTR), “United States and Indonesia Agree to Step Up Work to Expand Trade.” Press release, June 14, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/june/united-states-and-indonesia-agree-step .

U.S. Trade Representative (USTR). “United States and Laos Hold Inaugural Meeting under the U.S.-Laos Trade and Investment Framework Agreement (TIFA).” Press release, March 23, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/march/us-and-laos-hold-inaugural-meeting .

U.S. Trade Representative (USTR). “United States and Malaysia Meet under Trade and Investment Framework Agreement.” Press release, July 17, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/july/united-states-and-malaysia-meet-under .

U.S. Trade Representative (USTR). “United States and Paraguay Sign Trade and Investment Framework Agreement.” Press release, January 13, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/january/united-states-and-paraguay-sign .

U.S. Trade Representative (USTR). “United States and Philippines Strengthen Engagement on Trade.” Press release, July 11, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/july/united-states-and-philippines .

U.S. Trade Representative (USTR). “United States and Taiwan Hold Dialogue on Trade and Investment Priorities.” Press release, October 6, 2016. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2016/october/united-states-and-taiwan-hold .

U.S. Trade Representative (USTR). “United States and Thailand Discuss Trade Agenda under Trade and Investment Framework Agreement.” Press release, April 3, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/april/united-states-and-thailand-discuss .

U.S. Trade Representative (USTR). “United States and Vietnam Renew Trade Dialogue during Trade and Investment Framework Agreement (TIFA) Meetings.” Press release, March 28, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/march/us-and-vietnam-renew-trade-dialogue .

U.S. Trade Representative (USTR). “United States, Korea to Hold Amendment Negotiations on KORUS FTA.” Press release, December 28, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/titleunited-states-korea-hold .

U.S. Trade Representative (USTR). “U.S. Announces Compliance in World Trade Organization ‘Dolphin-Safe’ Labeling Dispute.” Press release, July 12, 2013. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2013/july/US-complies-tuna-dolphin .

U.S. Trade Representative (USTR). “USDA Secretary Sonny Perdue and USTR Robert Lighthizer Announce Expanded Access for U.S. Rice Exports to Colombia.” Press release, August 17, 2017. https://www.usda.gov/media/press-releases/2017/08/17/usda-secretary-sonny-perdue-and-ustr-robert-lighthizer-announce .

U.S. Trade Representative (USTR). “U.S.-EU Joint Report on T-TIP Progress to Date.” Press release, January 17, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/january/us-eu-joint-report-t-tip-progress-0 .

U.S. Trade Representative (USTR). U.S. Generalized System of Preferences (GSP) Guidebook , August 2017. https://ustr.gov/sites/default/files/files/gsp/GSP%20Guidebook%20August%202017_1.pdf .

U.S. Trade Representative (USTR). “U.S.-Nepal Joint Statement on 3rd Trade and Investment Framework Council Meeting.” Press release, April 20, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/april/us-nepal-joint-statement-3rd-trade .

U.S. Trade Representative (USTR). “U.S. Trade Representative Ron Kirk Notifies Congress of Intent to Negotiate New International Trade Agreement on Services.” Press release, January 15, 2013. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2013/january/ustr-kirk-notifies-congress-new-itas-negotiationshttps://ustr.gov/about-us/policy-offices/press-office/press-releases/2013/january/ustr-kirk-notifies-congress-new-itas-negotiations .

U.S. Trade Representative (USTR). “USTR Announces Initiation of Section 301 Investigation of China.” Press release, August 2017. https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF .

U.S. Trade Representative (USTR). “USTR Announces New GSP Eligibility Reviews of India, Indonesia, and Kazakhstan.” Press release, April 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/ustr-announces-new-gsp-eligibility .

U.S. Trade Representative (USTR). “USTR Announces Unprecedented Action to Block Illegal Timber Imports from Peru.” Press release, October 19, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/october/ustr-announces-unprecedented-action .

U.S. Trade Representative (USTR). “USTR Calls a Special Session under the U.S.-Korea Free Trade Agreement.” Press release, July 12, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/july/ustr-calls-special-session-under-us .

U.S. Trade Representative (USTR). “USTR Extends Public Comment Period for NAFTA Renegotiations Objectives.” Press release, June 13, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/june/ustr-extends-public-comment-period .

U.S. Trade Representative (USTR). “USTR Lighthizer Announces Results of Special 301 Out-of-Cycle Review of Thailand.” Press release, December 15, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/ustr-lighthizer-announces-results# .

U.S. Trade Representative (USTR). “USTR Lighthizer Statement on the Conclusion of the Second Special Session of the U.S.-Korea FTA Joint Committee.” Press release, October 4, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/october/ustr-lighthizer-statement .

U.S. Trade Representative (USTR). “USTR Lighthizer Statement on the Conclusion of the Special Session of the US-Korea FTA Joint Committee.” Press release, August 22, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/august/ustr-lighthizer-statement-conclusion .

U.S. Trade Representative (USTR). “USTR Lighthizer Statement on the President’s New Paradigm for US-Indo-Pacific Trade.” Press release, November 10, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/november/ustr-lighthizer-statement .

U.S. Trade Representative (USTR). “USTR Releases 2017 Special 301 Report on Intellectual Property Rights.” Press release, April 28, 2017. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/april/ustr-releases-2017-special-301-report .

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Appendix A
Data Tables

Table A.1 U.S. total exports to the world, by USITC digest sector, 2015–17

Sector	Description	2015	2016	2017	2016–17
			Million $		% change
1	Agricultural products	146,644	148,683	153,116	3.0
2	Forest products	39,059	37,707	39,698	5.3
3	Chemicals and related products	227,676	218,089	227,270	4.2
4	Energy-related products	110,225	98,418	143,236	45.5
5	Textiles and apparel	23,272	21,656	22,082	2.0
6	Footwear	1,464	1,368	1,430	4.5
7	Minerals and metals	135,667	128,684	136,452	6.0
8	Machinery	138,765	128,097	135,945	6.1
9	Transportation equipment	327,401	320,022	325,434	1.7
10	Electronic products	264,119	260,407	268,278	3.0
11	Miscellaneous manufactures	47,366	47,754	49,138	2.9
12	Special provisions	41,444	40,125	44,655	11.3
	Total	1,503,101	1,451,011	1,546,733	6.6

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add up to totals shown.

Table A.2 U.S. general imports from the world, by USITC digest sector, 2015–17

Sector	Description	2015	2016	2017	2016–17
			Million $		% change
1	Agricultural products	136,947	139,153	147,406	5.9
2	Forest products	42,383	43,118	44,856	4.0
3	Chemicals and related products	260,293	259,846	268,112	3.2
4	Energy-related products	194,132	157,826	198,096	25.5
5	Textiles and apparel	126,538	120,265	121,423	1.0
6	Footwear	27,650	25,634	25,654	0.1
7	Minerals and metals	189,230	183,522	200,714	9.4
8	Machinery	185,884	179,537	196,414	9.4
9	Transportation equipment	426,225	418,286	434,894	4.0
10	Electronic products	449,793	449,951	484,271	7.6
11	Miscellaneous manufactures	124,817	124,973	130,453	4.4
12	Special provisions	84,291	85,695	90,610	5.7
	Total	2,248,183	2,187,805	2,342,905	7.1

Source: USITC DataWeb/USDOC (accessed March 14, 2018).

Note: Because of rounding, figures may not add up to totals shown.