ITC

United States
International Trade Commission


The Year in Trade 2018

Operation of the Trade Agreements Program
70th Report


October 2019

Publication Number: 4986




United States International Trade Commission

Commissioners

David S. Johanson, Chairman

Rhonda K. Schmidtlein

Jason E. Kearns

Randolph J. Stayin

Amy A. Karpel






Catherine DeFilippo
Director, Office of Operations


William Powers
Director, Office of Economics












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









This report was prepared principally by:

Co-Project Leaders
Caroline Peters, Office of Economics, and Arona Butcher, Office of Economics

Office of Economics
Erika Bethmann, Justino De La Cruz, Meryem Demirkaya, Stephanie Fortune-Taylor, Joanne Guth, Alexander Hammer, Justin Holbein, Ermengarde Jabir, Lin Jones, Grace Kenneally, Nick Luettke, Meagan Martin, Christopher Montgomery, Trevor Litwin, Gregory Taylor, Edward Wilson, and Wen Jin Yuan

Office of the General Counsel
William W. Gearhart

Office of Industries
Natalie Hanson, Junie Joseph, and Heather Wickramarachi

Office of Investigations
Salvatore Mineo

Office of Tariff Affairs and Trade Agreements
Donnette Rimmer

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
Laura Rodriguez

Administrative Support
Hau Nguyen

Office of the Chief Information Officer,
Help Desk and Customer Service Division


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







Preface

This report is the 70th 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 2018. 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

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Figure ES.1 U.S. trade balance in goods and services, 2004–18

Figure ES.2 U.S. goods and services trade with major bilateral trading partners, 2018

Figure 1.1 U.S. real gross domestic product, percentage change, 2014–18

Figure 1.2 Economic growth (real GDP) trends in the world, the United States, and major trading partners, 2016–18

Figure 1.3 Indexes of U.S. dollar exchange rates for selected major foreign currencies, daily, 2018

Figure 1.4 U.S. merchandise trade with the world, 2016–18

Figure 1.5 Leading U.S. export markets, by share, 2018

Figure 1.6 Leading U.S. import sources, by share, 2018

Figure 1.7 U.S. cross-border trade in private services with the world, 2016–18

Figure 1.8 Leading U.S. export markets for private services, by share, 2018

Figure 1.9 Leading U.S. import sources for private services, by share, 2018

Figure 2.1 Products at issue in active proceedings, 2018

Figure 2.2 Share of TAA petitions certified by industry sector in FY 2018

Figure 3.1 Timeline for the WTO Dispute Settlement Process

Figure 6.1 U.S. merchandise trade with the EU, 2014–18

Figure 6.2 U.S. cross-border trade in private services with the EU, 2014–18

Figure 6.3 U.S. merchandise trade with China, 2014–18

Figure 6.4 U.S. cross-border trade in private services with China, 2014–18

Figure 6.5 U.S. merchandise trade with Canada, 2014–18

Figure 6.6 U.S. cross-border trade in private services with Canada, 2014–18

Figure 6.7 U.S. merchandise trade with Mexico, 2014–18

Figure 6.8 U.S. cross-border trade in private services with Mexico, 2014–18

Figure 6.9 U.S. merchandise trade with Japan, 2014–18

Figure 6.10 U.S. cross-border trade in services with Japan, 2014–18

Figure 6.11 U.S. merchandise trade with South Korea, 2014–18

Figure 6.12 U.S. cross-border trade in private services with South Korea, 2014–18

Figure 6.13 U.S. merchandise trade with India, 2014–18

Figure 6.14 U.S. cross-border trade in private services with India, 2014–18

Figure 6.15 U.S. merchandise trade with Taiwan, 2014–18

Figure 6.16 U.S. cross-border trade in private services with Taiwan, 2014–18



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Table ES.1 Section 232 steel and aluminum tariffs and retaliatory actions, 2018 developments for major trading partners

Table 1.1 U.S. merchandise total exports to the world, by USITC digest sector, 2017–18

Table 1.2 U.S. merchandise general imports from the world, by USITC digest sector, 2017–18

Table 1.3 U.S. merchandise trade with major trading partners and the world, 2018 (million dollars)

Table 1.4 U.S. merchandise total exports to major trading partners and the world, 2017–18

Table 1.5 U.S. merchandise general imports from major trading partners and the world, 2017–18

Table 1.6 U.S. cross-border trade in private services with major trading partners and the world, 2018 (million dollars)

Table 2.1 Antidumping duty orders that became effective during 2018

Table 2.2 Countervailing duty orders that became effective during 2018

Table 2.3 TAA certifications, by region, FY 2018

Table 2.4 U.S. imports for consumption from GSP beneficiaries, 2016–18

Table 2.5 U.S. imports for consumption from Nepal, 2016–18

Table 2.6 U.S. imports for consumption from AGOA beneficiaries, 2016–18

Table 2.7 U.S. imports for consumption from CBERA/CBTPA beneficiaries, 2016–18

Table 2.8 U.S. general imports of apparel from Haiti, 2016–18

Table 3.1 WTO dispute settlement panels established during 2018 in which the United States was a party

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

Table 4.1 U.S. trade and investment framework agreements (TIFAs) in 2018

Table 5.1 Total U.S. exports to FTA partners, by FTA partner, 2016–18

Table 5.2 U.S. general imports from FTA partners, by FTA partner, 2016–18

Table 5.3 U.S. merchandise trade balance with FTA partners, by FTA partner, 2016–18

Table 5.4 U.S. imports for consumption that entered under FTA provisions, by FTA partner, 2016–18

Table 5.5 Ratio of U.S. imports for consumption under FTAs to U.S. general imports, by partner, 2016–18 (percent)

Table 5.6 Timetable of major NAFTA negotiations and signing USMCA, 2017–18

Table 5.7 Active files as of year end 2018 under Articles 14 and 15 of the North American Agreement on Environmental Cooperation

Table 5.8 NAFTA Chapter 19 binational panels, active reviews through 2018

Table A.1 U.S. total exports to the world, by USITC digest sector (million dollars), 2016–18

Table A.2 U.S. general imports to the world, by USITC digest sector, 2016–18

Table A.3 Leading U.S. total exports to the world, by HTS 6-digit subheading, 2016–18

Table A.4 Leading U.S. general imports from the world by HTS 6-digit subheading, 2016–18

Table A.5 U.S. merchandise trade with top 15 single-country trading partners, 2018

Table A.6 Top 15 U.S. single-country merchandise export markets, 2018

Table A.7 Top 15 U.S. single-country merchandise import sources, 2018

Table A.8 U.S. private services exports to the world, by category, 2016–18

Table A.9 U.S. private services imports from the world, by category, 2016–18

Table A.10 Antidumping cases active in 2018, by USITC investigation number

Table A.11 Antidumping duty orders and suspension agreements in effect as of December 31, 2018

Table A.12 Countervailing duty cases active in 2018, by USITC investigation number

Table A.13 Countervailing duty orders and suspension agreements in effect as of December 31, 2018

Table A.14 Reviews of existing antidumping and countervailing duty orders and suspended investigations completed in 2018, by date of completion

Table A.15 Section 337 investigations and related proceedings completed by the Commission during 2018 and those pending on December 31, 2018

Table A.16 Outstanding section 337 exclusion orders at the USITC as of December 31, 2018

Table A.17 U.S. imports for consumption claiming eligibility under the Generalized System of Preferences (GSP), by source, 2016–18

Table A.18 Value of U.S. imports for consumption claiming eligibility under the Generalized System of Preferences (GSP), by USITC digest sector, 2016–18

Table A.19 Share of U.S. imports for consumption claiming eligibility under the Generalized System of Preferences (GSP), by USITC digest sector, 2016–18

Table A.20 Leading U.S. imports for consumption claiming eligibility under the Generalized System  of Preferences (GSP), by HTS 6-digit subheading, 2016–18

Table A.21 U.S. imports for consumption claiming eligibility under the African Growth and Opportunity Act (AGOA), by source, 2016–18

Table A.22 Leading U.S. imports for consumption claiming eligibility under the African Growth and Opportunity Act (AGOA) (excluding GSP), by HTS 6-digit subheading, 2016–18

Table A.23 U.S. imports for consumption claiming eligibility under the Caribbean Basin Economic Recovery Act (CBERA), by source, 2016–18

Table A.24 Leading U.S. imports for consumption under Caribbean Basin Economic Recovery Act (CBERA), by HTS provision, 2016–18

Table A.25 WTO dispute settlement cases to which the United States was a party, developments in 2018

Table A.26 NAFTA Chapter 19 substantive challenges to original and five-year review determinations of USITC and USDOC, developments in 2018

Table A.27 U.S. total exports to the EU, by USITC digest sector, 2016–18

Table A.28 U.S. general imports from the EU, by USITC digest sector, 2016–18

Table A.29 Leading U.S. total exports to the EU, by HTS 6-digit subheading, 2016–18

Table A.30 Leading U.S. total imports from the EU, by HTS 6-digit subheading, 2016–18

Table A.31 U.S. private services exports to the EU, 2016-18

Table A.32 U.S. private services imports from the EU, 2016-18

Table A.33 U.S. total exports to China, by USITC digest sector, 2016–18

Table A.34 U.S. general imports from China, by USITC digest sector, 2016–18

Table A.35 Leading U.S. total exports to China, by HTS 6-digit subheading, 2016–18

Table A.36 Leading U.S. general imports from China, by HTS 6-digit subheading, 2016–18

Table A.37 U.S. private services exports to China, 2016-18

Table A.38 U.S. private services imports from China, 2016-18

Table A.39 U.S. total exports to Canada, by USITC digest sector, 2016–18

Table A.40 U.S. general imports from Canada, by USITC digest sector, 2016–18

Table A.41 Leading U.S. total exports to Canada, by HTS 6-digit subheading, 2016–18

Table A.42 Leading U.S. general imports from Canada, by HTS 6-digit subheading, 2016–18

Table A.43 U.S. private services exports to Canada, 2016-18

Table A.44 U.S. private services imports from Canada, 2016-18

Table A.45 U.S. total exports to Mexico, by USITC digest sector, 2016–18

Table A.46 U.S. general imports from Mexico, by USITC digest sector, 2016–18

Table A.47 Leading U.S. total exports to Mexico, by HTS 6-digit subheading, 2016–18

Table A.48 Leading U.S. general imports from Mexico, by HTS 6-digit subheading, 2016–18

Table A.49 U.S. private services exports to Mexico, 2016-18

Table A.50 U.S. private services imports from Mexico, 2016-18

Table A.51 U.S. total exports to Japan, by USITC digest sector, 2016–18

Table A.52 U.S. general imports from Japan, by USITC digest sector, 2016–18

Table A.53 Leading U.S. total exports to Japan, by HTS 6-digit subheading, 2016–18

Table A.54 Leading U.S. total imports from Japan, by HTS 6-digit subheading, 2016–18

Table A.55 U.S. private services exports to Japan, 2016-18

Table A.56 U.S. private services imports from Japan, 2016-18

Table A.57 U.S. total exports to South Korea, by USITC digest sector, 2016–18

Table A.58 U.S. total imports from South Korea, by USITC digest sector, 2016–18

Table A.59 Leading U.S. total exports to South Korea, by HTS 6-digit subheading, 2016–18

Table A.60 Leading U.S. general imports from South Korea, by HTS 6-digit subheading, 2016–18

Table A.61 U.S. private services exports to South Korea, 2016-18

Table A.62 U.S. private services imports from South Korea, 2016-18

Table A.63 U.S. total exports to India, by USITC digest sector, 2016–18

Table A.64 U.S. general imports from India, by USITC digest sector, 2016–18

Table A.65 Leading U.S. total exports to India, by HTS 6-digit subheading, 2016–18

Table A.66 Leading U.S. general imports from India, by HTS 6-digit subheading, 2016–18

Table A.67 U.S. private services exports to India, 2016-18

Table A.68 U.S. private services imports from India, 2016-18

Table A.69 U.S. total exports to Taiwan, by USITC digest sector, 2016–18

Table A.70 U.S. general imports from Taiwan, by USITC digest sector, 2016–18

Table A.71 Leading U.S. total exports to Taiwan, by HTS 6-digit subheading, 2016–18

Table A.72 Leading U.S. general imports from Taiwan, by HTS 6-digit subheading, 2016–18

Table A.73 U.S. private services exports to Taiwan, 2016-18

Table A.74 U.S. private services imports from Taiwan, 2016-18

Table B.1 U.S. trade balance in goods and services, 2004–18 (million dollars)

Table B.2 U.S. goods and services trade with major bilateral trade partners, 2018 (million dollars)

Table B.3 U.S. real gross domestic product (GDP), percentage change, 2014–18

Table B.4 Economic gross domestic product (GDP) growth trends in the world, the United States, and major trading partners 2016–18 (percent)

Table B.5 U.S. merchandise trade with major trading partners and the world (billion dollars), 2014–18

Table B.6 U.S. merchandise trade with major trading partners and the world, 2018

Table B.7 U.S. private cross-border services trade with selected major trading partners and the world (billion dollars) 2014–18

Table B.8 U.S. private cross-border services trade with major trading partners and the world, 2018

Table B.9 Products at issue in active section 337 investigation proceedings, 2018

Table B.10 Trade Adjustment Assistance (TAA) petitions certified, by industry sector, FY 2018




Abbreviations and Acronyms

Acronyms Term
AGOA African Growth and Opportunity Act
AIT American Institute in Taiwan
APEC Asia-Pacific Economic Cooperation forum
ASEAN Association of Southeast Asian Nations
ATAP U.S.-Israel Agreement on Trade in Agricultural Products
BDCs beneficiary developing countries
BEA Bureau of Economic Analysis (USDOC)
Brexit Britain’s vote to leave the European Union
CAFTA-DR Dominican Republic-Central America-United States Free Trade Agreement
CARICOM Caribbean Community and Common Market
CBERA Caribbean Basin Economic Recovery Act
CBP Customs and Border Protection (USCBP)
CBTPA Caribbean Basin Trade Partnership Act
CEC Commission for Environmental Cooperation (NAFTA)
CED Comprehensive Economic Dialogue
CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora
CLC Commission for Labor Cooperation (NAFTA)
CNL competitive need limitation
COMESA Common Market for Eastern and Southern Africa
CRS Congressional Research Service
CSPV crystalline silicon photovoltaic (cells)
CTI Committee on Trade and Investment (APEC)
CTPA U.S.-Colombia Trade Promotion Agreement
CVD countervailing duty
DFAT Department of Foreign Affairs and Trade (Australia)
DSB Dispute Settlement Body (WTO)
EC European Commission
ECOWAS Economic Community of West African States
EDA Economic Development Administration (USDOC)
EGA Environmental Goods Agreement
EIA U.S. Energy Information Administration
EIU Economist Intelligence Unit
ETA Employment and Training Administration (USDOL)
EU European Union
FAS Foreign Agricultural Service (USDA)
FDA Food and Drug Administration
FDI foreign direct investment
Fed. Reg. Federal Register
FMCSA Federal Motor Carrier Safety Administration
FTA free trade agreement
FTAAP Free Trade Area of the Asia-Pacific
FTC Free Trade Commission
FY fiscal year
GATT General Agreement on Tariffs and Trade
GCC Cooperation Council for the Arab States of the Gulf (Gulf Cooperation Council)
GDP gross domestic product
GFSEC Global Forum on Steel Excess Capacity
GMP Good Manufacturing Practice
GPA Agreement on Government Procurement (WTO)
GSP Generalized System of Preferences
GVC global value chain
HELP Haiti Economic Lift Program
HOPE Haitian Hemispheric Opportunity through Partnership Encouragement Act
HTS Harmonized Tariff Schedule of the United States
ICSID International Centre for Settlement of Investment Disputes
ICT information and communications technology
ILAB Bureau of International Labor Affairs (USDOL)
IMF International Monetary Fund
IP intellectual property
IPRs intellectual property rights
ITA Information Technology Agreement (WTO)
JCCT Joint Commission on Commerce and Trade
KORUS U.S.-Korea Free Trade Agreement
LDBDC least-developed beneficiary developing country
LDCs lesser-developed countries
LTFV less than fair value
MOU memorandum of understanding
MSMEs micro, small, and medium-sized enterprises
MRA mutual recognition agreement
MRL maximum residue limit
mt metric tons
n.d. not dated
NAALC North American Agreement on Labor Cooperation (NAFTA)
NAFTA North American Free Trade Agreement
NAO National Administrative Office (NAFTA)
n.e.s.o.i. not elsewhere specified or included
n.i.e. not included elsewhere
NTPA Nepal Trade Preferences Act
NTPP Nepal Trade Preference Program
NTR normal trade relations (U.S. equivalent to most-favored-nation treatment)
OECD Organisation for Economic Co-operation and Development
OIE World Organisation for Animal Health (Office International des Epizooties)
OPEC Organization of the Petroleum Exporting Countries
OTEXA Office of Textiles and Apparel (USDOC)
PSU Policy Support Unit (APEC)
PTPA U.S.-Peru Trade Promotion Agreement
Pub. L. Public Law
RTA regional trade agreement
S&ED Strategic and Economic Dialogue (U.S.-China)
SACU Southern Africa Customs Union
SAT Tax Administration Service (Mexico)
SMEs small and medium-sized enterprises
SPS sanitary and phytosanitary (standards)
SSA sub-Saharan Africa
TAA Trade Adjustment Assistance
TAAEA Trade Adjustment Assistance Extension Act
TAARA Trade Adjustment Assistance Reauthorization Act of 2015
TICFA Trade and Investment Cooperation Forum Agreement
TIFA Trade and Investment Framework Agreement
TiVA Trade in Value Added (OECD–WTO initiative)
TPA trade promotion agreement
TPEA Trade Preferences Extension Act
TPF U.S.-India Trade Policy Forum
TPP Trans-Pacific Partnership
TPLs tariff preference levels
TRAs Trade Readjustment Allowances
TRIPS Trade-Related Aspects of Intellectual Property Rights agreement (WTO)
TRQ tariff-rate quota
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
U.S.C. U.S. Code
USCC U.S.-China Economic and Security Review Commission
USDA U.S. Department of Agriculture
USDOC U.S. Department of Commerce
USDOL U.S. Department of Labor
USDOS U.S. Department of State
USDOT U.S. Department of Transportation
USITC U.S. International Trade Commission
USTR U.S. Trade Representative
WAEMU West African Economic and Monetary Union
WTO World Trade Organization
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Executive Summary

This report on the operations of the trade agreements program is prepared by the U.S. International Trade Commission (Commission or USITC) as required by section 163(c) of the Trade Act of 1974. The 70th in a series, this report covers trade-related actions in the calendar year 2018.

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 fell slightly from 3.8 percent in 2017 to 3.6 percent in 2018, reflecting slower growth in advanced as well as emerging and developing economies. The economies of advanced countries grew 2.2 percent in 2018 compared with 2.4 percent in 2017. The growth rate of emerging-market and developing economies also dropped—from 4.8 percent in 2017 to 4.5 percent in 2018—and was primarily due to a slight dip in the growth rates of the Chinese and Indian economies over this period. All of the United States’ eight major trading partners showed slower growth rates in 2018 than in 2017. [1] Economic growth in the United States, however, accelerated in 2018: U.S. real gross domestic product (GDP) increased 2.9 percent in 2018, compared to an increase of 2.2 percent in 2017.

In 2018, the U.S. dollar appreciated 5.5 percent against a broad trade-weighted index of major foreign currencies, as well as against most of the currencies of its main trading partners. Between January 1 and December 31, 2018, the U.S. dollar appreciated by 9.6 percent against the Indian rupee; 9.1 percent against the Canadian dollar; 6.5 percent against the British pound sterling; 5.9 percent against the Chinese yuan; 5.2 percent against the euro; and 0.8 percent against the Mexican peso. Over the same period, the U.S. dollar depreciated by 2.2 percent against the Japanese yen.

Both U.S. exports and U.S. imports of goods increased in value in 2018. The value of U.S. merchandise exports totaled $1,664.1 billion in 2018, up 7.6 percent ($117.8 billion) from $1,546.3 billion in 2017. The value of U.S. merchandise imports totaled $2,541.3 billion in 2018, up 8.6 percent ($200.5 billion) from $2,340.8 billion in 2017. The largest increase in U.S. exports was in energy-related products, whereas the largest increase in U.S. imports was in chemicals and related products. None of the U.S. economy’s broad merchandise sectors experienced a trade surplus in 2018. [2] Overall, U.S. imports increased more than U.S. exports, resulting in an $82.7 billion increase in the U.S. merchandise trade deficit that brought it to $877.2 billion in 2018 (figure ES.1). This year, the merchandise data used in this report is available through a supplemental trade dataset accompanying the report at publication.

U.S. two-way cross-border trade in private services, which excludes exports and imports of government goods and services not included elsewhere (n.i.e.), increased 3.8 percent between 2017 and 2018. U.S. exports of private services grew 3.4 percent to $805.7 billion in 2018, while U.S. imports of private services grew 4.3 percent to reach $544.3 billion in 2018. As a result, the U.S. surplus in private services increased 1.5 percent to $261.4 billion.

Figure ES.1 U.S. trade balance in goods and services, 2004–18

Figure ES.1 is a line graph that shows the U.S. services trade surplus and the U.S. goods trade deficit from 2004 to 2018. The U.S. trade surplus in services gradually increased over the period until 2016, but then decreased slightly from 2016 to 2018. The U.S. trade deficit in goods increased from 2004 to 2008, fell significantly during 2009, and then began to increase in 2010before stabilizing from 2011 through 2016. The trade deficit increased again in 2017 and has continued to increase in 2018. The data behind the figure are presented in table B.1.

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, “ Table 1.2: U.S. International Transactions, Expanded Detail ,” June 20, 2019.

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

Key Trade Developments in 2018

Administration of U.S. Trade Laws and Regulations

Safeguard actions: The Commission conducted no new safeguard investigations during 2018 under sections 201–204 of the Trade Act of 1974 or under any of the provisions that implement safeguard provisions in free trade agreements (FTAs) involving the United States.

Two global safeguard measures were in effect during most of 2018. In early 2018, the President imposed new safeguard measures on imports of certain crystalline silicon photovoltaic cells and on imports of large residential washers.

Section 301: There were two ongoing investigations in 2018 under section 301 of the Trade Act of 1974. The first investigation was instituted in 1987 and concerned various European Union (EU) meat hormone directives, which prohibit the use of certain hormones that promote growth in farm animals. Following a successful challenge at the 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. In 2018, the EU Commission received a mandate from the EU Council to begin formal negotiations with the United States.

The second investigation was self-initiated by USTR in August 2017. In April 2018, USTR determined that the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce. In response, the United States imposed in two installments (tranches) an additional 25 percent ad valorem tariff on certain Chinese goods with an approximate annual trade value of $50 billion in July and August 2018, and initiated a World Trade Organization (WTO) dispute settlement case against China. In September 2018, the United States imposed an additional 10 percent ad valorem tariff on a third tranche of Chinese goods with an approximate trade value of $200 billion.

Special 301: In the 2018 Special 301 Report , USTR examined the adequacy and effectiveness of intellectual property rights protection in more than 100 countries. The report listed 12 countries on the priority watch list (Algeria, Argentina, Canada, Chile, China, Colombia, India, Indonesia, Kuwait, Russia, Ukraine, and Venezuela) and 24 countries on the watch list. The 2018 Out-of-Cycle Review of Notorious Markets report highlighted 33 internet-based markets and 25 physical marketplaces in 19 countries that reportedly engage in or facilitate substantial copyright piracy and trademark counterfeiting.

Antidumping duty investigations: The Commission instituted 31 new antidumping investigations and made 34 preliminary determinations and 52 final determinations during 2018. Antidumping duty orders were issued by the U.S. Department of Commerce (USDOC) in 41 of the final investigations on 16 products from 22 countries.

Countervailing duty investigations: The Commission instituted 22 new countervailing duty investigations, and made 25 preliminary determinations and 21 final determinations during 2018. Countervailing duty orders were issued by USDOC in 18 of the final investigations on 13 products from 8 countries.

Sunset reviews: During 2018, the Commission instituted 34 sunset reviews of existing antidumping duty and countervailing duty orders and suspension agreements, as required by law, either five years after their initial publication or five years after publication of a subsequent determination to continue them. The Commission completed 55 reviews, resulting in the continuation of 50 antidumping duty and countervailing duty orders for up to five additional years, as well as the termination of 2 orders and the revocation of 3 orders.

Section 129 investigations: Section 129 of the U.S. Uruguay Round Agreements Act established a procedure by which the Administration may respond to adverse WTO panel or Appellate Body reports in trade remedy cases. On March 29, 2018, India requested the establishment of a WTO compliance panel to review the consistency of the United States’ section 129 determinations with its WTO obligations in connection with the recommendations and rulings of the WTO Dispute Settlement Body (DSB) in United States—Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India (DS436). The panel is expected to complete its work and issue its report in 2019.

On June 4, 2018, USDOC completed a section 129 proceeding, carried out in connection with the recommendations and rulings of the WTO DSB in United States—Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea (DS464), and revised certain aspects of its original determination.

Section 337 investigations: During calendar year 2018, there were 130 active section 337 investigations and ancillary proceedings alleging unfair import practices, such as patent infringement. Sixty-four of these proceedings were instituted in 2018. Of the 64 new proceedings, 50 were new section 337 investigations and 14 were new ancillary (secondary) proceedings relating to previously concluded investigations. The Commission completed a total of 61 investigations and ancillary proceedings under section 337 in 2018, and issued 3 general exclusion orders, 12 limited exclusion orders, and 34 cease and desist orders.

Section 337 proceedings active in 2018 involved a wide variety 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. The second-largest category was pharmaceuticals and medical devices, which were at issue in about 13 percent of the active proceedings. Automotive, manufacturing, and transportation products were at issue in about 12 percent of the active proceedings, and small consumer products were at issue in about 9 percent of the proceedings.

Section 232 national security investigations: On March 8, 2018, the United States announced an additional 25 percent ad valorem additional tariff on imports of certain steel products and a 10 percent ad valorem tariff on certain aluminum products, effective March 23, 2018 (see table ES.1 for a summary of related actions by major U.S. trading partners in response). These duties were applied following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962. Certain countries were exempted from these tariffs, on a permanent or temporary basis. The Secretary of Commerce initiated two additional investigations under section 232 in 2018: one on imports of automobiles, including cars, SUVs, vans and light trucks, and automobile parts (initiated on May 23, 2018) and a second on imports of uranium (initiated on July 18, 2018).

Table ES.1 Section 232 steel and aluminum tariffs and retaliatory actions, 2018 developments for major trading partners

Country Subject to 25% tariff on steel exports and 10% tariff on aluminum exports to the United States at yearend 2018?

Date 232 tariffs applied to trading partner

Retaliation by trading partner in 2018?

WTO action in 2018?

EU Yes June 1, 2018 Yes. Retaliated with maximum 25% tariffs on a first stage of products effective June 22, 2018. Yes (DS548). Consultations requested by EU on June 1, 2018.
China Yes March 23, 2018 Yes. Retaliated with 15–25% tariffs on a range of products effective April 2, 2018. Yes (DS544). Consultations requested by China on April 5, 2018.
Canada a Yes June 1, 2018 Yes. Retaliated with tariffs on steel, aluminum and other products effective July 1, 2018. Yes (DS550). Consultations requested by Canada on June 1, 2018.
Mexico a Yes June 1, 2018 Yes. Retaliated with suspension of North American Free Trade Agreement (NAFTA) preferential duty rates, imposing tariffs of up to 25% on steel, aluminum, and agricultural products effective June 5, 2018. Yes (DS551). Consultations requested by Mexico on June 5, 2018.
Japan Yes March 23, 2018 No Yes. Japan notified the WTO of its intent to impose retaliatory tariffs on May 18, 2018, but took no further action in 2018.
South Korea Subject to quota on steel exports and 10% tariff on aluminum exports to the United States May 1, 2018 (for both steel quota and aluminum tariff) No No
India Yes March 23, 2018 No Yes (DS547). Consultations requested by India on May 18, 2018.
Taiwan Yes March 23, 2018 No No

Source: Proclamation 9704, 83 Fed. Reg. 11619 (March 15, 2018); Proclamation 9705, 83 Fed. Reg. 11625 (March 15, 2018); Proclamation 9710, 83 Fed. Reg. 13355 (March 28, 2018); Proclamation 9711, 83 Fed. Reg. 13361 (March 28, 2018); Proclamation 9740, 83 Fed. Reg. 20683 (May 7, 2018); Proclamation 9759, 83 Fed. Reg. 25857 (June 5, 2018); WTO, “ Dispute Settlement: DS548; United States—Certain Measures on Steel and Aluminum Products ” (accessed July 2, 2019); WTO, “ Dispute Settlement: DS556; United States—Certain Measures on Steel and Aluminum Products ” (accessed July 1, 2019); WTO, “ Dispute Settlement: DS550; United States—Certain Measures on Steel and Aluminum Products ” (accessed July 1, 2019); WTO, “ Dispute Settlement: DS551; United States—Certain Measures on Steel and Aluminum Products ” (accessed June 5, 2019); WTO, “ Immediate Notification under Article 12.5 of the Agreement on Safeguards ” May 18, 2018; WTO, “ Dispute Settlement: DS547; United States—Certain Measures on Steel and Aluminum Products ” (accessed May 29, 2019).

a Canada and Mexico terminated their retaliatory actions and the WTO disputes were terminated in 2019 after the United States reached mutually agreed solutions in May 2019 with Canada and Mexico.

Trade Adjustment Assistance (TAA): In fiscal year (FY) 2018, the U.S. Department of Labor (USDOL) received 1,178 petitions for TAA, up 13.6 percent from the 1,037 petitions received in FY 2017. The USDOL certified 895 petitions covering 76,902 workers as eligible for TAA and denied 217 petitions covering 17,374 workers. In FY 2018, USDOC certified 82 petitions as eligible for assistance under the TAA for Firms program, and approved 98 adjustment proposals.

Trade Preference Programs

Generalized System of Preferences (GSP): U.S. imports under GSP increased 10.7 percent, reaching $23.6 billion in 2018. These imports 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. The top five beneficiary countries (India, Thailand, Brazil, Indonesia, and Turkey) accounted for 73.2 percent of GSP imports.

Five country practice reviews were initiated in 2018 on India, Indonesia, Kazakhstan, Thailand, and Turkey. Effective January 1, 2018, Argentina’s GSP eligibility was reinstated after a nearly six-year suspension. Ukraine’s GSP eligibility was partially removed effective April 26, 2018, due to failure to adequately protect intellectual property rights.

Nepal Trade Preferences 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 2018, the second full year that the NTPA was in effect, U.S. imports from Nepal under NTPA were $3.1 million (an increase of 30.9 percent from the previous year), accounting for 3.1 percent of all U.S. imports from Nepal.

African Growth and Opportunity Act (AGOA): In 2018, 40 sub-Saharan African countries were eligible for AGOA benefits. Of these countries, 28 were also eligible for AGOA textile and apparel benefits for all or part of 2018. Apparel benefits for Eswatini (formerly known as Swaziland) were reinstated on July 3, 2018. Rwanda’s apparel benefits were terminated on July 31, 2018, as a result of an out-of-cycle review initiated by USTR on June 20, 2017, for Rwanda, Tanzania, and Uganda. The President determined that Tanzania and Uganda were in compliance with AGOA’s eligibility requirements on March 29, 2018.

In 2018, imports entering the United States exclusively under AGOA (excluding GSP) were valued at $10.8 billion, an 11.9 percent decrease from 2017. These imports entering the United States under AGOA comprised 43.9 percent of all imports from AGOA beneficiary countries in 2018. The decline in U.S. imports under AGOA in 2018 can be attributed to a decline in the value and quantity of imports of crude petroleum and passenger motor vehicles. An additional $1.2 billion from AGOA beneficiary countries entered the United States duty-free under GSP. In total, AGOA and GSP preference programs accounted for 48.8 percent of all imports from AGOA beneficiary countries in 2018.

Caribbean Basin Economic Recovery Act (CBERA): At yearend 2018, 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 2018, the value of U.S. imports under CBERA (including CBTPA) increased by 9.1 percent to $1.7 billion, mainly reflecting an increase in U.S. imports of apparel from Haiti and methanol from Trinidad and Tobago, which are both major imports under CBERA. U.S. imports under CBERA of crude petroleum continued to decline as U.S. production increased. Haiti was the leading supplier of U.S. imports under CBERA in 2018, followed by Trinidad and Tobago. Imports from CBERA programs accounted for 27.8 percent of all imports from CBERA beneficiary countries in 2018.

Haiti initiatives: Over the years, several amendments to CBERA have expanded trade benefits to Haiti, benefiting Haiti’s apparel industry. Nearly all (97.0 percent) of U.S. imports of apparel from Haiti entered duty free under CBERA. U.S. imports from Haiti under CBERA are brought in under CBTPA, the Haitian Hemisphere Opportunity through Partnership Encouragement Act of 2006 and 2008 (HOPE Acts), and the Haiti Economic Lift Program of 2010 (HELP Act) in 2018, with a growing portion entering under the HOPE/HELP Acts. The value of U.S. imports of apparel entering under the HOPE/HELP Acts rose 11.9 percent to $645.5 million in 2018, and represented nearly 70 percent of all U.S. apparel imports from Haiti.

World Trade Organization (WTO)

WTO developments: The WTO Director-General reported toward the end of the year that little progress had been made in trade negotiations since the Eleventh WTO Ministerial Conference in December 2017. However, negotiations towards a plurilateral agreement on fisheries subsidies advanced, as did exploratory work aimed at future WTO negotiations on the trade-related aspects of e-commerce, according to the Director-General. WTO members also discussed the functioning of the multilateral trading system and the need for WTO reform and modernization efforts. WTO membership remained at 164 in 2018.

WTO dispute settlement: During 2018, WTO members filed 39 requests for WTO dispute settlement consultations in new disputes, more than double the 17 filed in 2017. The United States was the complainant in 8 of the 39 requests filed during 2018 and the named respondent in 19. Nearly half of the complaints (9) filed against the United States concerned U.S. national security tariffs on steel and aluminum products, and 6 of the 8 complaints filed by the United States concerned measures taken by other WTO members in response to the U.S. steel and aluminum tariffs. The remaining two new requests filed by the United States during 2018 concerned export subsidy measures taken by India and Chinese measures concerning the protection of intellectual property rights. The remaining 10 requests in which the United States was the respondent involved duties on softwood lumber, fish fillets, and other products, as well as safeguard measures on crystalline silicon photovoltaic cells and large residential washers, and sanitary and phytosanitary measures on seafood products, alleged subsidies in the U.S. energy sector, and certain tariff and nontariff measures placed on imports of goods and services.

Twenty-three dispute settlement panels were established in 2018 in which the United States was either the complainant or the respondent. The United States was the complaining party in 8 of the disputes, and the responding party in 15 disputes. All but 3 of the disputes were filed in 2018. Nine of the panels were established to review U.S. measures on steel and aluminum products, and 5 were established to review measures taken by other WTO members in response to the U.S. tariffs on steel and aluminum. Two panel reports were issued in 2018 involving the United States—both times as a respondent in disputes about U.S. countervailing duty measures, one brought by Canada and the other by Turkey.

OECD, APEC, and TIFAs

Organisation for Economic Co-operation and Development (OECD): The OECD ministerial council meeting was held in Paris, France, on May 30–31, 2018. Discussions focused on how to harness international cooperation and improve economic policies to address global challenges. During the year, the OECD Trade Committee focused its work on broad areas involving trade in services, digital trade, trade in raw materials, and trade and investment. There were 37 OECD members following the accession of Lithuania and Colombia on May 30, 2018.

The Global Forum on Steel Excess Capacity, which is chaired by the OECD, held its second ministerial meeting in Paris, France, on September 20, 2018. At the meeting, members approved a report that included initial conclusions on a process to identify and remove subsidies and other state support to both public and private steel producers that can contribute to excess capacity in the steel sector.

Asia-Pacific Economic Cooperation (APEC) : Under Papua New Guinea’s leadership in 2018, cooperation among APEC member economies highlighted the theme of “Harnessing Inclusive Opportunities, Embracing the Digital Future.” APEC accomplishments in 2018 include the completion of APEC’S Bogor Goals Progress Report , progress made in constructing the APEC trade in value added (TiVA) database, and various activities conducted to facilitate digital trade and e-commerce in the APEC region.

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 2018, the United States had entered into 57 TIFAs, with no new TIFAs in 2018. Though the U.S.-Paraguay TIFA was signed in 2017, it has not yet entered into force. A number of TIFA Council meetings took place in 2018, including those with Algeria, Argentina, Armenia, Bangladesh, Central Asia, Indonesia, Laos, Nepal, New Zealand, Thailand, and Ukraine.

U.S. Free Trade Agreements

U.S. free trade agreements (FTAs) in force in 2018: The United States was party to 14 FTAs involving a total of 20 countries as of December 31, 2018. Starting with the most recent agreement, the FTAs in force during 2018 were with 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 2018, total two-way (exports and imports) merchandise trade between the United States and its 20 FTA partners was $1.6 trillion, which accounted for 39.1 percent of total U.S. merchandise trade with the world. U.S. trade with its partner countries under the North American Free Trade Agreement (NAFTA)—Canada and Mexico—continued to contribute the most to all U.S. trade with FTA partners, accounting for $1.2 trillion, or 74.8 percent of such trade. From 2017 to 2018, U.S. exports to the NAFTA countries rose 7.3 percent to $563.7 billion while U.S. imports from the NAFTA countries increased 8.4 percent to $664.9 billion. As a result, the U.S. merchandise trade deficit with its NAFTA partners increased by 15.1 percent to $101.2 billion in 2018.

U.S. trade with its non-NAFTA FTA partners was valued at $414.2 billion in 2018, a 9.6 percent increase from 2017. U.S. exports to these FTA partners increased 11.2 percent to $216.5 billion in 2018, while U.S. imports from these partners increased 8.0 percent to $197.7 billion. As result, the U.S. merchandise trade surplus with these countries increased 62.1 percent to $18.8 billion in 2018.

The value of imports that entered into the United States under FTAs and are subject to FTA duty reductions and eliminations totaled $408.0 billion in 2018, up 5.8 percent from 2017. Imports subject to FTA duty reductions and eliminations accounted for nearly half (47.3 percent) of total imports from FTA partners in 2018 and 16.1 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 Singapore, which grew $2.7 billion or 147.1 percent, represented the largest percentage increase in 2018, while imports from Mexico accounted for the greatest absolute change in value, rising by $17.4 billion (9.5 percent). Imports under FTAs from Panama and Oman also increased significantly, rising by 41.5 percent ($24 million) and 28.8 percent ($202 million), respectively.

FTA negotiations: On October 16, 2018, USTR Lighthizer notified Congress of the President’s intent to negotiate trade agreements with the United Kingdom (UK), the EU, and Japan. However, the UK cannot launch formal negotiations for a new trade agreement before it exits the EU.

On November 30, 2018, the United States, Mexico, and Canada signed the United States-Mexico-Canada Agreement (USMCA), which the USTR stated is intended to modernize and rebalance the North American Free Trade Agreement. Notable differences between USMCA and NAFTA include revised rules of origin for automobiles, updated rules regarding sanitary and phytosanitary measures and technical barriers to trade, better market access for agricultural products, new protections for intellectual property, and limitations on investor-state dispute settlement. The agreement also includes new chapters on digital trade, anticorruption, competitiveness, good regulatory practices, small and medium-sized enterprises, macroeconomic policies and exchange rates, labor, and the environment.

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 2018. Discussions with U.S. partners focused on a range of trade-related issues, as well as the labor and environmental provisions included in most of these agreements. The United States and South Korea signed a number of modifications and amendments to the U.S.-Korea FTA (KORUS) on September 24, 2018. In November 2018, the United States and Israel held the first round of negotiations on a permanent agreement to succeed the 2004 U.S.-Israel Agreement on Trade in Agricultural Products.

NAFTA developments: The pre-existing NAFTA remains in effect pending final actions approving the USMCA by each of the three countries. Per article 2205 of the agreement, any of the countries may also withdraw from NAFTA six months after issuing written notice to the other parties.

NAFTA parties undertook commitments concerning enforcement of environmental laws and other environment-related matters in a companion agreement to NAFTA called the North American Agreement on Environmental Cooperation. At the end of 2018, five cases regarding enforcement of environmental laws subject to the review of NAFTA’s Commission for Environmental Cooperation remained active under Articles 14 and 15. Two involved Canada: one was submitted in 2017, and the other in 2018; and three involved Mexico, all submitted in 2018. There were three submissions under review at the North American Agreement on Labor Cooperation at the end of 2018: two involved Mexico, and one involved the United States.

NAFTA dispute settlement: In 2018, 1 active Chapter 11 (investor-state dispute settlement) case was filed against the United States by Canadian investors; 6 cases were filed by U.S. investors against Canada; and 2 were filed against Mexico by U.S. investors. At the end of 2018, the NAFTA Secretariat listed 5 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. One of the reviews concerns a case filed by the United States contesting Mexico’s determinations; three concern cases filed by Canada contesting U.S. determinations; and one concerns a case filed by Mexico contesting U.S. determinations.

Trade Activities with Major Trading Partners

This report includes a review of 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, Canada, Mexico, Japan, South Korea, India, and Taiwan (ordered by the value of their two-way merchandise trade). Two-way merchandise and private services trade for each trading partner are presented in figure ES.2.

Figure ES.2 U.S. goods and services trade with major bilateral trading partners, 2018

Figure ES.2 is a bar chart that shows U.S. goods exports and imports as well as U.S. services exports and imports in 2018 for the selected major trading partners discussed in chapter 6 (the European Union (EU), China, Canada, Mexico, Japan, South Korea, India, and Taiwan). While goods trade is greater in value than services trade for these partners, the structure of goods trade is different than that of services trade, in that U.S. services exports are generally larger than U.S. services imports. The data behind the figure are presented in table B.2.

Source: USITC DataWeb/USDOC (accessed May 9, 2019); USDOC, BEA, Interactive data, International Transactions, Services, & IIP, International Transactions, tables 1.2 and 1.3, June 20, 2019.

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 2018, while EU member countries comprised 6 of the top 15 U.S. trading partners in terms of two-way (exports plus imports) trade. U.S. two-way merchandise trade with the EU increased 12.4 percent to $806.4 billion in 2018, accounting for 19.2 percent of total U.S. merchandise trade with the world. U.S. exports to the EU were $318.6 billion, which placed the EU as the top U.S. export market for the third year in a row. U.S. merchandise imports from the EU were $487.8 billion, second to those from China. Both U.S. exports and U.S. imports with the EU increased in 2018, but U.S. imports grew more, widening the U.S. merchandise trade deficit with the EU to $169.1 billion, an increase of 11.8 percent from the previous year. Leading U.S. exports to the EU included civilian aircraft, engines, and parts; crude petroleum; medicaments (medicines); refined petroleum products; and nonmonetary gold. Leading U.S. imports were passenger motor vehicles, medicaments, certain immunological products, light oils, and parts of turbojets and turbopropellers.

The EU was also the United States’ largest trading partner in terms of private services in 2018, accounting for 33.4 percent of total U.S. trade in private services. U.S. services exports increased more than U.S. services imports, widening the U.S. trade surplus in services with the EU from $50.3 billion in 2017 to $53.2 billion in 2018.

Among the important U.S.-EU trade developments in 2018 were the announcement of the establishment of a U.S.-EU Executive Working Group aimed at reducing transatlantic barriers to trade, a joint U.S.-EU-Japan scoping paper on damaging nonmarket economic policies of third countries, and a joint review of the EU-U.S. Privacy Shield Framework.

China

In 2018, China remained the United States’ largest single-country trading partner based on two-way merchandise trade, accounting for 15.7 percent of total U.S. merchandise trade with the world. U.S. two-way merchandise trade with China amounted to $659.8 billion in 2018, an increase of 3.9 percent from 2017. The U.S. merchandise trade deficit with China remained far higher than the U.S. trade deficit with any other trading partner in 2018, amounting to $419.2 billion. Its $43.6 billion increase (11.6 percent) relative to the year before reflected a $34.0 billion increase in U.S. merchandise imports from China and a $9.6 billion decrease in U.S. merchandise exports to China in 2018. U.S. merchandise imports from China totaled $539.5 billion in 2018, while U.S. merchandise exports to China totaled $120.3 billion. Leading U.S. exports to China in 2018 were civilian aircraft, engines, and parts; crude petroleum; passenger motor vehicles; semiconductors; and soybeans. Leading U.S. imports from China were cellphones; portable computers and tablets; telecommunications equipment; and computer parts and accessories.

In 2018, China was the United States’ third-largest services trading partner, with two-way services trade totaling $75.0 billion—5.6 percent of total U.S. cross-border services trade in 2018. The U.S. cross-border trade surplus in services with China increased $240 million in 2018 to $38.5 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 2017 to 2018, U.S. services exports to China grew by $1.2 billion, or 2.1 percent, while U.S. services imports from China grew by $915 million, or 5.8 percent.

In May 2018, prominent bilateral trade issues were addressed in consultations between the U.S. Trade Representative, the Secretary of the Treasury, and the Secretary of Commerce on the U.S. side, and the Chinese State Council Vice Premier, and other high-ranking Chinese officials on China’s side. Major topics addressed by U.S. and Chinese officials as part of these consultations were increasing U.S. agricultural and energy exports to China, intellectual property protection, and encouraging two-way bilateral investment.

China also imposed 25 percent ad valorem tariffs on selected U.S. products in response to U.S. tariffs at that level on approximately $50 billion of Chinese imports, which the United States imposed following USTR’s section 301 investigation. Both the United States and China imposed the first tranche of their tariffs on July 6, 2018, and the second tranche on August 23, 2018. USTR took further action under section 301, imposing an additional 10 percent tariff on approximately $200 billion of Chinese imports on September 24, 2018.

Canada

In 2018, Canada was the United States’ second-largest single-country trading partner after China for the fourth consecutive year. The value of U.S. two-way merchandise trade with Canada rose 6.1 percent to $617.1 billion in 2018, accounting for 14.7 percent of total U.S. merchandise trade with the world. Both U.S. merchandise exports and imports with Canada increased in 2018 from the previous year, but imports outpaced exports, resulting in a $2.6 billion increase (15.8 percent) in the U.S. merchandise trade deficit with Canada to $19.7 billion. Leading U.S. exports to Canada included crude petroleum; civilian aircraft, engines, and parts; motor vehicles—both for passengers and for goods transport—as well as their parts and accessories; and light oils. Top U.S. imports from Canada included crude petroleum; passenger motor vehicles and their parts and accessories; refined petroleum products; natural gas; and coniferous wood and products.

Canada remained the second-largest single-country U.S. trading partner for services in 2018, after the UK. Two-way services trade with Canada grew in 2018 to $99.3 billion, while the U.S. surplus in services increased to $28.0 billion, up from $24.9 billion the year before.

In 2018, a major focus of U.S.-Canada trade relations was the proposed USMCA, which all parties signed on November 30, 2018. Pending final actions by the three countries, NAFTA remained in force. The WTO established a dispute settlement panel in a case requested by Canada concerning U.S. antidumping and countervailing duties on Canadian softwood lumber products. However, no new negotiations on the softwood lumber agreement took place between the United States and Canada in 2018. In other developments, U.S. and Canadian officials signed a memorandum of understanding on the Canada-United States Regulatory Cooperation Council, reaffirming commitments to closer regulatory alignment.

Mexico

In 2018, Mexico was the United States’ third-largest single-country merchandise trading partner. U.S. two-way merchandise trade with Mexico amounted to $611.5 billion in 2018, an increase of 9.7 percent from 2017. Mexico accounted for 14.5 percent of U.S. trade with the world. U.S. merchandise exports to Mexico totaled $265.0 billion in 2018, and U.S. merchandise imports from Mexico amounted to $346.5 billion. Both U.S. merchandise imports and exports with Mexico increased in 2018 from the previous year. As the growth in imports outpaced that of exports, the merchandise trade deficit grew by $10.6 billion (14.9 percent) from the previous year, totaling $81.5 billion in 2018. Leading U.S. exports to Mexico included light oils; refined petroleum products; computer parts and accessories; diesel engines; semiconductors; parts and accessories of bodies (including cabs) for motor vehicles; and civilian aircraft, engines, and parts. Leading U.S. imports from Mexico included passenger motor vehicles, motor vehicles for goods transport, telecommunications equipment, road tractors for semi-trailers, color TV reception apparatus, and insulated ignition wiring sets.

Mexico was the United States’ sixth-largest single-country trading partner for services in 2018. U.S. exports of services to Mexico increased 4.0 percent ($1.3 billion) to $33.4 billion in 2018, while U.S. services imports from Mexico increased 1.2 percent ($310 million) to $25.6 billion. This resulted in a U.S. services trade surplus of $7.7 billion with Mexico in 2018.

A major focus of U.S.-Mexico trade relations in 2018 was the signing of USMCA on November 30, 2018. Joint efforts to modernize border procedures and facilities also continued in 2018, with the creation of new customs and inspection processes, pedestrian and vehicle inspection facilities, and vehicle processing lanes. Since the 2015 conclusion of a pilot program to address cross-border trucking between the United States and Mexico under NAFTA, the Federal Motor Carrier Safety Administration has been accepting applications from Mexico-domiciled motor carriers interested in conducting long-haul operations beyond the U.S. commercial zones.

Japan

In 2018, Japan remained the United States’ fourth-largest single-country trading partner in terms of two-way trade, accounting for 5.2 percent of total U.S. merchandise trade. The value of U.S. two-way merchandise trade with Japan grew 6.6 percent from 2017, to $217.6 billion in 2018. U.S. merchandise exports to Japan totaled $75 billion in 2018, and U.S. merchandise imports from Japan amounted to $142.6 billion. Although both imports and exports grew from 2017 to 2018, U.S. exports to Japan outpaced U.S. imports from Japan, and the U.S. merchandise trade deficit with Japan declined by $1.2 billion from 2017 (1.7 percent), totaling $67.6 billion in 2018. 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 2018, Japan remained the United States’ third-largest single-country services trading partner, representing 5.5 percent of U.S. services trade. U.S. cross-border services exports to Japan fell by $805 million, or 1.8 percent, to $44.4 billion in 2018, while U.S. cross-border services imports from Japan increased by $1.4 billion, or 4.8 percent, to $34.5 billion. As a result, the U.S. surplus in services trade with Japan declined to $14.0 billion from $16.2 billion the year before.

In 2018, President Trump and Prime Minister Abe of Japan agreed to initiate bilateral trade negotiations for a possible U.S.-Japan Trade Agreement. The United States has sought to increase regulatory compatibility in key goods sectors, and to obtain more fair and equitable trade in the motor vehicle sector. Both the United States and Japan have reaffirmed their common interests in addressing nonmarket economic issues including excess capacity and forced technology transfer. Other trade-related developments in 2018 include a reduction in Japan’s safeguard tariff on imports of frozen beef, the reopening of the Japanese market to U.S. lamb and goat meat exports, and reforms to the requirements for drug producers supplying the Japanese pharmaceutical market.

Republic of Korea

The Republic of Korea (South Korea) continued to be the United States’ sixth-largest single-country merchandise trading partner in 2018 (behind Germany and ahead of the United Kingdom), accounting for 3.1 percent of U.S. trade with the world. Two-way merchandise trade grew 9.0 percent from the previous year to $130.6 billion in 2018. U.S. merchandise exports to South Korea were valued at $56.3 billion in 2018, while U.S. merchandise imports from South Korea totaled $74.2 billion. The resulting trade deficit with South Korea was $17.8 billion in 2018, down 22.7 percent from 2017, as the increase in U.S. exports to South Korea from 2017 to 2018 outpaced the increase in U.S. imports from South Korea over the same period. Leading U.S. exports to South Korea included crude petroleum; machines for the manufacture of semiconductor devices or electronic integrated circuits; civilian aircraft, engines, and parts; beef; passenger motor vehicles; liquefied propane; natural gas; and semiconductors. Leading U.S. imports from South Korea included passenger motor vehicles, cellphones, computer parts and accessories, refined petroleum products, and immunological products.

In 2018, South Korea remained the United States’ ninth-largest single-country services trading partner based on two-way trade. U.S. services exports to South Korea fell 6.7 percent in 2018 to $21.9 billion, while U.S. services imports from South Korea rose by 7.0 percent in 2018 to reach $9.9 billion. As a result, the U.S. services trade surplus with South Korea decreased by 15.6 percent, from $14.3 billion in 2017 to $12.0 billion in 2018.

In 2018, the United States and South Korea negotiated and signed modifications to the U.S.-Korea FTA (KORUS), which originally entered into force on March 15, 2012. The new modifications were signed on September 24, 2018, and entered into force on January 1, 2019. The 2018 modifications to KORUS included a 20-year extension to the phaseout of the 25 percent U.S. tariff on South Korean trucks, provisions on doubling the annual quota per manufacturer of U.S.-origin trucks that can meet U.S. safety standards and enter the South Korean market without further modification eliminating duplicative emissions testing for U.S. exports of automotive vehicles, changing the treatment of U.S. exports under KORUS by South Korean customs to better process claims for preferential tariff treatment, and ensuring nondiscriminatory treatment for U.S. pharmaceutical exports, among others.

India

In 2018, India was the United States’ ninth-largest single-country trading partner based on two-way merchandise trade (behind France and ahead of Italy). U.S. two-way merchandise trade with India increased by 17.8 percent to $87.1 billion in 2018, accounting for 2.1 percent of U.S. merchandise trade with the world. Both U.S. exports to India and U.S. imports from India grew from 2017 to 2018, with the increase in exports exceeding the increase in imports. U.S. merchandise exports to India were $33.1 billion in 2018 and U.S. merchandise imports from India were $54.0 billion, resulting in a U.S. merchandise trade deficit with India of $20.9 billion in 2018, down 7.6 percent from 2017. Leading U.S. exports to India in 2018 were nonindustrial diamonds; crude petroleum; civilian aircraft, engines, and parts; nonmonetary gold; and bituminous coal. 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 eight services trading partners with which the United States had a services trade deficit in 2018, though this deficit has been narrowing since 2015. The services trade deficit with India decreased by 0.6 percent to $4.8 billion in 2018. U.S. cross-border services exports to India amounted to $24.8 billion, while U.S. cross-border services imports from India amounted to $29.5 billion in 2018.

Among U.S.-India trade developments in 2018, USTR announced that it was reviewing India’s eligibility for tariff preferences under GSP due to concerns with program compliance. At the WTO, the United States submitted a counternotification to the WTO Committee on Agriculture regarding India’s price supports for wheat, rice, and cotton.

Taiwan

In 2018, Taiwan remained the 11th-largest single-country U.S. trading partner (behind Italy and ahead of the Netherlands). U.S. two-way merchandise trade with Taiwan grew 11.5 percent to $76.0 billion in 2018, accounting for 1.8 percent of total U.S. merchandise trade with the world. U.S. merchandise exports to Taiwan were $30.2 billion in 2018 and U.S. merchandise imports from Taiwan were $45.8 billion, The U.S. merchandise trade deficit with Taiwan narrowed 7.3 percent to $15.5 billion in 2018, as U.S. exports to Taiwan rose by a larger amount than U.S. imports from Taiwan. The top U.S. exports to Taiwan during the year were crude petroleum; civilian aircraft, engines, and parts; machines for semiconductor or integrated circuit manufacturing; semiconductors; and computer memories. The top U.S. imports from Taiwan during the year were computer parts and accessories, microchips, telecommunications equipment, semiconductor storage devices, and semiconductors.

U.S. services exports to Taiwan increased by 2.5 percent to $9.6 billion, while U.S. services imports from Taiwan grew 3.4 percent to $8.2 billion. As a result, the U.S. services trade surplus with Taiwan continues to decline; it decreased by 1.6 percent, from $1.40 billion in 2017 to $1.37 billion in 2018.

The primary forum for bilateral discussions on trade and investment issues is the U.S.-Taiwan Trade and Investment Framework Agreement (TIFA). In 2018, while there was no TIFA Council meeting, the U.S.-Taiwan trade relationship continued through other mechanisms. The key issues remain technical barriers to trade, digital piracy, investment, and agriculture.

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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 2018. 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,” [3] 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. [4] 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). This year marks the 70th edition of the USITC’s report on the operation of the trade agreements program.

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 2018. It also provides a timeline of selected key trade activities. Chapter 2 covers the administration of U.S. trade laws and regulations in 2018, 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 2018. Chapter 4 covers 2018 developments at the Organisation for Economic Co-operation and Development (OECD) and Asian-Pacific Economic Cooperation (APEC) forum, as well as developments involving trade and investment framework agreements. Chapter 5 describes U.S. negotiation of and participation in free trade agreements (FTAs) in 2018, and chapter 6 covers trade data and trade relations in 2018 with major 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 2018 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, [5] 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”—the total of all goods that have been cleared by U.S. Customs and Border Protection (U.S. Customs) to enter the customs territory of the United States with required duties paid. [6] Also, much of the trade data used in the report, including U.S. services and merchandise trade data, are revised over time, so the trade statistics for earlier years in this report may not always match the data presented in previous reports. New this year, a supplemental merchandise trade dataset reflecting the data used in this report will also be released. The most current version of the merchandise trade data used in this report can be accessed using the USITC’s DataWeb database ( https://dataweb.usitc.gov ). [7]

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 2018

U.S. Economic Trends in 2018

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 $20.5 trillion economy in 2018. [8] The U.S. economy grew faster in 2018 than in 2017: U.S. real gross domestic product (GDP) increased 2.9 percent in 2018, compared to the growth rate of 2.2 percent in 2017 (figure 1.1). [9] The industries driving the higher growth rate were professional and business services; manufacturing; information; and educational services, health care, and social assistance. [10]

Figure 1.1 U.S. real gross domestic product, percentage change, 2014–18

Figure 1.1 is a bar chart that shows the percentage change in real U.S. gross domestic product from 2014 to 2018. This percentage change increased from 2014 to 2015, when it reached 2.9 percent then declined to 1.6 percent in 2016, and increased again to 2.2 percent in 2017 and then to 2.9 percent in 2018. The data behind the figures are presented in table B.3.

Source: USDOC, BEA, Interactive data, National data, National Income and Product Accounts “Table 1.1.1, Percent Change from Preceding Period in Real Gross Domestic Product,” June 20, 2019.

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

Global Economic Trends in 2018

The global economic growth rate fell slightly from 3.8 percent in 2017 to 3.6 percent in 2018 (figure 1.2). [11] Growth in the advanced economies slowed to 2.2 percent in 2018, down from 2.4 percent the previous year. The growth rate of emerging market and developing economies also fell—decreasing 0.3 percentage points from 4.8 percent in 2017 to 4.5 percent 2018. This decline was primarily due to a slight dip in the growth rates of the Chinese and Indian economies over this period. [12] All of the United States’ top eight trading partners based on two-way trade showed slower growth rates in 2018 than in 2017 (figure 1.2).

Figure 1.2 Economic growth (real GDP) trends in the world, the United States, and major trading partners, 2016–18

Figure 1.2 is a bar chart that shows the percentage change in gross domestic product of the world, the United States, and other major U.S. trading partners during 2016–18. The figure shows that China and India had much faster growth rates than the United States over these three years. However, the U.S. had faster growth rates than the EU, Canada, Mexico, Japan, South Korea, and Taiwan in 2018, despite having had slightly slower growth rates than the EU, Canada, and South Korea during 2016 and 2017. The data behind the figure are presented in table B.4.

Source: IMF, World Economic Outlook , April 2019.

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

The moderation in global growth in 2018 can be attributed to short-term uncertainty in certain economies, due to trade tensions and financial market pressures in large emerging markets and a convergence towards modest long-term growth rates among advanced economies. [13] Compared to its major trading partners, the United States was the only economy to show an improvement in its growth rate from 2017 to 2018. While growth in China (6.6 percent) and India (7.1 percent) remained relatively steady—decreasing only 0.2 percentage points for each country from 2017 levels—other economies experienced steeper declines. [14] Canada’s growth rate fell by 1.2 percentage points in 2018, due in part to lower prices for oil exports, pipeline capacity constraints, and slowing household spending. [15] Japan’s growth fell from 1.9 percent in 2017 to 0.8 percent in 2018, due, in part, to natural disasters, [16] and the EU saw a decrease of 0.6 percentage points in its growth rate over the same time period. Growth rates among the United States’ top trading partners were mostly below the world average of 3.6 percent in 2018, with the exception of China and India. [17] For the latter countries, continued levels of high growth were largely due to changes in government policies that encourage consumption and investment as well as an expansionary stance on monetary policy. [18]

Overall world trade volume for goods and services increased in 2018 by 3.8 percent, a slower rate than the 5.4 percent increase seen in 2016–17. [19] Both advanced and emerging economies showed slower growth rates in imports and exports in 2018. [20] In 2018, exports from emerging economies grew by 4.3 percent, down from 7.2 percent in 2017. Exports from advanced economies grew by 3.1 percent, down from 4.4 percent in 2017. Emerging economies’ imports grew by 5.6 percent in 2018, down from 7.5 percent the previous year, and in advanced economies they grew by 3.3 percent, down from 4.3 percent, over the same period. [21]

Exchange Rate Trends

The U.S. dollar appreciated relative to the currencies in the broad dollar index, [22] rising 5.5 percent between January and December 2018. This was in contrast to a 6.3 percent depreciation of the U.S. dollar as measured by the broad dollar index from January to December 2017. The 2018 trend was driven by the appreciation of the U.S. dollar against major world currencies, including most of the currencies of its main trading partners (figure 1.3). Between January 1 and December 31, 2018, the U.S. dollar appreciated by 9.6 percent against the Indian rupee; 9.1 percent against the Canadian dollar; 6.5 percent against the British pound sterling; 5.9 percent against the Chinese yuan; 5.2 percent against the euro; and 0.8 percent against the Mexican peso. Over the same period, the U.S dollar depreciated by 2.2 percent against the Japanese yen. [23]

Figure 1.3 Indexes of U.S. dollar exchange rates for selected major foreign currencies, daily, 2018

Figure 1.3 is a line graph that shows changes in the value of the U.S. dollar compared to the British pound, euro, Mexican peso, Japanese yen, Chinese yuan, Canadian dollar, and Indian rupee from January 2018 through December 2018. The U.S. dollar generally appreciated against all currencies except the yen over this time period.

Source: Federal Reserve System, “ Foreign Exchange Rates ” (accessed June 10, 2019).

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 dollar’s rise was partly driven by the Federal Open Market Committee’s four interest rate hikes from the 1.25–1.50 percent range to the 2.25–2.50 range against a backdrop of stronger growth and a lower-than-expected unemployment rate. [24] Investors contributed to the rise by increasing the demand for the dollar in response to the uncertainty related to the trade conflict between the United States and China. Investors continued to hold the dollar throughout the conflict, anticipating that the U.S. economy would be less affected than the economies of other countries by the uncertainty. [25] The appreciation of the dollar eventually tapered off in late 2018 following a shift in market expectations about the pace and extent of monetary policy tightening and the U.S. government shutdown at the end of the year. [26]

U.S. Trade in Goods in 2018

The value of U.S. merchandise exports was $1,664.1 billion in 2018, a 7.6 percent increase from the 2017 level (figure 1.4 and appendix table A.1). The value of U.S. merchandise imports totaled $2,541.3 billion over the same period, an 8.6 percent increase from the 2017 level (figure 1.4 and appendix table A.2). [27] U.S. imports grew more than U.S. exports, leading to an $82.7 billion increase in the U.S. merchandise trade deficit to $877.2 billion in 2018. [28] None of the 11 broad merchandise sectors that make up the U.S. economy experienced a trade surplus in 2018: these include agricultural products, forest products, chemicals, energy, textiles and apparel, footwear, minerals and metals, machinery, transportation equipment, electronic products, and miscellaneous manufactures. [29]

Figure 1.4 U.S. merchandise trade with the world, 2016–18

Figure 1.4 is a bar chart that shows U.S. merchandise exports, imports, and trade balance with the world from 2016 to 2018. The U.S. merchandise trade deficit with the world increased from 2016–17, and increased again from 2017–18. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Exports of energy-related products had the largest absolute and relative (percentage) increase in terms of value. Imports in this sector also experienced the largest relative (percentage) increase, but were second to imports of chemicals and related products in terms of absolute increase. Energy exports rose 35.7 percent in 2018, and imports increased by 19.4 percent over the same period (table 1.1 and table 1.2).

Several factors contributed to the increase in exports and imports by value in the energy sector in 2018. Crude petroleum, [30] which accounts for a large portion of the trade in the energy products sector (24.1 percent of the exports and 66.8 percent of the imports), drove much of the large changes in energy sector exports and imports in 2018. [31] First, both U.S. production of and demand for crude petroleum increased in 2018, but the increase in production exceeded the increase in demand, lowering the demand for U.S. imports and increasing U.S. exports in volume terms. The increase in U.S. production of crude petroleum was larger than the increase in domestic refinery demand for the second year in a row, with domestic consumption growing from 16.6 million to 17.0 million barrels a day (3.8 percent), compared to an increase in production from 9.4 million to 11.0 million barrels a day (17.2 percent) in 2018. [32] As a result, the volume of U.S. imports of crude petroleum decreased by 77.4 million barrels (2.7 percent) in 2018, [33] and the volume of U.S. exports of crude petroleum grew by 308.9 million barrels (73.1 percent) from 2017 to 2018. [34] In addition, prices for crude petroleum rose substantially in 2018. [35] This price increase contributed to the 108.9 percent ($24.6 billion) increase in the value of crude petroleum exports [36] and resulted in an 18.1 percent ($24.1 billion) increase in the value of imports, outweighing the decline in import volume (appendix tables A.3 and A.4).

U.S. Merchandise Trade by Product Category

Exports

Transportation equipment continued to be the largest U.S. export sector in 2018, accounting for 20.3 percent of all U.S. exports. It was followed by electronic products (16.6 percent of exports) and chemicals and related products (14.6 percent of exports) (table 1.1 and appendix table A.1). The top export products were civilian aircraft, engines, and parts; refined petroleum products; crude petroleum; light oils; nonmonetary gold; and nonindustrial diamonds (appendix table A.3).

Table 1.1 U.S. merchandise total exports to the world, by USITC digest sector, 2017–18

Sector 2017 2018 change 2017–18 % change 2017–18
Million $
Agricultural products 152,965 154,944 1,979 1.3
Forest products 39,592 40,862 1,270 3.2
Chemicals and related products 227,526 243,436 15,910 7.0
Energy-related products 144,319 195,897 51,578 35.7
Textiles and apparel 22,146 22,712 565 2.6
Footwear 1,432 1,559 127 8.8
Minerals and metals 136,447 146,274 9,827 7.2
Machinery 136,204 143,279 7,075 5.2
Transportation equipment 325,578 337,942 12,364 3.8
Electronic products 268,546 276,896 8,350 3.1
Miscellaneous manufactures 49,081 52,096 3,015 6.1
Special provisions 42,437 48,160 5,723 13.5
Total 1,546,273 1,664,056 117,783 7.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

Note: Because of rounding, figures may not add to totals shown. For a definition of special provisions, see footnote 43.

Exports in all merchandise sectors increased in 2018 (table 1.1). [37] The largest increase in both value and percentage terms occurred in the energy-related products sector (up $51.6 billion to $195.9 billion). It was followed in value by chemicals and related products (up $15.9 billion to $243.4 billion) and transportation equipment (up $12.4 billion to $337.9 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, including exports of crude petroleum (up $24.6 billion to $47.2 billion), light oils (up $9.6 billion to $39.2 billion), refined petroleum products (up $6.8 billion to $55.0 billion), liquefied propane products (up $2.5 billion to $14.9 billion), and bituminous coal (up $2.2 billion to $11.7 billion). Exports of civilian aircraft, engines, and parts increased $9.4 billion to $130.4 billion. The largest decline was in soybeans, exports of which declined by $4.4 billion (20.3 percent) to $17.1 billion. It was followed by passenger motor vehicles, for which exports declined by $2.7 billion (4.6 percent) to $56.5 billion (appendix table A.3). [38]

Imports

Electronic products and transportation equipment continued to be the top two import sectors in 2018, accounting respectively for 19.9 percent and 18.1 percent of total 2018 U.S. imports (table 1.2 and appendix table A.2). Passenger motor vehicles were the largest U.S. import product, valued at $195.5 billion in 2018. [39] They were followed by crude petroleum ($157.0 billion), medicaments ($56.0 billion), cellphones ($52.8 billion), and telecommunications equipment ($47.3 billion) (appendix table A.4).

Table 1.2 U.S. merchandise general imports from the world, by USITC digest sector, 2017–18

Sector 2017 2018 change 2017–18 % change 2017–18
Million $
Agricultural products 147,329 156,588 9,259 6.3
Forest products 44,821 48,696 3,875 8.6
Chemicals and related products 268,131 311,210 43,079 16.1
Energy-related products 196,833 234,983 38,150 19.4
Textiles and apparel 121,372 127,662 6,291 5.2
Footwear 25,640 26,567 927 3.6
Minerals and metals 200,577 215,281 14,704 7.3
Machinery 196,319 214,652 18,333 9.3
Transportation equipment 434,860 459,726 24,866 5.7
Electronic products 484,121 506,065 21,944 4.5
Miscellaneous manufactures 130,338 139,019 8,681 6.7
Special provisions 90,426 100,817 10,390 11.5
Total 2,340,768 2,541,267 200,498 8.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

Note: Because of rounding, figures may not add to totals shown. For a definition of special provisions, see footnote 46.

The value of U.S. imports in all 11 sectors increased in 2018 (table 1.2 and appendix table A.2). [40] The largest increase in value occurred in the chemicals and related products sector (up $43.1 billion to $311.2 billion, an increase of 16.1 percent), followed by the energy-related products sector, which also showed the largest percentage increase. Imports of energy-related products grew by $38.2 billion (19.4 percent), from $196.8 billion in 2017 to $235.0 billion in 2018; U.S. crude petroleum imports alone grew by $24.1 billion to $157.0 billion in 2018. [41] Other large increases in imports were recorded in the transportation equipment sector (up $24.9 billion to $459.7 billion in 2018) and electronic products sector (up $21.9 billion to $506.1 billion). After crude petroleum, the largest import increases at the product level were in petroleum oils (up $8.3 billion to $35.1 billion); computers (up $8.3 billion to $31.7 billion); medicaments (up $5.8 billion to $56.0 billion); and computer parts (up $5.1 billion to $27.1 billion).

U.S. Merchandise Trade with Leading Partners

Table 1.3 shows U.S. trade with major trading partners, ranked by total trade (exports plus imports) in 2018. In 2018, 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 $318.6 billion (19.1 percent of total exports). Canada followed closely at $298.7 billion (18.0 percent) (figure 1.5). Ranked by U.S. imports, China was the leading source of imports into the United States at $539.5 billion (21.2 percent of imports), followed by the EU at $487.8 billion (19.2 percent) (figure 1.6). [42]

Table 1.3 U.S. merchandise trade with major trading partners and the world, 2018 (million dollars), ranked by two-way trade

Major trading partner U.S. total exports U.S. general imports Trade balance Two-way trade     (exports plus imports)
EU 318,619 487,753 -169,134 806,372
China 120,341 539,495 -419,153 659,836
Canada 298,719 318,414 -19,695 617,133
Mexico 265,010 346,524 -81,514 611,534
Japan 74,967 142,596 -67,629 217,562
South Korea 56,344 74,223 -17,879 130,568
India 33,120 54,007 -20,887 87,127
Taiwan 30,243 45,761 -15,519 76,004
All others 466,692 532,494 -65,802 999,186
Total 1,664,056 2,541,267 -877,211 4,205,322

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

U.S. merchandise exports to nearly all leading trading partners increased from 2017 to 2018 (table 1.4). Exports declined only to China (down by $9.6 million or 7.4 percent). The largest increase in value was a $35.4 billion increase in exports to the EU ($318.6 billion in 2018, up from $283.3 billion in 2017). It was followed by a $21.7 billion increase in exports to Mexico ($265 billion in 2018, up from $243.3 billion in 2017). In percentage terms, the largest increase in exports between 2017 and 2018 was to India (28.9 percent), followed by Taiwan (17.5 percent) and South Korea (16.6 percent).

Table 1.4 U.S. merchandise total exports to major trading partners and the world, 2017–18, ranked by total exports 2018

Trading partner 2017 2018 change 2017–18 % change 2017–18
Million $
EU 283,269 318,619 35,350 12.5
Canada 282,265 298,719 16,454 5.8
Mexico 243,314 265,010 21,696 8.9
China 129,894 120,341 -9,552 -7.4
Japan 67,605 74,967 7,362 10.9
South Korea 48,326 56,344 8,018 16.6
India 25,689 33,120 7,431 28.9
Taiwan 25,730 30,243 4,513 17.5
All others 440,180 466,692 26,512 6.0
Total 1,546,273 1,664,056 117,783 7.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

U.S. merchandise imports from all of the major trading partners increased in 2018 (table 1.5). The largest rise in value was a $53.3 billion increase in imports from the European Union (up 12.3 percent), followed by a $34 billion increase in imports from China (up 6.7 percent) and a $32.3 billion increase in imports from Mexico (up 10.3 percent). In percentage terms, the largest increases in imports between 2017 and 2018 were from the EU (12.3 percent), followed by India (11.8 percent) and Mexico (10.3 percent).

Table 1.5 U.S. merchandise general imports from major trading partners and the world, 2017–18, ranked by general imports 2018

Trading partner 2017 2018 change 2017–18 % change 2017–18
Million $
China 505,462 539,495 34,033 6.7
EU 434,459 487,753 53,294 12.3
Mexico 314,262 346,524 32,262 10.3
Canada 299,280 318,414 19,135 6.4
Japan 136,480 142,596 6,115 4.5
South Korea 71,444 74,223 2,779 3.9
India 48,297 54,007 5,709 11.8
Taiwan 42,462 45,761 3,300 7.8
All others 488,622 532,494 43,872 9.0
Total 2,340,768 2,541,267 200,498 8.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Figure 1.5 Leading U.S. export markets, by share, 2018

Figure 1.5 is a pie chart that shows the leading U.S. merchandise export markets by their shares of U.S. total exports (including re-exports) in 2018. The EU and Canada were the leading U.S. export markets (19.1 percent and 18.0 percent respectively), and Mexico was third (15.9 percent). The data behind the figure are presented in table B.6.

Source: DataWeb/USDOC (accessed May 9, 2019).

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

Figure 1.6 Leading U.S. import sources, by share, 2018

Figure 1.6 is a pie chart that shows the leading sources for U.S. merchandise imports in 2018 by U.S. import share. China was the leading import source (21.2 percent share), followed by the EU (19.2 percent) and Mexico (13.6 percent). The data behind the figure are presented in table B.6.

Source: DataWeb/USDOC (accessed May 9, 2019).

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

U.S. Trade with Free Trade Agreement Partners

In 2018, two-way merchandise trade (total exports plus general imports) between the United States and its FTA partners totaled $1.6 trillion, accounting for 39.1 percent of total U.S. merchandise trade with the world ($4.2 trillion). [43] This was higher than in 2017, when the value of two-way merchandise trade between the United States and its FTA partners was $1.5 trillion; however, the share in 2018 was only slightly higher than 2017, when trade with FTA partners accounted for 39.0 percent of total U.S. merchandise trade.

The value of U.S. imports for consumption [44] entered under FTAs was $408.0 billion in 2018, a 5.8 percent increase from the 2017 value of $385.7 billion. These imports accounted for 47.3 percent of all imports from FTA partners in 2018 and for 16.1 percent of total U.S. imports from the world.

U.S. Imports under Trade Preference Programs

U.S. imports under trade preference programs increased by 3.2 percent, from $35.0 billion in 2017 to $36.1 billion in 2018; they accounted for 1.4 percent of total U.S. imports during 2018, whereas in 2017 they accounted for 1.5 percent of all imports. Imports that claimed eligibility under the U.S. Generalized System of Preferences program totaled $23.6 billion in 2018; imports under the African Growth and Opportunity Act totaled $10.8 billion; imports under the Caribbean Basin Economic Recovery Act and the Caribbean Basin Trade Partnership Act totaled $1.7 billion; imports under the Haiti initiatives totaled $0.7 billion; and imports under the Nepal Trade Preference Program totaled $0.003 billion ($3.1 million). [45]

U.S. Trade in Services in 2018

Total U.S. cross-border trade in private services (hereafter “services”) grew by 3.8 percent between 2017 and 2018. [46] During that period, U.S. exports of services increased by 3.4 percent from $779.3 billion to $805.7 billion, while U.S. services imports grew 4.3 percent from $521.8 billion to $544.3 billion. [47] The U.S. surplus in cross-border services trade increased 1.5 percent in 2018 to $261.4 billion (figure 1.7). All of the 10 largest U.S. services export categories grew in 2018. The services export categories with the highest growth rates in 2018 included maintenance and repair services (15.2 percent), professional and management consulting services (10.0 percent), and air transport (8.6 percent). U.S. imports of services grew in 8 of the top 10 services import categories, with declines in insurance services (down 16.0 percent) and research and development services (down 1.7 percent).

Figure 1.7 U.S. cross-border trade in private services with the world, 2016–18

Figure 1.7 is a bar chart that shows exports, imports, and trade balance for U.S. private cross-border services trade with the world from 2016 to 2018. The U.S. surplus in cross-border services increased 1.5 percent in 2018. The data behind the figure are presented in table B.7.

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, Table 3.1, “U.S. International Trade in Services,” June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

U.S. Services Trade by Product Category [48]

Exports

U.S. travel services exports, valued at $214.7 billion in 2018, accounted for the largest share (26.6 percent) of total U.S. cross-border services exports in 2018 (appendix table A.8). [49] Other major U.S. services export categories included charges for the use of intellectual property not included elsewhere (n.i.e.) [50] ($128.8 billion or 16.0 percent of total exports), financial services [51] ($112.0 billion or 13.9 percent), and professional and management consulting services ($86.8 billion or 10.8 percent). Total U.S. services exports grew by 3.4 percent in 2018, slightly slower than the 5.2 percent growth recorded in 2017. Maintenance and repair services n.i.e. [52] grew the fastest, increasing by 15.2 percent in 2018, compared to 6.9 percent growth in 2017. Professional and management consulting services also experienced rapid growth, rising 10.0 percent in 2018, compared to 5.9 percent in 2017. However, 6 of the 10 services categories experienced slower growth in 2018 than in previous years. These notably included technical, trade-related, and other business services (rising 1.2 percent in 2018, compared to 13.3 percent growth in 2017) and research and development services [53] (rising 0.8 percent in 2018, compared to 10.3 percent growth in 2017).

Imports

Travel services also accounted for the largest share of U.S. cross-border services imports in 2018 ($144.5 billion or 26.5 percent of total U.S. cross-border services imports) (appendix table A.9). Other categories with large shares included charges for the use of intellectual property n.i.e. ($56.1 billion or 10.3 percent), professional and management consulting services ($47.6 billion or 8.7 percent), insurance services ($42.5 billion or 7.8 percent), and air passenger fares ($42.0 billion or 7.7 percent). The fastest-growing categories of services imports were professional and management consulting services; technical, trade-related, and other business services; [54] air passenger fares; and financial services (with growth rates of 12.8 percent, 10.6 percent, 8.1 percent, and 8.1 percent, respectively). By comparison, U.S. imports in 2 of the top 10 services categories fell in 2018. Imports of both insurance services and research and development services declined in 2018 following growth in 2017; insurance services fell 16.0 percent [55] after an increase of 0.9 percent in 2017, while research and development services fell 1.7 percent after an increase of 3.4 percent in 2017.

U.S. Services Trade with Leading Partners

In 2018, the EU was the largest market for U.S. services exports and the largest foreign supplier of U.S. services imports (table 1.6). [56] In that year, the EU accounted for $251.8 billion (31.3 percent) of total U.S. services exports and $198.6 billion (36.6 percent) of total U.S. services imports (figures 1.8 and 1.9). [57] Following the EU, the top markets for U.S. services exports were Canada, China, and Japan, while the top sources of imports were Canada, Japan, and India. The United States maintained a services trade surplus with every major services trading partner except for India, with which it posted a $4.8 billion deficit in 2018. [58] The posted U.S. trade deficits with India in 2018 are primarily in telecommunications and other business services sectors, such as research and development services and professional and management consulting services. [59] While the U.S. trade deficit in other business services widened by $1.0 billion during 2017–18, the total private services trade deficit with India has remained steady at $4.8 billion due to a $1.0 billion increase in the trade balance in travel services over the same period. Before 2018, the total private services trade deficit with India had decreased steadily each year from $7.5 billion in 2014 to $4.8 billion in 2017.

Table 1.6 U.S. cross-border trade in private services with major trading partners and the world, 2018 (million dollars)

Major trading partner U.S. exports U.S. imports Trade balance Two-way trade (exports plus imports)
EU 251,824 (a ) 198,621 53,203 450,445
Canada 63,648 35,635 28,013 99,283
China 56,710 18,261 38,449 74,971
Japan 44,422 30,397 14,025 74,819
Mexico 33,374 25,664 7,710 59,038
India 24,769 29,530 -4,761 54,299
Brazil 28,061 6,051 22,010 34,112
South Korea 21,902 9,871 12,031 31,773
Singapore 21,597 9,255 12,342 30,852
Australia 21,610 7,779 13,831 29,389
All others 237,828 371,904 64,545 411,111
Total 805,745 544,347 261,398 1,350,092

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, table 3.2 and 3.3, “U.S. International Trade in Services, by Area and Country,” June 20, 2019.

a U.S. imports from the EU in 2018 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, 2018

Figure 1.8 is a pie chart that shows the percentage share of the top U.S. export markets for private services in 2018. During that year, the EU was the largest U.S. export market, accounting for 31.3 percent of the $805.7 billion in total U.S. service exports, followed by Canada at 7.9 percent and China at 7.0 percent. The data behind this figure are presented in table B.8.

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, tables 3.2 and 3.3, “U.S. International Trade in Services, by Area and Country,” June 20, 2019.

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, 2018

Figure 1.9 is a pie chart that shows the percentage share of top U.S. import sources for private services in 2018. During that year, the EU was the largest U.S. import source, accounting for 36.5 percent of the $544.3 billion in U.S. service imports, followed by Canada at 6.5 percent and Japan at 5.6 percent. The data behind the figure are presented in table B.8.

Source: USDOC, BEA, Interactive data, International Transactions, Services, and International Investment Position, International Transactions, tables 3.2 and 3.3, “U.S. International Trade in Services, by Area and Country,” June 20, 2019.

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 2018

The following timeline presents selected key trade events between the United States and its trading partners in 2018. 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 Agriculture, Office of the U.S. Trade Representative, White House, Federal Register , Asia-Pacific Economic Cooperation, Organisation for Economic Co-operation and Development, World Trade Organization, Government of South Korea, Embassy of Armenia to the United States, U.S. Embassy in Laos, 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 2018, 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 Preferences Act, the African Growth and Opportunity Act, and the Caribbean Basin Economic Recovery Act, including initiatives aiding Haiti. [60]

Import Relief Laws

Safeguard Actions

This section covers safeguard actions under statutes administered by the Commission, including the global safeguard provisions in sections 201–204 of the Trade Act of 1974, [61] and statutes implementing safeguard provisions in various bilateral free trade agreements involving the United States. The Commission conducted no new safeguard investigations during 2018 under sections 201–204 of the Trade Act of 1974 or under any of the provisions that implement safeguard provisions in free trade agreements involving the United States.

Two global safeguard measures, however, were in effect during most of 2018. In early 2018, the President imposed new safeguard measures on imports of crystalline silicon photovoltaic cells (CSPV cells) [62] and of large residential washers (washers). [63] On January 23, 2018, the President issued Proclamation 9693 “to facilitate positive adjustment to competition from imports of certain crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) and for other purposes.” The proclamation imposed a tariff-rate quota on imports of solar cells not partially or fully assembled into other products and an increase of duties on imports of modules for a period of four years, with annual reductions in the second, third, and fourth years. The measure was made effective as of February 7, 2018, and applied to imports from all countries except certain developing countries. [64] Also on January 23, 2018, the President issued Proclamation 9694 “to facilitate positive adjustment to competition from imports of large residential washers.” The proclamation imposed a tariff-rate quota on imports of washers and a tariff-rate quota on imports of covered washer parts for a period of three years and one day, with annual reductions in the second and third years. The measure was made effective as of February 7, 2018, and applied to imports from all countries except for products of Canada and certain developing countries. [65]

The President imposed the measures after receiving affirmative serious injury determinations and remedy recommendations from the Commission in late 2017. The Commission made the determinations and recommendations following the completion of investigations. It had instituted the investigations for CSPV cells and washers in May and June 2017, respectively, following receipt of petitions filed by domestic producers of the named articles. [66] The global safeguard measures issued in January 2018 were the first such measures imposed by the President since 2002, when the President imposed measures on imports of certain steel products.

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. [67] Section 301 may be used to enforce U.S. rights under bilateral and multilateral trade agreements or 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 consultations, 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. [68] 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. [69] In either case, the USTR must determine the appropriate action to take in response to the practice. The time period for making these determinations varies according to the type of practices alleged.

Section 301 Investigations

During 2018, there were two ongoing section 301 investigations: first, on various European Union (EU) meat hormone directives, which prohibit the use of certain hormones that promote growth in farm animals; and a second, a USTR self-initiated investigation under section 301 regarding China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.

EU Meat Hormones. The first section 301 investigation that was active during 2018 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 WTO, and in 1999 had imposed additional ad valorem duties [70] of 100 percent on about $117 million in imports from the EU in retaliation for the EU measures. [71]

After a series of consultations aimed at resolving the dispute, on May 13, 2009, the United States and the EU signed a memorandum of understanding (MOU). [72] Under the MOU, the EU agreed to establish a tariff-rate quota (TRQ) [73] with an in-quota tariff rate of zero for high-quality beef in the amount of 20,000 metric tons (mt). [74] The MOU was later revised, establishing a TRQ for high-quality beef in the amount of 45,000 mt, open to the United States and other qualifying suppliers. [75]

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. [76] The 2016 amendment provides that USTR may 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 the reimposed additional duties. The amendment also allows USTR to suspend concessions in the meat hormone dispute with the EU.

On December 9, 2016, representatives of the U.S. beef industry filed a request with USTR asking that the additional duties be reinstated. [77] In 2017, USTR held a hearing [78] and engaged in discussions with the EU about possible modifications of the TRQ for high-quality beef. [79] In September 2018, the EU Commission requested a mandate from the EU Council to negotiate with the United States, suggesting that the United States be allocated a part of the existing quota that is also available to other qualifying exporting countries. [80] The EU Council adopted the mandate in October 2018, enabling formal negotiations to begin. [81] According to European Commissioner for Agriculture Phil Hogan, the negotiation “will not entail any changes to the level of the existing quota or the quality of beef imported into the EU.” [82]

China Technology Transfer. On August 14, 2017, the President issued a memorandum directing 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 technology development. [83] In accordance with the President’s memorandum, on August 18, 2017, USTR initiated an investigation 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. [84]

Following publication of a report under section 302(b) of the Trade Act of 1974 on March 22, 2018, [85] and a determination under section 301(b) of the Trade Act of 1974 that certain acts, policies, and practices by China are unreasonable or discriminatory and burden or restrict U.S. commerce, USTR (1) initiated a World Trade Organization (WTO) dispute by requesting consultations with China regarding certain specific aspects of China’s technology regulations, and (2) at the direction of the President, determined to impose additional 25 percent duties on certain Chinese products with an annual trade value of approximately $50 billion. [86] In response to the U.S. action, China imposed retaliatory tariffs on U.S. goods. In accordance with the specific direction of the President, the USTR determined to modify the prior action in the investigation by imposing additional duties on products of China with an approximate trade value of $200 billion. [87] These tariffs went into effect on September 24, 2018. [88]

The Trade Representative determined that the following actions by China are unreasonable or discriminatory and burden or restrict U.S. commerce: [89]

The Trade Representative determined to address the second category of acts, policies, and practices (involving technology-licensing regulations) through recourse to WTO dispute settlement. [91] USTR initiated a WTO dispute on March 23, 2018, titled China—Certain Measures Concerning the Protection of Intellectual Property Rights (DS542). [92] This report also describes this dispute in the WTO dispute settlement section in chapter 3.

USTR imposed the added 25 percent ad valorem duties on certain Chinese goods in two tranches after public comment and public hearings. The first tranche covered 818 tariff subheadings, with an approximate annual trade value of $34 billion, and the second tranche covered 279 tariff subheadings, with an approximate annual trade value of $16 billion. [93] USTR established a process under which U.S. interests may request that particular products classified within a tariff subheading be excluded from the additional 25 percent duties. On December 21, 2018, USTR approved approximately 1,000 exclusion requests, and stated it would continue to issue decisions on pending requests on a periodic basis. [94]

As noted above, at the direction of the President, the USTR determined to modify the prior action by imposing additional duties on products of China with an approximate trade value of $200 billion. The rate of this additional duty was set initially at 10 percent ad valorem and took effect September 24, 2018. This rate was scheduled to increase to 25 percent ad valorem on March 2, 2019. [95]

USTR issued an update of its March 2018 report on November 21, 2018. The update explained “that China fundamentally had not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and that in certain areas, China’s acts, policies, and practices had become of even greater concern.” [96]

Special 301

The Special 301 law [97] requires that USTR annually identify and issue a list of foreign countries that (1) deny adequate and effective protection of IPRs, or (2) deny fair and equitable market access to U.S. persons who rely on IPR protection. [98]

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.” [99]

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. [100] 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). [101]

In addition, the Special 301 law directs USTR to identify so-called “priority foreign countries.” [102] 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, and that are not entering into good-faith negotiations or making significant progress in bilateral or multilateral negotiations to provide adequate and effective IPR protection. [103] The identification of a country as a priority foreign country triggers a section 301 investigation, [104] unless USTR determines that the investigation would be detrimental to U.S. economic interests. [105]

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. [106] 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. [107] 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 2018 Special 301 review, USTR examined the adequacy and effectiveness of IPR protection in more than 100 countries. [108] In conducting the review, USTR focused on a wide range of issues and policies, including inadequate IPR protection and enforcement worldwide, compulsory technology licensing and transfer, and the unauthorized use of unlicensed software by foreign governments. [109]

Although no country was identified as a priority foreign country in the 2018 Special 301 Report , the report identified 12 countries on the priority watch list: Algeria, Argentina, Canada, Chile, China, Colombia, India, Indonesia, Kuwait, Russia, Ukraine, and Venezuela. [110] In addition, the report identified 24 countries on the watch list. [111]

In keeping China on the priority watch list, and continuing Section 306 monitoring, [112] the report highlighted the urgent need for fundamental structural changes to strengthen IPR protection and enforcement, as well as equitable market access for U.S. persons that rely on IPR protection. [113] 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 2018 due to a lack of measurable improvement to its IPR framework on issues—both longstanding and new—that have negatively affected U.S. rights holders over the past year. [114]

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 most recent report, 2018 Out-of-Cycle Review of Notorious Markets , was issued in April 2019. [115] The report highlights markets where the scale of this activity is such that it can cause significant harm to U.S. IPR holders. The 2018 report listed 33 online markets and 25 physical markets in 19 countries, including markets in China and India, “in which pirated or counterfeit products and services reportedly are available or that facilitate substantial piracy and counterfeiting.” [116]

The 2018 Notorious Markets list highlights free trade zones (FTZs) and the role they may play in facilitating trade in counterfeit and pirated goods. FTZs have become major facilitators of illegal and criminal activity, including the illicit trade in pirated and counterfeit goods, smuggling, and money laundering. FTZs are designated economic areas that are not subject to the customs duties, taxes, or normal customs procedures of their host countries. They can range in size from a single warehouse to entire harbors and cities encompassing thousands of businesses. FTZs are an increasingly important part of global trade, and they play a particularly prominent role in the economies of developing countries. The number of FTZs grew from 79 zones in 25 economies in 1975 to over 3,500 zones in 130 economies in 2018. [117]

Antidumping and Countervailing Duty Investigations and Reviews

Antidumping Investigations

The U.S. antidumping law is found in Title VII of the Tariff Act of 1930, as amended. [118] This law offers relief to U.S. industries that are materially injured by imports that are dumped—that is, 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 in response to a petition filed with USDOC and the Commission by or on behalf of a U.S. industry, but can be self-initiated by USDOC. 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. [119] Generally, normal value is the price the foreign firm charges for a comparable product sold in its home market. [120] 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.” [121] 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). [122] A nonmarket-economy country means any foreign country that the administering authority determines does not operate on market principles of cost or pricing structures, so that prices paid on sales of merchandise in such country do not reflect the fair value of the merchandise. [123]

In all three instances, the amount by which the normal value exceeds the U.S. sales price is the “dumping margin.” The duty specified in an antidumping duty order reflects the weighted average dumping margins found by USDOC, both for the specific exporters it examined and for all other exporters. [124] 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 subject country, but it may be adjusted if USDOC receives a request for an annual review. [125]

The Commission instituted 31 new antidumping investigations, and made 34 preliminary determinations and 52 final determinations in 2018. [126] As a result of affirmative final USDOC and Commission determinations, in 2018, USDOC issued 41 antidumping duty orders on 16 products from 22 countries (table 2.1). The status of all antidumping investigations active at the Commission during 2018—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) [127] in effect as of the end of 2018 appears in appendix table A.11.

Table 2.1 Antidumping duty orders that became effective during 2018 a

Trade partner Product Range of dumping margins (percent)
Argentina Biodiesel 60.44–86.41
Belarus Carbon and Alloy Steel Wire Rod 280.02
Belgium Citric Acid and Certain Citrate Salts 19.3
Canada Softwood Lumber Products 3.20–7.28
China Hardwood Plywood Products 183.36
China Aluminum Foil 48.64–105.80
China Carton-Closing Staples 115.65–263.40
China Tool Chests and Cabinets 97.11–244.29
China Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 45.13–186.89
China Fine Denier Polyester Staple Fiber 65.17–103.06
China Stainless Steel Flanges 257.11
China Cast Iron Soil Pipe Fittings 33.44–360.39
China Sodium Gluconate 213.15
China Forged Steel Fittings 8.00–142.72
Colombia Citric Acid and Certain Citrate Salts 28.48
Germany Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 3.11–209.06
India Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 8.26–33.80
India Fine Denier Polyester Staple Fiber 21.43
India Stainless Steel Flanges 14.29–145.25
Indonesia Biodiesel 92.52–276.65
Italy Carbon and Alloy Steel Wire Rod 12.41–18.89
Italy Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 47.87–68.95
Italy Forged Steel Fittings 49.43–80.20
South Korea Carbon and Alloy Steel Wire Rod 41.1
South Korea Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 30.67–48.00
South Korea Fine Denier Polyester Staple Fiber 30.15–45.23
South Korea Low Melt Polyester Staple Fiber 16.27
Russia Carbon and Alloy Steel Wire Rod 436.80–756.93
South Africa Carbon and Alloy Steel Wire Rod 135.46–142.26
Spain Carbon and Alloy Steel Wire Rod 10.11–32.64
Spain Ripe Olives 16.88–25.50
Switzerland Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 7.66–30.48
Taiwan Fine Denier Polyester Staple Fiber 24.43–48.86
Taiwan Low Melt Polyester Staple Fiber 49.93
Taiwan Forged Steel Fittings 116.17
Thailand Citric Acid and Certain Citrate Salts 6.47–15.71
Turkey Carbon and Alloy Steel Wire Rod 4.74–7.94
Ukraine Carbon and Alloy Steel Wire Rod 34.98–44.03
United Arab Emirates Carbon and Alloy Steel Wire Rod 84.10
United Kingdom Carbon and Alloy Steel Wire Rod 147.63
Vietnam Tool Chests and Cabinets 327.17

Source: Compiled by USITC from Federal Register notices.

a 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. It provides for the imposition of additional duties to offset (“countervail”) foreign subsidies on products imported into the United States. [128] In general, procedures for such investigations are similar to those under the antidumping law. Petitions are filed with USDOC (the administering authority) and with the Commission. Before a countervailing duty order can be issued, 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 22 new countervailing duty investigations and made 25 preliminary determinations and 21 final determinations during 2018. USDOC issued 18 countervailing duty orders on 13 products from eight countries in 2018 as a result of affirmative USDOC and Commission determinations (table 2.2). The status of all countervailing duty investigations active at the Commission during 2018, 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 [129] in effect at the end of 2018 appears in appendix table A.13.

Table 2.2 Countervailing duty orders that became effective during 2018 a

Trade partner Product Range of countervailable subsidy rates (percent)
Argentina Biodiesel 71.87–72.28
Canada Softwood Lumber Products 3.34–17.99
China Hardwood Plywood Products 22.98–194.90
China Aluminum Foil 17.14–80.52
China Tool Chests and Cabinets 14.03–95.96
China Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 18.27–21.41
China Fine Denier Polyester Staple Fiber 38.00–47.57
China Stainless Steel Flanges 174.73
China Cast Iron Soil Pipe Fittings 7.37–133.94
China Sodium Gluconate 194.67
China Forged Steel Fittings 13.41
India Fine Denier Polyester Staple Fiber 13.38–27.36
India Stainless Steel Flanges 4.92–256.16
India Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel 8.02–42.60
Indonesia Biodiesel 34.45–64.73
Italy Carbon and Alloy Steel Wire Rod 4.16–44.18
Spain Ripe Olives 7.52–27.02
Turkey Carbon and Alloy Steel Wire Rod 3.81–3.88

Source: Compiled by USITC from Federal Register notices.

a 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 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 USDOC and the Commission, as appropriate, to review certain outstanding determinations and agreements after receiving information or a petition that shows changed circumstances. [130] 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. [131] On the basis of either USDOC’s or the Commission’s review, USDOC may revoke an antidumping duty or countervailing duty order in whole or in part, or may either terminate or resume a suspended investigation.

The sunset process began in 1995. It is subject to section 751(c) of the Tariff Act of 1930, which requires both USDOC and the Commission to conduct “sunset” reviews of existing antidumping duty and countervailing duty orders and suspension agreements five years after their initial publication and five years after publication of any subsequent determination to continue them. 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 to material injury. [132] If either USDOC or the Commission reach negative determinations, the order will be revoked or the suspension agreement terminated. During 2018, USDOC and the Commission instituted 34 sunset reviews of existing antidumping and countervailing duty orders or suspended investigations, [133] and the Commission completed 55 reviews. As a result of affirmative determinations by USDOC and the Commission, 50 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 2018. [134]

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 USTR to request that the agencies concerned—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. [135]

Hot-Rolled Steel from India . Following the December 19, 2014, adoption by the WTO Dispute Settlement Body (DSB) of the panel and Appellate Body reports in United States—Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India (DS436), the United States stated its intent to implement the recommendations of the DSB in a manner that respects U.S. WTO obligations. [136] Subsequently, the Commission and USDOC issued consistency determinations pursuant to section 129 in March 2016 and May 2016, respectively. [137] On April 22, 2016, the United States notified the DSB that it had complied with the recommendations and rulings in this dispute. [138]

On March 29, 2018, India requested the establishment of a WTO panel pursuant to Articles 6 and 21.5 of the Dispute Settlement Understanding to review the consistency of the United States’ section 129 determinations with its WTO obligations. India challenged USDOC’s findings regarding “public body” specificity and the use of benchmarks, and the Commission’s price effects and impact findings, in their respective consistency determinations. India also claimed that the United States had failed to implement a DSB finding that a never-used portion of U.S. law was “as such” inconsistent with WTO obligations. [139] The parties have completed all briefing in this implementation proceeding, the panel has held its substantive meeting with the parties, and the dispute is currently under advisement. [140] The panel is expected to complete its work and issue its report in 2019. [141]

Large Residential Washers from South Korea . On September 26, 2016, the DSB adopted the panel and Appellate Body reports in United States—Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea (DS464). [142] On September 26, 2016, the United States stated that it intended to implement the recommendations of the DSB in this dispute in a manner that respects U.S. WTO obligations, and that it would 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 implementation would expire on December 26, 2017. [143]

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 related to USDOC’s CVD investigation of large residential washers from South Korea. On December 18, 2017, USDOC initiated a section 129 proceeding, and completed that proceeding on June 4, 2018, with the issuance of a final determination in which USDOC revised certain aspects of its original determination. [144]

Section 337 Investigations

Section 337 of the Tariff Act of 1930, as amended, [145] prohibits certain unfair practices in the import trade, notably 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. [146] 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. [147] The Commission may institute an investigation on the basis of a complaint or on its own initiative. [148]

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 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 USTR [149] within 60 days of issuance. [150]

During calendar year 2018, there were 130 active section 337 investigations and ancillary (secondary) proceedings, 64 of which were instituted that year. Of these 64 new proceedings, 50 were new section 337 investigations and 14 were new ancillary proceedings relating to previously concluded investigations. In 46 of the new section 337 investigations instituted in 2018, patent infringement was the only type of unfair act alleged. Of the remaining 4 investigations, 1 involved allegations of patent infringement and trademark infringement; 1 involved allegations of antitrust violations; 1 involved allegations of false advertising and unfair competition; and 1 involved allegations of registered and common law trademark infringement, trademark dilution, and trade dress infringement.

The Commission completed a total of 61 investigations and ancillary proceedings under section 337 in 2018, including 2 enforcement proceedings, 4 rescission proceedings, 2 proceedings relating to bond forfeiture and return, 1 remand proceeding, 2 modification proceedings, and 1 combined modification and rescission proceeding. [151] In addition, the Commission issued 3 general exclusion orders, 12 limited exclusion orders, and 34 cease and desist orders during 2018. The Commission terminated 26 investigations without determining whether there had been a violation. Of these terminated investigations, 15 were terminated on the basis of settlement agreements and/or consent orders, 9 were terminated based on withdrawal of the complaint, and 2 were terminated for other reasons. Commission activities involving section 337 proceedings in 2018 are presented in appendix table A.15.

Figure 2.1 Products at issue in active proceedings, 2018

Figure 2.1 is a pie chart showing types of products at issue in active section 337 proceedings in the calendar year 2018: computer and telecommunications equipment, 37.7 percent; consumer electronics, 6.2 percent; pharmaceuticals and medical devices, 13.1 percent; automotive, manufacturing, and transportation products, 11.5 percent; small consumer products, 9.2 percent; and other, 22.3 percent. The data behind the figure are presented in table B.9.

Source: USITC calculations.

Note: Underlying data can be found in appendix table B.9 .

The section 337 investigations active in 2018 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. The second-largest category was pharmaceuticals and medical devices, which were at issue in about 13 percent of the active proceedings. Automotive, manufacturing, and transportation products were at issue in about 12 percent of the active proceedings, and small consumer products were at issue in about 9 percent of the proceedings (figure 2.1). The remaining 22 percent of active proceedings involved a wide variety of other types of articles, including toner cartridges, heavy-duty industrial mats, LED concert lights, beer dispensers, convertible sofas, arrow rests, baby formula supplements, carburetors, refrigerator water filters, cover plates for switches and outlets, and strength training systems.

At the close of 2018, 69 section 337 investigations and related proceedings were pending at the Commission. As of December 31, 2018, there were 114 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

During 2018, USDOC completed two investigations and instituted two new investigations under the national security provisions in section 232 of the Trade Expansion Act of 1962. [152] In the two completed investigations, relating to steel and aluminum respectively and begun in 2017, the Secretary of Commerce (the Secretary) made affirmative findings and remedy recommendations. The President concurred with the Secretary’s findings in both investigations and issued proclamations imposing higher duties on the subject imports. The Secretary instituted two new investigations under section 232 in May and July 2018, respectively, on imports of automobiles and uranium. Both investigations were pending at the end of 2018.

On March 8, 2018, the President issued two proclamations, Proclamation 9705 and 9704, imposing higher tariffs on certain steel and aluminum products, respectively. The proclamations were issued following receipt of reports and findings from the Secretary under the national security provision, section 232 of the Trade Expansion Act of 1962. The higher tariffs—25 percent ad valorem on certain steel products, and 10 percent ad valorem on certain aluminum products—remained in effect for the duration of 2018 and were still in effect when this report was prepared in 2019. The President modified the proclamations several times during 2018 to exempt certain countries and products.

On May 23, 2018, the Secretary initiated an investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automobile parts. USDOC scheduled public hearings in the investigation for July 19–20, 2018. [153] The investigation was still in progress at the end of 2018. [154] For country-specific developments in this investigation, see the European Union, Canada, Mexico, Japan, and South Korea sections in chapter 6.

On July 18, 2018, the Secretary initiated an investigation under section 232 of the Trade Expansion Act to determine the effects on the national security of imports of uranium. Interested parties were invited to submit written comments on the investigation by September 10, 2018; [155] this date was later extended to September 25, 2018. [156] The investigation was in progress at the end of 2018. [157]

Section 232 of the Trade Expansion Act requires the Secretary to submit a report to the President within 270 days of instituting 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 must so advise the President in his report. [158]

Steel Proclamations

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 Secretary transmitted his report to the President on his department’s national security investigation of U.S. steel imports on January 11, 2018. Based on findings in the report, the Secretary found “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. [159]

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 five categories of steel—flat, long, semi-finished, pipe and tube, and stainless (“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. [160]

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, [161] but exempted imports of subject steel from Canada and Mexico pending ongoing discussions. [162] 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. [163] The President subsequently issued several additional proclamations making further adjustments. [164]

Aluminum Proclamations

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 if the Secretary found that aluminum was being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the Secretary should recommend actions and steps that should be taken to adjust aluminum imports so that they would not threaten to impair the national security. [165]

The Secretary transmitted his department’s report on U.S. aluminum imports to the President on January 19, 2018. In the report, the Secretary stated 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 stated 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.” [166]

The Secretary again recommended two alternative courses of action. He recommended that the President (1) impose a worldwide quota on imports of primary aluminum and five types of wrought aluminum (collectively “subject aluminum” [167] ) 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) 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/or are potential unreliable suppliers or likely sources of transshipped aluminum from China.” [168]

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. [169] 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, [170] and later issued additional proclamations making further adjustments. [171]

Trade Adjustment Assistance

For several decades, the United States has provided trade adjustment assistance (TAA) to aid U.S. workers and firms adversely affected by import competition. [172] 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. [173] The main TAA programs in effect in fiscal year (FY) 2018 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 under the TPEA of 2015. [174] However, the U.S. Congress did not appropriate funding for new participants in this program for FY 2018. [175] As a result, USDA did not accept any new petitions or applications for benefits in FY 2018. [176]

Selected developments in the TAA programs for workers and firms during FY 2018 are summarized below. [177]

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. [178] 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. [179] 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 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. [180] (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. [181]

In 2018, $667.1 million was allocated to state governments to fund the TAA for Workers program. This funding included $397.9 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; $242.6 million for trade readjustment allowance benefits; and $26.7 million for reemployment trade adjustment assistance benefits. [182]

Groups of workers submitted 1,178 petitions for TAA in FY 2018, up 13.6 percent from the 1,037 petitions filed in FY 2017. USDOL certified 895 petitions covering 76,902 workers as eligible for TAA, and denied 217 petitions covering 17,374 workers. [183] The largest number of petitions certified in FY 2018 was in the Midwest census region, followed by the West, Northeast, and South (table 2.3). [184] By state, California had the most workers certified (6,193 workers), followed by Texas (5,125), Oregon (4,482), Pennsylvania (4,463), and Ohio (4,241). [185]

Table 2.3 TAA certifications, by region, FY 2018

Census region No. of petitions certified No. of workers covered
Midwest 252 21,824
South 192 23,707
Northeast 217 16,025
West 233 15,336
Other 1 10

Source: USDOL, ETA, email message to USITC staff, May 30, 2019.

The majority (57.2 percent, 512 petitions) of the TAA petitions certified during FY 2018 were in the manufacturing sector, covering 50,849 workers, followed by the professional, scientific, and technical services sector (14.2 percent, 127 petitions) and the finance and insurance sector (5.7 percent, 51 petitions) (figure 2.2). [186]

Figure 2.2 Share of TAA petitions certified by industry sector in FY 2018 a

Figure 2.2 is a pie chart that shows the share of TAA petitions certified by industry sector in fiscal year 2018. The highest share was accounted for by the manufacturing sector, with 57.2 percent, followed by professional, scientific, and technical services with 14.2 percent, finance and insurance at 5.7 percent, wholesale trade at 5.6 percent, and administrative and support and waste management and remediation services at 5.0 percent. The data behind the figure are presented in table B.10.

Source: USDOL, ETA, email message to USITC staff, June 8, 2019.

a “Other” includes all industry sectors where less than 20 petitions were certified in FY 2018.

Note: Underlying data can be found in appendix table B.10 .

Assistance for Firms

The TAA for Firms program [187] provides technical assistance to help U.S. firms experiencing a decline in sales and employment to become more competitive in the global marketplace. [188] 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, with firms also contributing a share of the cost of creating and implementing their recovery plans. [189] 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 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. [190] The program supports a nationwide network of 11 nonprofit or university-affiliated Trade Adjustment Assistance Centers to help firms to apply for a certification of eligibility and prepare and to implement a business recovery plan or adjustment proposal. [191] Firms generally have up to five years to implement an approved adjustment proposal. [192]

In FY 2018, EDA awarded a total of $13 million in TAA for Firms Program funds to its national network of 11 Trade Adjustment Assistance Centers. [193] During FY 2018, EDA certified 82 petitions for eligibility and approved 98 adjustment proposals. [194]

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. [195] Certain additional products (about 1,500 products) are allowed duty-free treatment only when originating from countries designated as least-developed beneficiary developing countries (LDBDCs). [196] The President’s authority to provide duty-free treatment under the GSP program, which had expired on December 31, 2017, was reauthorized on March 23, 2018, with retroactive coverage from January 1, 2018, through December 31, 2020. The renewal also made technical modifications to procedures for competitive need limitations (CNLs) and waivers. [197]

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. [198] 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. [199]

Countries are designated as “beneficiary developing countries” under the GSP program by the President. However, 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. [200] Complaints about such violations (“country practice allegations”) are usually brought to the attention of the interagency GSP subcommittee by a petition process; the subcommittee may launch a country practice review in response.

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. Rather, 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. [201] 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. [202] 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 ($185 million in 2018). [203]

In addition, the legislation to reauthorize the GSP program in 2006 provided that a CNL waiver should be revoked under certain circumstances: (1) if it has been in effect on a product for five or more years, and (2) 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. [204]

The following developments with respect to the U.S. GSP program occurred in 2018: [205]

U.S. imports under GSP preferences rose 10.7 percent, from $21.3 billion in 2017 to $23.6 billion in 2018 (table 2.4). These imports 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 2018 (total imports claimed under GSP as a share of eligible imports from GSP countries) was 49.3 percent, slightly down (0.6 percentage points) from 2017.

India was the leading source of imports entered under the GSP program in 2018, followed by Thailand and Brazil, continuing a pattern established in 2011 (appendix table A.17). These three countries together accounted for 55.6 percent of all U.S. imports under GSP in 2018, while the top five countries (including Indonesia and Turkey) accounted for 73.2 percent of GSP imports. U.S. imports from four of the top five countries increased in 2018 over the previous year; the exception was Brazil.

Table 2.4 U.S. imports for consumption from GSP beneficiaries, 2016–18

Item 2016 2017 2018
Total imports from GSP beneficiaries (million $) 201,315 214,626 237,541
Total imports under GSP (million $) 19,074 21,332 23,617
Imports under LDBDC provisions (million $) a 19,016 21,215 23,476
Imports under non-LDBDC provisions (million $) b 58 117 140
Imports under GSP (as a share of all imports from GSP countries) 9.5 9.9 9.9
Imports under GSP (as a share of all imports eligible for GSP) 48.6 49.9 49.3

Source: USITC DataWeb/USDOC, May 23, 2019.

Note: Because of rounding, figures may not add up to totals shown. LDBDC = least-developed beneficiary developing country.

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.

In 2018, the chemicals sector was again the top sector for imports claiming eligibility under GSP, up $724 million, an increase of 15.9 percent from 2017 (appendix tables A.18 and A.19). The minerals and metals sector ranked second in 2018, as it did in 2017, but imports claiming GSP decreased $399 million, a drop of 9.5 percent. Agricultural products made up the third-largest sector in 2018 and saw imports claiming GSP increase $448 million (13.6 percent) in 2018 over 2017. Energy-related products under GSP increased 872.2 percent, by far the largest percentage increase in 2018.

Among the top 15 U.S. imports under GSP in 2018, 10 imports increased in value over 2017 levels and 5 decreased in value from 2017 levels (appendix table A. 20). Gold jewelry imports were the leading GSP import product by value, but dropped 0.9 percent from 2017. Turkey, Indonesia, and South Africa accounted for 78.0 percent of this GSP trade. [214] Luggage and travel goods, recently added to GSP eligibility for all beneficiaries, were the second GSP import by value, increasing 154.5 percent over 2017. (Previously these were eligible just for LDBDCs and AGOA beneficiary countries.) [215] Ferrochromium was the third-highest GSP import by value, sourced primarily from South Africa. [216] GSP imports of ferrochromium were the second-highest GSP import in 2017, but dropped 24.0 percent in 2018 from the 2017 amount.

Nepal Trade Preference Program

The Nepal Trade Preferences Act (NTPA) was established under section 915 of the Trade Facilitation and Trade Enforcement Act of 2015. [217] This act entered into effect on December 30, 2016. [218] The Nepal Trade Preference Program, which was launched under the authority of NTPA, was designed to help Nepal’s economic recovery following a 2015 earthquake. [219] It is scheduled to expire on December 31, 2025. [220]

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 NTPA, in the African Growth and Opportunity Act (AGOA), and in GSP statutes. [221] NTPA originally gave Nepal duty-free access to the U.S. market for goods classified under 66 HTS 8-digit tariff lines, including certain luggage and flat goods in HTS chapter 42, 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. [222] Nepal is eligible for duty-free treatment on 77 tariff lines, 31 of which are also duty free under GSP. [223] However, NTPA’s rules of origin differ from GSP’s; i.e., under NTPA, U.S. content may be counted towards part of the 35 percent value added requirement. [224]

In 2018, total U.S. imports from Nepal were $98.6 million; imports from Nepal under GSP were $9.2 million; and imports under NTPA were $3.1 million. Imports under NTPA represented 3.1 percent of total imports from Nepal, a slight rise from 2.6 percent in 2017, the first year of the program (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 rose from 59.1 percent in 2017 to 62.2 percent in 2018.

Table 2.5 U.S. imports for consumption from Nepal, 2016–18

Item 2016 2017 2018
Total imports from Nepal (thousand $) 88,298 91,744 98,628
Imports under GSP (thousand $) 9,438 8,567 9,176
Imports under NTPP (thousand $) 0 2,367 3,098
Share of total imports from Nepal:
Imports under GSP (percent) 10.7 9.3 9.3
Imports under NTPP (percent) 0.0 2.6 3.1
Imports under NTPP and GSP as a share of all NTPP-eligible imports (percent) b ( a ) 59.1 62.2

Source: USITC DataWeb/USDOC (accessed May 23, 2019).

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

b NTPP-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 “NP” in parentheses. The symbol “NP” indicates that Nepal is eligible for duty-free treatment with respect to all articles listed in the designated provisions. Includes imports for which preferential tariff treatment was claimed for NTPP-eligible goods by U.S. importers under GSP, for HTS rate lines with special duty symbols “A,” “A*”, or “A+.”

Africa 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. [225] In particular, AGOA provides duty-free access to the U.S. market for all GSP-eligible products, and for more than 1,800 additional qualifying HTS 8-digit tariff-line items that are eligible under AGOA only. While AGOA’s eligibility criteria [226] and rules of origin [227] are similar to those of the GSP program, AGOA beneficiary countries are exempt from the GSP competitive need limitations (CNLs). [228] 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. [229] The current AGOA expiration date is September 30, 2025. [230]

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. In 2018, 40 SSA countries were eligible for AGOA benefits. [231] Of these countries, 28 were eligible for AGOA textile and apparel benefits for all or part of 2018. [232] Of the countries in the latter group, all but one (South Africa) were also eligible for additional textile and apparel benefits intended for lesser-developed beneficiary countries (LDBCs) for all or part of 2018. [233] Notable among these extra benefits is the third-country fabric provision for LDBCs. This provision provides duty-free treatment for certain apparel articles cut and sewn in designated beneficiary countries from non-U.S., non-AGOA fabrics as long as additional eligibility criteria are satisfied. [234] Meanwhile, as a result of the 2018 annual review of AGOA eligibility, Mauritania’s AGOA eligibility was terminated effective January 1, 2019; 39 SSA countries remain eligible for AGOA benefits in 2019. [235]

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. [236] On March 21, 2017, the U.S.-based 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 stated 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. The petition further contended that the decision was a violation of the AGOA eligibility criteria, which included actions by beneficiary countries to eliminate barriers to U.S. trade and investment.

In response to the petition, on June 20, 2017, USTR initiated an out-of-cycle review of AGOA eligibility for Rwanda, Tanzania, and Uganda, but not Kenya. USTR explained that Kenya had taken steps to reverse the tariff increases, effective July 1, 2017, and had pledged not to ban imports of used clothing. [237] During the course of the out-of-cycle review, Tanzania and Uganda took similar actions to address the concerns raised in the petition. [238] Therefore, on March 29, 2018, the President determined that Tanzania and Uganda were meeting AGOA’s eligibility requirements. [239] On July 30, 2018, the President determined that Rwanda was no longer in compliance with AGOA’s eligibility requirements, and issued a proclamation suspending the application of duty-free treatment for all AGOA-eligible goods in the apparel sector from Rwanda, effective July 31, 2018. [240]

In 2018, the value of U.S. imports that entered free of duty from beneficiary countries under AGOA (including imports under GSP) was $12.0 billion, an 11.5 percent decline from 2017. These imports accounted for 48.8 percent of total imports from AGOA countries in 2018. In 2018, imports entering the United States exclusively under AGOA (excluding those entered under GSP) were valued at $10.8 billion, accounting for 43.9 percent of U.S. imports from AGOA countries (table 2.6). [241]

Table 2.6 U.S. imports for consumption from AGOA beneficiaries, 2016–18

Item 2016 2017 2018
Total imports from AGOA countries (million $) 19,997 24,876 24,527
Imports under AGOA (million $) a 10,326 13,545 11,972
Imports under AGOA, excluding GSP (million $) b 9,140 12,230 10,777
Imports under AGOA (as a share of all imports from AGOA countries) 51.6 54.4 48.8
Imports under AGOA (as a share of all imports eligible for AGOA) 86.8 88.6 85.8

Source: USITC DataWeb/USDOC (accessed May 23, 2019).

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.

The decline in U.S. imports under AGOA in 2018 compared to 2017 mainly reflected a decline in the value and quantity of imports of crude petroleum and passenger motor vehicles under the program. [242] The value of U.S. crude petroleum imports under AGOA fell 15.1 percent ($1.3 billion) from 2017 to 2018, and the quantity fell 36.2 percent (59.8 million barrels). [243] The value of U.S. imports of passenger motor vehicles under AGOA fell 54.6 percent ($644.0 million), and the quantity fell by 58.0 percent (25,043 units) (appendix A.22). [244] Nigeria, one of the top petroleum-producing countries in SSA, experienced significant declines in the value and quantity of its exports of crude petroleum to the United States under AGOA. Meanwhile, South Africa, the major SSA exporter of passenger motor vehicles to the United States, experienced considerable declines in the value and quantity of their exports of passenger motor vehicles to the United States under AGOA (appendix tables A.21 and A.22).

The major suppliers of duty-free U.S. imports under AGOA in 2018 were Nigeria (40.5 percent of total AGOA imports), Angola (18.1 percent), South Africa (13.8 percent), Chad (5.6 percent), Kenya (4.3 percent), and Ghana (3.1 percent). These six countries accounted for 85.3 percent of total imports by value under AGOA, a drop of 6.3 percentage points from 2017, mainly driven by a decline of U.S. imports under AGOA from Nigeria, Angola, and South Africa (appendix table A.21). [245]

Crude petroleum continued to be the leading import under AGOA. It accounted for 69.9 percent of the total value of AGOA imports in 2018, a 2.7 percentage point decline from 72.6 percent in 2017. The decline in value of U.S. crude petroleum imports under AGOA was mainly due to the decline of U.S. imports of such products from Nigeria.

Apparel products and passenger motor vehicles were two other major U.S. imports under AGOA. They accounted for 11.2 percent and 5.0 percent of the value of total AGOA imports in 2018, respectively (appendix table A.22). [246] U.S. passenger motor vehicle imports under AGOA came exclusively from South Africa, and they declined in value from $1.2 billion in 2017 to $534.5 million in 2018. The decline was driven in part by a fall in U.S. sales of imported C-Class Mercedes, which tend to come from South Africa and were mainly produced by Mercedes-Benz South Africa (MBSA). [247] U.S. imports of apparel products under AGOA were valued at $1.2 billion in 2018, an 18.4 percent increase from $1.0 billion in 2017. [248] The increase was mainly due to an increase in U.S. imports under AGOA from the major apparel-producing countries in SSA, such as Kenya, Lesotho, Madagascar, Ethiopia, and Ghana. [249]

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. [250] The 17th annual AGOA Forum was held in Washington, DC, on July 11–12, 2018. The theme of the forum was “Forging New Strategies for U.S.-Africa Trade and Investment.” Participants from the U.S. side included senior government officials, members of Congress, and private sector and civil society representatives. Participants from the African side were mainly trade and commerce ministers from the AGOA-eligible countries, heads of African regional economic communities, and representatives from the private sector and civil society. During the forum, U.S. Trade Representative Robert Lighthizer outlined the administration’s trade policy approach towards Africa, and announced the administration’s intention to establish a bilateral free trade agreement with an as-yet-undetermined African country. The ultimate goal, according to the Trade Representative, is to have a network of free trade agreements which could serve as building blocks to an eventual African continental trade partnership with the United States. [251]

Caribbean Basin Economic Recovery Act

The Caribbean Basin Economic Recovery Act (CBERA) was enacted in 1983 as part of the United States’ 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. [252] 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. [253] 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. [254] 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. [255] In the section that follows, the term CBERA refers to CBERA as amended by the CBTPA.

At the end of 2018, 17 countries and dependent territories were designated eligible for CBERA preferences, [256] and 8 of those countries were designated eligible for CBTPA preferences. [257] 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, Saint Kitts and Nevis, and Saint Vincent and the Grenadines, under CBTPA; [258] and Sint Maarten and Suriname, under both CBERA and CBTPA. [259]

In 2018, the value of U.S. imports under CBERA increased by 9.1 percent to $1.7 billion from $1.5 billion in 2017 (table 2.7). The top five imports under CBERA in 2018—methanol (HTS subheading 2905.11), T-shirts (subheadings 6109.10 and 6109.90), and sweaters (subheadings 6110.20 and 6110.30)—comprised 65 percent of imports under the program (appendix table A.24). The largest increase in the value of U.S. imports under CBERA was in cotton T-shirts (subheading 6109.90), which increased by 28.9 percent to $106.2 million, primarily due to a 38.9 percent rise in the quantity imported. The next-largest increase in import value was in methanol, which rose by 18.4 percent to $447.7 million, despite a 3.4 percent drop in the quantity imported. However, the value of a number of U.S. imports under the program declined in 2018. U.S. imports of polystyrene declined by $13.8 million (17.6 percent), mostly because of a decrease in quantity imported of 12.2 percent; and U.S. imports of crude petroleum declined by $19.6 million (36.6 percent), mostly due to a decrease in quantity imported of 27.6 percent. [260]

Table 2.7 U.S. imports for consumption from CBERA/CBTPA beneficiaries, 2016–18

Item 2016 2017 2018
Total imports from CBERA countries (million $) 5,320 5,798 6,071
Total imports under CBERA/CBTPA (million $) 1,410 1,544 1,685
Imports under CBTPA (million $) a 931 928 1,000
Imports under CBERA, excluding CBTPA (million $) b 479 617 685
Imports under CBERA (as a share of all imports from CBERA countries) (%) 26.5 26.6 27.8
Imports under CBERA (as a share of all imports eligible for CBERA) (%) 72.2 67.1 65.9

Source: USITC DataWeb/USDOC (accessed March–June 2019).

Note: The data for U.S. imports under CBERA include U.S. imports under CBERA as amended by both CBTPA and the HOPE and HELP Acts. In previous Year in Trade reports, trade data under the HOPE and HELP Acts were reported and analyzed separately only in the “Haiti Initiatives” section. Thus, numbers from the previous report are not comparable to the numbers in the table above. Beginning this year, USITC staff have tracked Census data of textile and apparel imports under HOPE/HELP at the shipment level. These data are cross-checked against aggregate figures from USDOC’S Office of Textiles and Apparel (OTEXA), which is part of the International Trade Administration, to ensure an accurate reporting of HOPE/HELP utilization rates.

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.

U.S. imports under CBERA accounted for 27.8 percent of all U.S. imports from CBERA countries in 2018 and for 65.9 percent of the U.S. imports from CBERA countries that were eligible for CBERA trade preferences. Haiti was the leading supplier of U.S. imports under the program in 2018, accounting for 56.8 percent of the total value. Haiti is the only supplier of apparel under CBERA. Trinidad and Tobago was the second leading supplier of U.S. imports under CBERA in 2018, accounting for 32.6 percent of the total value. Trinidad and Tobago was the sole supplier of several top U.S. imports under CBERA, including methanol, petroleum products, and melamine. Haiti and Trinidad and Tobago together supplied about 90 percent of U.S. imports under CBERA preferences. Jamaica and The Bahamas were the third and fourth leading suppliers, accounting for 5.0 and 3.9 percent of the total, respectively (appendix table A.23).

Haiti Initiatives

Starting in 2006, several amendments to CBERA have expanded and enhanced the trade benefits available to Haiti. These benefits give Haitian apparel producers more flexibility in sourcing yarns and fabrics beyond the preferences available under CBTPA, which rely on the use of U.S. yarns only. The Haitian Hemisphere Opportunity through Partnership Encouragement Act of 2006 (HOPE Act) [261] and of 2008 (HOPE II Act) [262] (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. [263] 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) for Haiti that were established under CBTPA and the HOPE Acts and extended them through September 30, 2020. [264] The Trade Preferences Extension Act of 2015 extended the HOPE/HELP Acts preferences through September 30, 2025. [265] To date, there have been no other changes to the HOPE/HELP Acts, and duty-free access to the U.S. market remains a major incentive for U.S. firms to import apparel from Haiti. [266]

Nearly all (97.0 percent) U.S. imports of apparel from Haiti entered duty-free under trade preference programs in 2018 (table 2.8). Existing trade preferences under the CBTPA provisions and the HOPE Acts allow Haitian producers and U.S. buyers to use both U.S. yarns and fabrics, and yarns and fabrics of any origin, to take advantage of duty-free benefits. [267] Slightly more than one-quarter (27.4 percent) of total U.S. imports of apparel from Haiti ($254.5 million) entered under CBTPA provisions in 2018. The share entering under CBTPA has been falling steadily since 2014, reflecting a continued shift of U.S. apparel imports from Haiti from entering under CBTPA provisions to entering under the HOPE/HELP Acts. [268] This decline in the utilization of CBTPA preferences may be attributed not only to the more flexible rules of origin offered under HOPE/HELP but also to CBTPA’s approaching expiration on September 30, 2020, given that the HOPE/HELP Acts do not expire until September 30, 2025. Between 2017 and 2018, the value of U.S. imports of apparel entering under the HOPE/HELP Acts rose 11.9 percent, from $577.0 million to $645.5 million. These imports represented nearly 70 percent of total U.S. apparel imports from Haiti, up from 67 percent in 2017 and 63 percent in 2016.

Table 2.8 U.S. general imports of apparel from Haiti, 2016–18

Item 2016 2017 2018
Total apparel imports from Haiti (million $) 848.5 862.1 928.1
Apparel imports under a trade preference program (million $) 842.9 853.8 900.0
CBERA/CBTPA (million $) 307.9 276.8 254.5
HOPE and HELP Acts (million $) 535.0 577.0 645.5
Share of total apparel imports from Haiti: (Percent)
Apparel imports under a trade preference program (%) 99.3 99.0 97.0
CBERA/CBTPA (%) 36.3 32.1 27.4
HOPE and HELP Acts (%) 63.1 66.9 69.6

Source: USITC DataWeb/USDOC (accessed March–June 2019).

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 March–June 2019).

Because Haiti shares a border with the Dominican Republic on the island of Hispaniola, Haiti’s apparel industry has been able to benefit from the Dominican Republic’s infrastructure, including more developed port facilities through which it can ship apparel to the United States. [269] Haiti also exclusively benefits from rules that allow and encourage co-production with the Dominican Republic. [270] This allows companies to rely on Haiti for the labor-intensive assembly operations while placing capital investments such as knitting, dyeing, or cutting machinery in the Dominican Republic, where commercial contracts are more reliable and access to adequate financing and insurance is less of a concern. [271] Several Dominican companies are major investors in industrial parks in Haiti. [272] Firms from South Korea, Sri Lanka, and Taiwan have also invested in Haiti’s apparel production and in the industrial parks that support that industry. Several Asian-based apparel manufacturers, including Hansae and S&H Global (South Korea), MAS Akansyel (Sri Lanka), and Everest (Taiwan), plan to expand their manufacturing operations in Haiti and add additional sewing jobs. [273]

Other companies have been more reluctant to make such commitments in Haiti. Several industry representatives have commented that uncertainty around the implementation of CBTPA and HOPE/HELP—namely, the programs’ relatively short-term past extensions and revolving expiration dates—has hindered long-term investments and plans for expanded sourcing in Haiti. [274]

Top of the page

Chapter 3 The World Trade Organization

This chapter covers developments in 2018 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. [275] The chapter also summarizes developments in major WTO dispute settlement cases during the year.

Meetings and Agreements

Multilateral Trade Negotiations

In October 2018, the WTO Director-General Roberto Azevêdo reported to an informal meeting of the Trade Negotiations Committee and WTO heads of delegations that little progress had been made in trade negotiations since the Eleventh WTO Ministerial Conference in December 2017. He asked members to continue to work in all areas of negotiations, noting that only the members themselves could drive issues forward. [276]

Beyond multilateral trade negotiations in the WTO under the Doha Development Agenda (DDA), the WTO Director-General highlighted increased discussion in his consultations with members over the functioning of the multilateral trade system itself, where some members saw distortions in trade practices that might be checked through WTO reform or modernization efforts. He said in his address to the full WTO membership in December 2018 that members need to work to ease tensions and respond to systemic issues. [277]

General Council

At the WTO General Council session in July 2018, members agreed to hold the Twelfth WTO Ministerial Conference, June 8–11, 2020, in Astana, Kazakhstan. [278]

Work Programs, Decisions, Waivers, and Reviews

At the year-end meeting of the General Council, delegates reviewed a variety of work programs, including the work programs on electronic commerce, small economies, and Aid for Trade. They also reviewed progress on the initiative on the development assistance aspects of cotton; reviewed the report by the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) on the functioning of the compulsory licensing system for medicines; and reviewed waivers, as described below.

Work Program on Electronic Commerce

The Chair of the General Council reported on the periodic reviews held under the Work Program on Electronic Commerce during 2018. These reviews discussed, in particular, the moratorium on imposing customs duties on electronic transmissions. At the Eleventh WTO Ministerial conference held in December 2017, members agreed to extend this moratorium for two years while they worked toward possible future negotiations on electronic commerce (e-commerce). They also discussed the possible establishment of a WTO institutional structure, such as a working group, to provide a single WTO forum to help focus future e-commerce discussions. [279] Separate but parallel discussions among a subset of WTO members in 2018 addressed possible future e-commerce negotiations under the Electronic Commerce Initiative (see the “Electronic Commerce Initiative” section later in this chapter).

Work Program on Small Economies

The Committee on Trade and Development reported on meetings held during 2018 in keeping with its standing General Council mandate. These included dedicated sessions held in June and November 2018, which focused on the factors that contribute to higher trade costs faced by small and vulnerable economies. They also discussed best practices and policy approaches to mitigate the effect of each factor. [280]

Aid for Trade Initiative

The WTO-led Aid for Trade initiative seeks to mobilize resources to address the trade-related constraints identified by developing and least-developed countries. [281] The Committee on Trade and Development carries out its activities under the Aid for Trade initiative based on a two-year work program. [282] On May 7, 2018, the Committee agreed on its work program for Aid for Trade for the 2018–19 period. [283] The work program’s primary focus is the Aid for Trade Global Review in 2019––the seventh since 2007––that will review progress made in subjects such as aid-for-trade financing for trade policy and regulation, trade development, trade-related infrastructure, increasing productive trade capacity, trade-related adjustment, and other trade-related needs. [284]

Development Assistance Aspects of Cotton

On behalf of the WTO Director-General, the Deputy DG reported to the General Council on the development assistance aspects of cotton, as called for originally under the 2004 Doha Work Program [285] and reinforced subsequently by decisions taken at the ministerial conferences held in 2013 and 2015. [286] In particular, he reported on progress made under the so-called Cotton Initiative that looks to better coordinate trade negotiations affecting cotton, such as domestic support and export subsidy programs in developed countries, with the development aspects of cotton. Examples of the latter include cotton-specific assistance channeled by the international development community to the less developed cotton producers through bilateral, multilateral, and regional efforts. [287] In addition to increases in active cotton-specific development assistance in 2018, the Deputy DG reported that discussions and work taking place under the Director-General’s Consultative Framework Mechanism on Cotton have become more “methodical.” [288]

Annual Review of the TRIPS Special Compulsory Licensing System

The General Council noted in the annual report of the TRIPS Council [289] covering the Special Compulsory Licensing System, an amendment to the WTO TRIPS Agreement that entered into force on January 23, 2017. [290] The amendment grew out of a 2005 decision by WTO members to waive a particular restriction on compulsory licensing found in the TRIPS Agreement. Under TRIPS, typically a member country that produces generic medicines under compulsory licenses must sell those medicines only into its own domestic market. The amendment allows generic versions of patented medicines to be produced under compulsory licenses exclusively for export to countries that cannot manufacture the needed medicines themselves. [291] All WTO members are eligible to import medicines under this additional compulsory licensing mechanism, although industrial countries have elected not to use it for imports. [292] The waiver aims to help developing and least-developed countries import needed medicines when faced with public health problems, even if they obtain the medicines from suppliers in another country producing under compulsory licenses. [293]

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

In 2018, the General Council adopted four draft decisions that introduced a number of changes, made respectively in the Harmonized System’s 2002, 2007, 2012, and 2017 versions, into the WTO Schedule of Tariff Concessions. [294] The council also conducted its annual review of waivers under Article IX:4 of the WTO Agreement, including waivers granted to the United States for the Caribbean Basin Economic Recovery Act (through December 31, 2019), African Growth and Opportunity Act (through September 30, 2025), Former U.S. Trust Territory of the Pacific Islands (through December 31, 2026), and trade preferences granted to Nepal (through December 31, 2025). [295] Under the terms of the waivers, the United States is required to submit an annual report to the General Council covering trade under these programs in the previous year. [296] These waivers allow the United States to continue to provide preferential trade access to the above partner economies.

WTO Membership

In 2018, WTO membership remained at 164. [297] In addition, the WTO counted 23 observer governments, as well as numerous observer institutions. According to the WTO Director-General, 22 of the 23 observer governments were at some stage in the process of WTO accession at yearend 2018. [298] Of these 22 governments, USTR considered 11 to be engaged [299] in the accession process during the year, while the remaining 11 either were dormant [300] or had not yet begun the process [301] during 2018. [302]

Agreement on Trade Facilitation

The WTO Agreement on Trade Facilitation (TFA) aims to expedite the movement, clearance, and release of goods, including goods in transit. It sets out measures for cooperation on trade facilitation and customs compliance issues between customs authorities and other appropriate authorities. In addition, the agreement contains provisions for technical assistance and capacity building to facilitate trade. [303] The TFA entered in force on February 22, 2017, after it was ratified by the necessary two-thirds of the WTO membership. [304] The Committee on Trade Facilitation, established as part of the agreement, held its first session May 16, 2017. The committee receives updates on ratifications and notifications under the TFA, as well as on activities of the WTO Trade Facilitation Agreement Facility. [305]

The Committee on Trade Facilitation held four sessions in 2018. Committee discussions during the year focused on notifications, administration, and implementation of the agreement. Members also exchanged experiences on how national committees address trade facilitation, transit, and other topics; possible regional approaches to trade facilitation; and subjects such as authorized economic operators, use of a single customs window, and advanced customs rulings. [306]

By November 30, 2018, 140 countries had ratified the TFA, representing over 85 percent of WTO membership. [307] Near yearend 2018, submission of category A, B, and C notifications also rose to 114, 71, and 60, respectively. [308]

Plurilateral Agreements Already in Force

Agreement on Trade in Civil Aircraft [309]

The Agreement on Trade in Civil Aircraft entered into force on January 1, 1980 as part of the Uruguay Round agreements. During the process of establishing the WTO in 1995, the Agreement on Trade in Civil Aircraft was one of two plurilateral agreements carried out that committed signatories to core disciplines applicable only to those parties signing the agreement. [310] In 2018, there were 32 signatories to the Agreement on Trade in Civil Aircraft, of which 20 European Union (EU) member states are signatory governments in their own right. The agreement eliminates import duties on all civil (i.e., nonmilitary) aircraft, as well as on other related products covered by the agreement. Examples of covered products are civil aircraft engines and their parts and components; components and sub-assemblies of civil aircraft; and flight simulators and their parts and components. [311] In 2018, the WTO Committee on Trade in Civil Aircraft held an informal meeting in March, as well as a formal meeting in October where signatory countries adopted the annual report for 2018. [312] The Committee continued to discuss whether and how to update the tariff classifications of the list of products covered by the agreement. [313]

Agreement on Government Procurement [314]

The initial Agreement on Government Procurement (GPA) was signed in 1994 as a plurilateral agreement under the WTO, administered by the WTO Committee on Government Procurement. The initial agreement had 19 parties, including the United States. [315] The agreement aims to open bidding to all suppliers from GPA parties on government procurement contracts covering goods, services, and construction services.

Once the agreement came into effect, the parties opened negotiations to improve its provisions, leading to the Revised Agreement on Government Procurement in 2012. Signed by the initial 19 parties, [316] the new agreement covered 47 WTO members overall. [317] On October 17, 2018, the parties approved the accession of Australia to the GPA. Australia would officially become a party to the GPA 30 days after submitting its formal instrument of accession to the WTO Director-General. [318] At the November 27, 2018, meeting of the committee, the parties approved in principle the final market-access offer by the United Kingdom in its own right in preparation for Brexit. The offer was intended to replicate the EU’s current GPA schedule of commitments that the UK accepts as a member state of the European Union. [319]

Expansion of the Information Technology Agreement

The Information Technology Agreement (ITA) [320] 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. [321] It was concluded by 29 participants at the December 1996 Singapore Ministerial Conference. [322] In 2018, no new members signed onto the ITA, which now totals 53 participants (accounting for 82 WTO members), including the United States. [323]

In June 2012, a subset of ITA participants initiated talks to expand product coverage under the ITA, given advances made in information technology products since the original ITA was signed. [324] By July 2015, following 17 rounds of negotiations, participants agreed to eliminate tariffs on an additional 201 products. [325] New products covered by the ITA expansion include new-generation semiconductors, semiconductor manufacturing equipment, optical lenses, Global Positioning System (GPS) navigation equipment, and medical equipment such as magnetic resonance imaging products and ultrasonic scanning apparatus. To date, more than 50 WTO members, accounting for about 90 percent of world trade in products covered under the expansion, have confirmed their acceptance of tariff concessions. [326]

WTO members that participated in the negotiations to expand the ITA implemented their third set of tariff reductions on July 1, 2018. [327] The Committee of Participants on the Expansion of Trade in Information Technology Products met twice in 2018. These meetings focused on two implementation issues concerning India and China. [328] In addition, under the work program on nontariff measures, an informal group of 15 members focused on conformity assessment procedures linked to test results, e-labeling, and transparency. [329]

Selected Plurilateral Agreements under Discussion

This section covers negotiations on fisheries subsidies and exploratory talks on electronic commerce, which were active during 2018. There have been no new developments in the negotiations on an environmental goods agreement since 2016. [330]

Negotiations on an Agreement on Fisheries Subsidies [331]

WTO negotiations on fisheries subsidies were initially launched in November 2001 at the Fourth WTO Ministerial Conference in Doha, Qatar, and further elaborated in December 2005 at the Sixth Ministerial Conference in Hong Kong, China. The aim of these negotiations was to improve WTO disciplines on fisheries subsidies; in 2005, it was expanded to include work toward prohibiting certain forms of fisheries subsidies that contribute to overfishing and overcapacity.

In September 2015, world leaders adopted the United Nations’ Sustainable Development Goals (SDGs), and in doing so gave renewed impetus to the WTO fisheries negotiations. In particular, SDG target 14.6 sets a target date of 2020 for eliminating subsidies that contribute to illegal, unreported, and unregulated (IUU) fishing, as well as prohibits certain forms of subsidies that contribute to overcapacity and overfishing. SDG target 14.6 also includes special and differential treatment for developing and least-developed countries as an integral part of these negotiations. [332]

Within the WTO Negotiating Group on Rules (Negotiating Group), WTO members discussed proposals and exchanged views on a possible agreement to discipline fishing subsidies in 2016 and 2017. [333] The chair circulated a document––a so-called compilation matrix [334] ––on July 28, 2017, reflecting seven proposals put forward by various negotiating groups: (1) New Zealand, Iceland, and Pakistan; (2) the EU; (3) Indonesia; (4) the African, Caribbean, Pacific (ACP) Group of States; (5) a Latin American group composed of Argentina, Colombia, Costa Rica, Panama, Peru, and Uruguay; (6) the Least-Developed Countries (LDC) Group; and (7) Norway. [335] The matrix organized the seven proposals into the following six categories: (1) general provisions; (2) prohibitions; (3) standstill; [336] (4) special and differential treatment, and technical assistance and capacity building; (5) transparency; and (6) transitional provisions and institutional arrangements/review. [337] Based on the compilation matrix, the Negotiating Group on Rules produced a working document that compiled definitions, scope, prohibited subsidies, and exceptions into a single document. [338]

In the December 2017 Ministerial Decision on fisheries subsidies, [339] members agreed to continue negotiating a fisheries agreement with a view to adoption by the Ministerial Conference in 2019. In early 2018 members discussed how to organize work on fisheries subsidies, [340] with the Negotiating Group opening consultations on March 28, 2018. [341] Members agreed on a May–July 2018 work program to include the following sets or clusters of meetings: May 14–17, to address subsidies that contribute to overcapacity and overfishing; June 11–14, to discuss fishing subsidies that affect overfished stocks; and July 23–25, to focus on subsidies that relate to IUU fishing, with all three clusters of meetings addressing aspects of special and differential treatment. [342]

The Negotiating Group developed its September–December 2018 work program to support more substantive talks aimed toward actual negotiations. [343] Under the work program, specific topics would be assigned to four so-called Incubator Groups that would meet just before the Negotiating Group’s cluster meetings so as to better inform its discussions. Eighteen topics were developed at the outset of this work program for incubator groups to address. Examples include how to identify harmful subsidy effects on fish stocks and fishing capacity; approaches to “positive” or “nonharmful” subsidies; how to define and determine IUU fishing and overfished stocks; how to distinguish between capacity and overcapacity, and fishing activity from overfishing; aspects of fisheries management, such as regional fisheries management organizations (RFMOs); the applicability of any disciplines established to at-sea activities, on-shore activities, and fishing in high seas areas not under management by an RFMO; the role of outside expertise in developing fisheries disciplines; and overall transparency provisions. [344]

Members opened their September–December 2018 work program on September 17, 2018, with Incubator Group sessions, followed by the Negotiating Group’s first cluster of meetings September 24–28. [345] The next set of meetings started October 30 with Incubator Group meetings, followed by the Negotiating Group’s second cluster of meetings November 5–9, 2018. [346] A third set took place with Incubator Group sessions starting November 27, followed by the Negotiating Group’s third cluster of meetings December 3–7, 2018. [347] During the December 3–7 meetings, the Negotiating Group on Rules agreed to intensify talks on fisheries subsidies in 2019, [348] and set its January–July 2019 work program. [349] The group was expected to move from discussions of the 2018 proposals into negotiations on a consolidated draft text by early 2019. [350]

Electronic Commerce Initiative

The Joint Statement on Electronic Commerce of December 13, 2017, released at the Eleventh WTO Ministerial conference in Buenos Aires, Argentina, set out a focus on addressing electronic commerce and digital trade. Discussions were to run in parallel with the WTO Work Program on Electronic Commerce. [351]

In the statement, like-minded WTO members committed to initiate exploratory work as a group in early 2018 aimed at preparing for future WTO negotiations on trade-related aspects of electronic commerce. The group noted that a primary goal was to take better advantage of the opportunities presented by e-commerce, while also recognizing the role played by the WTO in promoting open, transparent, nondiscriminatory, and predictable regulatory environments to facilitate e-commerce.

During 2018, these WTO Meetings for Exploratory Work on Electronic Commerce occurred nearly monthly, for a total of nine meetings for the year. In these meetings, roughly 80 WTO members exchanged ideas and proposals aimed at opening negotiations on trade-related aspects of e-commerce. Discussions focused on a set of four themes expected to provide the basis for eventual negotiations: (1) enabling digital trade/e-commerce; (2) openness and digital trade/e-commerce; (3) trust and digital trade/e-commerce; and (4) other crosscutting issues. [352]

Dispute Settlement Body

This section gives an overview of the WTO dispute settlement process, as well as information about proceedings during calendar year 2018, particularly those in which the United States was a complaining or responding party. More specifically, it provides (1) a tally of new requests for consultations filed by WTO members during calendar year 2018 under the WTO Dispute Settlement Understanding (DSU); (2) a table that lists the new dispute settlement panels established during calendar year 2018 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 2018, as well as summaries of panel and Appellate Body reports issued during 2018 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 a typical WTO dispute settlement process

Figure 3.1 shows a flowchart of the WTO dispute settlement process. The general steps are as follows: consultations, panel established, panel composition, panel examination, interim review stage, panel report issued to parties, panel report issued to the DSB, possible appeal, DSB adopts panel/appellate report(s), implementation, compensation if non-implementation, and retaliation if no agreement on compensation.

Source: WTO, “ The Process—Stages in a Typical WTO Dispute Settlement Case ” (accessed June 7, 2018).

This section’s summaries of issues and of findings and recommendations in panel and Appellate Body reports are based entirely on information in publicly available documents. Sources include summaries published online by the WTO, summaries included in USTR’s 2019 Trade Policy Agenda and 2018 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 2018 in disputes in which the United States was the complainant or respondent appears in appendix table A.25.

This section focuses on developments during 2018, including panel and Appellate Body reports issued during 2018 and adopted by the Dispute Settlement Body (DSB). With minor exceptions, panel and Appellate Body reports and DSB actions after the close of 2018 will be summarized in the Commission’s report covering 2019. [353] A number of disputes filed before 2018 remained inactive throughout 2018, either at the consultation stage or with a panel established but not composed. With minor exceptions, this report will not discuss those disputes. [354]

Finally, this section focuses only on developments through the panel and Appellate Body stage and does not include matters that arose after the 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 or were finally resolved during 2018, well after the DSB adopted the panel and/or Appellate Body report in the original dispute. One example is a dispute brought by the United States in 2004 against the EU on measures affecting trade in large civil aircraft. The Appellate Body issued a report on this dispute on May 15, 2018, in ongoing compliance proceedings, confirming that the EU and certain EU member states had failed to comply with the earlier WTO determination that found “launch aid”—subsidies from several EU countries to Airbus—to be inconsistent with their WTO obligations. On July 13, 2018, at the request of the United States, arbitration proceedings about the level of countermeasures (suspended in January 2012) to be applied were resumed, with a decision expected in 2019. [355] In another dispute dating back to 2008, the Appellate Body issued a report in December 2018 on compliance proceedings, bringing to a close a dispute about the U.S. dolphin-safe labeling measure affecting the importation, marketing, and sale of tuna and tuna products. [356]

New Requests for Consultations

During 2018, WTO members filed 39 new requests for dispute settlement consultations. This number was significantly higher than the average for the five preceding years and more than double the 17 filed in 2017. Requests filed by three members—the United States (8 requests), China (5), and South Korea (3)—accounted for slightly over 40 percent of the requests filed during 2018. The United States was the named respondent in nearly half the disputes filed during 2018 (in 19 of 39 complaints). China was a distant second, as the named respondent in four disputes. Nearly half the complaints (9) filed against the United States concerned U.S. national security tariffs on steel and aluminum products, and two-thirds of the complaints filed by the United States concerned measures taken by other WTO members in response to the U.S. steel and aluminum tariffs. The issues presented in these disputes are described below. The 39 new requests included 25 different named WTO members, either as a complainant or named respondent or in both capacities. [357]

As of the end of 2018, seven of the eight disputes filed by the United States during 2018 were at the panel stage, with the panel composed in one of those disputes. The eighth was still at the consultation stage. [358] As of the end of 2018, 14 of the 19 disputes filed against the United States during 2018 had advanced to the panel stage, including two in which a panel had also been composed. The remaining five disputes were still in the consultation phase. Four of the disputes, two filed by the United States against Canada and Mexico, respectively, and one each filed by Canada and Mexico against the United States, were terminated in May 2019 after the parties reached a mutually agreed solution.

Disputes Filed by the United States

In DS541, filed in March 14, 2018, the United States requested consultations with India concerning certain alleged export subsidy measures. The United States claimed that the measures appear to be inconsistent with Articles 3.1(a) and 3.2 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement). When consultations failed to resolve the dispute, the United States requested the DSB to establish a panel. The DSB established a panel on March 14, 2018, and the Director-General composed the panel on July 23, 2018. On December 3, 2018, the chair of the panel informed the DSB that the panel’s work had been delayed due to lack of available resources in the Secretariat, and that the panel did not expect to issue its final report to the parties before the second quarter of 2019. [359] In the dispute the United States challenged several Indian export subsidy programs: (1) the Export Oriented Units Scheme and sector-specific schemes, including Electronics Hardware Technology Parks Scheme; (2) the Merchandise Exports from India Scheme; (3) the Export Promotion Capital Goods Scheme; (4) Special Economic Zones; and (5) a duty-free imports for exporters program. [360]

The U.S. Trade Representative filed dispute DS542 after having determined, under section 301(b) of the Trade Act of 1974, that certain acts, policies, and practices by China in the form of certain specific aspects of China’s technology regulations are unreasonable or discriminatory and burden or restrict U.S. commerce. [361] The United States requested consultations with China on March 23, 2018, concerning certain measures pertaining to the protection of intellectual property rights. The United States claimed that China’s measures appear to be inconsistent with Articles 3, 28.1(a) and (b), and 28.2 of the TRIPS Agreement. After consultations failed to resolve the matter, the United States asked the DSB to establish a panel, and the DSB did so on November 21, 2018. The Director-General composed the panel on January 16, 2019. [362] In a press release issued at the time the United States filed the dispute, the Trade Representative stated that China appears to be breaking WTO rules “by denying foreign patent holders, including U.S. companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends” and “by imposing mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology.” [363]

The United States filed the remaining six disputes—DS557, DS558, DS559, DS560, DS561, and DS566—in response to measures imposed by Canada, China, the EU, Mexico, Turkey, and the Russian Federation, respectively, challenging the tariffs each WTO member imposed in response to U.S. actions on trade in aluminum and steel. [364] The United States claimed that the measures appear to be inconsistent with Articles I:1, II:1(a) and II:1(b) of the General Agreement on Tariffs and Trade (GATT) 1994. After consultations failed to resolve the disputes, the United States requested the establishment of a panel in each dispute, and the DSB established panels in DS557, DS558, DS559, and DS560 on November 21, 2018; a panel in DS566 on December 18, 2018; and a panel in DS561 on January 28, 2019. [365] The United States stated that it had imposed the tariffs under section 232 of the Trade Expansion Act of 1962 to protect U.S. national security interests. [366] By agreement of the parties, two of these disputes, DS557 and DS560, were terminated in May 2019 after the United States reached mutually agreed solutions with Canada and Mexico, respectively. [367]

Disputes in Which the United States Was the Named Respondent

Nine of the 19 disputes filed against the United States concerned U.S. measures imposed by the President on certain steel and aluminum products under his section 232 national security authority. [368] The complaining parties in the nine disputes claimed (with some differences between them) that the U.S. measures appeared to be inconsistent with certain provisions of the Agreement on Safeguards and with Articles I, II, X, XI, and XIX of GATT 1994. After consultations failed to resolve the disputes, the complaining WTO members requested the establishment of separate panels to address their individual disputes. The DSB established individual panels in DS544, DS548, DS550, DS551, DS552, DS554, and DS564 on November 21, 2018, and established a panel in DS547 (India) and in DS556 (Switzerland) on December 4, 2018. [369] As indicated above, two of those disputes, brought by Canada and Mexico, respectively, were terminated in May 2019 as part of the mutually agreed solution reached by the United States, Canada, and Mexico. [370]

Three of the disputes, one by China and two by South Korea, challenged U.S. safeguard measures imposed by the President in February 2018 on imports of crystalline silicon photovoltaic products and large residential washers. Each of those disputes claimed that the U.S. measures are inconsistent with certain U.S. obligations under the Safeguard Agreement and Article XIX of GATT 1994. [371]

The remaining seven requests for consultations were filed by Vietnam, South Korea, China, and Venezuela. Two of the requests related to U.S. countervailing duty and antidumping measures. First, in DS536, Vietnam requested consultations with the United States concerning certain antidumping measures on fish fillets from Vietnam and other U.S. legal instruments. Vietnam claimed that the measures appear to be inconsistent with certain provisions in Articles 1, 2, 6, 9, 11, and 17 and Annex II of the Antidumping Agreement; with Articles I, VI, and X of GATT 1994; with Articles 3, 19, and 21 of DSU; with Article XVI:4 of the WTO Agreement; and with Vietnam’s Protocol of Accession. After consultations failed to resolve the dispute, Vietnam requested establishment of a panel. The DSB established a panel on July 20, 2018, and the Director-General composed the panel on November 30, 2018. [372]

In DS539, South Korea requested consultations with the United States about certain antidumping and countervailing duty measures imposed on products from South Korea, and certain laws, regulations, and other measures maintained by the United States with respect to the use of facts available in antidumping and countervailing duty proceedings. South Korea claimed that the measures appear to be inconsistent with certain provisions in Articles 1, 2, 3, 5, 6, 9, 11, and 18 and in Annexes I and II of the Antidumping Agreement; with Articles 1, 10, 11, 12, 14, 15 19, 21, and 32 and Annex VI of the SCM Agreement; with Article VI of GATT 1994; and with Article XVI:4 of the Marrakesh Agreement. After consultations failed to resolve the dispute, South Korea requested establishment of a panel. The DSB established a panel on May 28, 2018. Following agreement of the parties, the panel was composed on December 5, 2018. [373]

The five remaining disputes concerned several different matters. In DS540, Vietnam requested consultations concerning certain U.S. measures affecting the importation into the United States of pangasius [374] seafood products from Vietnam, purportedly because of sanitary and phytosanitary concerns. Vietnam claimed that the measures appear to be inconsistent with Articles I:1 and XI:1 of GATT 1994. As of the end of 2018, the dispute was still in consultations. [375] In DS543, filed by China, China claimed that certain tariff measures to be imposed on Chinese goods and implemented through sections 301–310 of the U.S. Trade Act of 1974 appear to be inconsistent with Articles 1:1 and II:1(a) and (b) of GATT 1994 and Article 23 of the DSU. After consultations failed to resolve the dispute, China requested the establishment of a panel. [376]

In DS563, China requested consultations with the United States concerning certain measures allegedly adopted and maintained by the governments of certain U.S. states and municipalities relating to alleged subsidies or domestic content requirements in the energy sector. China claimed the measures appear to be inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement, Articles 2.1 and 2.2 of the Agreement on Trade-Related Investment Measures (TRIMS Agreement), and Article III:4 of GATT 1994. The dispute was still in consultations at the end of 2018. [377] Dispute DS565, also filed by China, concerned U.S. tariff measures on certain goods from China imposed in response to USTR’s section 301 investigation. China claimed that the measures appear to be inconsistent with certain provisions in Articles I and II of GATT 1994 and Article 23 of DSU. The dispute was still in consultations at the end of 2018. [378]

Finally, DS574, which was filed by Venezuela, concerned measures imposed by the United States related to goods of Venezuelan origin, imports of gold from Venezuela, the liquidity of Venezuela’s public debt, transactions in Venezuelan digital currency, and the supply and consumption of services by certain Venezuelan nationals, specifically those on a blocked persons list. Venezuela claimed that the measures appear to be inconsistent with certain provisions of Articles I, II, III, V, X, XI, XIII, and XXIII of GATT 1994 and certain articles of the General Agreement on Trade in Services (GATS). The dispute was in consultations at the end of 2018. [379]

New Panels Established in 2018 That Involve the United States

As indicated in table 3.1, 23 dispute settlement panels were established during 2018 in which the United States was either the requesting party (complainant) or the respondent party. The United States was the complaining party in 8 of the disputes, and the responding party in 15 disputes. All but 3 of the listed disputes (DS531, [380] DS533, [381] and DS534 [382] ) were filed during 2018.

Table 3.1 WTO dispute settlement panels established during 2018 in which the United States was a party

Case no. Complainant Respondent Case name Panel established
DS531 United States Canada Canada—Measures Governing the Sale of Wine in Grocery Stores (second complaint) 07/20/2018
DS533 Canada United States United States—Countervailing Measures on Softwood Lumber from Canada 04/09/2018
DS534 Canada United States United States—Anti-Dumping Measures Applying Differential Pricing Methodology to Softwood Lumber from Canada 04/09/2018
DS536 Vietnam United States United States—Anti-Dumping Measures on Fish Fillets from Viet Nam 07/20/2018
DS539 South Korea United States United States—Anti-Dumping and Countervailing Duties on Certain Products and the Use of Facts Available 05/28/2018
DS541 United States India India—Export Related Measures 05/28/2018
DS542 United States China China—Certain Measures Concerning the Protection of Intellectual Property Rights 11/21/2018
DS544 China United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS545 South Korea United States United States—Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products 09/26/2018
DS546 South Korea United States United States—Safeguard Measure on Imports of Large Residential Washers 09/26/2018
DS547 India United States United States—Certain Measures on Steel and Aluminum Products 12/04/2018
DS548 European Union United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS550 a Canada United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS551 a Mexico United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS552 Norway United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS554 Russian Federation United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS556 Switzerland United States United States—Certain Measures on Steel and Aluminum Products 12/04/2018
DS557 a United States Canada Canada—Additional Duties on Certain Products from the United States 11/21/2018
DS558 United States China China—Additional Duties on Certain Products from the United States 11/21/2018
DS559 United States European Union European Union—Additional Duties on Certain Products from the United States 11/21/2018
DS560 a United States Mexico Mexico—Additional Duties on Certain Products from the United States 11/21/2018
DS564 Turkey United States United States—Certain Measures on Steel and Aluminum Products 11/21/2018
DS566 United States Russian Federation Russian Federation—Additional Duties on Certain Products from the United States 12/18/2018

Source: WTO, “ Chronological List of Dispute Cases ” (accessed July 2, 2019).

a Dispute terminated in May 2019 after Canada, Mexico, and the United States reached a mutually agreeable solution in the four respective disputes.

Panel and Appellate Body Reports Issued and/or Adopted during 2018 That Involve the United States

During 2018, a WTO dispute settlement panel issued a report in two disputes to which the United States was a party. The United States was the named respondent in both disputes (table 3.2). 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 that 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
DS505 Canada United States United States—Countervailing Measures on Supercalendered Paper from Canada Panel report circulated 07/5/2018; appeal notified 08/27/2018
DS523 Turkey United States United States—Countervailing Measures on Certain Pipe and Tube Products (Turkey) Panel report circulated 12/18/2018; appeal notified 01/25/2019

Source: WTO, “ Chronological List of Dispute Cases ” (accessed July 2, 2019).

Reports in Which the United States Was the Respondent

United States Countervailing Measures on Supercalendered Paper from Canada (DS505)

On March 30, 2016, Canada requested consultations with the United States to consider claims related to U.S. countervailing duties on supercalendered paper from Canada (USDOC Investigation C-122-854). Canada alleged that the U.S. measures at issue were inconsistent with obligations under Articles 1.1(a)(1), 1.1(b), 2, 10, 11.1, 11.2, 11.3, 11.6, 12.1, 12.2, 12.3, 12.7, 12.8, 14, 14(d), 19.1, 19.3, 19.4, 22.3, 22.5, and 32.1 of the SCM Agreement and under Article VI:3 of GATT 1994. After consultations failed to resolve the dispute, Canada requested establishment of a panel, and the DSB established a panel on July 21, 2016. On August 31, 2016, the Director-General composed the panel. [383]

After the panel met in March and June 2017, it circulated its report on July 5, 2018. The panel report, among other things, upheld Canada’s claims with respect to the treatment by the U.S. Department of Commerce (USDOC) of subsidies that exporters refused to disclose in response to USDOC questionnaires, but which USDOC subsequently discovered during the course of the countervailing duty investigation. [384] USDOC terminated the countervailing duties on July 5, 2018. [385]

On August 27, 2018, the United States appealed the panel’s findings related to the treatment of undisclosed subsidies discovered during the course of a countervailing duty investigation. As of the end of 2018, the appellate proceedings were ongoing.

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

On March 8, 2017, Turkey requested consultations with the United States concerning countervailing duty measures imposed by the United States under four final countervailing duty determinations issued by USDOC pertaining to certain pipe and tube products. Turkey challenged the application of the measures in the four determinations with respect to the provision of hot-rolled steel for less than adequate remuneration. Specifically, Turkey challenged USDOC’s “public bodies” determination, use of facts available, and determination of specificity of the subsidy program. Turkey also challenged USDOC’s calculation of benchmarks, both as applied and “as such.” With respect to injury, Turkey challenged the USITC’s “practice” of cross-cumulating imports, as well as the application of that practice in the underlying determinations. [386] Turkey claimed that the measures appear to be inconsistent with Article 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 with Article VI:3 of GATT 1994. After consultations failed to resolve the dispute, Turkey requested establishment of a panel, and the DSB established a panel on June 19, 2017. On September 14, 2017, the Director-General composed the panel. [387]

The panel circulated its report on December 18, 2018. With respect to its public body determination, the panel found that USDOC acted inconsistently with Article 1.1(a)(1) by failing to apply the standard set out previously by the Appellate Body, and failing to establish, based on record evidence, that the relevant entities were public bodies. With respect to benchmarks as such, the panel rejected Turkey’s claim that USDOC has a practice of rejecting in-country benchmarks solely based on majority or substantial government ownership or control of the market. For benchmarks as applied, the panel declined to make a finding under Article 14(d) of the SCM Agreement because the relevant determination had ceased to have legal effect before the panel’s establishment. With respect to specificity, the panel found that USDOC acted inconsistently with Articles 2.1(c) and 2.4 of the SCM Agreement by failing to identify and clearly substantiate the existence of a subsidy program, and failing to take into account the extent of diversification of Turkey’s economy and the length of time in which the program had been in place. With respect to facts available, the panel found that USDOC acted inconsistently with respect to Article 12.7 of the SCM Agreement by failing to do a comparative process of reasoning and evaluation before selecting from the facts available in certain circumstances.

In addition, with respect to injury, the panel found that Article 15.3 of the SCM Agreement does not permit the USITC to assess cumulatively the effects of imports not subject to countervailing duty investigations with the effects of imports subject to countervailing duty investigations. The panel thus found cross-cumulation by the USITC, both in the original investigations at issue and as a practice, to be inconsistent with Article 15.3. With respect to cross-cumulation in sunset reviews, the panel found that USITC did not act inconsistently with Article 15.3 of the SCM Agreement, either “as such” or in connection with the sunset review at issue. [388]

On January 25, 2019, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. On January 30, 2019, Turkey notified the DSB of its decision to cross-appeal. [389] On March 25, 2019, the Appellate Body notified the DSB that it would not be able to circulate its report in a timely way in accordance with Article 17.5 of the DSU. [390]

U.S. Concerns with WTO Dispute Settlement

The President’s 2018 Trade Policy Agenda and 2018 Annual Report issued in March 2018 set out 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 report stated 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, and cited a number of examples. The report also cited additional concerns about (1) the Appellate Body’s decision to ignore the mandatory 90-day deadline for deciding appeals; (2) service on the Appellate Body by persons who are no longer Appellate Body members; (3) the tendency of WTO reports to make findings unnecessary to resolve a dispute or on issues not presented in a dispute; (4) the Appellate Body’s approach to reviewing facts, and about de novo review of a WTO member’s domestic law; and (5) claims by the Appellate Body that its reports are entitled to be treated as precedent. [391]

The President’s 2019 Trade Policy Agenda and 2018 Annual Report, issued in March 2019, restated these concerns and noted that many WTO members share these concerns. The President’s 2019 report stated that, as a result, “the United States was not prepared to agree to launch the process to fill vacancies on the WTO Appellate Body without WTO Members engaging with and addressing these critical issues.” [392]

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Chapter 4 Selected Regional and Bilateral Trade Activities

This chapter summarizes trade-related activities during 2018 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 activities conducted under U.S. trade and investment framework agreements (TIFAs).

Organisation for Economic Co-operation and Development (OECD)

The OECD’s membership is comprised of the world’s leading market-based economies. It provides a policy forum for member governments to review, discuss, and find evidence-based solutions to economic, social, and environmental challenges facing the global economy, including trade, taxation, and macroeconomic performance and job creation. [393] After the accession of Lithuania and Colombia on May 30, there were 37 OECD members in 2018. [394]

Ministerial Council Meeting

The OECD held its Ministerial Council Meeting on May 30–31, 2018, in Paris, France. Ministers focused on ways to harness international cooperation and better economic policies to promote human progress for better lives. [395] They also discussed a number of other topics connected with the world economy, including:

Trade Committee

In 2018, the OECD Trade Committee met in March (172nd session), April (173rd session), and October (174th session). [399] One focus was on preparations for upcoming activities in multilateral bodies, such as the May 2018 OECD Ministerial Council Meeting, [400] the June 2018 Group of 7 Summit, [401] and the November–December 2018 Group of 20 (G20) Leaders’ Summit. [402] In addition, the Trade Committee spent time finalizing Colombia’s bid to become an OECD member, as announced May 30, 2018. Besides the three plenary sessions, the Trade Committee held confidential sessions in 2018 on March 23, April 25, and October 23. [403]

Working Party of the Trade Committee

The Working Party of the Trade Committee held four meetings in 2018: March 15–16, June 18–19, October 17–18, and December 11–12. [404] During the year, the Working Party addressed multiple topics, notably trade in services, digital trade, trade in raw materials, and trade and investment. For example, for the first two categories—services and digital trade—Working Party projects included:

Other Working Party projects discussed included one addressing aspects of trade and investment—such as measuring the effects of regional trade agreements—and another analyzing the economic impact on particular OECD countries of the United Kingdom’s withdrawal from the European Union (“Brexit”). [409]

Global Forum on Steel Excess Capacity

The Global Forum on Steel Excess Capacity (GFSEC) was created following calls from leaders of the G20 to address structural problems such as global excess capacity in the steel and other industries. [410] On December 16, 2016, GFSEC was formally established in Berlin, Germany, [411] to (1) exchange information and data on global steel capacity developments and government policies affecting excess steel capacity; (2) develop policy solutions and recommendations to alleviate excess capacity in the steel industry; and (3) report on its work to the G20 ministers. [412] The OECD both chairs the forum and facilitates the work produced by the GFSEC steering group. [413] In 2018, 33 economies participated in the forum, including several non-OECD steel-producing economies. [414] The lifespan of the GFSEC was initially set at three years, but could be extended based on the consensus of members.

In 2017, GFSEC member economies approved the so-called Berlin Ministerial report, which contained six guiding principles. These principles are as follows:

1. Understanding that steel excess capacity is a global challenge, requiring collective policy solutions.

2. Refraining from market-distorting subsidies and government support measures.

3. Fostering a level playing field in the steel industry.

4. Ensuring market-based outcomes in the steel industry.

5. Encouraging adjustment and thereby reducing excess capacity.

6. Ensuring greater transparency as well as review, discussion, and assessment of the implementation of the Global Forum policy solutions.

GFSEC member economies also drafted policy recommendations for governments to use. For example, to address the goals of the fifth principle, the economies recommended reducing excess capacity in the steel sector, while governments can address the sixth principle by formulating recommendations to continually update members‘ information on steel capacity and policy measures. [415]

The forum met several times in 2018, including at the second ministerial-level GFSEC meeting, which was held in Paris, France, on September 20, 2018. At the ministerial, the forum agreed on a report, which was presented at the G20 leaders’ summit November 30–December 1, 2018. [416] The report included initial conclusions on a process to identify and remove subsidies and other government support measures for both public and private steel producers that could contribute or may have contributed to excess capacity in the steel sector. [417]

Asia-Pacific Economic Cooperation (APEC)

Background

Established in 1989 and composed of 21 member economies, [418] Asia-Pacific Economic Cooperation (APEC) is a regional economic and trade 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. APEC organizes events, including economic leaders’ summits, ministerial meetings, senior officials’ meetings, policy dialogues, and workshops, to discuss various trade and economic issues. APEC decisions are made by consensus, and commitments are undertaken voluntarily. [419] Every year, one of the 21 APEC member economies plays the host to APEC meetings and serves as the APEC chair. [420] In 2018, Papua New Guinea served as the APEC chair and hosted major APEC meetings for the first time since Papua New Guinea joined APEC in 1993.

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 for overarching goals and initiatives. The working groups under each committee are tasked with implementing 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 realize APEC’s goals by providing skill training and technological expertise to member economies. [421]

2018 APEC Developments

For the Papua New Guinea meeting, APEC adopted the theme of “Harnessing Inclusive Opportunities, Embracing the Digital Future.” The theme was intended to recognize the importance of facilitating e-commerce and digital trade while emphasizing the productivity and economic gains possible through APEC collective efforts on developing the digital economy. APEC members pledged to promote an inclusive participation of all groups in the digital economy through capacity building, skills development, and facilitation of access to secure digital infrastructure. [422]

In its 2018 annual report to ministers, CTI noted that APEC work for the year focused on supporting and improving the multilateral trading system, reducing trade and investment barriers, improving procedures at the border and along supply chains, and harmonizing standards and regulations to reduce trade costs. Three of the accomplishments highlighted for the year show progress made in these areas: [423]

In addition, the CTI report noted progress made in improving trade facilitation and regulatory cooperation, among others.

Digital Trade, Internet Economy, and E-Commerce [425]

As noted earlier, the theme selected by Papua New Guinea for its year as host was “Harnessing Inclusive Opportunities, Embracing the Digital Future.” Under this theme, APEC actively worked on and discussed a number of issues related to e-commerce and digital trade in 2018:

APEC also made significant progress in creating a policy and regulatory environment to ensure privacy protection in the APEC region. In 2018, Singapore became the sixth APEC economy, alongside the United States, Mexico, Canada, Japan, and South Korea, to participate in the Cross-border Privacy Rules System, a regional cross-border data transfer mechanism and privacy code of conduct developed by APEC for business. Also in 2018, Singapore and the United States became the first two APEC economies to participate in the APEC Privacy Recognition for Processors system, a “corollary certification system for personal information processors” designed to help personal information processors comply with the APEC Privacy Framework 2004. [428] APEC continued to implement the APEC Cross-border Privacy Enforcement Arrangement (CPEA), the first multilateral arrangement in the APEC region enabling privacy enforcement agents to share information and otherwise assist in cross-border data privacy enforcement. In 2018, the Philippines and Taiwan joined nine other APEC economies as the latest members to participate in the CPEA.

The Bogor Goals [429]

In November 2018, APEC published the APEC’s Bogor Goals Progress Report , assessing the steps its 21 member economies have made toward achieving APEC’s Bogor Goals in recent years. [430] These goals, adopted in 1994, aim to create a free and open trade and investment area in the Asia-Pacific region by reducing tariff and nontariff barriers to trade and investment, facilitating business, and fostering economic and technical cooperation. The report highlighted major achievements as well as areas for improvement:

The report also noted improvements in areas such as customs procedures, intellectual property rights protections, competition policies, government procurement, regulatory reforms, and dispute mediation, among others. [432]

Trade and Investment Framework Agreements

Trade and Investment Framework Agreements (TIFAs) provide principles for dialogue on trade and investment issues. By yearend 2018, the United States had entered into 56 TIFAs (table 4.1), with no new TIFAs in 2018. TIFAs cover diverse matters, including market access, labor, environment, and intellectual property rights. [433] 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. [434]

The most recent TIFA negotiations were with Paraguay. Though the U.S.-Paraguay TIFA was signed in 2017, it has not yet entered into force. As a result, discussions on trade and investment issues between the United States and Paraguay are channeled through the United States-Paraguay Bilateral Council on Trade and Investment. [435]

Table 4.1 U.S. trade and investment framework agreements (TIFAs) in 2018

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, 2012
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” (accessed May 15, 2019); USTR, “ United States, Bangladesh Sign Trade and Investment Cooperation ,” November 25, 2013; USTR , 2019 Trade Policy Agenda and 2018 Annual Report , March 2019, 352–59; USTR, “ SACU ” (accessed May 15, 2019).

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 May 15, 2019).

a The United States-South Africa TIFA was amended on June 18, 2012. It 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, 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, Saint Lucia, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago. It also has five associate members: Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, and the Turks and Caicos Islands.

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

f The 21 members of COMESA are Burundi, Comoros, the Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Eswatini (formerly Swaziland), Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Somalia, Tunisia, Uganda, Zambia, and Zimbabwe.

g The six 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 six 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 five members of SACU are Botswana, Eswatini (formerly Swaziland), Lesotho, Namibia, and South Africa.

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

Developments in TIFAs during 2018

During 2018, 11 TIFA councils met, with results as discussed in this section.

Algeria

On October 2, 2018, the United States and Algeria held their sixth TIFA Council meeting in Washington, DC. They discussed trade and investment issues in various sectors—tourism, energy, health, handcrafts, and agriculture. The countries also discussed issues related to the digital economy, intellectual property rights, and modernization of the Algerian banking sector. [436]

Argentina

Under their TIFA, the United States and Argentina met in Washington, DC, on October 19, 2018. During the meeting, the countries discussed various issues, including agricultural market access, the need to reduce steel excess capacity, intellectual property rights protection, and continued cooperation on the World Trade Organization (WTO) initiative on electronic commerce. [437]

Armenia

On March 19, 2018, the United States and Armenia met in Washington, DC, for their second TIFA council meeting. Senior government officials discussed a range of topics, including procedures for implementing technical standards, conformity assessment, and stakeholder consultation, as well as sanitary and phytosanitary measures, customs clearance, intellectual property rights, and processes for monitoring and enforcing labor laws. In addition, the meeting included a roundtable discussion with private sector members. [438]

Bangladesh

Under their Trade and Investment Cooperation Forum Agreement, the United States and Bangladesh met in Washington, DC, on September 13, 2018, to discuss expansion of their bilateral trade and investment relationship. Topics of discussion included market access for U.S. cotton, the digital economy, labor reforms, and transparency in government procurement.

During the 2018 meeting, the United States articulated uneasiness on the country’s labor conditions. In 2013, Bangladesh was suspended from the Generalized System of Preferences (GSP) program owing to issues with workers’ rights and safety. [439] Although USTR recognized some progress on these issues during Bangladesh’s GSP review in 2015, Bangladesh’s GSP eligibility has not been reinstated, given that further progress is needed in these areas. [440]

Central Asia

On October 16, 2018, the United States, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan met in Tashkent, Uzbekistan, for the U.S.-Central Asia TIFA Council meeting. The Afghan and Pakistani governments joined the meeting as observers. [441] Two previously launched working groups, on intellectual property and women’s economic empowerment, held their first meetings in 2018. Countries discussed trade and investment issues including regional connectivity, economic cooperation, customs issues, sanitary and phytosanitary measures, standards and technical barriers to trade, and workers’ rights. [442]

Indonesia

The United States and Indonesia met under their TIFA in Jakarta, Indonesia, on May 14, 2018. The countries met with the goal of building a stronger trade relationship and promoting free bilateral trade. During the meeting, senior officials discussed recent updates on the GSP country practice review for Indonesia, and agreed to work together to address issues of agriculture, digital trade, financial services, fisheries, and labor. [443] In addition, the countries approved a work plan to address intellectual property concerns with respect to Indonesia’s citation in USTR’s 2018 Special 301 Report . The Special 301 report addressed various issues, including patent law in relation to local manufacturing and use requirements, and compulsory licenses. [444]

Laos

On January 31, 2019, the United States and Laos held the second meeting under their TIFA in Vientiane, Laos. The countries discussed strengthening opportunities in various areas, including electronic payments, automotive standards, digital trade, and intellectual property. [445]

Nepal

On November 13, 2018, the United States and Nepal held their fourth TIFA Council meeting in Washington, DC, to strengthen trade and investment relations. Both countries discussed a range of topics, including business environment and labor reforms, investment promotion, execution of the WTO Trade Facilitation Agreement, digital trade and e-commerce, sanitary and phytosanitary measures, and market access and reform in Nepal’s agricultural sector. The countries also addressed methods of creating and improving innovation in the business environment by increasing intellectual property protection and facilitating foreign investment. Nepal also cited its interest in increasing its utilization of the Nepal Trade Preferences Act, which allows certain products from Nepal to be imported duty free into the United States. [446]

New Zealand

During July 19–20, 2018, the United States and New Zealand met under their TIFA in Washington, DC. During the meetings, U.S. officials discussed the two countries’ expanding trade and investment relations, including cooperation on areas of mutual interest. Topics addressed included trade barriers in third-country markets, unfair trade practices, intellectual property, and cooperation between the United States and New Zealand at the WTO and APEC. [447]

Thailand

On April 10, 2018, the United States and Thailand held a Trade and Investment Council meeting in Washington, DC. The countries discussed ways to expand trade relations and address trade issues. Both countries restated the importance of their relationship and cooperation on trade expansion. Topics addressed included the U.S. trade agenda and questions related to Thai barriers to U.S. exports, such as agriculture, customs, intellectual property, and labor issues. Senior government officials also addressed regional and multilateral engagements, including implementation of the WTO Trade Facilitation Agreement and approaches to advancing the ASEAN-U.S. Trade and Investment Framework Arrangement. [448]

Ukraine

The United States and Ukraine met on October 23, 2018, under their Trade and Investment Cooperation Agreement (TICA). The meeting, held in Washington, DC, under the auspices of the U.S.-Ukraine Trade and Investment Council, was the eighth meeting since the TICA entered into force in 2008. During the meeting, the two countries discussed ways to expand trade in agricultural and industrial goods, work done by working groups on technical and sanitary and phytosanitary barriers to trade, and the new law implemented on collective management in Ukraine. Additional topics of discussion were the governance of electronic payment systems, the environment for refunds of Ukraine’s value-added tax, transportation logistics, and agricultural export controls. [449]

Top of the page

Chapter 5 U.S. Free Trade Agreements

This chapter summarizes developments related to U.S. free trade agreements (FTAs) during 2018. [450] It describes trends in U.S. merchandise trade with FTA partners, highlights 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 2018.

U.S. Trade with FTA Partners in 2018

The United States was party to 14 FTAs involving a total of 20 countries as of December 31, 2018. Starting with the most recent, the FTAs in force during 2018 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.-Peru TPA (2009); the U.S.-Oman FTA (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 $1.6 trillion in 2018, accounting for 39.1 percent of total U.S. merchandise trade with the world. [451] The value of U.S. exports to FTA partners totaled $780.3 billion, an 8.3 percent increase from $720.3 billion in 2017; this growth exceeded the 7.6 percent increase in total U.S. exports to the world in 2018. The value of U.S. exports to most FTA partners increased in 2018; the exception was exports to Jordan. U.S. imports from FTA partners were valued at $862.6 billion, also an 8.3 percent increase from $796.6 billion in 2017. The U.S. merchandise trade deficit with all FTA partners increased 7.9 percent to $82.4 billion in 2018 (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 2018, these countries accounted for $1.2 trillion, or 74.8 percent, of total U.S. trade with its FTA partners. From 2017 to 2018, the value of U.S. exports to NAFTA countries rose 7.3 percent ($38.1 billion) to $563.7 billion. U.S. imports from NAFTA countries rose 8.4 percent ($51.4 billion), to $664.9 billion in 2018. As a result, the U.S. merchandise trade deficit with its NAFTA partners increased by 15.1 percent to $101.2 billion in 2018.

U.S. trade with its non-NAFTA FTA partners was valued at $414.2 billion in 2018, which was a 9.6 percent increase from 2017. U.S. exports to these FTA partners increased 11.2 percent ($21.8 billion), from $194.7 billion in 2017 to $216.5 billion in 2018. At the same time, U.S. imports from these partners increased 8.0 percent ($14.6 billion) from $183.1 billion in 2017 to $197.7 billion in 2018. U.S. exports increased more than imports, causing the U.S. merchandise trade surplus with its non-NAFTA FTA partners to increase 62.1 percent to $18.8 billion (tables 5.1–5.3).

Table 5.1 Total U.S. exports to FTA partners, by FTA partner, 2016–18

FTA partner 2016 2017 2018 2017–18
Million $ % change
NAFTA 496,786 525,580 563,729 7.3
Canada 266,734 282,265 298,719 5.8
Mexico 230,051 243,314 265,010 8.9
Non-NAFTA 179,249 194,734 216,546 11.2
Israel 13,198 12,550 13,715 9.3
Jordan 1,459 1,921 1,606 -16.4
Chile 12,937 13,605 15,340 12.8
Singapore 26,832 29,806 33,141 11.2
Australia 22,149 24,527 25,306 3.2
Morocco 1,933 2,220 2,945 32.7
Bahrain 900 898 2,037 126.7
CAFTA-DR a 28,682 30,619 32,175 5.1
Oman 1,804 1,985 2,421 22.0
Peru 7,927 8,663 9,634 11.2
South Korea 42,313 48,326 56,344 16.6
Colombia 13,047 13,312 14,996 12.7
Panama 6,069 6,301 6,885 9.3
FTA partner total 676,034 720,313 780,276 8.3
Total U.S. exports 1,451,024 1,546,273 1,664,056 7.6
FTA partner share of total U.S. exports (percent) 46.6 46.6 46.9

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

Note: Because of rounding, figures may not add to totals shown. FTA partners are ordered according to the date of entry into force of the respective FTA.

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

Table 5.2 U.S. general imports from FTA partners, by FTA partner, 2016–18

FTA partner 2016 2017 2018 2017–18
Million $ % change
NAFTA 571,685 613,542 664,938 8.4
Canada 277,766 299,280 318,414 6.4
Mexico 293,920 314,262 346,524 10.3
Non-NAFTA 176,421 183,106 197,702 8.0
Israel 22,210 21,941 21,762 -0.8
Jordan 1,555 1,687 1,814 7.5
Chile 8,797 10,551 11,366 7.7
Singapore 17,832 19,367 27,256 40.7
Australia 9,509 10,045 10,125 0.8
Morocco 1,021 1,233 1,566 27.0
Bahrain 768 996 991 -0.5
CAFTA-DR a 23,335 23,570 25,184 6.8
Oman 1,125 1,067 1,281 20.0
Peru 6,253 7,271 7,883 8.4
South Korea 69,888 71,444 74,223 3.9
Colombia 13,717 13,491 13,789 2.2
Panama 410 442 462 4.4
FTA partner total 748,106 796,648 862,640 8.3
Total U.S. imports 2,187,032 2,340,768 2,541,267 8.6
FTA partner share of total U.S. imports (percent) 34.2 34.0 33.9

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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, 2016–18

2016 2017 2018 2017–18
Million $ % change
NAFTA -74,900 -87,962 -101,209 -15.1
Canada -11,031 -17,014 -19,695 -15.8
Mexico -63,869 -70,948 -81,514 -14.9
Non-NAFTA 2,828 11,628 18,844 62.1
Israel -9,012 -9,391 -8,047 14.3
Jordan -95 234 -207 ( b )
Chile 4,140 3,054 3,974 30.1
Singapore 8,999 10,438 5,885 -43.6
Australia 12,640 14,482 15,181 4.8
Morocco 912 987 1,380 39.8
Bahrain 131 -98 1,046 ( b )
CAFTA-DR c 5,347 7,049 6,991 -0.8
Oman 679 918 1,140 24.3
Peru 1674 1,392 1,750 25.8
South Korea -27,576 -23,117 -17,879 22.7
Colombia -670 -179 1,207 ( b )
Panama 5,659 5,859 6,423 9.6
FTA partner total -72,072 -76,334 -82,364 -7.9
Total U.S. trade balance -736,009 -794,495 -877,211 -10.4

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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 $408.0 billion in 2018, accounting for nearly half (47.3 percent) of total U.S. imports from FTA partners and for 16.1 percent of U.S. imports from the world (tables 5.4–5.5). [452]

The value of U.S. imports entered under FTAs in 2018 increased $22.3 billion (5.8 percent), up from $385.7 billion in 2017. FTA imports from Singapore grew 147.1 percent ($2.7 billion), representing the largest percentage increase. The growth was primarily driven by large increases in imports of beverage sweeteners. [453] Imports under FTAs from Panama and Oman increased by 41.5 percent ($24 million) and 28.8 percent ($202 million), respectively; however, they changed from smaller baselines. Imports from Mexico accounted for the greatest increase in value, rising by $17.4 billion (9.5 percent) to $200.5 billion. A large part of this increase was due to an increase in motor vehicle imports from Mexico. [454] On the other hand, imports from Canada fell by $563 million (0.4 percent). In total, combined imports from the NAFTA partners rose 5.4 percent ($16.8 billion). The largest decline in U.S. imports under any FTA was seen in imports from Bahrain, largely due to a 29.5 percent drop in imports of aluminum wire. [455]

Table 5.4 U.S. imports for consumption that entered under FTA provisions, by FTA partner, 2016–18

FTA partner 2016 2017 2018 2017–18
Million $ % change
NAFTA 302,373 313,049 329,876 5.4
Canada 131,358 129,936 129,373 -0.4
Mexico 171,015 183,112 200,502 9.5
Non-NAFTA 72,707 72,626 78,130 7.6
Israel 2,743 2,709 2,852 5.3
Jordan 1,356 1,487 1,610 8.3
Chile 4,702 5,952 6,412 7.7
Singapore 1,845 1,814 4,481 147.1
Australia 3,732 4,018 3,738 -7.0
Morocco 194 205 243 18.1
Bahrain 499 582 489 -15.9
CAFTA-DR a 13,665 13,707 14,710 7.3
Oman 815 702 904 28.8
Peru 2,661 3,299 3,694 11.9
South Korea 35,055 33,085 33,186 0.3
Colombia 5,387 5,010 5,731 14.4
Panama 53 56 80 41.5
FTA partner total 375,080 385,675 408,006 5.8
Total U.S. imports for consumption 2,172,868 2,328,313 2,551,606 9.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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 general imports, with a ratio of 88.8 percent (table 5.5). Other countries with notably high ratios include Oman (70.6 percent), Mexico (57.9 percent), and Chile (56.4 percent). The CAFTA-DR countries as a whole also had a high ratio of FTA imports to general imports, at 58.4 percent. Each CAFTA-DR partner had large ratios of FTA imports to general imports , except for Costa Rica, for which the ratio was 31.4 percent. The partners with the smallest shares of imports entered under an FTA to general imports were Israel (13.1 percent), Morocco (15.5 percent), and Singapore (16.4 percent). The imports from these countries often entered the United States free of duty under normal trade relations rates (this category is equivalent to most-favored-nation rates in other countries).

Table 5.5 Ratio of U.S. imports for consumption under FTAs to U.S. general imports, by partner, 2016–18 (percent)

FTA partner 2016 2017 2018
NAFTA 52.9 51.0 49.6
Canada 47.3 43.4 40.6
Mexico 58.2 58.3 57.9
Non-NAFTA 41.2 39.7 39.5
Israel 12.4 12.3 13.1
Jordan 87.2 88.1 88.8
Chile 53.4 56.4 56.4
Singapore 10.3 9.4 16.4
Australia 39.3 40.0 36.9
Morocco 19.0 16.7 15.5
Bahrain 64.9 58.4 49.4
CAFTA-DR a 58.6 58.2 58.4
Oman 72.4 65.8 70.6
Peru 42.6 45.4 46.9
South Korea 50.2 46.3 44.7
Colombia 39.3 37.1 41.6
Panama 13.0 12.7 17.2
FTA partner total 50.1 48.4 47.3

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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 2018

Since 1974, Congress has enacted Trade Promotion Authority (TPA) legislation that defines U.S. negotiating objectives and priorities for trade agreements and establishes consultation and notification requirements for the President to follow throughout the negotiation process. At the end of the negotiation and consultation process, Congress gives the agreement an up or down vote, without amendment.

The most recent renewal of this authority is contained in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which was signed into law on June 29, 2015. [456] The Act sets out 21 principal trade negotiating objectives, including objectives on trade in goods, trade in services, trade in agriculture, foreign investment, intellectual property, digital trade in goods and services and cross-border data flows, regulatory practices, and state-owned and state-controlled enterprises. There are also two negotiating objectives on currency and currency manipulation.

TPA sets out a timeline addressing the role of Congress in the FTA negotiation process. TPA procedures apply to both the negotiation of new agreements and changes to existing agreements, such as the United States-Mexico-Canada Agreement. Ninety days before negotiations are to begin, the President is required to notify Congress of his intent to enter into negotiations. [457] Thirty days beforehand, the President is to publish negotiating objectives. [458] Ninety days before an agreement is to be signed, the President is to notify Congress of his intent to enter into an agreement, [459] and 60 days before signing, the President is to publish the full text of the agreement. [460] The timeline also includes timeframes for House and Senate consideration once the implementing bill is introduced. [461]

In connection with any proposed trade agreement, USITC is to provide advice to the President as to the probable economic effect of modifications of tariff and nontariff measures on industries producing like or directly competitive articles and on consumers. [462] The USITC is also required to submit a report assessing the likely impact of the agreement on the U.S. economy as a whole and on specific industry sectors 105 days after the trade agreement is signed. [463]

On November 30, 2018, the President signed the United States-Mexico-Canada Agreement. Developments during 2018 leading up to his signature are described below. On October 16, 2018, U.S. Trade Representative (USTR) Lighthizer notified Congress of the President’s intent to negotiate trade agreements with the United Kingdom (UK), the European Union (EU), and Japan. [464] This notification launched the congressionally mandated 90-day consultation period under Trade Promotion Authority before the launch of negotiations. [465]

Negotiating objectives for the UK, the EU, and Japan were released over the December 2018–February 2019 period. In addition to these negotiating objectives, the negotiating objectives for agreements with EU and UK also included language on regulation and competitive safeguards on dominant carriers to ensure fair competition in the telecommunications industry; [466] on the establishment of consultative mechanisms and disciplines that address subsidy issues; [467] and on commitments to trade engagement with Israel. [468] Negotiating objectives for the agreement with Japan also included language on preserving fair competition in the telecommunications industry, explicitly through “transparent regulation and an independent regulator.” [469]

U.S.-UK Trade Agreement

On November 16, 2018, USTR announced a request for public comment on a proposed U.S.-UK trade agreement. To help in the development of its negotiating objectives, USTR specifically invited comments on relevant barriers to trade, the economic costs of tariff removal to U.S. producers and consumers, product-specific barriers, customs issues, and other nontariff barriers. [470] After considering public comments and hearing testimony, USTR published its negotiating objectives for a trade agreement with the UK in February 2019. [471]

The UK cannot enter into a new trade agreement with non-European Union (EU) countries before it exits the EU because the EU has exclusive competence over its Common Commercial Policy, including its trade policy. [472] However, discussions between the UK and the United States on strengthening bilateral trade and investment ties were initiated in two separate forums.

The U.S.-UK Trade and Investment Working Group began meeting in July 2017 with the objective of reaffirming and strengthening commercial relationships between U.S. and UK businesses ahead of the UK’s exit from the EU. [473] The group met on four subsequent occasions in November 2017, [474] March 2018, [475] July 2018, [476] and November 2018. [477] At these meetings, the group discussed industrial and agricultural goods, services and investment, digital trade, intellectual property rights, regulatory issues related to trade, and small and medium-sized enterprises (SMEs). [478]

The U.S.-UK SME Dialogue began meeting in March 2018 to identify resources available from both countries to assist SMEs and to hear from SMEs on the opportunities and challenges they experience when trading bilaterally. [479] The Dialogue convened on two more occasions, in London in July 2018 [480] and in Washington, DC, in November 2018. Discussions focused on access to finance and wider business support for SMEs, intellectual property protection, and the use of e-commerce tools to promote SME exports. [481]

U.S.-EU Trade Agreement

On November 15, 2018, USTR announced a request for public comment on a proposed U.S.-EU trade agreement. Written public comments on the negotiating objectives for a trade agreement were due on December 10, 2018. Again, to aid in the development of its negotiating objectives, USTR specifically invited comments on relevant barriers to trade, economic costs of tariff removal to U.S. producers and consumers, product-specific barriers, customs issues, and other nontariff barriers. USTR also held a public hearing on negotiating objectives for a U.S.-EU trade agreement on December 14, 2018, hearing testimony of industry representatives from the agriculture, biotechnology, manufacturing, and telecommunications and software sectors, among others. [482] After considering public comments and hearing testimony, USTR published negotiating objectives for a trade agreement with the EU in January 2019. [483]

President Trump and European Commission President Jean-Claude Juncker issued a joint statement on July 25, 2018, to announce the formation of an Executive Working Group (EWG). Headed by the EU Commissioner for Trade Cecilia Malmström and USTR Lighthizer, the EWG was formed to make progress on reducing transatlantic barriers to trade. Goals of the EWG included working to eliminate non-auto industrial tariffs and nontariff barriers, and to increase trade in services, chemicals, pharmaceuticals, medical products, and soybeans. As part of the activities of the EWG, the United States and EU also agreed to strengthen cooperation on trade in energy; to launch a dialogue on standards in order to reduce trade costs and bureaucratic obstacles; and to address unfair trading practices via World Trade Organization (WTO) reform. [484]

After the EWG was formed, Commissioner Malmström and USTR Lighthizer met in Brussels on September 10, 2018, to launch formal discussions under the group. Further meetings of the EWG at the ministerial level were held in New York on September 25, 2018, and in Washington, DC on November 14, 2018. Additional meetings were held at the technical level between U.S. and EU officials, including a technical meeting on regulatory issues in Washington, DC on October 23–26, 2018. Relevant regulatory departments and agencies of the U.S. government and the European Commission participated in these meetings. [485]

To implement certain elements of the July 25, 2018, joint statement, the European Commission needs specific negotiating mandates to be authorized by the Council of the European Union, which is composed of government ministers from each EU member state. [486] In preparation for negotiations on industrial tariffs and on product conformity assessment, the European Commission submitted draft negotiating mandates to the Council of the European Union for member state approval on January 18, 2019. [487] EU member states must approve the proposed mandates before trade negotiations can begin. [488] On March 14, 2019, the European Parliament rejected a draft resolution to recommend the opening of EU-U.S. trade negotiations on industrial tariffs and on product conformity assessment. The rejection by Parliament is not binding, however, and on April 15, 2019, the European Council approved mandates for the Commission to open negotiations on elimination of tariffs for industrial goods and on conformity assessment. [489]

U.S.-Japan Trade Agreement

On November 15, 2018, USTR announced a request for public comment on a proposed U.S.-Japan trade agreement. Written public comments on the negotiating objectives for a trade agreement were due on November 26, 2018. To help it develop its negotiating objectives, USTR specifically invited comments on relevant barriers to trade, economic costs of tariff removal to U.S. producers and consumers, product-specific barriers, customs issues, and other nontariff barriers. USTR also held a public hearing on negotiating objectives for a U.S.-Japan trade agreement on December 10, 2018, hearing testimony of industry representatives from the agriculture, biotechnology, manufacturing, and telecommunications and software sectors, as well as others. [490] Negotiations started in April 2019. [491]

After considering public comments and hearing testimony, USTR published negotiating objectives for a trade agreement with Japan on December 21, 2018. [492] Unlike the EU and UK negotiating objectives, one of the explicit goals of the U.S.-Japan negotiation is improving the trade balance and reducing the bilateral trade deficit. [493] USTR also identified regulatory compatibility to facilitate U.S. exports in key goods sectors, including pharmaceuticals, medical devices, cosmetics, information and communication technology equipment, motor vehicles, and chemicals. [494] With regard to motor vehicles, USTR objectives focused specifically on obtaining fair and more equitable trade in the motor vehicle sector, including provisions designed to address nontariff barriers in Japan as well as to increase production and jobs in the United States. [495] Also, unlike previous trade agreement negotiations, USTR has elected to pursue negotiations with Japan in stages. [496]

Several discussions at the ministerial and executive level took place in 2018 between the United States and Japan. Japanese Minister for Economic Revitalization Toshimitsu Motegi and USTR Lighthizer engaged in ministerial consultations on August 8–9, 2018, in Washington, DC, agreeing to deepen bilateral economic cooperation. [497] President Trump and Prime Minister Abe announced that the United States and Japan would begin negotiations for a U.S.-Japan trade agreement on September 26, 2018. [498] Vice President Pence and Deputy Japanese Prime Minister Taro Aso also convened the third meeting of the U.S.-Japan Economic Dialogue in Japan in November 2018, where participants discussed further expanding trade and investment between Japan and the United States. [499]

United States-Mexico-Canada Agreement (USMCA)

On November 30, 2018, the United States, Mexico, and Canada signed the United States-Mexico-Canada Agreement (USMCA) in Buenos Aires, Argentina. [500] NAFTA remains in effect until each country’s legislature ratifies USMCA, although any of the countries may withdraw from NAFTA six months after issuing written notice to the other parties. [501] The United States, Mexico, and Canada signed USMCA after completing the negotiations that began on August 16, 2017, in Washington, DC. [502] The two primary goals of the negotiations were (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 in a way that makes it easier to reduce the U.S. trade deficit with Canada and Mexico. [503]

Five negotiating rounds were completed in 2017, and in 2018, negotiations continued with round six (table 5.6). [504] At the end of round six, the chapter on corruption was completed. [505] USTR announced at the end of round seven that the negotiators had closed out three additional chapters: those on good regulatory practices, administration and publication, and sanitary and phytosanitary (SPS) measures. Negotiators also completed work on sectoral annexes related to chemicals and proprietary food formulas, made substantial progress on telecommunications and technical barriers to trade, and agreed to include a chapter on energy. [506]

Table 5.6 Timetable of major NAFTA negotiations and signing USMCA, 2017–18

Negotiations Date Country/City
First round August 16–20, 2017 Washington, DC
Second round September 1–5, 2017 Mexico City
Third round September 23–27, 2017 Ottawa, Canada
Fourth round October 11–17, 2017 Arlington, Virginia
Fifth round November 17–21, 2017 Mexico City
Sixth round January 23–28, 2018 Montreal, Canada
Seventh round February 25–March 5, 2018 Mexico City
Negotiations continue: Government officials provide various updates March 6–May 14, 2018 United States, Mexico, and Canada
Negotiations continue: USTR provides an update August 3, 2018 Washington, DC
Preliminary agreement between the United States and Mexico August 31, 2018 Washington, DC
Canada and the United States reach an agreement, alongside Mexico; the text of the agreement is released September 30, 2018 Washington, DC
The United States, Mexico, and Canada sign the USMCA November 30, 2018 Buenos Aires, Argentina

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; Gobierno de México, Embajada de México en Estados Unidos, “ Continúan los trabajos de renegociación del TLCAN en Washington D.C .” (The NAFTA renegotiation work continues in Washington, DC), August 3, 2018; USTR, “ USTR Statement on Trade Negotiations with Mexico and Canada ,” August 31, 2018; USTR, “ Joint Statement from United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland ,” September 30, 2018; USTR, 2019 Trade Policy Agenda and 2018 Annual Report , March 2019.

After round seven, officials from all three countries continued to engage in negotiations. In May 2018, USTR stated that after weeks of continuous discussions, negotiators had covered a large number of complex issues such as intellectual property, dairy and agriculture, de minimis levels, energy, labor, and more. [507] In August 2018, the United States and Mexico reached a preliminary agreement, while negotiations with Canada continued. As a result, on August 31, 2018, the President notified Congress of his intent to sign a trade agreement with Mexico, and Canada if it was willing, in 90 days. [508] Finally, on September 30, 2018, the United States and Canada reached an agreement, alongside Mexico, on the United States-Mexico-Canada Agreement (USMCA). [509] USTR published the full text of the agreement on the same day. The agreement was signed on November 30, 2018.

USMCA consists of 34 chapters, 4 annexes, and 14 side letters that address trade issues among the United States, Mexico, and Canada. It covers trade in goods and services in areas such as rules of origin, customs facilitation, SPS measures, technical barriers to trade, foreign investment, intellectual property, government procurement, competition policy, and labor and environmental standards. [510] In addition, USMCA includes new chapters on topics such as digital trade, anticorruption, competitiveness, good regulatory practices, and SMEs. [511] The chapters on Labor and Environment, which were covered as side agreements in NAFTA are now incorporated into the core text of the agreement and are subject to dispute settlement. [512]

Highlights of the signed agreement relative to NAFTA include: [513]

Developments in the North American Free Trade Agreement (NAFTA) [525]

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. [526]

NAFTA’s central oversight body is the Free Trade Commission (FTC), which is responsible for overseeing NAFTA’s implementation, as well as activities under its dispute settlement provisions. The FTC itself has not officially met since 2012. [527] However, since October 2012, trade ministers, senior officials, and experts from the three member countries have met regularly to consider approaches to expand and deepen trade and investment opportunities in North America, and beginning in 2017, met regularly to renegotiate the agreement. As noted above, the renegotiated agreement—USMCA—was signed on November 30, 2018. The original NAFTA remains in effect pending final actions approving the USMCA by each of the three countries. Per article 2205 of the agreement, any of the countries may also withdraw from NAFTA six months after issuing written notice to the other parties. [528]

The following sections describe the major activities of NAFTA’s Commission for Labor Cooperation and Commission for Environmental Cooperation during 2018, as well as dispute settlement activities under NAFTA Chapters 11 and 19 in that year.

NAFTA s Commission for Labor Cooperation

The Commission for Labor Cooperation (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 to 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 administrative secretariat, other government agencies, and the public. [529] 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). Each NAO sets its own domestic procedures for reviewing and responding to public communications. Since 2010, the NAOs have also undertaken the activities of the secretariat, including carrying out the cooperative activities of the CLC. These activities range from seminars and conferences to joint research projects and technical assistance. [530]

As of the end of 2018, there were three submissions under review at the NAALC, the same number as last year. One with the United States’ NAO (involving Mexico), [531] and two with the Canadian NAO (one involving Mexico and one involving the United States). [532]

On December 22, 2018, 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 so that final legislation improves labor standards, protects Mexican workers’ rights, and complies with Mexico’s obligations under USMCA. [533]

NAFTA’s Commission for Environmental Cooperation

The Commission for Environmental Cooperation (CEC) was established under Article 8 of the North American Agreement on Environmental Cooperation (NAAEC). The NAAEC is a supplemental agreement to NAFTA that came into force at the same time as NAFTA; it was 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. [534] The CEC was established to support cooperation among the parties to reach these goals. [535]

Articles 14 and 15 of NAAEC offer citizens and nongovernmental organizations a mechanism to help enforce environmental laws in the NAFTA countries. Article 14 governs allegations of failures to effectively enforce environmental laws submitted for review by the CEC. It sets out guidelines about criteria for submissions and for requesting a response from the relevant NAFTA party regarding the submission. Article 15 outlines the CEC Secretariat’s obligations in considering the submissions and the development of a factual record concerning the allegations raised in the submissions. [536] At the end of 2018, five submissions remained active under Articles 14 and 15. Two involved Canada, with one submitted in 2017, and the other in 2018; and three involved Mexico, all submitted in 2018 (table 5.7).

Table 5.7 Active submissions as of yearend 2018 under Articles 14 and 15 of the North American Agreement on Environmental Cooperation

Name Case First filed Country a Status
Alberta Tailings Ponds II SEM-17-001 June 26, 2017 Canada The Secretariat posted a request for information relevant to the factual record on its web site.
Metrobús Reforma SEM-18-002 b Feb. 2, 2018 Mexico The Secretariat informed Council (the governing body of the CEC) that the Secretariat considers that the submission warrants development of a factual record.
Hydraulic Fracturing in Nuevo León SEM-18-003 Oct. 3, 2018 Mexico The Secretariat determined that the submission met the criteria of Article 14(1) and requested a response from the concerned government party in accordance with Article 14(2).
Chileno Bay Club SEM-18-004 Nov. 9, 2018 Mexico The Secretariat received a response from the concerned government party and began considering whether to recommend a factual record.
Grand-Brûlé–Saint-Sauveur Supply Line SEM-18-005 Dec. 7, 2018 Canada The Secretariat determined that the revised submission did not meet the Article 14(1) criteria and terminated the process under guideline 6.3.

Source: CEC, “ Submission on Enforcement Matters: Active Submissions ” (accessed June 14, 2019).

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

b CEC,“ Submissions ” (accessed July 2, 2019).

At the 25th regular session of the CEC Council on June 27, 2018, in Oklahoma City, Oklahoma, the CEC focused on “Innovation and Partnerships for Green Growth.” [537] The session showed ways that partnerships among indigenous, academic, youth, and private sectors at the federal, state, and local levels can foster innovation, entrepreneurship, and technological advances that support environmental protection and healthier ecosystems in North America. [538]

In Oklahoma, the three countries’ academic, government, and private sector partners demonstrated how scientific innovations such as radar and computer modeling assist in monitoring the atmosphere and climate developments. In this way, they support research, policy-making, and preparedness efforts to address extreme events and mitigate their impacts on human health, the environment, and economic growth and productivity. [539] For example, these technologies can help the CEC track North American species migrations and protect species and their habitats—both critical to environmental sustainability and ecotourism.

Also at this meeting, the CEC held a public session with experts from state governments, academia, and the private sector to address ways to promote innovation and partnerships supporting green growth in North America. [540] In addition, the Council reviewed progress to date in implementing 10 cooperative projects related to supporting legal and sustainable trade in select North American species and improving industrial energy efficiency. [541]

The Border Environment Cooperation Commission and the North American Development Bank were created in 1994 under a NAFTA side agreement to address environmental issues in the U.S.-Mexico border region. The bank’s projects are certified by the Border Environmental Cooperation Commission. As of December 31, 2018, the bank had contracted a total of about $3.1 billion in loans and grants to help finance 257 projects estimated to cost a total of $9.8 billion. [542]

NAFTA Dispute Settlement

The dispute settlement provisions of NAFTA—found in Chapters 11 (Investment) and 19 (Review and Dispute Settlement in Antidumping/Countervailing Duty Matters)—cover a variety of areas. [543] The sections below describe developments during 2018 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 2018.

NAFTA Chapter 11 Dispute Settlement Developments

Chapter 11 of NAFTA includes provisions designed to protect cross-border investors and their investments. It establishes a mechanism for the settlement of investment disputes that seeks to assure a “minimum standard of treatment” for investors of the parties. [544] An individual investor who alleges that a NAFTA country has breached its investment obligations under Chapter 11 may pursue arbitration through internationally recognized channels. [545] A key feature of the Chapter 11 arbitral provisions is the enforceability in domestic courts of final awards made by arbitration tribunals. [546] In 2018, there were six active Chapter 11 cases filed against Canada by U.S. investors, [547] and two filed against Mexico by U.S. investors. [548] There were no cases filed against the United States.

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. [549] 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. [550] At the end of 2018, the NAFTA Secretariat listed five binational panels active under Chapter 19 (table 5.8). [551] The United States filed one case contesting Mexico’s determinations; Canada filed three cases contesting U.S. determinations; and Mexico filed one case contesting U.S. determinations. Table A.26 lists all chapter 19 panels with developments in 2018, including those that were terminated.

Table 5.8 NAFTA Chapter 19 binational panels, active reviews through 2018

Country of determination under panel review a Case number National agencies’ final determination b Case title
Mexico
MEX-USA-2015-1904-01 SE Antidumping Administrative Review Ammonium Sulphate
United States
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-CDA-2018-1904-03 USITC Injury Determination Softwood Lumber from Canada
USA-MEX-2018-1904-04 USDOC Antidumping Administrative Review Large Residential Washers from Mexico

Source: NAFTA Secretariat, “ Dispute Settlement: Status Report of Panel Proceedings ” (accessed June 14, 2019).

a The United States filed the first case contesting Mexico’s determination. Canada filed the next three cases, and Mexico filed the last case, both countries contesting U.S. determinations.

b In Canada, the Canada Border Services Agency makes final dumping determinations and the Canadian International Trade Tribunal makes subsidy determinations and injury determinations. In Mexico, all determinations are made by the Secretariat of the Economy. In the United States, dumping and subsidy determinations are made by the U.S. Department of Commerce and injury determinations are made by USITC. NAFTA Secretariat, “ Overview of the Dispute Settlement Provisions ” (accessed June 14, 2019).

Developments in Other U.S. FTAs Already in Force during 2018

In 2018, 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. [552] Highlights of these consultations are presented in this section.

To date, the United States has implemented 14 FTAs with a total of 20 countries. [553] Twelve of the 14 U.S. FTAs have labor provisions to protect worker rights and facilitate cooperation on labor issues, and another includes such provisions in a supplemental agreement. [554] The USDOL’s Bureau of International Labor Affairs monitors reports and submissions made under the labor provisions of U.S. trade agreements. [555] Similarly, 12 of the 14 FTAs contain environmental provisions to facilitate cooperation on environmental matters and to ensure that domestic environmental laws are effectively enforced, and another includes such provisions in a supplemental agreement. [556] Lastly, 12 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. [557] The U.S. Department of State assists companies involved in investment disputes with foreign governments. [558] Highlights of the past year’s activities are discussed below.

U.S.-Australia FTA

The U.S.-Australia Free Trade Agreement was signed on May 18, 2004, and entered into force on January 1, 2005. [559] In 2018, discussions in the U.S.-Australia Free Trade Agreement’s Joint Committee [560] led to Australia’s removal of a 14-year Australian ban on U.S. heat-treated beef products in May 2018. Australia also removed its luxury car tax on reimported cars refurbished overseas. [561]

U.S.-Bahrain FTA

The U.S.-Bahrain Free Trade Agreement was signed September 14, 2004, and entered into force on August 1, 2006. [562] In 2018, the United States and Bahrain signed a Memorandum of Understanding on Trade in Food and Agriculture Products that said that Bahrain will continue to accept existing U.S. export certifications for food and agricultural products. [563]

Labor

The United States and Bahrain discussed various aspects of labor rights, including (1) improving Bahrain’s capacity to counter employment discrimination; (2) possible legal amendments to make Bahrain’s labor laws more consistent with international labor standards; (3) enforcement of labor laws concerning freedom of association and collective bargaining; and, (4) encouraging dialogue among stakeholders in Bahrain on labor matters. [564]

Environment

On March 7, 2018, senior officials from the two governments held the inaugural meeting of the Joint Forum on Environmental Cooperation under the Memorandum of Understanding on Environmental Cooperation––negotiated in parallel with the U.S.-Bahrain FTA––as well as the inaugural meeting of the Subcommittee on Environmental Affairs held under the FTA. [565] They reviewed progress in implementing commitments under the FTA’s Environment chapter, and discussed areas of potential cooperation under the 2017–2021 Work Program on Environmental Cooperation that was approved in August 2017. [566] These areas included (1) projects and programs to improve air quality and reduce adverse health effects from air pollution; (2) protection of coastal environmental zones and overexploitation of marine resources; (3) capacity to protect endangered species—for example, through the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); and (4) promotion of the environmental technology business sector. [567]

United States-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR)

The United States-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) was signed on May 28, 2004, with El Salvador, Honduras, Nicaragua, Guatemala, and Costa Rica; it was signed with the Dominican Republic on August 1, 2004. The CAFTA-DR entered into force with all parties by January 1, 2009. [568]

Labor

In 2018, the United States continued engagement with the Dominican Republic over concerns identified in a 2013 USDOL report regarding labor laws in the Dominican sugar sector. In May 2018, USDOL published its sixth periodic review of the implementation of the 2013 report’s recommendations. [569] In addition, USDOL conducted missions in 2018 to Honduras as a follow-up to the 2015 multiyear Labor Rights Monitoring and Action Plan, which set out concrete steps that the government of Honduras must take to improve the application of its labor laws. In October 2018, USDOL published a progress report on the status of implementation of the plan. [570]

In 2018, Guatemala established a National Tripartite Commission on Labor Relations and Freedom of Association. The commission contributed to the closure in November 2018 of a complaint by Guatemalan workers to the International Labour Organization (ILO) alleging violations of the ILO’s freedom of association provisions. [571]

Environment

Officials met twice in 2018 to discuss implementation of the environmental provisions of CAFTA-DR. [572] The Environmental Affairs Council met in June 2018 in Santo Domingo, Dominican Republic, with a particular focus on combating wildlife trafficking and illegal logging. [573] The council also discussed the role of environmental courts and tribunals in enforcing environmental laws to help implement the Environmental Cooperation Agreement established under CAFTA-DR. The Secretariat for Environmental Matters, an independent body, received three new submissions from the public claiming a failure to effectively enforce a CAFTA-DR party’s environmental laws. The Secretariat has received 41 such submissions since its establishment in 2007. [574]

U.S.-Chile FTA

The U.S.-Chile Free Trade Agreement was signed June 6, 2003, and entered into force on January 1, 2004. [575] On October 16, 2018, officials from the two countries held the 12th meeting of the United States-Chile Free Trade Commission, which is responsible for the ongoing implementation of the U.S.-Chile FTA. [576] A major focus of that meeting was addressing longstanding intellectual property rights issues in Chile. [577]

Labor

In 2018, USDOL released its annual report on child labor, citing Chile as having made “moderate advancement” in efforts to eliminate the worst forms of child labor. The report also mentioned positive measures in the areas of legal framework, labor and criminal law enforcement, and coordination of government efforts, as well as government policies and social programs. [578]

Environment

In 2018, U.S. and Chilean officials met for the eighth meeting of the Environmental Affairs Council under the agreement, as well as the sixth meeting of the Joint Commission for Environmental Cooperation. [579] The two sides approved a Work Program covering 2018–20, which sets out work priorities, including strengthening effective implementation and enforcement of environmental laws, promoting conservation, and promoting improved air and water quality. [580]

U.S.-Colombia TPA

The U.S.-Colombia Trade Promotion Agreement was signed November 22, 2006, and entered into force on May 15, 2012. [581] On January 1, 2019, the eighth annual set of tariff reductions took effect under the agreement; the agreement should be fully in effect 10 years after its entry into force, or 2022. On August 3, 2018, the United States and Colombia held the second meeting of the Free Trade Commission, the body established to review implementation of the United States-Colombia Trade Promotion Agreement. [582]

Labor

The two governments held meetings about the Labor Chapter of the FTA in February and December 2018. Specifically, they met to discuss Colombia’s implementation of recommendations made in the 2017 report issued by USDOL. [583] These recommendations addressed issues concerning Colombia’s labor law inspection system, fines for employers who violate labor laws, abusive subcontracting and collective pacts, and prosecution of violence and threats against unionists. [584]

Environment

In July 2018, the United States and Colombia signed the Agreement Establishing a Secretariat for Environmental Enforcement Matters consistent with the requirements of the FTA. The independent secretariat is responsible for receiving submissions from the public alleging that Colombia is failing to effectively enforce its environmental laws and developing factual records regarding such submissions when directed by an FTA party to do so. The two partners also finalized selection of an Executive Director to oversee the Secretariat’s functions. [585]

U.S.-Israel FTA

The U.S.-Israel Free Trade Agreement was signed April 22, 1985, and entered into force on September 1, 1985. [586] The United States-Israel Joint Committee is the central oversight body for the agreement, but it has not met since February 2016. [587] In November 2018, the two sides held the first round of negotiations on an agreement to succeed the 2004 U.S.-Israel Agreement on Trade in Agricultural Products. The 2004 agreement, which addressed market access in agricultural products, was supposed to expire in December 2008, but has been extended each year to provide time to negotiate a new agreement. According to USTR, the 2004 agreement provides Israel with duty-free access to 90 percent of agricultural tariff lines, whereas Israel provides the United States with duty-free access to only 72 percent. [588]

U.S.-Jordan FTA

The U.S.-Jordan Free Trade Agreement was signed October 24, 2000, and entered into force on December 17, 2001; the U.S.-Jordan FTA was fully implemented as of January 1, 2010. [589] The Joint Committee that oversees the agreement met last in May 2016, discussing issues concerning trade and investment, labor, agriculture, and technical barriers to trade in agriculture, as well as aspects of WTO agreements. [590] The Qualifying Industrial Zone program allows products with a certain amount of Israeli content to enter the United States duty free if manufactured in Jordan (this is also true of such products when made in Egypt or in the West Bank and Gaza). In 2018, U.S. imports from Jordan under the Qualifying Industrial Zones were $12.9 million, less than 1.0 percent of total U.S. imports from Jordan. [591]

Labor

The United States and Jordan signed the Implementation Plan Related to Working and Living Conditions of Workers in Jordan in 2013. The plan addresses concerns about Jordan’s garment factories, such as anti-union discrimination against foreign workers, accommodation conditions for foreign workers, and gender discrimination and harassment. In 2018, the two parties continued work toward completing the plan, in particular addressing inspection of living conditions for garment workers by Jordan’s Ministry of Labor. In December 2018, the U.S. Department of Labor visited Jordan to press for the issuance of directives under the plan, as well as of outreach materials for migrant workers. [592]

Environment

In February 2018, the two parties held a Joint Forum on Environmental Cooperation in Amman, Jordan. [593] During the Joint Forum, the parties reviewed accomplishments under the 2014–18 Environmental Work Program and approval of a new Work Program for 2018–21. The new work program sets out activities addressing effective enforcement of environmental laws, protecting wildlife, and sustainably managing wildlife, ecosystems, and natural resources by strengthening legislation implementing the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). [594]

U.S.-Korea FTA (KORUS)

On January 5, 2018, representatives of the United States and South Korea met in Washington, DC, to negotiate modifications and amendments to the U.S.-Korea Free Trade Agreement (KORUS). The two countries discussed solutions to crosscutting barriers as well as sector-specific barriers to trade in key industrial goods sectors. [595] These discussions continued in a meeting in Seoul on January 31–February 1, 2018, where views on market access and tariffs were exchanged. [596] On March 28, 2018, U.S. Trade Representative Lighthizer and South Korean Minister for Trade Hyun Chong Kim reached an agreement in principle on the general terms of the amendments to the KORUS agreement. [597] As part of this last round of talks, the two countries also agreed on terms for a country exemption for South Korea from the steel import tariffs imposed by Presidential Proclamation 9705 in exchange for quantitative limitations on U.S. imports of steel from South Korea. [598] Subsequent meetings on the progress of KORUS revisions took place in Washington, DC, between Trade Representative Lighthizer and Trade, Industry, and Energy Minister Paik Ungyu on April 23, 2018, and between Trade Representative Lighthizer and Trade Minister Hyun Chong Kim on July 27, 2018. [599]

On September 3, 2018, USTR and South Korea’s Ministry of Trade, Industry, and Energy published the agreed outcome of the negotiations to amend and modify KORUS. [600] Representatives of the United States and South Korea signed a number of amendments to KORUS and related commitments on September 24, 2018, in New York. [601] Notable changes were made on the following issues:

Automotive Products. South Korea agreed to extend the phaseout of the 25 percent U.S. tariff on South Korean trucks from 2021 to 2041. [602] It also agreed to several provisions pertaining to recognition of standards, committing to (1) double the number of U.S.-origin vehicles per manufacturer that may be imported annually and sold in South Korea if they meet U.S. safety standards in lieu of South Korean safety requirements, (2) recognize U.S. standards for auto parts needed to service U.S. vehicles, and (3) eliminate duplicative or additional emissions testing of U.S. vehicles for the South Korean market. [603] With regard to emissions standards, South Korea agreed to expand the “eco-credit” cap from 14 grams of carbon dioxide per kilometer to 17.9 grams (the current U.S. cap), and to consider more lenient targets for small-volume manufacturers in the forthcoming implementing regulations for the 2021–25 Corporate Average Fuel Economy standards. [604]

Customs. South Korea agreed to make changes to the procedures of the South Korean Customs Service for verifying the origin of exports from the United States for claims of preferential tariff treatment under KORUS. The two sides also committed to setting up a working group to monitor and address future issues. [605]

Pharmaceuticals. The United States secured a commitment from South Korea to amend its Premium Pricing Policy for Global Innovative Drugs, ensuring nondiscriminatory treatment for U.S. pharmaceutical exports in compliance with South Korea’s obligations under KORUS. [606]

The revised agreement also clarifies and restricts the investor-state dispute settlement application under KORUS, [607] introduces a new provision increasing the transparency of trade remedy procedures, [608] and provides preliminary modifications to the rules of origin for South Korean textiles. [609]

Annual meetings of committees formed under KORUS continued to convene in 2018. The Sanitary and Phytosanitary Procedures (SPS) and Agriculture Committees, formed in efforts to align biotechnology policies and pesticide maximum residue limits and to resolve SPS barriers to trade, met most recently in Washington, DC, in November 2018, and made substantive progress on a number of these issues. [610]

The South Korean government submitted the bill to the National Assembly for ratification on October 12, 2018, and the National Assembly ratified the revised KORUS agreement on December 7, 2018. [611] On the U.S. side, the President implemented the changes by proclamation pursuant to his authority in section 201(b) of the United States-Korea Free Trade Agreement Implementation Act and in accordance with the consultation and layover requirement in section 104 of the act. [612] The signed KORUS modifications entered into force on January 1, 2019. [613]

U.S.-Morocco FTA

The U.S.-Morocco Free Trade Agreement was signed June 15, 2004, and entered into force on January 1, 2006. [614] The two parties held their fifth meeting of the FTA Joint Committee on October 18, 2017, concentrating on a number of agriculture and SPS issues, geographical indications (GIs), and certain textile and apparel cases. The United States and Morocco improved their understanding of their respective views on GIs during 2018, given a pending Morocco-EU agreement on the protection of GIs. In late 2018, the United States approved modifications of certain rules of origin for textiles and apparel under the FTA at Morocco’s request. [615]

Agriculture and Sanitary and Phytosanitary Measures

In the area of agricultural market access, in 2018 Morocco opened its market to imports of U.S. beef and poultry after the two sides agreed on export certificates. Morocco also agreed to speed up the phaseout of duties on 40 tariff lines covering wheat, beef, and poultry products, given that Morocco applied lower duties on EU products. Morocco also agreed to improve access to its tariff-rate quota for common wheat by increasing tenders and improving administration of the quota. [616]

Labor

Following concerns raised by the United States in 2014 under the agreement’s labor provisions, Morocco continued to carry out a new domestic worker law in 2018. This law extends protection and benefits to Moroccan workers by setting a minimum wage, limiting weekly working hours, setting a minimum age for employment, and providing for a day of rest for workers. [617]

Environment

The United States-Morocco Working Group on Environmental Cooperation met in 2018 to monitor implementation of the agreement’s Environment chapter, review accomplishments of the 2014–17 Plan of Action, and to approve a new Plan of Action for 2018–21. The new plan addresses environmental cooperation regarding technological solutions in the areas of water, air, and waste technology, as well as efforts to combat environmental crimes. It prioritizes combating wildlife trafficking, illegal logging, and illegal fishing through consultations and training. It also seeks to create opportunities for innovation and technological solutions in areas such as solid waste management, recycling, and monitoring and mitigation of pollution. [618]

U.S.-Oman FTA

The U.S.-Oman Free Trade Agreement was signed January 19, 2006, and entered into force on January 1, 2009. [619] The United States-Oman Joint Committee, which oversees the agreement, has discussed a broad range of trade issues, including trade and investment; the FTA’s customs, investment, and services chapters; possible cooperation in the broader Middle East and North Africa region; and cooperative efforts related to labor rights and environmental protection. [620]

Labor

Stemming from the agreement’s labor provisions, in 2018 Oman launched a new two-year “Decent Work Country Program” in conjunction with the United Nations’ International Labour Organization. This program is aimed at building on the previous program, which ended in 2016. The new program focuses on social protection; employment, skills, and entrepreneurship development; and international labor standards and labor governance. [621]

Environment

USTR has continued to review implementation of the U.S.-Oman FTA Environment chapter and held bilateral meetings in Muscat in March 2018 focusing on wildlife trafficking and illegal fishing. As part of these meetings, the United States and Oman signed a new Plan of Action for 2018–21. The plan sets out activities related to managing ecosystems and natural resources sustainably; combating wildlife trafficking; and promoting environmental education, training, awareness, and transparency, as well as public participation in environmental decision-making and enforcement. [622]

U.S.-Panama TPA

The U.S.-Panama Trade Promotion Agreement was signed June 28, 2007, and entered into force on October 31, 2012. [623] On January 1, 2019, the eighth round of tariff reductions under the agreement took place. The United States-Panama Free Trade Commission (FTC) is the central oversight body for the agreement, but did not meet in 2018. [624] In 2018, the two countries continued to work together to address remaining implementation issues under the agreement. The two sides expect to hold the third FTC meeting in 2019 to review implementation of the TPA. [625]

Labor

The two sides met in September 2018 to discuss various issues concerning labor law enforcement, in particular laws against child labor. [626]

Environment

The Environmental Affairs Council (EAC) and the Environmental Cooperation Commission (ECC) met in October 2018 to discuss environmental protection under the agreement’s Environment chapter, particularly wildlife trafficking, illegal logging, illegal fishing, and conservation of wetlands. The EAC approved a 2018–19 work program and working procedures for the Secretariat for Environmental Enforcement Matters, which launched at this meeting. [627] The independent secretariat aims to promote participation in environmental enforcement issues and receives and considers public submissions about the enforcement of environmental laws. [628]

The ECC discussed environmental cooperation projects completed under the 2014–17 Environmental Cooperation Work Program, as well as the status of current and planned environmental cooperation projects. These projects address issues such as illegal, unreported, and unregulated (IUU) fishing and illegal logging; wildlife trafficking; environmental management at ports; air quality; environmental impact assessments; and adoption of cleaner production practices. The ECC also approved its second work program for 2018–22. It prioritizes cooperative activities to strengthen environmental laws and regulations; improve private sector compliance with environmental laws; and increase education, transparency, and public participation to improve protection of the environment and enforcement of environmental laws. [629]

U.S.-Peru TPA

The U.S.-Peru Trade Promotion Agreement (TPA) was signed April 12, 2006, and entered into force on February 1, 2009. [630] All remaining tariff reductions, which cover only agricultural products, should be complete by 2026. The U.S.-Peru Free Trade Commission oversees the agreement and its implementation. In 2018, four of the bodies organized under the Free Trade Commission met: the Committee on Technical Barriers to Trade, the Committee on Sanitary and Phytosanitary Matters, the Committee on Trade Capacity Building, and the Working Group on Customs and Trade Facilitation. The two governments expect to hold the next Free Trade Commission meeting in 2019. [631]

Labor

In 2018, both sides continued to follow up on the issues raised in a 2016 U.S. Department of Labor (USDOL) report issued in response to a submission made under the Labor chapter of the TPA. These issues concerned Peru’s protection of fundamental labor rights and enforcement of labor laws, in particular as they relate to nontraditional exports and temporary contracting in both the agriculture and the textile industries. [632] In April 2018, USDOL issued its second periodic review of progress made in addressing these concerns, [633] and in November 2018, officials from USTR and USDOL held a teleconference with Peruvian officials to discuss efforts by Peru to address labor issues. [634] In addition, USDOL recognized Peru’s advances in combating child labor in its most recent report on the subject. [635] The USDOL report noted, among other things, that Peru increased criminal penalties for subjecting children to forced labor and had imposed its longest human trafficking sentence yet in a case involving minors. [636]

Environment

In addition to its Environment chapter, the agreement includes the Annex on Forest Sector Governance, aimed at combating illegal logging and trade in timber and wildlife products from Peru. In February 2018, Peru and the United States convened the seventh meeting of the Environmental Affairs Council (EAC) and the Environmental Cooperation Commission (ECC), as well as the ninth meeting of the Sub-committee on Forest Sector Governance (Sub-committee) in Lima. [637] The EAC reviewed the progress Peru and the United States have made to effectively implement, and comply with, the obligations under the agreement’s Environment chapter, including implementation of the Secretariat for Submissions on Environmental Enforcement Matters. The secretariat received two submissions in July 2018 claiming failure to effectively enforce environmental laws. [638]

In addition, in July 2018, the ECC exchanged views regarding the implementation of the United States-Peru Environmental Cooperation Work Program for 2015–2018. The parties highlighted cooperation regarding small-scale gold mining, environmental monitoring and enforcement, and water management in support of the agreement’s Environment chapter. [639]

On February 26, 2018, the United States Interagency Committee on Trade in Timber Products from Peru (Timber Committee) requested that Peru verify whether three shipments of timber exported to the United States in 2017 met requirements under the agreement’s Forest Annex. [640] Peru issued its timber verification report in July 2018, which could not establish the legality of one shipment. [641] In August 2018, the Timber Committee released recommendations related to this issue. Many of these included commitments already made by Peru but not yet substantially implemented, such as upgrading Peru’s timber traceability system, improving detection of illegally harvested timber, and taking stronger action against those violating Peru’s forestry laws. [642]

U.S.-Singapore FTA

The U.S.-Singapore Free Trade Agreement was signed May 6, 2003, and entered into force on January 1, 2004. [643]

Environment

In January 2018, the two governments held their biennial review under the Memorandum of Intent between the United States of America and the Republic of Singapore on Cooperation in Environmental Matters, which was negotiated in parallel with the Environment chapter of the U.S.-Singapore Free Trade Agreement. The two sides focused on shared commitments to environmental protection and sustainable natural resource use. [644] The two governments reviewed accomplishments under the 2016–17 Plan of Action, in particular efforts to combat wildlife trafficking and illegal fishing. They also agreed on a new Plan of Action for 2018–19, which focuses on (1) implementation and enforcement of environmental laws; (2) conservation and sustainable use of and trade in natural resources; and (3) the exchange of information on environmental policies, best practices in environmental protection, and innovative environmental technology and techniques for pollution management. [645]

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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 2018: the European Union (EU), China, Canada, Mexico, Japan, South Korea, India, and Taiwan (ordered according to the value of their two-way merchandise trade with the United States). For each trading partner, the chapter summarizes U.S. bilateral trade, including trade in both merchandise and private services, [646] and reports the major developments in bilateral trade policies and programs during 2018.

European Union

U.S.-EU Trade Overview

The EU as a single entity is the United States’ largest two-way trading partner (i.e., exports plus imports) in terms of both goods and services. The value of U.S. merchandise trade with the 28 member states of the EU increased 12.4 percent, from $717.7 billion in 2017 to $806.4 billion in 2018. The EU share of total U.S. goods trade rose slightly, from 18.6 percent in 2017 to 19.2 percent in 2018. The U.S. merchandise trade deficit with the EU rose by $17.9 billion, from $151.2 billion in 2017 to $169.1 billion in 2018, as U.S. imports grew more than U.S. exports in value terms (figure 6.1).

The EU was the largest market for U.S. merchandise exports in 2018 for the third year in a row, accounting for 19.1 percent of total U.S. exports. U.S. goods exports to the EU increased 12.5 percent, from $283.3 billion in 2017 to $318.6 billion in 2018. Leading U.S. exports to the EU included civilian aircraft, engines, and parts; crude petroleum; medicaments (medicines); refined petroleum products; and nonmonetary gold. Nearly all of the top 15 U.S. goods exports to the EU increased between 2017 and 2018.

The EU remained the second-largest source of U.S. merchandise imports, following China, in 2018. The EU accounted for 19.2 percent of total U.S. goods imports in 2018. U.S. imports from the EU increased 12.3 percent, from $434.5 billion in 2017 to $487.8 billion in 2018. Leading U.S. imports were passenger motor vehicles, medicaments, certain immunological products, light oils, and parts of turbojets and turbopropellers. U.S.-EU merchandise trade data are shown in appendix tables A.27 through A.30.

Figure 6.1 U.S. merchandise trade with the EU, 2014–18

Figure 6.1 is a bar chart that shows U.S. merchandise trade with the EU from 2014 to 2018. The U.S. merchandise trade deficit with the EU grew gradually from $144.2 billion in 2014 to a high of $169.1 in 2018, as U.S. imports from the EU rose more than U.S. exports to the EU. The data behind this table are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 17, 2019).

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, 2014–18

Figure 6.2 is a bar chart that shows U.S. trade in private cross-border services with the EU from 2014 to 2018. During the five-year period, the U.S. trade surplus in private services with the EU at first rose from $59.9 billion in 2014 to a peak of $61.3 billion in 2015 before falling again to $53.2 billion in 2018. The data behind the figure are presented in table B.7.

Source: USDOC, BEA, U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

U.S. two-way cross-border trade in services with the EU increased 3.4 percent to $450.4 billion in 2018 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—one that increased from $50.3 billion in 2017 to $53.2 billion in 2018—as U.S. exports grew more than U.S. imports (figure 6.2). The United Kingdom (UK) was the EU’s largest services trader with the United States, with 29.8 percent of the EU total, followed by Germany and France.

U.S. exports of services to the EU increased 3.7 percent ($8.9 billion) to $251.8 billion in 2018, while U.S. imports increased 3.1 percent ($6.0 billion) to $198.6 billion (tables A.31 and A.32). Leading U.S. services exports to the EU included other business services, [647] charges for the use of intellectual property, [648] travel services, and financial services. Leading U.S. services imports from the EU included travel services, other business services, transport, and charges for the use of intellectual property.

Trade Developments

A potential U.S.-EU trade agreement was under discussion beginning in July 2018. These discussions led to the establishment of an Executive Working Group to reduce transatlantic trade barriers, which was one of the primary trade events of the U.S.-EU relationship over the past year. However, attention was also focused on the steel and aluminum tariffs imposed on EU goods by the United States under section 232 of the Trade Expansion Act of 1962, and EU retaliatory measures. Despite their disagreement over the tariffs, the United States and EU—along with Japan—found common ground in looking at nonmarket economic policies of third countries, on which they issued a joint scoping paper outlining possible collective remedial actions. [649] Finally, the EU’s much-discussed General Data Privacy Regulation (GDPR) went into effect in May 2018, in concert with a joint U.S.-EU review of the EU-U.S. Privacy Shield Framework. [650] All of these topics are described below.

EU automotive exports to the United States were also at issue in 2018. On May 23, 2018, USDOC initiated an investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automobile parts. [651] The EU submitted written comments to USDOC on June 29, 2018. [652] EU Ambassador David O’Sullivan provided testimony at USDOC’s public hearing on July 19, 2018, stating that EU automotive exports to the United States do not threaten or impair the U.S. auto industry or national security. [653]

In March 2018, the first Joint Committee meeting under the Bilateral Agreement on Prudential Measures regarding Insurance and Reinsurance (the U.S.-EU Covered Agreement) was held to reaffirm commitments made in 2017 concerning continuous review, close coordination, and full and timely implementation of agreement provisions. [654] The UK continued to prepare for an expected exit from the EU (Brexit) [655] by signing a separate U.S.-UK Bilateral Agreement on Prudential Measures Regarding Insurance and Reinsurance in December 2018; this agreement upholds the terms of the U.S.-EU Covered Agreement. [656] Under the framework of the Transatlantic Economic Council, the EU hosted the ninth workshop for small and medium-sized enterprises (SMEs) in Vienna, Austria. This workshop focused on best practices for supporting SME development through dual vocational education programs, technology-assisted financing, cooperative intellectual property protections, and public-private partnerships. [657] Lastly, In March 2018, the EU Commission proposed a directive to establish an interim EU-wide tax on digital services. [658] However, the proposal was abandoned in early 2019 when several member states voiced opposition. By March 2019, four member states (France, Italy, Spain, UK) had separately introduced or proposed introducing a digital services tax bill. [659]

Also during 2018, there was a new development in the long-running dispute on EU measures affecting trade in large civil aircraft, based on a dispute that the United States filed with the World Trade Organization (WTO) in 2004. On May 15, 2018, the WTO compliance panel issued a report confirming that the EU and certain EU member states had failed to comply with the earlier WTO determination that found launch aid to be inconsistent with their WTO obligations (DS316). [660] The outcome of the WTO compliance panel report is described in more detail in chapter 3.

Section 232 Steel and Aluminum Tariffs

On February 16, 2018, under section 232 of the Trade Expansion Act of 1962, the U. S. Department of Commerce (USDOC) released its report finding that imports of steel and aluminum threatened U.S. national security. [661] In response to these findings, the President imposed a 25 percent ad valorem tariff on imported steel from all countries, temporarily excluding Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all countries, also temporarily excluding Canada and Mexico, effective March 23, 2018. [662]

On March 22, 2018, President Trump issued two more proclamations temporarily exempting the EU and certain other countries from the tariffs, as discussions continued with the goal of finding “satisfactory alternative means to address the threatened impairment to the national security.” [663] With respect to the EU, the new proclamations highlighted “our shared commitment to supporting each other in national security concerns; the strong economic and strategic partnership between the United States and the EU, and between the United States and EU member countries; and our shared commitment to addressing global excess capacity in steel [and aluminum] production.” If satisfactory alternative means were not found, these exemptions would last only through May 1, 2018. [664] On April 30, 2018, the President issued two more proclamations, which further exempted the EU, Canada, and Mexico from the tariffs until June 1, 2018. [665]

On May 16, 2018, the EU responded to the proposed imposition of the section 232 steel and aluminum tariffs by issuing a regulation that announced the imposition of additional ad valorem duties on selected U.S. products in two stages. The first stage included ad valorem duties of up to 25 percent on imports from the United States valued at $3.1 billion, including agricultural products, processed food, beverages, tobacco, eye makeup, cotton T-shirts, steel and aluminum products, and more. [666]

On June 1, 2018, the United States imposed the section 232 tariffs on steel and aluminum imports from the EU; on June 20, 2018, the European Commission adopted the regulation imposing retaliatory tariffs, effective June 22. [667] Also on June 1, the EU requested WTO dispute settlement consultations with the United States (DS548) concerning the imposition of the section 232 tariffs. [668] On July 16, 2018, the United States responded by requesting WTO consultations with the EU regarding the EU imposition of retaliatory tariffs (DS559). [669] For more information about these WTO dispute settlement cases, see chapter 3.

The second stage of the two-stage EU response, announced in May 2018, included extra ad valorem duties of 10, 25, 35, and 50 percent on about $3.9 billion worth of U.S. goods, including motor vehicles, cranberries, textile fabrics, footwear, tableware, washing machines, and more. These tariffs are to be applied either starting March 23, 2021, or after the WTO Dispute Settlement Body rules that the “United States’ safeguard measures are inconsistent with the relevant provisions of the WTO Agreement,” if that ruling comes earlier. [670]

In 2017, the last full year before tariffs were imposed, the EU was the largest source of U.S. steel imports, comprising 19.8 percent of all U.S. steel product imports. [671] The EU was also the fifth-largest source for U.S. aluminum imports, comprising 6.6 percent of all U.S. aluminum imports in 2017. [672]

Trade Agreement Negotiations

On July 25, 2018, President Trump and European Commission President Jean-Claude Juncker established a U.S.-EU Executive Working Group to work together to (1) eliminate non-auto industrial tariffs and nontariff barriers; (2) increase trade in several key industries, including services, chemicals, pharmaceuticals, medical products, and soybeans; and (3) work together with other WTO partners on WTO reform to address such issues as industrial subsidies, intellectual property theft, forced technology transfer, overcapacity, and other distortions imposed by state-owned enterprises. [673] The two sides also agreed to launch a dialogue on standards, following up on past work, and to cooperate in the area of energy, in particular to facilitate U.S. exports of liquefied natural gas to the EU. [674]

On October 16, 2018, the Office of the U.S. Trade Representative (USTR) notified Congress of the Administration’s intent to initiate negotiations on a trade agreement with the EU under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. [675] USTR’s letter to Congress set out broad goals of securing higher-paying jobs in the United States, and improving trade and investment opportunities with the EU. In addition to consulting with Congress, USTR solicited comments from the public and held a hearing on December 14, 2018. Using this input, in January 2019, USTR published negotiating objectives for the agreement. [676] For more information, see chapter 5.

Non-market Economic Policy

On May 31, 2018, a trilateral meeting of the U.S., EU, and Japanese trade ministers produced a joint scoping paper on the issue of non-market-oriented policies of third countries that lead to unfair competitive conditions. All parties agreed to “deepen and accelerate” discussions on possible new WTO rules for industrial subsidies and state-owned enterprises, with a view toward future negotiations. The three parties also released two joint statements on cooperating to address forced technology transfer, and on identifying the elements that signal market conditions and the means to maintain these conditions. [677]

The scoping paper defined the basis for developing strong rules on market-distorting industrial subsidies. Specific objectives outlined included improving transparency by incentivizing WTO members to notify the WTO of subsidies granted or maintained. The ministers also recognized the need to better address the market-distorting behavior of public bodies and state-owned enterprises by defining a “public body” and dealing with “state-influenced market-distorting behavior” of entities not defined as public bodies. The paper also suggested ways to improve the effectiveness of subsidy rules, including prohibiting the most harmful subsidies, providing a targeted remedy to address subsidies that contribute to overcapacity, and enhancing information-gathering rules at the WTO. [678]

The group’s first joint statement addressed (1) policies that pressure foreign companies to transfer technology to domestic entities and (2) government-supported “unauthorized intrusion into, and theft from, the computer networks of foreign companies to access their sensitive commercial information and trade secrets and use that information for commercial gain.” Specific objectives outlined in the statement included pinpointing and sharing best practices for stopping governments’ direct and unfair support for systematic investment in—and acquisition of—foreign companies’ assets in order to obtain their technology and intellectual property. The three parties also agreed to work with like-minded partners to stop policies and practices that contribute to forced technology transfer, through the WTO dispute settlement process if necessary. [679]

The second joint statement addressed non-market-oriented policies and practices that lead to overcapacity and uncompetitive markets. The statement affirmed a list of elements that signal market-oriented conditions—including freely determined decisions on prices, costs, inputs, purchases, sales, investments, and capital allocation based on market signals; market-determined prices of capital, labor, and technology; and recognition of international accounting standards, corporation law, bankruptcy law, and private property law—and pledged to add to this list if possible. The parties also agreed to work with other countries on finding ways to maintain market-oriented conditions. [680]

GDPR and the U.S.-EU Privacy Shield

The EU’s General Data Protection Regulation (GDPR), intended to modernize and replace the EU’s 1995 Data Protection Directive, lays out a comprehensive approach to data protection and privacy. [681] It took effect on May 25, 2018. [682] GDPR establishes strict privacy rights for individuals as regards the processing, collection, dissemination, erasure, and portability of their personal data. [683]

The GDPR characteristic that most concerns U.S. companies and trade associations is GDPR’s “extraterritorial jurisdiction”—the fact that it applies outside the EU’s boundaries. [684] Companies that handle personal data of EU data subjects [685] fall under EU legal jurisdiction with respect to obeying GDPR rules regardless of the companies’ physical location. Complying with GDPR adds legal and administrative expenses and raises costs of data storage and processing for affected firms. Moreover, firms that fail to comply with GDPR data protection rules not only may be liable as “controllers” of personal data, but also may be jointly liable with their contractors that are “processers” of those personal data. Violators may be fined up to 4 percent of their annual global firm revenue. [686] Despite widespread concern over the anticipated costs of complying GDPR’s policies, some experts have acknowledged a benefit to the competitiveness of larger digital services companies that have adequate resources to bear the compliance costs of such legislation. [687]

A further concern for U.S. companies is the possible spread of the GDPR approach. Given the large size of the EU market and the breadth of its authority, many countries outside the EU often use EU regulations as a model for their own. This tendency could have the effect of duplicating these stringent data policies in other markets in which U.S. firms operate. [688]

Though GDPR only came into force in 2018, data privacy has long been part of the U.S.-EU economic policy agenda. In fact, 2018 saw the second annual review of the U.S.-EU Privacy Shield framework, which gives companies a mechanism for transferring personal data from the EU to the United States that is consistent with EU law. [689] At the second annual review in Brussels, Belgium, in October 2018, the European Commission concluded that the Privacy Shield framework “continues to provide an adequate level of privacy protection under EU law.” [690] The EU highlighted improvements made by USDOC following the first annual review in 2017, including setting up a system of checks on random firms to ensure compliance, and the verification of public access to firms’ privacy policies online. [691] The EU also reiterated the need for the United States to nominate a permanent ombudsperson to address potential disputes. Despite the overall positive review, the Privacy Shield framework was the subject of cases before the EU General Court and Irish Supreme Court in 2018. [692]

China

U.S.-China Trade Overview

In 2018, China remained the United States’ top single-country trading partner in terms of two-way merchandise trade, accounting for 15.7 percent of total U.S. trade. Total U.S. merchandise trade with China increased 3.9 percent, from $635.4 billion in 2017 to $659.8 billion in 2018. Over the same period, the U.S. merchandise trade deficit with China grew by $43.6 billion in 2018 to $419.2 billion. The growth in the bilateral merchandise trade deficit was attributable to a $9.6 billion decrease in U.S. exports to China, accompanied by a $34.0 billion increase in U.S. imports (figure 6.3).

In 2018, China was the third-largest single-country destination for U.S. merchandise exports, accounting for 7.2 percent of global U.S. merchandise exports. Between 2017 and 2018, U.S. exports of merchandise to China declined 7.4 percent, from $129.9 billion in 2017 to $120.3 billion in 2018. Agricultural exports contributed to the vast majority of this decline, particularly soybeans. Leading U.S. exports to China were civilian aircraft, engines, and parts; passenger motor vehicles; [693] crude petroleum; semiconductors; and soybeans.

China remained the largest source of U.S. merchandise imports in 2018, accounting for 21.2 percent of global U.S. imports. The value of U.S. imports from China increased 6.7 percent in 2018, from $505.5 billion in 2017 to $539.5 billion in 2018. Leading U.S. imports from China were cellphones; portable computers and tablets; telecommunications equipment; and computer parts and accessories. Imports in all of these top four categories rose from 2017 to 2018, with the exception of cellphone imports, which declined 3.1 percent. U.S.-China merchandise trade data are shown in appendix tables A.33–A.36.

China was the United States’ third-largest services trading partner in 2018, with two-way services trade growing by 2.8 percent from $72.9 billion in 2017 to $75.0 billion in 2018. U.S. services exports grew by 2.1 percent to $56.7 billion, while services imports grew by 5.3 percent, reaching $18.3 billion. As a result, the U.S. services trade surplus with China grew by 0.6 percent in 2018, reaching $38.5 billion (figure 6.4).

In 2018, top services exports to China included travel services ($32.1 billion); charges for intellectual property use ($8.5 billion); and transport ($5.3 billion) (table A.37). Travel services is by far the largest of these sectors, comprising 56.5 percent of 2018 U.S. services exports to China. The fastest-growing category of services exports to China in 2018 was maintenance and repair services, growing 20.0 percent since 2017. The top U.S. services imports from China included other business services ($5.4 billion); transport ($5.0 billion); and travel services ($4.5 billion) (table A.38). These three sectors accounted for 82.1 percent of 2018 U.S. services imports from China. The fastest-growing import category, however, was insurance services, growing 63.5 percent since 2017.

Figure 6.3 U.S. merchandise trade with China, 2014–18

Figure 6.3 is a bar chart that shows U.S. merchandise trade with China from 2014 to2018. The merchandise trade deficit with China increased from $375.6 billion in 2017 to $419.2 billion in 2018. From 2014 to 2015, and again in 2017 and 2018, the value of U.S. import growth exceeded the value of U.S. export growth. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 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, 2014–18

Figure 6.4 is a bar chart that shows U.S. trade in private cross-border services with China from 2014 to 2018. During the 5-year period, the U.S. trade surplus in private services increased from $29.9 billion in 2014 to $38.4 billion in 2018 as U.S. exports grew faster than U.S. imports. U.S. exports to China were triple the value of U.S. imports during 2014–2018. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 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 23 WTO disputes against China. Of the 20 WTO disputes China has filed since its accession, 15 have been against the United States. In 2018, the United States filed 2 new WTO disputes against China. The first one was filed on March 23, 2018, following the release of USTR’s Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974 , discussed below . [694] In that dispute, the United States requested consultations with China concerning measures pertaining to the protection of intellectual property rights (IPRs). [695]

In the second dispute, filed on July 16, 2018, the United States requested consultations about China’s imposition of additional duties on imported U.S. products. [696] Developments in these and other WTO disputes during 2018 are described in more detail in chapter 3 and appendix table A.25.

In 2018, high-level U.S.-China official dialogue did not follow the same structure as in the past. Previously, high-level U.S.-China bilateral discussions fell under the umbrella of the U.S.-China Joint Commission on Commerce and Trade, the U.S.-China Strategic Economic Dialogue, the U.S.-China Strategic and Economic Dialogue, [697] and the relatively new U.S.-China Comprehensive Economic Dialogue, which the Trump Administration established in April 2017. But USTR deemed efforts before 2018 to be “largely ineffective,” citing what it viewed as the marginal progress made by each of these groups. [698] As a result, institutions such as the U.S.-China Economic and Security Review Commission noted that high-level institutional bilateral discussions were less structured in 2018, and even called into question the future of such forums. [699]

A series of high-level bilateral consultations took place in May 2018 between U.S. Secretary of the Treasury Steven Mnuchin, U.S. Secretary of Commerce Wilbur L. Ross, U.S. Trade Representative Robert Lighthizer, Chinese State Council Vice Premier Liu He, and other high-ranking Chinese officials. On May 19, 2018, as a result of those discussions, the United States and China released a joint statement of progress regarding a number of bilateral trade issues. [700] According to the statement, both sides agreed to meaningful increases in U.S. agricultural and energy exports to China, the importance of IPR protection, and the need to encourage two-way bilateral investment. [701]

Despite these developments, on May 29, 2018, the United States announced that it planned to proceed with the tariff hikes against China under section 301. [702] In response, China declared those actions to be “clearly contrary to the recent agreement between the two sides,” and said it would not carry out the market-opening efforts it had planned to pursue if threatened by the higher tariffs. [703] After the imposition of tariffs from both sides, as described further below, President Trump and China’s President Xi Jinping met at the G20 conference in Argentina on December 1, 2018. At this meeting, they agreed that the United States would suspend raising the tariff rate from 10 percent to 25 percent on the third tranche of approximately $200 billion worth of Chinese goods. [704] The suspension was aimed at providing the negotiators with more time to find a mutually acceptable solution. [705]

Tariff Escalation

In 2018, the United States implemented a variety of trade measures as trade tensions rose. In particular, it imposed higher tariffs and implemented several related policies, including short-term relief programs for U.S. agriculture and enhanced reviews for Chinese investment (described below). China, too, increased its tariffs on U.S. imports at various periods throughout 2018 in response to U.S. actions, and an increasing number of U.S. companies operating in China have expressed concerns over increased regulatory barriers. [706]

Section 232 Steel and Aluminum Tariffs. On February 16, 2018, under section 232 of the Trade Expansion Act of 1962, USDOC released its report finding that imports of steel and aluminum threatened to impair U.S. national security. [707] In response to these findings, the President imposed a 25 percent ad valorem tariff on imported steel from China and all other countries (except Canada and Mexico) and a 10 percent ad valorem tariff on imported aluminum from China and all other countries (except Canada and Mexico), effective March 23, 2018. [708] In response, China requested dispute settlement consultations with the United States at the WTO on April 5, 2018. [709] In April 2018, China also imposed additional tariffs of 15 to 25 percentage points on selected U.S. exports, including aluminum waste and scrap, pork, fruits and nuts, wine, modified ethanol, ginseng roots, and stainless steel pipes. [710] The United States requested WTO dispute settlement consultations with China on the imposition of these additional duties on July 16, 2018. [711] Dispute Settlement Body panels were established for both WTO disputes on November 21, 2018. [712]

In 2017, the last full year before tariffs were imposed, China was the 10th-largest source of U.S. steel imports, accounting for 3.4 percent of all U.S. steel imports in that year. [713] China was also the 2nd-largest source of U.S. aluminum imports in 2017, accounting for 12.8 percent of all U.S. aluminum imports. [714] Although China was the world’s largest producer of primary aluminum, producing over half the world’s supply in 2017, U.S. aluminum imports from China are shipped mostly in the form of semifinished products such as bars, rods, and wire. [715]

Intellectual Property Rights, Technology Transfer, and Innovation. The United States and China have had longstanding consultations on issues related to IPRs, technology transfer, and innovation, particularly since China’s WTO accession and its acceptance of the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. [716] On August 14, 2017, President Trump issued a memorandum directing USTR to conduct a section 301 investigation to determine whether any of China’s laws, policies, practices, or actions might be unreasonable or discriminatory and might harm American IPRs, innovation, or technology development. [717] USTR initiated a section 301 investigation on August 18, 2017, and issued its report on March 22, 2018. [718] The investigation focused on whether the following practices were unreasonable or discriminatory and whether they burdened or restricted U.S. commerce:

1. China’s use of foreign ownership restrictions

2. China’s regime of technology regulations regarding the terms of licensing of technologies by U.S. companies to Chinese entities

3. China’s facilitation of investment in and acquisition of U.S. companies by Chinese companies

4. China’s support of intrusions and theft from computer networks of U.S. companies [719]

For more information on this investigation and its findings in 2018, see chapter 2.

In 2018, China had various plans and directives in place to revise its laws and regulations protecting IPRs in accordance with TRIPS, and has undertaken broad efforts to reorganize its intellectual property responsibilities among its government agencies. [720] However, USTR continued to find that China’s 2018 IPR protection and enforcement regime presented serious barriers to U.S. exports and investment. [721] Given the scope and scale of its reported IPR infringement activities, China remained on USTR’s Priority Watch List in its 2019 Special 301 Report . [722]

The Special 301 Report did note some positive developments in 2018:

1. As noted above, China reorganized its intellectual property responsibilities among its government agencies. This included China’s creation of a new State Administration for Market Regulation (SAMR) agency aimed at centralizing its government’s enforcement responsibilities over patent and trademark regulation. [723]

2. The Chinese government continued its process of judicial reforms in 2018, establishing a new appellate tribunal within the Supreme People’s Court (SCP), the “SPC IP Court.” [724]

3. China proposed revisions to its existing intellectual property laws and regulations. [725]

Despite these developments in 2018, USTR claimed that China has still not made fundamental structural changes to strengthen its system of intellectual property protection and enforcement, has not fully opened its market to foreign investment, has not allowed the market to play a decisive role in allocating resources, and has not refrained from government interference in private sector decisions about technology transfer. [726]

On March 22, 2018, USTR released its Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974 . [727] Of its main determinations, USTR found that some aspects pertaining to IPR protection could be addressed through the WTO dispute settlement process. [728] On March 23, 2018, USTR filed a request for consultations with China at the WTO to address certain Chinese laws and regulations pertaining to the protection of IPRs that the United States alleges are inconsistent with China’s obligations under the TRIPS Agreement. The WTO Dispute Settlement Body established a panel on November 21, 2018. [729]

Rising Tariffs. Based on the findings of its section 301 investigation, and pursuant to the direction of the President, USTR imposed an additional 25 percent tariff on approximately $50 billion worth of select Chinese imports that were implemented in two different tranches (installments). The first tranche was imposed on an estimated $34 billion of U.S. imports from China (under 818 tariff subheadings) that entered the United States for consumption on or after July 6, 2018, and the second tranche was imposed on an estimated $16 billion of Chinese imports (under 279 tariff subheadings) that entered the United States for consumption on or after August 23, 2018. [730] The top sectors that were subject to tariffs were aerospace, information and communication technology, robotics, and machinery. [731]

Following the imposition of U.S. tariffs on Chinese goods, China imposed what its State Council Tariff Committee considered retaliatory tariffs of 25 percent covering about $50 billion worth of select U.S. imports. [732] These were implemented in two tranches, coinciding with the U.S. July 6, 2018, and August 23, 2018, implementation dates. [733] These tariffs affected U.S. exports to China of various agricultural products (e.g. soybeans) and transportation products (e.g., vehicles, vessels). [734]

On September 24, 2018, President Trump imposed an additional tariff on what the White House estimated to impact approximately $200 billion worth of Chinese imports. [735] Initially set at 10 percent, these tariffs were scheduled to increase to 25 percent by January 1, 2019. [736] In response, China announced that it would raise tariffs on $60 billion in U.S. imports by 5 or 10 percent depending on the product, effective September 24, 2018. [737] After the G20 meeting in November–December 2018, President Trump agreed to keep tariffs at 10 percent on January 1, 2019, and China agreed to temporarily suspend the imposition of tariffs on automotive vehicles and parts. That is, whereas tariffs on these products were originally set to go into effect on January 1, 2019, the Chinese government agreed to suspend them for an additional three months. [738]

Short-Term Agricultural Relief Programs

In response to increases in Chinese tariffs on U.S agricultural exports, the U.S. Department of Agriculture (USDA) authorized $12 billion in programs to help U.S. agricultural producers weather an estimated $11 billion in losses from disrupted markets. According to USDA, U.S. agricultural exports of soybeans, sorghum, livestock products (e.g., milk, pork), and fruits and nuts appear to have been impacted the most in 2018. [739] Moreover, since the U.S. tariffs were imposed, USDA has identified unusually strict and cumbersome Chinese customs entry procedures for U.S. agricultural exports, whose delays have affected the marketability of perishable crops. [740]

To address these issues, USDA initiated three short-term relief programs. The first, called the Market Facilitation Program, provided incremental payments to U.S. soybean, sorghum, corn, wheat, cotton, dairy, and hog producers to help farmers manage the effects of disrupted markets. The second, referred to as the Food Purchase and Distribution Program, purchased unexpected surpluses of affected commodities (e.g., fruits, nuts, legumes, beef, pork, and milk) and redistributed those products to food banks and other charitable programs. Finally, USDA used its Trade Promotion Program to help develop new export markets for U.S. products, which is administered through the Foreign Agricultural Service. The combined cost of those programs was an estimated $12 billion. [741]

Monitoring Foreign Investment in the United States

Increasing concern has been expressed about the U.S. national security implications of Chinese and other countries’ investment in U.S. advanced technology companies. As a result, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) was signed into law with the declared aim of protecting critical American technology and intellectual property from harmful foreign acquisitions. [742] FIRRMA was intended both to modernize the tools used for protecting critical U.S. technology and to strengthen mechanisms already administered by the Committee on Foreign Investment in the United States (CFIUS). [743] FIRRMA has mandated expanded export control measures, requiring a U.S. interagency process to identify and impose controls over the exportation of certain “emerging and foundational technologies.” [744]

As of 2018, FIRRMA (1) expanded the scope of what CFIUS can investigate by redefining terms such as “critical technologies” and adding certain new transactions, including real estate (for properties close to military instillations), to what is reviewable; (2) modified CFIUS’s review procedures to increase scrutiny of investments originating from countries of special concern; and (3) required CFIUS to take specific actions within prescribed deadlines for certain programs and for reporting requirements to various Congressional committees. These 2018 revisions to CFIUS are considered the most comprehensive changes made to the foreign investment review process since 2007. [745] The Administration is now using the expanded CFIUS mandate to address concerns over Chinese state-directed investment in critical technologies. [746]

Canada

U.S.-Canada Trade Overview

In 2018, Canada was the United States’ second-largest single-country trading partner after China, which is the same position it held in 2017. U.S. two-way merchandise trade with Canada grew 6.1 percent to $617 billion in 2018 from $582 billion in 2017, accounting for 14.7 percent of total U.S. merchandise trade with the world. The U.S. merchandise trade deficit with Canada grew 15.8 percent to $19.7 billion in 2018, as U.S. imports rose by $19.1 billion and U.S. exports rose by $16.5 billion (figure 6.5).

In 2018, Canada was the largest single-country export market for U.S. goods, accounting for 18.0 percent of all U.S. merchandise exports to the world. U.S. merchandise exports to Canada increased 5.8 percent from $282.3 billion in 2017 to $298.7 billion in 2018. The top U.S. exports to Canada during 2018 were crude petroleum; civilian aircraft, engines, and parts; motor vehicles—both for passengers and for goods transport—as well as their parts and accessories; and light oils.

In 2018, Canada remained the third-largest single-country import source for the United States, behind China and Mexico. U.S. merchandise imports from Canada grew from $299.3 billion in 2017 to $318.4 billion in 2018, a 6.4 percent increase. The top U.S. imports from Canada during 2018 were crude petroleum; passenger motor vehicles and their parts and accessories; refined petroleum products; natural gas; and coniferous wood and products. U.S.-Canada merchandise trade data are shown in appendix tables A.39–A.42.

Canada remained the second-largest single-country U.S. trading partner in services in 2018, following the United Kingdom. Two-way cross-border services trade grew 9.4 percent from $90.8 billion to $99.3 billion in 2018, accounting for 7.4 percent of total U.S. services trade with the world. U.S. cross-border services exports to Canada increased by $5.8 billion, or 10.1 percent, to $63.6 billion in 2018, while U.S. cross-border services imports from Canada increased by $2.7 billion, or 8.2 percent, to $35.6 billion. As a result, the U.S. surplus in services trade with Canada increased to $28.0 billion from $24.9 billion the year before (figure 6.6).

The United States’ largest services exports in 2018 included travel services ($18.2 billion), other business services ($14.2 billion), and charges for intellectual property use ($8.5 billion) (table A.43). “Other business services” were the fastest-growing services export, increasing by 27.8 percent compared to 2017. Major U.S. services imports from Canada were travel services ($9.2 billion), other business services ($8.8 billion), and transport ($5.5 billion) (table A.44). Imports of charges for intellectual property use ($2.3 billion) was the fastest-growing services import, increasing by 37.5 percent since 2017. In terms of trade balance, the United States produced its largest surpluses in travel services ($9.0 billion) and charges for intellectual property use ($6.2 billion), with deficits in maintenance and repair services ($0.3 billion) and telecommunications, computer, and information services ($0.7 billion).

Figure 6.5 U.S. merchandise trade with Canada, 2014–18

Figure 6.5 is a bar chart that shows U.S. merchandise trade with Canada from 2014 to 2018. Over that period, the U.S. merchandise trade deficit with Canada narrowed from $36.5 billion to $19.7 billion, as U.S. imports fell more than U.S. exports. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Figure 6.6 U.S. cross-border trade in private services with Canada, 2014–18

Figure 6.6 is a bar chart that shows U.S. trade in private cross-border services with Canada from 2014 to 2018. During the five-year period, the U.S. trade surplus in private services with Canada fell from $30.8 billion to $28.0 billion in 2018, as U.S. imports grew more than U.S. exports. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

Much of the U.S.-Canada trade relationship is governed by the North American Free Trade Agreement (NAFTA). In 2018, negotiations to modernize the agreement concluded after one year. On August 27, 2018, the United States and Mexico reached a preliminary agreement in principle and, on September 30, 2018, Canada and the United States reached agreement, along with Mexico. On November 30, 2018, in Buenos Aires, Argentina, on the margins of the G20 meeting, Canada, Mexico, and the United States signed the United States-Mexico-Canada (USMCA) Agreement. [747] For more details about the USMCA, see chapter 5.

Canadian automotive exports to the United States were also at issue in 2018. On May 23, 2018, USDOC initiated an investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automobile parts. [748] Canada’s Deputy Ambassador to the United States, Kirsten Hillman, provided testimony at USDOC’s public hearing on July 19, 2018, stating that Canada-U.S. auto trade does not pose a risk to U.S. national security. [749]

In other 2018 developments, Canada joined other countries in requesting WTO dispute settlement consultations with the United States and imposing countermeasures on imports from the United States following the U.S. imposition of tariffs on steel and aluminum products for national security reasons. Also, the United States imposed antidumping and countervailing duties on softwood lumber imports from Canada, and both sides signed a memorandum of understanding on regulatory cooperation. These topics are discussed below.

Section 232 Steel and Aluminum Tariffs

Following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962 (section 232), the President imposed a 25 percent ad valorem tariff on imported steel from all countries except Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all other countries except Canada and Mexico, effective March 23, 2018. [750] Canada and Mexico were exempted from the initial imposition of these tariffs for several reasons. These included the two countries’ shared commitments to addressing national security concerns and global excess capacity in steel; the economic integration of the three countries, as well as the physical proximity of the three countries’ industrial bases and the export of U.S. steel articles to Canada and Mexico; and the close relation of U.S. economic welfare to national security. [751] On April 30, 2018, the President issued two more proclamations, which extended the initial tariff exemption deadline of May 1, 2018, for the EU, Canada, and Mexico. [752] This extended exemption expired on June 1, 2018, however, and on that date, the 25 percent tariff on steel imports and the 10 percent tariff on aluminum imports from Canada went into effect. [753]

In response to these tariffs, Canada requested dispute settlement consultations at the WTO on the same day they were imposed. [754] Canada also imposed its own tariffs on imports of steel, aluminum, and other products from the United States in the amount of $12.6 billion on July 1, 2018, deemed by Canada to be equivalent to the 2017 value of Canadian exports affected by the U.S. tariffs. [755] The United States requested WTO dispute settlement consultations with Canada on the imposition of these additional duties on July 16, 2018, and a Dispute Settlement Body (DSB) panel was established. [756] DSB panels were established for both WTO disputes on November 21, 2018. [757]

In 2017, the last full year before tariffs were imposed, Canada was the largest single-country source of U.S. steel imports, comprising 17.7 percent of all U.S. steel product imports. [758] Canada was also the largest source for U.S. aluminum imports, which comprised 38.5 percent of all U.S. aluminum imports. [759]

Softwood Lumber

The United States-Canada Softwood Lumber Agreement (SLA) was signed on October 12, 2006. In it, Canada agreed to apply certain export charges and volume limits on its exports of softwood lumber to the United States when the price of such products falls below certain thresholds. Following several extensions, the 2006 SLA officially expired on October 12, 2015, and entered a one-year grace period when no trade remedy petition was permitted, to allow for renegotiation of a new agreement. After the grace period expired on November 25, 2016, the U.S. lumber industry petitioned the Commission and USDOC for trade remedy investigations on imports of softwood lumber from Canada. [760]

On November 8, 2017, USDOC published its final affirmative determinations in antidumping and countervailing duty investigations on softwood lumber from Canada, and on December 7, 2017, USITC found that imports of softwood lumber from Canada had caused material injury to U.S. softwood lumber producers. [761] On January 3, 2018, USDOC amended its final affirmative determinations and issued antidumping (AD) and countervailing duty (CVD) orders on softwood lumber imports from Canada. [762]

Subsequently Canada requested panel reviews of the USDOC and Commission determinations in November and December 2017 and on January 19, 2018, under chapter 19 of the NAFTA. [763] Canada also filed disputes under the WTO Dispute Settlement Understanding against the United States regarding U.S. softwood lumber AD and CVD measures on November 28, 2017. After consultations failed to resolve the disputes, Canada requested the establishment of panels, and the WTO DSB established panels in both disputes on April 9, 2018. [764] During 2018, the United States and Canada did not engage in negotiations toward a new softwood lumber agreement.

Canada-United States Regulatory Cooperation Council

On June 4, 2018, U.S. and Canadian officials signed a memorandum of understanding regarding the Canada-United States Regulatory Cooperation Council (RCC). [765] The memorandum reaffirmed the principles and commitments of the RCC to deepen regulatory cooperation and reduce, eliminate, or prevent unnecessary regulatory differences between the two countries. The memorandum further stated that it looks to promote economic growth, innovation, competitiveness, and job creation through the elimination of unnecessary regulatory differences. [766]

In the memorandum, the two sides set out their understanding as to how the RCC participants would continue to operate as co-chairs of the RCC’s governing council so as to provide strategic direction on regulatory cooperation. This includes actions such as setting priorities and objectives to focus on closer alignment of existing regulatory systems at the federal level; ensuring that regulatory outcomes protect consumers, health, safety, security, and the environment; and ensuring that cooperation initiatives do not unnecessarily duplicate the mandates of existing agencies and departments. The memorandum includes an annex that sets out the RCC’s objectives, principles, and mandate. The annex also includes sections addressing regulatory cooperation, including guidance in identifying sectors for increased alignment; expression of a shared commitment to good regulatory practices; and information about RCC membership, the RCC Secretariat, RCC meetings, roles in support of the RCC, and stakeholder engagement. [767]

Wine, Beer, and Spirits

According to USTR, market access barriers in several Canadian provinces have hampered exports of U.S. wine and spirits to Canada for many years. [768] Among these were measures governing the sale of wine in grocery stores maintained by the provincial liquor board in British Columbia that appear to provide advantages to British Columbian wine through an exclusive retail sales channel not available to imported wines. [769] Consequently, the United States requested WTO dispute-settlement consultations with Canada in two disputes. Its first dispute requested consultations on January 18, 2017; [770] its second, on September 28, 2017. [771] A panel was established on July 20, 2018, in the latter dispute. [772]

In an exchange of letters between Canadian Minister of Foreign Affairs Chrystia Freeland and USTR Lighthizer on November 30, 2018, Canada committed to ensure that British Columbia would stop its practice of allowing only local wines to be stocked in supermarkets, addressing the U.S. dispute in the WTO disputes, by no later than November 1, 2019. In exchange, the United States agreed to take no further action at the WTO before this date. [773]

Mexico

U.S.-Mexico Trade Overview

In 2018, Mexico remained the United States’ third-largest single-country merchandise trading partner, following China and Canada. Merchandise trade between the two countries increased by 9.7 percent to $611.5 billion in 2018, accounting for 14.5 percent of U.S. trade with the world. While both imports and exports increased in 2018, the U.S. merchandise trade deficit with Mexico rose by $10.6 billion to $81.5 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 2018, accounting for 15.9 percent of total U.S. exports to the world. U.S. merchandise exports to Mexico totaled $265.0 billion, an increase of 8.9 percent from 2017. In 2018, leading U.S. exports to Mexico included light oils, refined petroleum products, computer parts and accessories, internal combustion diesel engines, semiconductors, parts and accessories of bodies (including cabs) for motor vehicles, and civilian aircraft, engines, and parts. The increase in the value of exports from 2017 to 2018 appears to have been driven largely by increased exports of oil and petroleum products.

Mexico was the United States’ second-largest single-country import source in 2018 after China, accounting for 13.6 percent of U.S. total imports. In 2018, U.S. merchandise imports from Mexico increased by 10.3 percent to $346.5 billion, driven mainly by the increased value of U.S. imports of computers and crude petroleum. Leading U.S. imports from Mexico included passenger motor vehicles, computers, crude petroleum, telecommunications equipment, road tractors for semitrailers, color TV reception apparatus, and insulated ignition wiring sets. U.S.-Mexico merchandise trade data are shown in appendix tables A.45 through A.48.

In 2018, the U.S. cross-border trade surplus in services with Mexico increased by 14.3 percent to $7.7 billion, largely as a result of growing U.S. services exports (figure 6.8). U.S. exports of services to Mexico rose 4.0 percent ($1.3 billion) to $33.4 billion in 2018, whereas U.S. services imports from Mexico rose 1.2 percent to $25.7 billion. Mexico continued to be the United States’ sixth-largest single-country trading partner for services in 2018, after the UK, Canada, China, Japan, and Germany.

In 2018, leading U.S. services exports to Mexico included travel services, transport, and charges for intellectual property use (table A.49). Leading U.S. services imports from Mexico included travel services; transport; other business services; and telecommunications, computer, and information services (table A.50). Travel services was the largest services category for both imports and exports, accounting for 67.7 percent and 53.6 percent of U.S. imports and exports of services, respectively, in 2018.

Figure 6.7 U.S. merchandise trade with Mexico, 2014–18

Figure 6.7 is a bar chart that shows U.S. merchandise trade with Mexico from 2014 to 2018. During that period, the U.S. merchandise trade deficit with Mexico grew steadily from $54.7 billion in 2014 to $81.5 billion in 2018. In 2018, the U.S. merchandise trade deficit with Mexico increased by $10.6 billion from 2017, as U.S. imports to Mexico increased more than U.S. exports. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 28, 2019).

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

Figure 6.8 U.S. cross-border trade in private services with Mexico, 2014–18

Figure 6.8 is a bar chart that shows U.S. trade in private cross-border services with Mexico from 2014 to 2018. During the five-year period, the U.S. trade surplus in private services with Mexico decreased from $10.0 billion in 2014 to $7.7 billion in 2018 as U.S. imports grew more than U.S. exports. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

Most of the U.S.-Mexico trade relationship is governed by NAFTA, which came into force January 1, 1994. On August 16, 2017, negotiations between the United States, Canada, and Mexico to modernize NAFTA started in Washington, DC. On November 30, 2018, the United States, Canada, and Mexico signed the United States-Mexico-Canada Agreement (USMCA). These negotiations are described in chapter 5.

Mexican automotive exports to the United States were also at issue in 2018. On May 23, 2018, USDOC initiated an investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automobile parts. [774] The Mexican Ambassador to the United States, Gerónimo Gutiérrez Fernández, provided testimony at USDOC’s public hearing on July 19, 2018, stating that U.S. imports of vehicles and auto parts from Mexico do not threaten U.S. national security. [775]

The following section describes major U.S.-Mexico trade developments in 2018, including U.S. government tariffs on aluminum and steel imports from Mexico, work to modernize U.S.-Mexico border crossings, and recent results related to NAFTA’s cross-border trucking provisions. In a long-running WTO dispute involving Mexico’s complaint about U.S. dolphin-safe labeling provisions for tuna and tuna products, the WTO DSB issued a report on compliance proceedings in 2018, bringing the case to an end. [776] The Appellate Body report upheld all aspects of the previous panels’ legal and factual analysis that Mexico appealed—in particular the panels’ findings that the dolphin-safe labeling measure was not inconsistent with U.S. WTO obligations. This dispute is described in more detail in chapter 3.

Section 232 Steel and Aluminum Tariffs

Following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962, the White House imposed a 25 percent ad valorem tariff on imported steel from all countries except Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all other countries except Canada and Mexico, effective March 23, 2018. [777] As noted earlier, Canada and Mexico were exempted from the initial imposition of these tariffs because of shared commitments to addressing national security concerns and global excess capacity in steel; the economic integration of the three countries; the physical proximity of the three countries’ industrial bases; the export of U.S. steel articles to Canada and Mexico; and the close relation of U.S. economic welfare to national security. [778] On April 30, 2018, the President issued two more proclamations, which extended the initial tariff exemption deadline of May 1, 2018, for the EU, Canada, and Mexico. [779] This extended exemption expired on June 1, 2018, however, and on that date, the 25 percent tariff on steel imports and the 10 percent tariff on aluminum imports from Mexico went into effect. [780]

In response to the tariffs, on June 5, 2018, the Mexican government suspended NAFTA preferential duty rates on U.S. products classified under 71 subheadings of the international Harmonized System (HS) of tariff classification, 50 of which correspond to various steel products. Retaliatory tariffs imposed by Mexico range up to 25 percent, and included agricultural and food products, as well as steel and aluminum. [781]

At the same time, Mexico challenged the U.S. measures by filing a dispute under the WTO dispute settlement provisions. On June 5, 2018, Mexico requested consultations with the United States on certain measures imposed by the United States, allegedly to adjust imports of steel and aluminum into the United States. [782] Mexico claimed that the measures appear to be inconsistent with WTO obligations. [783] On July 16, 2018, the United States requested WTO dispute settlement consultations with Mexico on the imposition of the additional duties, and a panel was established. [784]

In 2017, the last full year before tariffs were imposed, Mexico was the third-largest single-country source of U.S. steel product imports, supplying 8.6 percent of all U.S. steel product imports. [785] Mexico was the seventh-largest source for U.S. aluminum imports in 2017, supplying 2.8 percent of all U.S. aluminum imports. [786]

Modern Borders

In 2018, the United States and Mexico continued to make progress on cross-border improvements. In April 2017, officials of U.S. Customs and Border Protection and Mexico’s Tax Administration Service (SAT) met in Mexico City to advance the development of customs practices in both the United States and Mexico. [787] Their intent was to enhance bilateral work in trade and travel facilitation; continue to cooperate on innovative approaches to cargo inspection for faster goods flow; and improve the efficiency of their customs processes to manage risk and to reduce processing times and transactional costs. [788] To improve cargo inspection, a pilot program known as Unified Cargo Processing was put into action. [789] The U.S. Department of Homeland Security regarded the pilot as successful; upon its implementation at the Mariposa port of entry in Nogales, Arizona, in July 2016, wait times were significantly reduced for both U.S. and Mexican businesses. [790]

Due to its success in Nogales, the Unified Cargo Processing pilot program was expanded to include the Otay Mesa Cargo Facility in San Diego County, California. In an announcement on September 20, 2017, the U.S. Department of Homeland Security introduced the program’s aims of ending separate inspections and reducing wait times at the border. [791] In 2018, the U.S. General Services Administration (GSA) continued to modernize and expand the facility by doubling the number of pedestrian processing facilities from 6 to 12 lanes to accommodate a new transit hub. [792]

Recent GSA efforts to modernize ports of entry include the Calexico Land Port of Entry, which was built in 1974 and is the main border crossing linking the Imperial Valley agricultural industry to the Mexican state of Baja California. In 2018, GSA completed phase 1 of the facility’s modernization and expansion plan. This phase involved the creation of new pedestrian and privately owned vehicle inspection facilities and the expansion of the port’s facility for commercial inspections. This first phase of the project, which included 10 new northbound vehicle-processing lanes, opened in September 2018. [793]

Cross-Border Trucking between the United States and Mexico

Chapter 12 of NAFTA states that Mexican trucks are to be allowed to provide cross-border truck services throughout the United States beginning in 2000. However, the beginning of such services was delayed because of U.S. safety concerns. 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. [794] The pilot program concluded on October 10, 2014. [795] On January 15, 2015, FMCSA began accepting applications from Mexico-domiciled motor carriers interested in conducting long-haul operations beyond the U.S. commercial zones. [796]

In 2018, reports from FMCSA indicated that motor carriers that were either owned by Mexicans or domiciled in Mexico continued to operate safely on U.S. roads. If enacted, the United States-Mexico-Canada Agreement would enable the United States to restrict the number of authorizations of Mexican-domiciled carriers to provide cross-border long-haul truck services into the United States in the event of “material harm” to U.S. trucking suppliers, operators, and drivers. [797]

Japan

U.S.-Japan Trade Overview

In 2018, Japan remained the United States’ fourth-largest single-country trading partner in terms of two- way trade, accounting for 5.2 percent of total U.S. merchandise trade. U.S. merchandise trade with Japan increased 6.6 percent, from $204.1 billion in 2017 to $217.6 billion in 2018. At the same time, the U.S. merchandise trade deficit with Japan declined by $1.2 billion in 2018 to $67.6 billion. The decrease in the bilateral merchandise trade deficit was attributable to a $7.4 billion increase in U.S. exports to Japan and a corresponding $6.1 billion increase in U.S. imports from Japan (figure 6.9).

Japan remained the fourth-largest destination for U.S. merchandise exports in 2018, accounting for 4.5 percent of global U.S. exports. Between 2017 and 2018, U.S. exports to Japan increased 10.9 percent, from $67.6 billion in 2017 to $75.0 billion in 2018. 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 2018, accounting for 5.6 percent of global U.S. imports. The value of U.S. imports from Japan increased 4.5 percent in 2018, from $136.5 billion in 2017 to $142.6 billion in 2018. 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.51–A.54.

Japan remained the United States’ fourth-largest single-country services trading partner in 2018, representing $74.8 billion, or 5.5 percent of U.S. services trade. U.S. cross-border services exports to Japan fell by $0.8 billion, or 1.8 percent, to $44.4 billion in 2018, while U.S. cross-border services imports from Japan increased by $1.4 billion, or 4.8 percent, to $30.4 billion. As a result, the U.S. surplus in services trade with Japan declined to $14.0 billion from $16.2 billion the year before (figure 6.10).

The United States’ largest services exports in 2018 included travel services ($10.3 billion), transport ($9.8 billion), and other business services ($7.7 billion) (table A.55). Maintenance and repair services ($1.5 billion) made up the fastest-growing service export, increasing by 17.3 percent compared to 2017. Major U.S. services imports from Japan were charges for intellectual property use ($11.8 billion), transport ($9.2 billion), and government goods and services ($4.3 billion) (table A.56). Imports of financial services ($1.6 billion) increased by 15.8 percent in 2018. In terms of two-way trade, the United States produced its largest surpluses in travel services ($6.7 billion) and other business services ($4.2 billion), with deficits in charges for intellectual property use ($5.2 billion) and government goods and services ($3.6 billion).

Figure 6.9 U.S. merchandise trade with Japan, 2014–18

Figure 6.9 is a bar chart that shows U.S. merchandise trade with Japan from 2014 to 2018. Whilethe U.S. merchandise trade deficit with Japan rose from  $67.6 billion in 2014to $69.1 billion in 2015, it decreased in 2016 to $68.8 billion, returning to $67.6 billion in 2018. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Figure 6.10 U.S. cross-border trade in services with Japan, 2014–18

Figure 6.10 is a bar chart that shows U.S. trade in private cross-border services with Japan from 2014 to 2018. During the five-year period, the U.S. trade surplus in private services with Japan decreased from $18.0 billion in 2014 to $14.0 billion in 2018, as the value of U.S. exports fell during this period while the value of U.S. imports grew. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

In 2017, the United States withdrew from the Trans-Pacific Partnership [798] —a proposed free trade agreement among 12 Asia/Pacific countries, including the United States and Japan.

Japanese automotive exports to the United States were at issue in 2018. On May 23, 2018, USDOC initiated an investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automobile parts. [799] Kazutoshi Aikawa, a representative of the Government of Japan, provided testimony at USDOC’s public hearing on July 19, 2018. In his testimony, Mr. Aikawa stated that Japanese automotive exports to the United States do not threaten or impair the U.S. auto industry or national security. [800]

President Trump and Prime Minister Shinzo Abe of Japan agreed to initiate bilateral negotiations for a U.S.-Japan Trade Agreement in September 2018. In a joint statement, the two sides agreed to start negotiations towards an agreement on goods and services “that can produce early achievements.” After these discussions have been completed, they agreed that the two countries will tackle other trade and investment topics. Both leaders agreed to respect the positions of the other with respect to desired outcomes, as follows: for the United States, “market access outcomes in the motor vehicle sector” will increase U.S. motor vehicle production and jobs; and for Japan, “with regard to agricultural, forestry, and fishery products, outcomes related to market access as reflected in Japan’s previous economic partnership agreements constitute the maximum level.” [801]

In October, USTR officially notified Congress of the Administration’s intent to initiate negotiations on a trade agreement with Japan. [802] After notifying Congress, USTR published a notice in the Federal Register seeking public comment and announcing it would hold a public hearing in December 2018 on the proposed U.S.-Japan trade agreement. [803] Following the public hearing, USTR published its negotiating objectives in December 2018. [804] In this document, USTR noted that it may seek to pursue negotiations with Japan in stages, which would be different from past U.S. trade negotiations, which involved one comprehensive negotiation. [805]

In 2018, the United States and Japan coordinated efforts to address trade issues of common interest. For example, the United States and Japan, along with the EU, held trilateral meetings in 2018 to discuss policy measures to address nonmarket economic issues including global excess capacity and forced technology transfer. [806] The third meeting of the U.S.-Japan Economic Dialogue was convened in Tokyo in November 2018, with discussions focusing on expanding further trade and investment between Japan and the United States. [807] Additionally, the United States and Japan worked to advance issues related to digital trade within the Asia-Pacific Economic Cooperation and WTO. [808] Furthermore, several trade developments related to agricultural products, passenger motor vehicles, and pharmaceuticals occurred between Japan and the United States in 2018.

Section 232 Steel and Aluminum Tariffs

Following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962, the President imposed a 25 percent ad valorem tariff on imported steel from all countries except Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all other countries except Canada and Mexico, effective March 23, 2018. [809] Japan was among the countries affected by these tariffs on steel and aluminum. In response to the new U.S. tariffs, on May 18, 2018, Japan notified the WTO of its intent to impose retaliatory tariffs on U.S. products. [810] However, Japan did not initiate WTO proceedings or impose retaliatory tariffs in 2018.

In 2017, Japan was the sixth-largest single-country source of U.S. steel imports, supplying 5.7 percent of all U.S. steel product imports. [811] Japan was also the 15th-largest source of U.S. aluminum imports, supplying 1.0 percent of all U.S. aluminum imports. [812]

Agricultural Products

Historically, Japan has served as a top export market for U.S. agricultural products. In 2018, Japan maintained its status as the third-largest single-country market for U.S. agricultural goods. [813] U.S. agricultural exports to Japan increased by 8.4 percent, totaling $12.9 billion in 2018. [814] Recent U.S.-Japan agricultural trade developments include a reduction in Japan’s safeguard tariff on imports of frozen beef and the reopening of the Japanese market to U.S. lamb and goat meat exports.

Japan’s 2018 tariff reduction followed a tariff increase the year before. In August 2017, Japan increased its duty on imports of frozen beef from 38.5 percent to 50 percent after imports exceeded the volume level established by Japan’s special safeguard (SSG) measure. Frozen beef exporters in countries with economic partnership agreements (EPAs) with Japan were exempted from the safeguard tariff and able to export frozen beef below the SSG rate. At the beginning of the Japanese fiscal year in April 2018, Japan reset its safeguard mechanism and reduced its tariff on frozen beef imports back to 38.5 percent. However, the Japanese government has announced its intention to maintain its volume-triggered safeguard mechanism for countries without an EPA, including the United States. [815] In 2018, Japan was the third-largest destination for U.S. frozen beef exports, totaling $560 million. [816]

In addition to reducing the tariff on frozen beef to pre-safeguard levels, Japan reopened its market to U.S. sheep and goat meat exports in July 2018, following working-level meetings of the U.S.-Japan Economic Dialogue. [817] Japan had banned U.S. exports of sheep and goat for more than 14 years after bovine spongiform encephalopathy (popularly known as “mad cow disease”) was detected in the United States in 2003. In 2018, Japan imported $200.9 million in sheep and goat meat, with 97 percent of imports originating from Australia and New Zealand. [818] U.S. exports of sheep and goat meat totaled $352,600, representing less than 0.002 percent of Japan’s total imports of these meats. [819]

Several market access issues continued to affect U.S. agricultural exports to Japan in 2018. For example, in 2017, Japan’s Consumer Affairs Agency expanded its requirements for country of origin labeling (COOL) to include main ingredients in processed foods manufactured in Japan. Although the new requirements were subject to a transition period ending in 2022, the United States raised concerns with Japan in 2018 that new COOL requirements may adversely affect U.S. exports of food ingredients to Japan. [820] Japan also continues to operate a tariff-rate quota (TRQ) of 682,200 metric tons for imported rice. USTR maintains that Japan’s rice TRQ inhibits U.S. rice producers from accessing final consumers in Japan. [821] USTR has also identified Japan’s state-operated wheat import system and its “gate price mechanism” for pork as ongoing barriers to U.S. agricultural exports. [822]

Passenger Motor Vehicles

Passenger motor vehicles make up a significant share of two-way trade between Japan and the United States. In 2018, the United States exported $623.0 million worth of passenger motor vehicles to Japan while importing $40.4 billion. The United States has consistently experienced large deficits in passenger motor vehicle trade with Japan, reaching $39.8 billion in 2018. [823] Although Japan has no auto tariffs, U.S. industry says there are significant nontariff barriers which serve as a barrier to market access for U.S. passenger motor vehicle producers. [824] These barriers include standards and testing protocols that are unique to the Japanese market, a lack of transparency about the process of developing Japanese regulations, and policies that hinder the development of distribution and service networks for U.S. passenger motor vehicles in Japan. [825]

USTR has identified improving market access opportunities in Japan’s automotive sector as a key objective for a trade agreement with Japan. As part of its list of negotiating objectives released in December 2018, USTR has announced intentions to negotiate “securing additional provisions as necessary to obtain fair and more equitable trade in the motor vehicle sector.” [826]

Pharmaceutical Products

Introduced in 2010, Japan’s Price Maintenance Premium is a program designed to accelerate the introduction of innovative drugs to the Japanese market. [827] In 2018, the government of Japan introduced reforms altering the requirements for drug producers to qualify for the premium. USTR has cited these changes as a potential trade barrier for U.S. pharmaceutical companies. New requirements for local clinical trials and product launches appear to favor Japanese companies while excluding small and medium-sized U.S. pharmaceutical companies from receiving the premium. [828] According to the most recent data from Japan’s Ministry of Health, Labour, and Welfare, U.S.-origin pharmaceuticals made up 20 percent of Japan’s $95 billion pharmaceutical market. However, changes to the pricing system are expected to negatively affect the growth of Japan’s pharmaceutical market. [829]

Republic of Korea (South Korea)

U.S.-South Korea Trade Overview

South Korea continued to be the United States’ sixth-largest single-country merchandise trading partner in 2018. Two-way merchandise trade was valued at $130.6 billion, up from $119.8 billion in 2017. 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 $17.9 billion with South Korea in 2018, a 22.6 percent decrease from the $23.1 billion deficit in 2017, as U.S. exports to South Korea increased by $8.0 billion and U.S. imports from South Korea increased by $2.8 billion (figure 6.11). The U.S. combined goods and services trade deficit with South Korea has decreased for the third year in a row, reaching $5.4 billion in 2018. This is the same value as the trade deficit in 2011, the year before the U.S.-Korea Free Trade Agreement (KORUS) entered into force. [830]

U.S. merchandise exports to South Korea were valued at $56.3 billion in 2018, up 16.6 percent from 2017. Leading U.S. exports to South Korea were crude petroleum; machines for the manufacture of semiconductor devices or electronic integrated circuits; civilian aircraft, engines, and parts; semiconductors; liquefied propane; and corn. Crude petroleum was among the top U.S. exports to South Korea for the second year in a row; it was also the fastest growing, spiking 410.4 percent in value from $1.1 billion in 2017 to $5.6 billion in 2018. [831] Beef exports represented the fifth-largest U.S. export to South Korea, with a total value of $1.7 billion in 2018, up 43.6 percent from $1.2 billion in 2017. [832] South Korea is the second-largest export market for U.S. beef after Japan, accounting for about 21.2 percent of U.S. beef exports in 2018. Passenger motor vehicles were another top export to South Korea in 2018, growing from $1.5 billion in 2017 to $1.7 billion in 2018. [833] Exports of all passenger motor vehicles combined are the United States’ sixth-largest export to South Korea.

U.S. merchandise imports from South Korea totaled $74.2 billion in 2018, increasing 3.9 percent ($2.7 billion) from 2017. U.S. imports of passenger motor vehicles, the top import from South Korea, declined to $13.8 billion in 2018, down $1.9 billion (12.1 percent) from 2017. Other top U.S. imports from South Korea included computer parts and accessories, cellphones, refined petroleum products, and immunological products. U.S.-South Korea merchandise trade data are shown in appendix tables A.57–A.60.

In 2018, South Korea was the United States’ ninth-largest single-country services trading partner in terms of two-way trade. U.S. cross-border services exports to South Korea decreased 6.7 percent in 2018 to $21.9 billion. U.S. cross-border services imports from South Korea increased in 2018, by 7.0 percent, to reach $9.9 billion. As a result, the U.S. services trade surplus with South Korea fell from $14.3 billion in 2017 to $12.0 billion in 2018, a decline of 15.6 percent (figure 6.12).

In 2018, leading U.S. services exports to South Korea included travel services ($9.4 billion), charges for intellectual property use ($5.0 billion), transport ($2.7 billion), and other business services ($1.6 billion) (table A.61). All four of these services exports categories experienced declines from 2017. Leading U.S. services imports from South Korea include transport ($6.5 billion), travel services ($1.5 billion), and other business services ($956 million) (table A.62). Both transport and travel services exports increased from 2017 to 2018, by 7.4 and 16.4 percent, respectively.

Figure 6.11 U.S. merchandise trade with South Korea, 2014–18

Figure 6.11 is a bar chart that shows U.S. merchandise trade with South Korea from 2014 to 2018. From 2014 to 2015 the U.S. merchandise trade deficit with South Korea grew from $25.0 billion to $28.3 billion as U.S. imports from Korea grew and U.S. exports to Korea fell. The deficit declined sharply from 2015 to 2018, reaching $17.9 billion as U.S. exports to Korea grew much more than U.S. imports from Korea. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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, 2014–18

Figure 6.12 is a bar chart that shows U.S. trade in private cross-border services with South Korea from 2014 to 2018. The U.S. trade surplus in private services with South Korea increased slightly from $11.7 billion in 2014 to $14.3 billion in 2017, but decreased to $ 12.0 billion in 2018 as a result of increased U.S. import of Korean services and decreased U.S. services exports. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

Several high-level meetings on issues of bilateral trade between the United States and South Korea took place in 2018. Most notably, President Trump and South Korean President Moon Jae-in met on September 24, 2018, in New York to sign the modifications to the KORUS agreement. [834] This followed two other meetings in Washington, DC, one between U.S. Trade Representative Lighthizer and Trade Minister Kim Hyun-chong on July 31, 2018, and the other between U.S. House Committee Foreign Affairs Chairman Ed Royce and South Korean Minister of Trade, Industry, and Energy Paik Ungyu on July 1, 2018. At both meetings, South Korea expressed views on why South Korean automobile exports should be exempt from potential tariffs under section 232 of the U.S. Trade Expansion Act. [835] On July 19, 2018, the South Korean Deputy Minister for Trade, Kang Sung-Cheon, also provided similar testimony at USDOC’s hearing on the section 232 investigation of automotive imports. [836] At the end of 2018, this section 232 investigation was still in progress. [837]

Three different WTO disputes involving the United States and South Korea were active in 2018. Two of these disputes were in response to the safeguard actions that the United States took in response to imports of large residential washers (DS546) and of crystalline silicon photovoltaic products (DS545). [838] Panels were established for both disputes on September 26, 2018, but neither had been composed as of yearend 2018. [839] In the third active 2018 WTO dispute, South Korea requested consultations with the United States on February 14, 2018, in a dispute concerning several issues related to U.S. antidumping and countervailing duty measures across two countervailing duty proceedings and six antidumping proceedings (DS539). A panel was established by the Dispute Settlement Body on May 28, 2018, and was composed on December 5, 2018. However, no further actions have been taken since then. [840] On June 4, 2018, the USDOC concluded its section 129 investigation on large residential washers from South Korea, revising its final countervailing duty analysis in accordance with WTO Dispute Settlement Panel and Appellate Body Panel reports. [841] For more information on these WTO disputes, see chapter 3.

Section 232 Steel and Aluminum Tariffs

Following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962, the President imposed a 25 percent ad valorem tariff on imported steel from all countries except Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all other countries except Canada and Mexico, effective March 23, 2018. [842] Through negotiations that took place alongside those involving KORUS (see below), South Korea received an exemption for its steel products before the tariff took effect, while discussions on a satisfactory alternative solution to addressing the threatened impairment to U.S. national security by steel imports from South Korea continued. [843] At the conclusion of these discussions, South Korea agreed to an absolute annual quota for its exports of 54 subcategories of steel to the United States. The quota was effective on May 1, 2018, and is equivalent to 70 percent of the United States’ average import volume of steel from South Korea from 2015–17. [844] On May 31, 2018, the quota was modified to be measured on a quarterly basis, effective July 1, 2018. [845]

South Korea was the second-largest single-country source for U.S. imports of steel in 2017 behind Canada, supplying 9.6 percent of U.S. steel imports. [846] South Korea is a less important source of U.S. imports of aluminum; in 2017 it was the 20th-largest single-country supplier of aluminum to the United States. [847] The 10 percent tariff on U.S. imports of aluminum from South Korea is still in effect as of August 2019.

U.S.-Korea FTA

The process to renegotiate KORUS began with a formal notification to South Korea from USTR Lighthizer on July 12, 2017, calling for a special session of the KORUS Joint Committee. Two special sessions were convened in 2017: one on August 22 in Seoul, and one on October 4 in Washington, DC. [848] Negotiations for KORUS began on January 5, 2018. [849] Following a series of ministerial-level talks throughout the spring and summer of 2018, the agreement was signed by South Korea and the United States on September 24, 2018. The KORUS modifications entered into force on January 1, 2019. [850] For more information on KORUS negotiations, see chapter 5.

Bilateral developments under the KORUS agreement have continued into 2019. On March 15, 2019, USTR requested its first-ever consultations with South Korea under KORUS Chapter 16 on Competition-Related Matters. In its request, the United States expressed its concerns over competition hearings held by the Korea Fair Trade Commission (KFTC). [851] With a mandate that includes promoting competition and strengthening consumers’ rights, KFTC can conduct investigations of companies and levy fines for violations and failure to cooperate with investigators. Several U.S. firms have raised concerns that KFTC’s procedures do not comply with South Korea’s obligations under KORUS. According to these firms, KFTC’s procedures inhibit the ability of companies to adequately defend themselves during proceedings and hearings by denying them the opportunity to review and rebut the evidence against them. [852]

South Korea has sought to address these concerns with changes to procedures governing access to evidence. These changes were set forth in amendments to the Monopoly Regulations and Fair Trade Act, which was submitted to the South Korean National Assembly in December 2018. The United States did not find that these amendments resolved its concerns, however, and submitted its consultation request as a result. [853]

Oil-related Exports

U.S. exports of crude petroleum to South Korea quintupled in value in 2018, growing from $1.1 billion in 2017 to $5.6 billion in 2018. [854] This upsurge stemmed from a number of factors, including an increase in U.S. production of crude petroleum as well as trade diversion due to the Chinese response to U.S. tariffs under its section 301 investigation.

The increase in production was an important factor, given that the United States produced 17.5 percent more crude petroleum in 2018 than in the previous year, averaging 11.0 million barrels a day. [855] The majority of crude petroleum produced in the United States comes from the U.S. Gulf Coast states. However, most refineries in the region are configured to process primarily heavy sour crudes, which have a higher density and sulfur content than the light sweet crudes produced nearby. As a result of this mismatch between the type of crude petroleum produced in the Gulf Coast and the local refinery configurations, as well as limited pipeline infrastructure for supplying refineries in other regions, a large portion of the United States’ supply of light sweet crude was exported. [856]

China was the largest Asian single-country destination market for U.S. crude petroleum in the first half of 2018. [857] However, China stopped importing crude petroleum from the United States from August to October 2018. This coincided with China’s announcement of its proposed “first tranche” list of U.S. goods potentially subject to increased Chinese tariffs as part of the China-U.S. section 301 dispute; U.S. crude oil was initially included on this list. [858]

As U.S. exports of crude petroleum to China fell, exports to other Asian economies increased in the latter half of 2018. Out of all the Asian markets, South Korea, home to some of the largest and most advanced oil refineries in the world (including refineries capable of handling light sweet crudes), received the largest share of these increased exports. [859] Overall, South Korea was the largest single-country destination in Asia for U.S. crude petroleum exports in 2018, and was second only to Canada in terms of total import volume of U.S. crude petroleum in 2018. [860]

India

U.S. India Trade Overview

In 2018, 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 17.8 percent to $87.1 billion in 2018. India’s share of total U.S. merchandise trade with the world for 2018 was 0.2 percent higher than 2017 at 2.1 percent. U.S. exports to India rose significantly in 2018, shrinking the U.S. merchandise trade deficit with India by 7.6 percent to $20.9 billion in 2018 (figure 6.13).

U.S. merchandise exports to India increased 28.9 percent in 2017–18, from $25.7 billion to $33.1 billion. Leading U.S. exports to India in 2018 were nonindustrial diamonds; crude petroleum; civilian aircraft, engines, and parts; nonmonetary gold; and bituminous coal. While U.S. exports of gold decreased by $443 million (or 18.6 percent) in 2018, most other U.S. exports increased, including those of crude petroleum, which experienced a nearly fivefold increase to $3.0 billion.

U.S. merchandise imports from India increased by 11.8 percent in 2018 to $54.0 billion. Leading U.S. imports from India in 2018 were nonindustrial diamonds, [861] certain medicaments, frozen shrimp, light oils, and gold jewelry. U.S.-India merchandise trade data are shown in appendix tables A.63 through A.66.

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 5.7 percent to $54.3 billion in 2018. India is 1 of only 2 among the top 20 services trading partners with which the United States had a services trade deficit in 2018 (the other was Italy). This trade deficit has been decreasing since 2015, and this trend continued in 2018, when the deficit dipped by 0.6 percent to $4.8 billion (figure 6.14).

Leading U.S. services exports to India included travel services ($14.4 billion), charges for intellectual property use ($3.4 billion), and transport ($1.8 billion) (table A.67). However, the largest growth in services exports was in maintenance and repair services, which grew 27.6 percent from $0.7 billion in 2017 to $0.8 billion in 2018. Leading U.S. services imports from India included telecommunications, computer, and information services ($15.3 billion); other business services ($8.5 billion); and travel services ($3.3 billion) (table A.68). Imports of financial services dropped 21.4 percent, while imports of charges for intellectual property use increased by 57.1 percent from $781 million in 2017 to $1.2 billion in 2018.

Figure 6.13 U.S. merchandise trade with India, 2014–18

Figure 6.13 is a bar chart that shows U.S. merchandise trade with India from 2014 to 2018. Between 2014 and 2016, U.S. exports remained stable while U.S. imports increased, which resulted in an expanding trade deficit from $23.8 billion to $24.3 billion. Since then, U.S. exports have increased more than U.S. imports, resulting in a drop in the U.S. trade deficit to $20.9 billion in 2018. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Figure 6.14 U.S. cross-border trade in private services with India, 2014–18

Figure 6.14 is a bar chart that shows U.S. trade in private cross-border services with India from 2014 to 2018. During the five-year period, both U.S. exports and U.S. imports increased each year. Since 2014, when the U.S. services trade deficit with India was at a record level ($7.5 billion), the U.S. deficit has fallen to $4.8 billion both in 2017 and 2018, as U.S. services trade exports have grown faster than U.S. service trade imports from India. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 are preliminary. Underlying data can be found in appendix table B.7 .

Trade Developments

Among the important U.S.-India trade developments of 2018 were the issuance of the United States’ first-ever counternotifications at the WTO, the imposition of section 232 tariffs on steel and aluminum, and the GSP eligibility review of India. These topics are discussed in detail below. Unlike in prior years, the annual U.S.-India Trade Policy Forum did not take place in 2018. U.S. and Indian officials met in New Delhi on April 11–12 to discuss the section 232 tariffs on U.S. imports of steel and aluminum from India and the WTO dispute over export subsidies. [862]

There were several active WTO dispute settlement proceedings involving the United States and India in 2018. In March 2018, the United States requested dispute settlement consultations with India about alleged export subsidy measures, and in May 2018, it requested the establishment of a panel. [863] Specifically, USTR argued that various export promotion schemes provide benefits to Indian exporters that allow them to sell their goods in the United States more cheaply, adversely affecting U.S. manufacturers and workers. [864] There were also developments in a dispute involving U.S. measures related to the renewable energy sector where India was the complainant against the United States. [865] On May 4, 2018, the United States submitted a counternotification [866] to the WTO Committee on Agriculture (COA) regarding India’s price support for wheat and rice, [867] and on November 13, 2018, the United States submitted a counternotification to the COA on India’s market price support for cotton. [868]

Section 232 Steel and Aluminum Tariffs

Following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962, the President imposed a 25 percent ad valorem tariff on imported steel from all countries except Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all other countries except Canada and Mexico, effective March 23, 2018. [869] On May 18, 2018, India requested dispute settlement consultations with the United States at the WTO in response. After consultations failed to resolve the dispute, India requested that the DSB establish a panel, and on December 4, 2018, the DSB established a panel. [870]

In 2017, India was the 11th-largest single-country source of U.S. steel imports, supplying 2.6 percent of all U.S. steel product imports. [871] India was also the eighth-largest source for U.S. aluminum imports in 2017, supplying 2.2 percent of all U.S. aluminum imports. [872]

GSP Country Eligibility Review

On April 12, 2018, USTR announced that it was reviewing the eligibility of India, as well as Indonesia and Kazakhstan, for benefits under the Generalized System of Preferences (GSP) due to concerns about program compliance. [873] For India, the GSP eligibility review resulted from concerns related to India’s compliance with the eligibility criterion on market access. USTR accepted two petitions filed by the U.S. dairy industry and the U.S. medical device industry, which alleged that Indian trade barriers were affecting U.S. exports in those sectors. Based on its own assessment process, USTR also identified concerns with India’s compliance with the market access criterion. According to USTR, India “has implemented a wide array of trade barriers that create serious negative effects on U.S. commerce,” [874] such as high tariffs and technical barriers to trade. [875] Because of the similarity of the issues raised in the petitions and in USTR’s own review process, USTR combined them into one overall review based on the GSP market access criterion. [876]

Intellectual Property

India remained on USTR’s Priority Watch List in the 2018 Special 301 Report due to continuing concerns regarding weak protection and enforcement of IPRs. [877] Of concern are patentability issues; the production, domestic distribution, and export of counterfeit pharmaceuticals; trademark counterfeiting; and digital piracy. Several patent issues were noted as being particularly burdensome for U.S. firms, including narrow patentability standards, the threat of compulsory licensing and patent revocations, long wait times to receive patents, and onerous reporting requirements. [878] The report also described problems with government handling of the confidential data supplied by U.S. companies during the market approval process. Although these data are supposed to be protected from disclosure, companies state that they have proven vulnerable to unfair commercial use. According to the report, data on products in the pharmaceutical and agricultural chemical sectors are especially susceptible to misuse. [879]

USTR’s 2018 Out-of-Cycle Review of Notorious Markets Report identified several online or physical marketplaces of concern in India that are reported to engage in or facilitate commercial-scale copyright piracy and trademark counterfeiting. In particular, the report noted markets in India for counterfeit apparel and footwear, pirated media, and counterfeit and illegal pharmaceuticals. [880]

Taiwan

U.S.-Taiwan Trade Overview

In 2018, Taiwan was the United States’ 11th-largest single-country trading partner, which is the same position it held in 2017. U.S. two-way merchandise trade with Taiwan grew 11.4 percent to $76.0 billion in 2018 from $68.2 billion in 2017, continuing to account for 1.8 percent of total merchandise trade with the world. The U.S. merchandise trade deficit with Taiwan narrowed 7.2 percent to $15.5 billion in 2018, as U.S. imports rose by $3.3 billion while U.S. exports rose by $4.5 billion (figure 6.15).

U.S. merchandise exports to Taiwan increased from $25.7 billion in 2017 to $30.2 billion in 2018, a 17.5 percent increase. The top U.S. exports to Taiwan during the year were crude petroleum; civilian aircraft, engines, and parts; machines for semiconductor or integrated circuit manufacturing; semiconductors; and memories. U.S. exports of crude petroleum increased by $2.7 billion, accounting for 60.3 percent of the overall rise in exports to Taiwan in 2018, while the other top five exports declined.

U.S. merchandise imports from Taiwan increased from $42.5 billion in 2017 to $45.8 billion in 2018, a 7.8 percent rise. The top U.S. imports from Taiwan during the year were computer parts and accessories; microchips; telecommunications equipment; semiconductor storage devices; and semiconductors. U.S. imports of computer parts and accessories increased by $885.6 million, or 63.8 percent, accounting for 26.8 percent of the overall rise in imports from Taiwan in 2018. U.S.-Taiwan merchandise trade data are shown in appendix tables A.69 through A.72.

Taiwan remained the 14th-largest single-country U.S. trading partner in services in 2018. Two-way cross-border trade in services grew 2.8 percent, from $17.3 billion in 2017 to $17.8 billion in 2018, accounting for 1.3 percent of total U.S. services trade with the world. U.S. services exports to Taiwan increased by 2.5 percent to $9.6 billion, while imports rose 3.2 percent to $8.2 billion. As a result of the larger absolute increase in imports, the U.S. services trade surplus continued to decline, decreasing 1.6 percent from $1.40 billion in 2017 to $1.37 billion in 2018 (figure 6.16).

In 2018, leading U.S. services exports to Taiwan included transport, travel services, and charges for intellectual property use (table A.73). Transport increased from 2017 to 2018 while travel services held steady, but exports of charges for intellectual property continued their decline, falling 24.6 percent in 2018. Leading U.S. services imports from Taiwan included transport, travel services, and other business services (table A.74). Transport was by far the largest category, accounting for 69.6 percent of U.S. services imports from Taiwan in 2018.

Figure 6.15 U.S. merchandise trade with Taiwan, 2014–18

Figure 6.15 is a bar chart that shows U.S. merchandise trade with Taiwan from 2014 to 2018. The U.S. merchandise trade deficit with Taiwan increased from $14.2 billion in 2014 to $15.5 billion in 2018, reaching a peak of $16.7 billion in 2017. The increase in the deficit was attributable to U.S. imports growing at faster rate than U.S. imports. The data behind the figure are presented in table B.5.

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Figure 6.16 U.S. cross-border trade in private services with Taiwan, 2014–18

Figure 6.16 is a bar chart that shows U.S. trade in private cross-border services with Taiwan from 2014 to 2018. The U.S. trade surplus in private services with Taiwan decreased by $3.3 billion during this period, falling from $4.7 billion in 2014 to $1.4 billion in 2017 and 2018,urplus dropped as both U.S. cross-border service exports fell and imports grew. The data behind the figure are presented in table B.7.

Source: USDOC, BEA U.S. International Transactions, Services, & IIP, International Transactions, International Services, tables 2.2 and 2.3, and International Transactions, table 3.2, June 20, 2019.

Note: Data for 2018 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). The TIFA Council did not meet in 2018, but the two countries did hold bilateral trade and investment discussions in September 2018. [881] The U.S. delegation was led by Terry McCartin, Acting Assistant U.S. Trade Representative for China, and included officials from the USTR and the U.S. Departments of State, Commerce, and Agriculture. [882] The two sides discussed a variety of issues, including technical barriers to trade, as well as digital piracy and other intellectual property rights issues, investment, and agriculture, which are discussed below.

Section 232 Steel and Aluminum Tariffs

Following investigations into the national security implications of U.S. steel and aluminum imports under section 232 of the Trade Expansion Act of 1962, the President imposed a 25 percent ad valorem tariff on imported steel from all countries except Canada and Mexico, and a 10 percent ad valorem tariff on imported aluminum from all other countries except Canada and Mexico, effective March 23, 2018. [883] Although Taiwan’s exports were subject to the new U.S. tariffs, Taiwan did not initiate WTO dispute proceedings or impose retaliatory tariffs in 2018. In 2017, Taiwan was the 8th-largest single-country source of U.S. steel imports, comprising 4.3 percent of all U.S. imports of steel products. [884] Taiwan was also the 21st-largest source for U.S. aluminum imports in 2017, comprising 0.7 percent of all U.S. aluminum imports. [885]

Intellectual Property Rights Protection

The United States has been working with Taiwan to improve protection and enforcement of IPRs, and continues to monitor changes to Taiwan’s Copyright Act. The Legislative Yuan [886] introduced draft amendments to the Copyright Act to combat illicit streaming in December 2018. Some issues, however, remain unresolved, including some licensing provisions and the role of collective management organizations. [887] Questions also remain concerning the use of copyrighted textbooks. [888] Following talks at the September 2018 meeting, the United States and Taiwan agreed to a Digital Anti-Piracy Work Plan to continue addressing enforcement cooperation, legislative reforms to the Copyright Act, and legitimate teaching materials. [889]

Investment

Investment is another issue that remains a top priority in U.S.-Taiwan discussions, and was one of the chief topics discussed at the September 2018 meeting. [890] Taiwan limits investment into certain sectors, including agriculture, some manufacturing, and some services. Taiwan’s Executive Yuan is currently considering amendments to Taiwan’s Statute for Investment by Foreign Nationals that would exempt U.S. investments under $1.0 million from the approval process. [891]

The Deputy Assistant Secretary for Manufacturing at the U.S. Department of Commerce International Trade Administration visited Taiwan in December 2018 to discuss market access issues and to promote Taiwanese investment into the United States through participation in the SelectUSA Summit. [892] The SelectUSA Investment Summit, hosted by the U.S. Department of Commerce to encourage foreign direct investment into the United States, occurred June 20–22, 2018. The summit was attended by 120 delegates from Taiwan, representing advanced manufacturing, petrochemicals, iron and steel, information and communication technology, biotechnology, banking, machinery, aerospace, and franchising. [893]

Agriculture

The United States continued to engage with Taiwan about certain agricultural regulations, as Taiwan was the ninth-largest export market for U.S. agricultural goods in 2018. [894] Starting in November 2017, Taiwan banned the entry of ready-to-cook potatoes that had any amount of the color green (“greening”) on them, because it might indicate the presence of glycoalkoloids. However, after U.S. engagement, in November 2018 Taiwan ended its zero-tolerance policy, establishing instead a threshold for the amount of greening allowed. [895]

The United States also continued to work with Taiwan to establish maximum residue limits for ractopamine. In 2007, Taiwan notified the WTO of its intent to establish maximum residue limits for ractopamine, but has set such limits only with respect to beef muscle cuts. In the absence of established maximum limits, there is a zero tolerance for ractopamine, which can be found in other beef products and pork. This approach has led to longstanding barriers to U.S. exports of beef and pork. [896]

In September 2018, Taiwan sent a delegation of government officials to Washington, DC, on an agricultural trade goodwill mission. [897] The delegation met with members of Congress and signed “intent to purchase” agreements for $1.56 billion in soybeans, an increase of 30 percent from their purchase order the previous year. In 2017, a similar delegation pledged to purchase $2.8 billion in U.S. corn, soybeans, and wheat. [898]

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U.S. Trade Representative (USTR). “Joint Statement by the United States and Canada on Section 232 Duties on Steel and Aluminum.” May 17, 2019. https://ustr.gov/sites/default/files/Joint_Statement_by_the_United_States_and_Canada.pdf .

U.S. Trade Representative (USTR). “Joint Statement by the United States Trade Representative Robert E. Lighthizer and Republic of Korea Minister for Trade Hyun Chong Kim.” Press release, March 28, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/joint-statement-united-states-trade .

U.S. Trade Representative (USTR). “Joint Statement from the 9th EU-U.S. SME Workshop.” November 15, 2018. https://ustr.gov/sites/default/files/JOINT_STATEMENT_9th_EU-US_SME_Workshop.pdf .

U.S. Trade Representative (USTR). “Joint Statement from United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland.” Press release, September 30, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/september/joint-statement-united-states .

U.S. Trade Representative (USTR). “Joint Statement on the 4th U.S.-Nepal Trade and Investment Framework Council Meeting.” Press release, November 15, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/november/joint-statement-4th-us-nepal-trade .

U.S. Trade Representative (USTR). “Joint Statement on the Second Meeting of the United States-Argentina Council on Trade and Investment.” Press release, October 22, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/october/joint-statement-second-meeting .

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U.S. Trade Representative (USTR). “Joint Statement on the United States-Ukraine Trade and Investment Council.” Press release, October 24, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/october/joint-statement-united-states .

U.S. Trade Representative (USTR). “Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union.” Press release, May 31, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/may/joint-statement-trilateral-meeting .

U.S. Trade Representative (USTR). “Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union.” Press release, September 25, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/september/joint-statement-trilateral .

U.S. Trade Representative (USTR). “Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.” Federal Register , June 20, 2018. https://ustr.gov/sites/default/files/2018-13248.pdf .

U.S. Trade Representative (USTR). “Notice of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.” Federal Register , August 16, 2018. https://www.federalregister.gov/documents/2018/08/16/2018-17709/notice-of-action-pursuant-to-section-301-chinas-acts-policies-and-practices-related-to-technology .

U.S. Trade Representative (USTR). “Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.” Federal Register , May 9, 2019. https://www.federalregister.gov/documents/2019/05/09/2019-09681/notice-of-modification-of-section-301-action-chinas-acts-policies-and-practices-related-to .

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U.S. Trade Representative (USTR). “Statement on the First Joint Committee Meeting Under the U.S.-EU Bilateral Agreement on Prudential Measures on Insurance and Reinsurance.” Press release, March 27, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/statement-first-joint-committee .

U.S. Trade Representative (USTR). “Statement Regarding Implementation of the PTPA Forest Annex and Peru’s July 2018 Verification Report.” Press release, September 17, 2018. https://ustr.gov/sites/default/files/Timber%20Committee%20Report%2009.17.18.pdf .

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U.S. Trade Representative (USTR). “The United States and Chile Hold the Twelfth Meeting of the Free Trade Commission under the U.S.-Chile Free Trade Agreement.” Press release, October 17, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/october/united-states-and-chile-hold .

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U.S. Trade Representative (USTR). “United States Challenges Five WTO Members Imposing Illegal Tariffs Against U.S. Products.” Press release, July 16, 2018. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/united-states-challenges-five-wto .

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Yap, Chuin-Wei. “China’s Tariff Turnaround: U.S. Crude Oil Drops Off the Target List.” Wall Street Journal . August 9, 2018. https://www.wsj.com/articles/chinas-tariff-turnaround-u-s-crude-oil-drops-off-the-target-list-1533814362 .

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Appendix A Data Tables

Table A.1 U.S. total exports to the world, by USITC digest sector, 2016–18

Sector Description 2016 2017 2018 % change 2017–18
Million $
1 Agricultural products 148,626 152,965 154,944 1.3
2 Forest products 37,700 39,592 40,862 3.2
3 Chemicals and related products 217,979 227,526 243,436 7.0
4 Energy-related products 98,489 144,319 195,897 35.7
5 Textiles and apparel 21,734 22,146 22,712 2.6
6 Footwear 1,367 1,432 1,559 8.8
7 Minerals and metals 128,680 136,447 146,274 7.2
8 Machinery 128,183 136,204 143,279 5.2
9 Transportation equipment 320,006 325,578 337,942 3.8
10 Electronic products 260,426 268,546 276,896 3.1
11 Miscellaneous manufactures 47,702 49,081 52,096 6.1
12 Special provisions 40,131 42,437 48,160 13.5
Total 1,451,024 1,546,273 1,664,056 7.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Table A.2 U.S. general imports to the world, by USITC digest sector, 2016–18

Sector Description 2016 2017 2018 % change 2017–18
Million $
1 Agricultural products 139,097 147,329 156,588 6.3
2 Forest products 43,115 44,821 48,696 8.6
3 Chemicals and related products 259,890 268,131 311,210 16.1
4 Energy-related products 157,321 196,833 234,983 19.4
5 Textiles and apparel 120,230 121,372 127,662 5.2
6 Footwear 25,634 25,640 26,567 3.6
7 Minerals and metals 183,544 200,577 215,281 7.3
8 Machinery 179,486 196,319 214,652 9.3
9 Transportation equipment 418,311 434,860 459,726 5.7
10 Electronic products 449,853 484,121 506,065 4.5
11 Miscellaneous manufactures 124,854 130,338 139,019 6.7
12 Special provisions 85,697 90,426 100,817 11.5
Total 2,187,032 2,340,768 2,541,267 8.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Table A.3 Leading U.S. total exports to the world, by HTS 6-digit subheading, 2016–18

HTS 6 Description 2016 2017 2018 % change 2017–18
Million $
1201.90 Soybeans, other than seed 22,843 21,461 17,103 -20.3
2709.00 Petroleum oils and oils from bituminous minerals, crude 9,380 22,594 47,190 108.9
2710.12 Light oils and preparations containing 70% by weight petroleum oils or oils from bituminous minerals, not containing biodiesel, not waste oils 24,272 29,557 39,154 32.5
2710.19 Petroleum oils, oils from bituminous minerals (other than crude) & products containing by weight 70% or more of these oils, not biodiesel or waste 37,729 48,156 54,998 14.2
2711.12 Propane, liquefied 7,401 12,368 14,910 20.6
3004.90 Medicaments, in measured doses, etc. (excluding vaccines, etc., coated bandages etc., and pharmaceutical goods), n.e.s.o.i. 19,096 17,128 17,855 4.2
7102.39 Diamonds, nonindustrial, worked, including polished or drilled 18,845 17,897 19,471 8.8
7108.12 Gold, nonmonetary, unwrought n.e.s.o.i. (other than powder) 17,518 19,610 20,131 2.7
8473.30 Parts and accessories for automatic data processing machines and units thereof, magnetic or optical readers, transcribing machines, etc., n.e.s.o.i. 15,502 15,527 17,741 14.3
8486.20 Machines and apparatus for the manufacture of semiconductor devices or of electronic integrates circuits 8,833 12,490 12,294 -1.6
8517.62 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus 18,857 17,592 17,742 0.9
8542.31 Processors and controllers, electronic integrated circuits 19,849 18,963 19,097 0.7
8703.23 Passenger motor vehicles with spark-ignition internal combustion reciprocating piston engine, cylinder capacity over 1,500 cc but not over 3,000 cc 21,924 18,703 17,401 -7.0
8703.24 Passenger motor vehicles with spark-ignition internal combustion reciprocating piston engine, cylinder capacity over 3,000 cc 18,604 18,814 17,852 -5.1
8800.00 Civilian aircraft, engines, and parts 120,929 120,988 130,384 7.8
Total of items shown 381,582 411,846 463,322 12.5
All other HTS subheadings 1,069,442 1,134,427 1,200,733 5.8
Total of all commodities 1,451,024 1,546,273 1,664,056 7.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

Note: Data reflect shipments under HTS chapters 1–97. Because of rounding, figures may not add up to totals shown. N.e.s.o.i. = not elsewhere specified or included; cc = cubic centimeter; gvw = gross vehicle weight.

Table A.4 Leading U.S. general imports from the world by HTS 6-digit subheading, 2016–18

HTS 6 Description 2016 2017 2018 % change 2017–18
Million $
2709.00 Petroleum oils and oils from bituminous minerals, crude 101,704 132,936 157,030 18.1
8703.23 Passenger motor vehicles with spark-ignition internal combustion reciprocating piston engine, cylinder capacity over 1,500 cc but not over 3,000 cc 106,344 101,633 102,806 1.2
3004.90 Medicaments, in measured doses, etc. (excluding vaccines, etc., coated bandages etc., and pharmaceutical goods), n.e.s.o.i. 51,062 50,120 55,950 11.6
8517.12 Telephones for cellular networks or for other wireless networks 49,795 55,955 52,839 -5.6
8517.62 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus 45,356 47,630 47,299 -0.7
8471.30 Portable  automatic data processing machines, weight not more than 10 kg, consisting of at least a central processing unit, keyboard & a display 35,861 39,988 39,695 -0.7
8703.24 Passenger motor vehicles with spark-ignition internal combustion reciprocating piston engine, cylinder capacity over 3,000 cc 50,092 47,121 39,141 -16.9
2710.19 Petroleum oils, oils from bituminous minerals (other than crude) & products containing by weight 70% or more of these oils, not biodiesel or waste 21,563 26,769 35,083 31.1
8471.50 Processing units other than those of 8471.41 and 8471.49, n.e.s.o.i. 19,629 23,418 31,698 35.4
8473.30 Parts and accessories for automatic data processing machines and units thereof, magnetic or optical readers, transcribing machines, etc., n.e.s.o.i. 15,208 21,940 27,050 23.3
2710.12 Light oils and preparations containing 70% by weight petroleum oils or oils from bituminous minerals, not containing biodiesel, not waste oils 17,224 18,552 23,507 26.7
7102.39 Diamonds, nonindustrial, worked, including polished or drilled 23,019 21,541 23,295 8.1
8542.31 Processors and controllers, electronic integrated circuits 20,888 21,043 21,572 2.5
8703.22 Passenger motor vehicles with spark-ignition internal combustion reciprocating piston engine, cylinder capacity over 1,000 cc but not over 1,500 cc 10,963 15,994 20,744 29.7
8704.31 Motor vehicles for goods transport n.e.s.o.i., with spark-ignition internal combustion piston engine, gvw not over 5 metric tons 15,890 15,827 17,667 11.6
Total of items shown 584,597 640,467 695,376 8.6
All other HTS subheadings 1,602,435 1,700,301 1,845,890 8.6
Total of all commodities 2,187,032 2,340,768 2,541,267 8.6

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

Note: Data reflect shipments under HTS chapters 1–97. Because of rounding, figures may not add up to totals shown. N.e.s.o.i. = not elsewhere specified or included; cc = cubic centimeter; gvw = gross vehicle weight.

Table A.5 U.S. merchandise trade with top 15 single-country trading partners, 2018

Rank Country Total exports General imports Total % of total trade
Million $
1 China 120,341 539,495 659,836 15.7
2 Canada 298,719 318,414 617,133 14.7
3 Mexico 265,010 346,524 611,534 14.5
4 Japan 74,967 142,596 217,562 5.2
5 Germany 57,654 125,904 183,558 4.4
6 South Korea 56,344 74,223 130,568 3.1
7 United Kingdom 66,228 60,784 127,013 3.0
8 France 36,326 52,519 88,845 2.1
9 India 33,120 54,007 87,127 2.1
10 Italy 23,153 54,714 77,867 1.9
11 Taiwan 30,243 45,761 76,004 1.8
12 Netherlands 49,391 24,599 73,990 1.8
13 Brazil 39,494 30,940 70,434 1.7
14 Ireland 10,687 57,468 68,155 1.6
15 Switzerland 22,231 41,135 63,365 1.5
Top 15 1,183,909 1,969,083 3,152,992 75.0
All others 480,147 572,183 1,052,330 25.0
Total 1,664,056 2,541,267 4,205,322 100.0

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Table A.6 Top 15 U.S. single-country merchandise export markets, 2018

Rank Country Million $ % of total exports
1 Canada 298,719 18.0
2 Mexico 265,010 15.9
3 China 120,341 7.2
4 Japan 74,967 4.5
5 United Kingdom 66,228 4.0
6 Germany 57,654 3.5
7 South Korea 56,344 3.4
8 Netherlands 49,391 3.0
9 Brazil 39,494 2.4
10 Hong Kong 37,460 2.3
11 France 36,326 2.2
12 Singapore 33,141 2.0
13 India 33,120 2.0
14 Belgium 31,416 1.9
15 Taiwan 30,243 1.8
Top 15 1,229,854 73.9
All others 434,201 26.1
Total 1,664,056 100.0

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Table A.7 Top 15 U.S. single-country merchandise import sources, 2018

Rank Country Million $ % of total exports
1 China 539,495 21.2
2 Mexico 346,524 13.6
3 Canada 318,414 12.5
4 Japan 142,596 5.6
5 Germany 125,904 5.0
6 South Korea 74,223 2.9
7 United Kingdom 60,784 2.4
8 Ireland 57,468 2.3
9 Italy 54,714 2.2
10 India 54,007 2.1
11 France 52,519 2.1
12 Vietnam 49,211 1.9
13 Taiwan 45,761 1.8
14 Switzerland 41,135 1.6
15 Malaysia 39,384 1.5
Top 15 2,002,138 78.8
All others 539,128 21.2
Total 2,541,267 100.0

Source: USITC DataWeb/USDOC (accessed May 9, 2019).

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

Table A.8 U.S. private services exports to the world, by category, 2016–18

Services Industry 2016 2017 2018 % change 2017–18
Million $
Travel 206,650 210,655 214,680 1.9
Charges for the use of intellectual property n.i.e. 124,387 126,523 128,748 1.8
Financial services 99,074 109,203 112,015 2.6
Professional and management consulting services 74,524 78,940 86,828 10.0
Research and development services 38,300 42,232 42,555 0.8
Air passenger fares 39,341 40,889 41,465 1.4
Technical, trade-related, and other business services 31,790 36,019 36,439 1.2
Maintenance and repair services n.i.e. 25,132 26,880