International Trade
Further Improvements Needed to Handle Growing Workload for Monitoring and Enforcing Trade Agreements Gao ID: GAO-05-537 June 30, 2005The vast majority of U.S. exports are covered by at least one trade agreement. Ensuring that U.S. companies can take advantage of the market opportunities created by trade agreements has therefore become a critical responsibility for U.S. government agencies. GAO examined U.S. government efforts to monitor and enforce trade agreements. Specifically, GAO (1) reviewed how the nature and scope of U.S. trade agreements has changed in the last 10 years and what effect changes had on agencies' monitoring and enforcement workload, (2) evaluated how U.S. government agencies monitor and enforce trade agreements, and (3) analyzed how the U.S. government allocates resources for monitoring and enforcement of trade agreements within the context of other trade activities.
The number and scope of trade agreements have grown significantly in recent years, increasing the monitoring and enforcement workload for federal agencies. For example, membership in the World Trade Organization (WTO) has grown over 30 percent in the past 10 years. In addition, trade agreements increasingly cover complex subjects like intellectual property and technical standards. As a result, the amount of work needed to ensure countries comply with such agreements has increased. The Office of the U.S. Trade Representative (USTR) and the Departments of Agriculture, Commerce, and State generally monitor market access issues brought to the agencies' attention by complaints from the private sector or that they identify themselves. They also monitor countries' compliance with certain trade agreements. Over the past 5 years, agencies with trade responsibilities have taken steps to improve their ability to address compliance issues. However, weaknesses still exist. For example, staff we spoke with in Washington, D.C., and at overseas posts told us that communication is sometimes inefficient. Moreover, Commerce staff do not always have access to complete information from overseas posts regarding compliance issues they are working on in those countries. Agency resources for handling compliance issues face growing demands. Competition with other activities, such as trade negotiations, and staffing and training limitations, all affect agencies' ability to effectively monitor and enforce trade agreements. For example, officials responsible for monitoring and enforcing trade agreements in all eight overseas posts we visited said that additional training would help them monitor and enforce trade agreements more effectively. Despite these constraints and agencies' shared responsibility for monitoring and enforcing trade agreements, agencies do not systematically coordinate their assessment or planning for future resource needs.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-537, International Trade: Further Improvements Needed to Handle Growing Workload for Monitoring and Enforcing Trade Agreements
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Report to the Ranking Minority Member, Committee on Finance, U.S.
Senate:
June 2005:
International Trade:
Further Improvements Needed to Handle Growing Workload for Monitoring
and Enforcing Trade Agreements:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-537]:
GAO Highlights:
Highlights of GAO-05-537, a report to the Ranking Minority Member,
Committee on Finance, U.S. Senate:
Why GAO Did This Study:
The vast majority of U.S. exports are covered by at least one trade
agreement. Ensuring that U.S. companies can take advantage of the
market opportunities created by trade agreements has therefore become a
critical responsibility for U.S. government agencies.
GAO examined U.S. government efforts to monitor and enforce trade
agreements. Specifically, GAO (1) reviewed how the nature and scope of
U.S. trade agreements has changed in the last 10 years and what effect
changes had on agencies‘ monitoring and enforcement workload, (2)
evaluated how U.S. government agencies monitor and enforce trade
agreements, and (3) analyzed how the U.S. government allocates
resources for monitoring and enforcement of trade agreements within the
context of other trade activities.
What GAO Found:
The number and scope of trade agreements have grown significantly in
recent years, increasing the monitoring and enforcement workload for
federal agencies. For example, membership in the World Trade
Organization (WTO) has grown over 30 percent in the past 10 years. In
addition, trade agreements increasingly cover complex subjects like
intellectual property and technical standards. As a result, the amount
of work needed to ensure countries comply with such agreements has
increased.
The Office of the U.S. Trade Representative (USTR) and the Departments
of Agriculture, Commerce, and State generally monitor market access
issues brought to the agencies‘ attention by complaints from the
private sector or that they identify themselves. They also monitor
countries‘ compliance with certain trade agreements. Over the past 5
years, agencies with trade responsibilities have taken steps to improve
their ability to address compliance issues. However, weaknesses still
exist. For example, staff we spoke with in Washington, D.C., and at
overseas posts told us that communication is sometimes inefficient.
Moreover, Commerce staff do not always have access to complete
information from overseas posts regarding compliance issues they are
working on in those countries.
Agency resources for handling compliance issues face growing demands.
Competition with other activities, such as trade negotiations, and
staffing and training limitations, all affect agencies‘ ability to
effectively monitor and enforce trade agreements. For example,
officials responsible for monitoring and enforcing trade agreements in
all eight overseas posts we visited said that additional training would
help them monitor and enforce trade agreements more effectively.
Despite these constraints and agencies‘ shared responsibility for
monitoring and enforcing trade agreements, agencies do not
systematically coordinate their assessment or planning for future
resource needs.
Growing Workload for Monitoring and Enforcing Trade Agreements:
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that agencies (1) take steps to facilitate communication
on trade issues, (2) develop a strategy for improving trade compliance
training, and (3) develop a resource strategy for monitoring and
enforcing trade agreements. The Departments of Agriculture and State
generally concurred with GAO‘s recommendations. The Department of
Commerce offered comments to clarify certain facts. USTR provided
technical comments.
www.gao.gov/cgi-bin/getrpt?GAO-05-537.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
The Number and Scope of Trade Agreements Have Grown, Thus Increasing
the Monitoring and Enforcement Workload:
Trade Agencies' Ability to Identify and Address Potential Trade
Agreement Violations Has Improved, Although Communication Needs Further
Improvement:
Despite Growing Demands on Agency Resources, the U.S. Government Lacks
a Coordinated Resource Strategy for Monitoring and Enforcing Trade
Agreements:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Additional Information about U.S. Trade Agreements:
Countries and Regions with Which the United States Has Trade
Agreements:
Types of U.S. Trade Agreements:
Agency Trade Agreement Archives:
Appendix III: Examples of U.S. Government Trade Monitoring and
Enforcement Activities:
Korea:
Japan:
Turkey:
Morocco and Singapore:
Appendix IV: Comments from the Department of Agriculture:
Appendix V: Comments from the Department of Commerce:
Appendix VI: Comments from the Department of State:
Appendix VII: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Table:
Table 1: Key Federal Agencies That Participate in Trade Agreement
Monitoring and Enforcement Efforts:
Figures:
Figure 1: Growing Workload for Monitoring and Enforcing Trade
Agreements:
Figure 2: USTR Estimates of the Numbers of Staff Needed to Support Key
Initiatives, 2005:
Figure 3: Domestic Staff in Key Monitoring and Enforcement Units:
Figure 4: Overseas Staff in Key Monitoring and Enforcement Units:
Figure 5: Trading Partners with Which the U.S. has Five or More
Agreements, as of 2005:
Figure 6: U.S. Trade Agreements by Region, as of 2005:
Figure 7: U.S. Trade Agreements by Type, as of 2005:
Figure 8: Comparison of USTR, Commerce, and Agriculture Archives of
Trade Agreements, as of 2005:
Abbreviations:
APHIS: Animal and Plant Health Inspection Service:
CS: Trade Promotion/U.S. Foreign and Commercial Service:
EU: European Union:
FAS: Foreign Agricultural Service:
FDA: Food and Drug Administration:
FSN: Foreign Service National:
FSIS: Food Safety Inspection Service:
FTA: free trade agreement:
MAC: Market Access and Compliance:
NAFTA: North American Free Trade Agreement:
USTR: U.S. Trade Representative:
WIPI: Wireless Internet Platform for Interoperability:
WTO: World Trade Organization:
Letter June 30, 2005:
The Honorable Max Baucus:
Ranking Minority Member:
Committee on Finance:
United States Senate:
Dear Senator Baucus:
A top trade priority for the United States is opening foreign markets
for American goods and services by ensuring that U.S. trading partners
comply with existing trade agreements. This is because the vast
majority of U.S. exports in 2004 were covered by at least one trade
agreement. Ensuring that U.S. companies can take advantage of the
market opportunities created by trade agreements has therefore become a
critical responsibility for U.S. government agencies. Since U.S.
government efforts to monitor and enforce trade agreements involve
numerous federal agencies, these agencies must coordinate their
activities to be effective and to help ensure that trade agreements are
beneficial to the United States.
Given the large and growing number of U.S. trade agreements, the wide
subject areas covered by such agreements, and the limited resources
available to negotiate and enforce trade agreements, we examined U.S.
government efforts to monitor and enforce trade agreements.
Specifically, we (1) reviewed how the nature and scope of U.S. trade
agreements has changed in the last 10 years and what effect the changes
had on agencies' monitoring and enforcement workload, (2) evaluated how
U.S. government agencies monitor and enforce trade agreements, and (3)
analyzed how the U.S. government allocates resources for monitoring and
enforcement of trade agreements within the context of other trade
activities.
To describe the nature and scope of U.S. trade agreements, we reviewed
data on trade agreements from the Office of the U.S. Trade
Representative (USTR) and the Departments of Agriculture and Commerce.
To evaluate how U.S. government agencies monitor and enforce trade
agreements, we examined the activities of officials at four key trade
agencies: USTR and the Departments of Agriculture, Commerce, and
State.[Footnote 1] In addition, we met with overseas staff involved in
monitoring and enforcement in eight countries. To select the countries
to visit, we considered several variables and attempted to visit a
variety of posts. We further met with private sector representatives in
Washington, D.C., and in the eight countries where we conducted
overseas fieldwork, including private sector representatives who had
recently worked with U.S. government officials to resolve trade
compliance issues. We also analyzed U.S. government reports and
documents, and prior GAO reports related to monitoring and enforcement
activities.[Footnote 2]To determine how the U.S. government allocates
resources for monitoring and enforcement activities, we met with
officials from the four key trade agencies and reviewed budget
documents, strategic plans, and agency performance reports. For a more
detailed explanation of our scope and methodology, including how we
selected countries to visit and private sector representatives to
interview, see appendix I. We conducted our work from July 2004 to
April 2005 in accordance with generally accepted government auditing
standards.
Results in Brief:
Increasing membership in key trade agreements and the widening scope
and complexity of U.S. trade agreements have added to the monitoring
and enforcement workload for federal agencies. World Trade Organization
(WTO) membership has increased by almost one-third over the past 10
years, increasing the workload for agency officials responsible for
monitoring countries' compliance with their WTO obligations. In
addition, since 2000 the United States has negotiated comprehensive
free trade agreements with 12 countries. These agreements cover complex
topics such as intellectual property rights and technical standards.
Monitoring compliance with these agreements requires intensive efforts
from agency staff, as well as staff with specialized knowledge.
Trade agencies generally monitor market access issues that U.S.
companies bring to their attention or that they identify themselves,
some of which may be covered by a trade agreement. They also routinely
monitor countries' compliance with certain specific trade agreements.
Agencies employ a variety of approaches to address these issues,
including using trade agreements as leverage for resolving a particular
trade issue. In recent years, agencies have taken action to improve
coordination and enhance human capital available to monitor and enforce
trade agreements. For instance, they have taken steps to create more
effective formal and informal coordination with other agencies and with
the private sector. However, Commerce and State staff in Washington,
D.C., and at overseas posts told us that communication is sometimes
inefficient. For example, State sometimes uses classified e-mail and
Web sites to exchange important, updated information on trade issues,
even if the information itself is not classified. However, Commerce
staff in Washington, D.C., and overseas who work on compliance issues
told us that even though they have the appropriate clearances, they
have limited access to these classified systems, which can impede their
ability to address compliance issues.
Despite growing demands on resources for monitoring and enforcing
agreements, agencies typically independently assess and plan for
resource needs. As a result, the U.S. government lacks a coordinated
strategy to ensure that agencies can effectively handle the growing
monitoring and enforcement workload. Resources for monitoring and
enforcement face growing demands from competition with other trade
activities such as trade negotiations, staffing limitations, and
barriers to developing and accessing expertise. For example, many
Agriculture, Commerce, and State staff responsible for monitoring and
enforcing trade agreements have not received training regarding how to
fulfill these responsibilities, and staff in all eight countries we
visited said additional training would help them fulfill these
responsibilities more effectively. In spite of these growing demands
and the fact that responsibility for monitoring and enforcing trade
agreements is spread across multiple agencies, there is no systematic
interagency coordination regarding assessing and planning for resource
needs. Since it does not routinely use an interagency trade policy-
making structure to address current trade policy issues, the U.S.
government lacks a formal interagency mechanism or strategy for
assessing and allocating resources for future monitoring and
enforcement activities. While agencies have previously recognized that
effectively monitoring and enforcing trade agreements requires
developing a strategy for coordinating their respective resources, they
have not done so since 2001. The lack of such a strategy complicates
each agency's individual resource planning and sometimes strains agency
resources.
In this report, we make several recommendations to improve agency
efforts to monitor and enforce trade agreements in the areas of
communication, training, and resource planning. We provided a draft of
this report to the Office of the U.S. Trade Representative and the
Departments of Agriculture, Commerce, and State for their comments.
Agriculture and State generally concurred with GAO's recommendations.
Commerce offered comments to clarify certain facts. USTR submitted
technical comments.
Background:
Most U.S. trade is covered by trade agreements, which vary in type and
complexity. In 2004, 97 percent of U.S. exports were to members of the
WTO,[Footnote 3] and 43 percent of U.S. exports were to countries with
which the United States had a free trade agreement (FTA). Some
agreements are multilateral, such as the WTO agreements, which cover
trade in multiple industries among 148 members. Most U.S. trade
agreements, however, are bilateral, such as the U.S.-Singapore Free
Trade Agreement. The number of trade agreements to which the United
States is a party has grown significantly over the past 10 years.
According to USTR data, the number of bilateral trade agreements grew
nearly 50 percent in the last 10 years: from 176 in 1995 to 254 in
2004.[Footnote 4]
Monitoring and enforcing trade agreements primarily involves four
agencies and multiple units within each agency. USTR has primary
statutory responsibility for implementation of U.S. international trade
policy. In addition, the Departments of Agriculture, Commerce, and
State make substantial contributions to federal monitoring and
enforcement efforts, both by performing their own monitoring activities
and by supporting USTR's efforts. Each of these agencies has both
domestic and overseas components as well as multiple geographic-,
industry-, and issue-specific units involved in monitoring and
enforcement (see table 1).
Table 1: Key Federal Agencies That Participate in Trade Agreement
Monitoring and Enforcement Efforts:
Agency: U.S. Trade Representative;
Monitoring and enforcement unit (headquarters): Monitoring and
Enforcement Unit;
Units performing monitoring and enforcement work overseas: U.S. Mission
to the WTO, and Trade Policy Officer, U.S. Mission to the EU;
Examples of other units involved: General Counsel; WTO and Multilateral
Affairs; and region- specific offices.
Agency: Commerce;
Monitoring and enforcement unit (headquarters): Market Access and
Compliance Office;
Units performing monitoring and enforcement work overseas: Trade
Promotion/U.S. and Foreign Commercial Service, Market Access and
Compliance overseas officers;
Examples of other units involved: Manufacturing and Services, Import
Administration, Patent and Trademark Office.
Agency: State;
Monitoring and enforcement unit (headquarters): Trade Policy and
Programs;
Units performing monitoring and enforcement work overseas: Economic
section of embassy;
Examples of other units involved: Country desk staff, issue-specific
task forces.
Agency: Agriculture;
Monitoring and enforcement unit (headquarters): Foreign Agriculture
Service;
Units performing monitoring and enforcement work overseas: Foreign
Agriculture Service;
Examples of other units involved: Animal and Plant Health Inspection
Service, Food Safety and Inspection Service.
Source: GAO.
[End of table]
Agencies coordinate monitoring and enforcement activities through an
extensive interagency network for trade policy development led by USTR
and involving at least 17 other federal agencies.[Footnote 5] The
structure for interagency monitoring and enforcement coordination flows
from the Trade Policy Committee, which was established pursuant to
Section 242 of the Trade Expansion Act of 1962.[Footnote 6] The Trade
Policy Committee has two subordinate bodies--the Trade Policy Review
Group, a management-level committee, and the Trade Policy Staff
Committee, a senior-staff level committee subordinate to the Trade
Policy Review Group. Two of the nearly 100 subsidiary bodies of the
Trade Policy Staff Committee--the Monitoring and Enforcement
Subcommittee and the Compliance Task Force--meet on a regular basis to
discuss trade compliance issues. Other geographic and sectoral
subcommittees are also involved in monitoring and enforcement efforts
as part of their overall mandates.
Trade agencies perform a number of monitoring and enforcement
activities following the same general process. In a prior report, we
described several key steps in monitoring and enforcing trade
agreements and noted that communication is important throughout the
process.[Footnote 7] The key steps we identified are:
* Identifying problems. Agency officials rely on multiple sources for
information about potential trade compliance problems. In general, the
private sector is the most important source for information for
identifying problems. Agency staff posted overseas are also a valuable
source of information because of their involvement with both private
sector and foreign government officials.
* Setting priorities. Agency officials prioritize among the multiple
trade agreements and compliance issues needing their attention. There
are some common factors that agencies apply when setting priorities,
including the amount of U.S. trade, the trade principles at stake, and
how quickly action needs to be taken.
* Gathering and analyzing information. Once agencies have identified
potential problems, they gather and analyze a wide range of information
about the allegation of noncompliance, such as documentation on foreign
practices that may be inconsistent with trade obligations.
* Developing responses. Developing responses to compliance problems is
a collaborative effort. Federal agencies take into account other agency
views and private sector interests to develop the most appropriate U.S.
response.
* Taking enforcement action. In some cases, the U.S. government can
invoke formal dispute settlement procedures built into trade agreements
or take other actions under U.S. trade law, such as increasing tariff
levels on foreign imports. Since formal dispute settlement procedures
are time-intensive, decisions to pursue these are always vetted through
an interagency process that considers how such actions affect a broad
range of U.S. interests.
The Number and Scope of Trade Agreements Have Grown, Thus Increasing
the Monitoring and Enforcement Workload:
In addition to the growing number of bilateral trade agreements, other
key factors have increased the monitoring and enforcement workload for
U.S. trade agencies. These factors include growth in WTO membership and
the widening scope and complexity of trade agreements.
Increasing membership in key multilateral trade agreements,
particularly WTO agreements, has significantly expanded agencies'
monitoring and enforcement workload. WTO membership has grown by 36
countries (over 30 percent) to 148 members since 1995, and an
additional 27 countries are in the accession process. The WTO's primary
means of facilitating monitoring of the global trading system is
through the WTO committee structure, which oversees implementation of
each WTO agreement. This includes a requirement that each member file
notifications of certain government actions, such as providing
subsidies. Since agency officials must review these notifications, as
the number of WTO members grows, so does the workload for trade
agencies. The increase in WTO membership especially affects USTR's
workload, because it is responsible for advocating and defending U.S.
trade agreement rights and obligations within the WTO. To meet this and
other responsibilities, USTR has posted 13 permanent staff and 14
detailees from other agencies or contractors to the U.S. Mission to the
WTO in Geneva, Switzerland. The other key trade agencies are also
affected by growing WTO membership. For example, China's December 2001
accession to the WTO required the four trade agencies to add staff
resources to meet the demands of monitoring China's compliance with its
WTO commitments.[Footnote 8] Officials from Agriculture told us they
have assigned 3 staff members to monitor China's WTO notifications to
ensure it is complying with the terms of its accession agreement. In
addition, Commerce has dedicated more than 95 staff members (more than
is dedicated to any other country or region) to monitoring China's
compliance.
An additional reason for the increased workload is the widening scope
of recent trade agreements. For example, FTAs, which cover a wide
variety of areas including agricultural products, services, and
intellectual property, are of growing importance to U.S. trade policy.
As shown in figure 1, the United States has negotiated several new FTAs
in recent years.[Footnote 9] Monitoring and enforcing free trade
agreements requires intensive effort on the part of USTR and other
trade agencies. For example, staff at the U.S. embassy in Singapore
used a formal free trade agreement monitoring plan to track Singapore's
efforts to implement the FTA and identify areas in which Singapore
needed to take additional action to fully implement the terms of the
agreement. Officials said that these efforts involved significant
involvement by embassy staff throughout the year and a particularly
large effort in advance of a joint U.S.-Singapore review of the
operation of the agreement during its first year.
Figure 1: Growing Workload for Monitoring and Enforcing Trade
Agreements:
[See PDF for image]
[End of figure]
The federal government's monitoring and enforcement workload is also
affected by the growing complexity of subjects covered in trade
agreements. For example, USTR coordinates with other agencies to
increase intellectual property protection around the world, including
negotiating agreements that address intellectual property protection,
which require monitoring and enforcement.[Footnote 10] Agency officials
noted that they spend a significant amount of time attempting to
resolve complex intellectual property rights issues. Foreign
governments are increasingly using technical standards as trade
barriers, which can require some specific technical knowledge to
understand. To address such issues, Commerce has posted standards
attachés in Mexico, Brazil, and at the U.S. Mission to the EU in
Brussels, Belgium, specifically to try to help U.S. companies deal with
complex standards related issues for a wide variety of products.
Trade Agencies' Ability to Identify and Address Potential Trade
Agreement Violations Has Improved, Although Communication Needs Further
Improvement:
Trade agencies generally monitor market access issues that are brought
to them by private industry or that they identify themselves. Once a
market access or trade agreement compliance issue is identified,
agencies attempt to resolve the problem as quickly and efficiently as
possible.[Footnote 11] Trade agencies have taken a number of steps to
specifically address and improve their monitoring and enforcement
capabilities. In particular, agencies have improved their coordination
with one another and increased their investment in human capital.
Although trade agencies have taken steps to improve their
communication, it could be further improved because communicating
important information on compliance issues is sometimes inefficient.
Trade Agencies Generally Monitor Market Access Issues and Use Trade
Agreements as Leverage:
Trade agencies generally monitor market access issues,[Footnote 12]
some of which may be covered by a trade agreement. They also monitor
countries' compliance with certain specific trade agreements and will
use trade agreements as leverage for resolving a particular
case.[Footnote 13] Efforts to monitor and enforce trade agreements are
part of a larger effort to improve market access for U.S. exports. One
part of these efforts is identifying and addressing trade barriers in
foreign markets. To track such efforts, Commerce has created a database
that includes all market access cases that Commerce staff work on, and
it identifies those cases that are covered by a trade
agreement.[Footnote 14] About half of the 161 cases Commerce staff
initiated in fiscal year 2004 related to market access issues not
covered by specific provisions of trade agreements. Most often, trade
agencies become aware of these issues when a U.S. company comes forth
with a complaint. These agency officials told us they then research the
specifics of the issue, including whether it involves a potential
violation of a specific trade agreement.[Footnote 15] If it does, the
officials can then use the trade agreement as leverage for resolving
the issue. For example, Commerce officials told us that U.S.
construction companies that want to bid on construction projects in
Japan often report having difficulty doing so because of strict
regulations imposed by the government of Japan. Commerce's Trade
Promotion/U.S. Foreign and Commercial Service (CS) staff in Japan
therefore often use the terms of a bilateral trade agreement between
the United States and Japan, the Major Projects Agreement, to encourage
Japan to open up the bidding process.
Trade agencies' domestic staff also play a significant role in
monitoring international market access issues. For example, CS has a
network of export and industry specialists located in U.S. Export
Assistance Centers throughout the United States. These U.S. Export
Assistance Centers are one-stop shops ready to provide small or medium-
sized businesses with local export assistance. One important function
of these centers is to perform regular outreach to companies. Through
this outreach, CS domestic staff are sometimes the first to hear about
potential market access issues.
Several large U.S. companies told us they often prefer to work directly
with foreign governments to try to resolve market access issues. If
these efforts are unsuccessful, they may request assistance from the
U.S. government. In those instances, the companies with which we spoke
were highly satisfied with the efforts of the U.S. government in
addressing their complaints. At times, however, companies turn to the
U.S. government only as a last resort or ask the U.S. government not to
get involved in certain issues. Companies told us this was particularly
the case in those countries where association with the U.S. government
might be seen as more of a detriment than an aid. For example, several
private sector representatives from large U.S. companies operating in
Europe told us that they typically attempt to resolve compliance issues
with European governments without help from the U.S. government. In
France, for example, a private sector representative told us that
negative public sentiment toward the U.S. government makes some U.S.
companies shy away from U.S. government assistance on trade issues.
Trade agencies also proactively identify new market access issues and
monitor developments regarding long-standing trade issues as a part of
their overall efforts to improve market access for U.S. exporters. At
the overseas posts we visited, we observed that agencies' overseas
staff play a large role in these efforts by monitoring local political
and economic developments and engage in such activities as daily
monitoring of the local press and reviewing official government
publications. For example, a Foreign Agricultural Service (FAS)
official in Turkey is assigned to review the Turkish government's daily
publication of newly proposed regulations in order to identify any
proposals that may affect U.S. agricultural exports. Overseas staff
also try to maintain good contact with their foreign government
counterparts, so as to stay informed of foreign government activities.
In addition, Foreign Service Nationals (FSNs) often play an invaluable
role in proactive monitoring.[Footnote 16] With their institutional
knowledge and expertise, FSNs may be the best positioned staff to
identify a potential market access issue and monitor long standing
trade issues. Moreover, at some posts the FSNs are the only staff an
agency may have in the country to carry out monitoring activities. For
example, the Agricultural Attaché who covers Romania is posted in
Bulgaria. Although he makes frequent visits to Romania, FSNs employed
by USDA must deal with the day-to-day monitoring of agricultural trade
issues in Romania.
In addition, agencies also proactively monitor countries' compliance
with some trade agreements, often because the issues are particularly
important to U.S. exporters or because of requirements in the
agreements. For example, since trade with Japan is important to U.S.
exporters, the United States and Japan have an agreement that requires
annual talks to discuss ongoing trade issues of interest to both
countries. In addition, trade agencies are involved in periodic WTO
reviews of each member's overall trade policy as a part of the WTO's
Trade Policy Review Mechanism. Some other agreements such as FTAs also
include built-in structures for monitoring compliance. For example, the
U.S.-Singapore FTA requires the countries to meet periodically in order
to review implementation progress by both sides and discuss any issues
that have arisen.
USTR is also required by domestic law to prepare a variety of trade-
related reports that assist it in its efforts to monitor and enforce
trade agreements. These requirements range from providing broad trade
policy objectives and plans to reporting on specific issues or sectors.
For instance, USTR's required reports include:
* The Annual Report on the Trade Agreements Program. USTR, in
consultation with other agencies, prepares this broad report, which
includes, among other things, discussion of foreign trade restrictions
against U.S. exports.
* The National Trade Estimate Report on Foreign Trade Barriers. This
report identifies and estimates the impact of foreign barriers to U.S.
exports.
* Special 301 Report. USTR is required to identify those countries that
deny adequate and effective protection for intellectual property
rights, or fair and equitable market access for U.S. persons that rely
on intellectual property protection.
* The Annual Review of Telecommunications Trade Agreements. USTR also
reports on individual sectors, such as telecommunications. This
particular report reviews the operation and effectiveness of U.S.
telecommunications trade agreements and determines whether foreign
countries are complying with the terms of these agreements.
Trade Agencies Can Employ a Variety of Approaches to Attempt to Resolve
Market Access and Compliance Issues:
Once trade issues have been identified, agencies can employ a variety
of tools to attempt to resolve them, depending on the context. This
includes using overseas staff to take both informal and formal actions.
Staff will attempt to resolve an issue by calling their foreign
government counterparts to discuss the issue. In Korea, for instance,
embassy officials work very closely with the Ministry of Foreign
Affairs and Trade on standards issues. For example, the Korean
government is currently considering switching its automobile license
plates to a size that would require American car manufacturers to alter
their vehicles. In response, embassy officials set up meetings of
standards experts from the ministry, industry, and the U.S. government
to try to prevent damaging regulations from being issued. If this type
of initial low-level action does not resolve the issue, agency
officials may send a letter to a foreign government official in the
relevant ministry. If unsuccessful, they may send a formal letter on
behalf of the U.S. government (called a démarche) requesting that the
government take specific action.
While trade agency officials state they try to resolve an issue at the
lowest level possible, they also look to use the most efficient means
possible. Sometimes the most efficient way to solve a problem is
through the immediate involvement of senior officials to raise the
visibility of the issue. Thus, agencies use visits by senior officials
as leverage to attempt to resolve trade issues. For example, the United
States and Japan engage in annual trade talks involving senior
government officials. These talks provide a good opportunity for senior
U.S. officials to discuss unresolved trade issues with their Japanese
counterparts.
A particularly contentious issue may require additional intervention by
more senior U.S. officials. In a recent dispute, for instance, the
European Union (EU) had proposed a regulation that would require wood
packaging material such as boxes, pallets, and crates to be made from
debarked wood to ensure no pests or fungi in the wood packaging could
be spread to Europe. This could have hurt U.S. companies exporting to
the EU using methods that were consistent with the international
standard for the treatment of wood packaging material rather than
packaging material made from debarked round wood required by the
EU.[Footnote 17] The industry turned to the U.S. government for
assistance, and the issue progressively made its way up the government
hierarchy, eventually resulting in letters from both the Secretaries of
Agriculture and Commerce and the U.S. Trade Representative to their
European counterparts. The European Commission agreed to postpone the
new rules for 1 year, to give experts time to discuss technical aspects
of debarking.
The U.S. government can also use an international forum to try to
resolve a compliance issue. For instance, the United States has
utilized the Joint Commission on Commerce and Trade in an attempt to
resolve some of China's WTO compliance problems. At the April 2004
meeting of this government-to-government consultative forum, the U.S.
and Chinese governments discussed key trade issues and formed working
groups; signed several memoranda of understanding and letters of
intent; and reached several more specific agreements to improve China's
implementation.[Footnote 18]
When necessary, the U.S. government can use domestic law and
established dispute settlement mechanisms to enforce trade agreement
obligations. U.S. trade law provides several opportunities for taking
action to ensure countries' compliance with trade agreements. For
instance, Section 301 of the Trade Act of 1974 allows the U.S.
government to increase duties on imports from foreign countries found
to be in violation of a trade agreement they have entered into with the
United States. In addition, some trade agreements, such as the North
American Free Trade Agreement and the WTO, also include binding dispute
settlement mechanisms to which members can take their
disputes.[Footnote 19] For example, since 1995, the United States has
brought 79 cases against other WTO members for alleged violations of
WTO agreements.
Trade Agencies Have Taken Steps to Improve Coordination and Enhance
Human Capital for Monitoring and Enforcement Activities:
Since we reported on the monitoring and enforcement process in 2000,
trade agencies have taken a number of measures to improve their
monitoring and enforcement activities. These measures fall into two
general categories: coordination and enhancing human capital.
Coordination:
To improve interagency coordination, agencies created formal structures
within the Trade Policy Staff Committee specifically for the purpose of
discussing compliance issues. The Monitoring and Enforcement
Subcommittee and the Compliance Task Force each provide a regular forum
for federal agencies to share and discuss information, set priorities,
assign responsibilities, and design and implement strategies. In
addition, some overseas posts have instituted both formal and informal
interagency trade compliance teams to coordinate monitoring and
enforcement efforts abroad and in Washington, D.C. In Morocco, for
example, agencies established a formal, embassy-wide committee to
discuss issues related to the FTA. The committee meets on an as-needed
basis, although it plans to revive the weekly meetings once FTA
implementation begins.[Footnote 20] Trade agencies have also attempted
to improve coordination by taking advantage of technology. For
instance, officials in Washington and several overseas posts noted that
since GAO reported on trade compliance in 2000, e-mail and video-
teleconferencing have become important tools for communicating
information on trade compliance issues.
Trade agencies have also attempted to improve coordination with the
private sector. This is particularly true with regard to the formal
private sector advisory committees that USTR relies on for input on
important trade issues. Following a GAO report recommending
improvements in the private sector advisory committee structure, trade
agencies made several changes to the system.[Footnote 21] For instance,
USTR now holds monthly teleconference calls with all advisory committee
chairs and e-mails updates to advisors on important U.S. trade
initiatives. In addition, Commerce has increased its outreach efforts
by holding private sector advisory committee meetings outside of
Washington, D.C; speaking to domestic trade associations and overseas
American Chambers of Commerce; and coordinating trade shows and events
with its U.S. Export Assistance Centers. Commerce also sponsors a
Compliance Liaison Program to help U.S. exporters overcome trade
barriers, identify problems in overseas markets, and solicit new
compliance cases.[Footnote 22]
Human Capital:
Trade agencies have also taken measures to enhance their human capital
resources for monitoring and enforcing trade agreements in several
areas. For instance, some agencies have instituted trade-and compliance-
targeted training for their officers. One such example is the week-long
core trade agreement monitoring and implementation course that State
began offering in 2002. The course covers elements of major trade
agreements (focusing on the WTO) and U.S. trade laws. The course has
been offered about five times a year, four times at State's training
facilities in Virginia and once overseas. Each class accommodates
approximately 30 officials, predominately from State but with a few
officials from other agencies as well. Commerce also offers a similar
trade agreement compliance course for officials involved in monitoring
trade agreements.
In addition to the formal trade compliance training discussed above,
Commerce and State offer additional formal and informal training
opportunities to officials with monitoring and enforcement
responsibilities. For instance, portions of other formal State training
courses on issues such as intellectual property rights and
telecommunications directly or indirectly train staff to monitor trade
agreements. Commerce also provides additional informal training related
to trade agreements through videoconferences and teleconferences.
Commerce recently addressed human capital issues for monitoring trade
agreements by revising performance guidelines to clarify when staff can
report performance data based on market access and compliance work. The
current guidelines, implemented in April 2005, allow staff to take
credit for the removal, reduction, or alleviation of a market access
barrier whether or not an export sale immediately follows. CS officers
told us that previously, they did not receive credit for the results
they were achieving from monitoring trade agreements because they could
not be directly tied to increased exports.
Furthermore, some trade agencies have placed policy experts in overseas
posts, in part to help monitor and enforce trade agreements. For
instance, Commerce has, for the first time, posted four Market Access
and Compliance (MAC) officers and three standards attachés
overseas.[Footnote 23] A number of trade agency officials--who must
divide their attention among multiple job priorities--told us these
officials serve as an invaluable resource, as they dedicate their time
almost solely to market access, compliance, and standards issues. In
China, for example, intellectual property rights violations are a
common problem that U.S. trade agency officials must resolve.[Footnote
24] To attempt to address this issue, the U.S. Patent and Trademark
Office has stationed a patent attorney in China to provide specialized
support on intellectual property rights issues.
Exchanging Information on Trade Issues Is Sometimes Inefficient:
While trade agencies' overall coordination has improved since our 2000
report, communication is still sometimes inefficient. According to
agency officials with whom we met, the trade agencies generally
coordinate their monitoring and enforcement efforts well at various
levels: within headquarters, between headquarters and posts, and within
posts. Opportunities exist, however, for further improvement in agency
communication regarding compliance issues.
Communication between Commerce and State, for example, can be
difficult, because of Commerce's limited access to the classified
communication systems that State sometimes uses to exchange information
on trade issues.[Footnote 25] Both Commerce and State officials told us
that not all the information transmitted on classified systems is, in
fact, classified; however the agencies disagree on the extent to which
this occurs.[Footnote 26] According to State, information regarding
trade issues rarely appears on the classified email system. Commerce,
however, believes that unclassified information that might be utilized
in compliance work may be frequently transmitted over the classified
email system. Regardless of the amount of unclassified information sent
over classified systems, Commerce officers at headquarters have no
access to classified information from their desktop computers. Some
other officials told us that they had trouble obtaining classified
information on compliance issues on which they were working. In order
to read classified e-mails or cables, they must go to a secure reading
room. Commerce is in the process of obtaining access to the secure
system for email used by State, but a Commerce official told us this
process has already taken more than four years.
Some overseas officials also experience obstacles to accessing
classified information. At the U.S. Mission to the European Union, for
example, CS officers do not have the means to access classified systems
in the Commercial Section of the Embassy. They must go to a different
floor of the embassy and enter a secure area to obtain access to
classified systems. In addition, FSNs, who we observed play a key role
in monitoring and enforcement activities, cannot have access to
classified systems because they do not have appropriate security
clearances. Furthermore, at some posts the various trade agencies are
not located in the same building, or sometimes even the same city,
making communication more difficult still. In Korea, for example, only
one Commerce computer allows access to State's classified system, yet
CS has officers that are located in satellite offices separate from the
embassy. Some officials overseas said that while they could obtain all
the information they needed, inefficiencies in obtaining information
and guidance from officials in Washington sometimes affected their
monitoring and enforcement activities.
Despite Growing Demands on Agency Resources, the U.S. Government Lacks
a Coordinated Resource Strategy for Monitoring and Enforcing Trade
Agreements:
Agency resources for monitoring and enforcing trade agreements face
growing demands, but USTR, Agriculture, Commerce, and State
independently assess and plan for resource needs. Despite these
demands, the U.S. government lacks a coordinated strategy for assessing
and planning for resource needs for monitoring and enforcement
activities.
Trade Agencies Face Significant and Growing Resource Demands:
Trade agencies face growing demands on their resources for handling
their monitoring and enforcement workloads. Since monitoring and
enforcing trade agreements is only one activity undertaken by trade
agencies, resources for monitoring and enforcement face competition
from other trade activities, such as negotiating new agreements.
Further, tight budgets and growing costs in recent years constrained
staffing levels. In addition, agencies sometimes face constraints to
developing and accessing necessary expertise such as limited training.
Monitoring and enforcement activities face growing competition from
other trade activities for resources:
Staff from USTR, Agriculture, Commerce, and State perform a variety of
trade activities, only one of which is monitoring and enforcing trade
agreements. Each trade agency therefore allocates its own resources
among these various activities. For instance, USTR has categorized its
responsibilities as the lead U.S. trade agency into four areas--trade
policy development, negotiations, communication and management, and
monitoring and enforcement. As shown in figure 2, USTR estimates in its
Fiscal Year 2005 Performance Plan under the Government Performance and
Results Act that about 50 (or about 22 percent) of its 225 full-time
equivalents are needed to support its monitoring and enforcement
activities.
Figure 2: USTR Estimates of the Numbers of Staff Needed to Support Key
Initiatives, 2005:
[See PDF for image]
[End of figure]
One area with which monitoring and enforcement activities must compete
for resources is the negotiation of new trade agreements. Since the
passage of Trade Promotion Authority in 2002,[Footnote 27] trade
agencies have been heavily involved in supporting numerous
negotiations. These have included the WTO's Doha Development Agenda,
the Free Trade Area of the Americas, and other FTAs. Since 2000 alone,
the United States has completed negotiations on free trade agreements
with 12 countries, and negotiations:
are under way or about to begin with 12 more countries.[Footnote 28]
These negotiations require significant amounts of staff time and
resources. This can have an effect on monitoring and enforcement
activities because oftentimes the same units contributing to
negotiating new agreements also monitor existing agreements. In
addition, once FTAs are completed, trade agencies then must devote
significant resources to monitoring countries' compliance with these
new agreements, thus adding further to the workload.
[See PDF for image]
[End of figure]
Trade agency officials told us they do not expect to receive
significantly more resources for monitoring and enforcing trade
agreements. Commerce officials said that as the Administration attempts
to meet its goal of reducing the federal budget deficit, they expect to
receive few, if any, additional resources for monitoring and enforcing
trade agreements. Likewise, USTR's fiscal year 2006 budget request
includes no increase in staffing levels. In addition, Agriculture
anticipates having fewer resources because of tight budget conditions.
Units responsible for monitoring and enforcing trade agreements also
typically have multiple additional responsibilities. For instance,
staff in MAC regional units are also responsible for other tasks,
including:
* providing technical knowledge and detailed expertise to support trade
negotiations;
* participating in international trade conferences, events, and
missions to assess trade barriers; and:
* providing technical knowledge and expertise in support of senior
level contacts with foreign government officials.
Staff at the overseas posts we visited reported spending significantly
varying proportions of their time on monitoring and enforcement
efforts. Some staff at posts in Japan and the EU reported spending most
or almost all of their time on such activities. In contrast, staff in
some other posts reported spending little, if any, time on these
activities. Overseas units with monitoring and enforcement
responsibilities also typically have additional responsibilities
related to improving the ability of U.S. companies to export their
products. For example, Agriculture's FAS overseas officers also:
* prepare reports on changes in policies and other developments that
could affect U.S. agricultural exports;
* assess U.S. export marketing opportunities; and:
* respond to the information needs of those who develop, initiate,
monitor, and evaluate U.S. food and agricultural policies and programs.
Staffing Levels Face Significant Constraints:
As discussed earlier, the monitoring and enforcement workload has
increased significantly in recent years. However, since 2002, staffing
levels in trade agency units with primary monitoring and enforcement
responsibility have not increased significantly. While the number of
staff in Commerce's MAC unit and State's Economic and Business Affairs
Bureau grew substantially between 2000 and 2002, the number has grown
little since then. As shown in figure 3, total staff levels in key
trade agencies' primary monitoring and enforcement units has been
essentially static since 2002.
Figure 3: Domestic Staff in Key Monitoring and Enforcement Units:
[See PDF for image]
Note: State data represent the number of staff in the Bureau of
Economic and Business Affairs. Commerce data represent the number of
staff in the International Trade Administration's Market Access and
Compliance unit. Agriculture data represent the number of staff in the
Foreign Agriculture Service's International Trade Policy unit. USTR
data represent the number of staff in the Monitoring and Enforcement
Unit.
[End of figure]
Some trade agencies have faced particular constraints to overseas
staffing in recent years. As shown in figure 4, the number of overseas
staff in key monitoring and enforcement units in Agriculture and
Commerce has been relatively steady or has declined since
2000.[Footnote 29] For instance, the number of CS staff has declined by
more than 10 percent, from more than 750 in 2000 to less than 670 in
2004.[Footnote 30]
Figure 4: Overseas Staff in Key Monitoring and Enforcement Units:
[See PDF for image]
Notes: State data represent the number of economic officers. Commerce
data represent the number of staff in the Trade Promotion/U.S. and
Foreign Commercial Service. Agriculture data represent the number of
staff in the Foreign Agriculture Service. Data for Commerce and
Agriculture include U.S. officers and Foreign Service Nationals.
Commerce has posted four MAC officers overseas since 2002. USTR has
also posted about 30 staff at the U.S. Mission to the WTO and one staff
person to the U.S. Mission to the European Union.
[End of figure]
In addition, some Agriculture and Commerce overseas staff are
responsible for overseeing activities in several countries other than
the one in which they are posted. For example, the Commercial Counselor
posted in Turkey oversees Commerce operations in five other countries;
as a result, he spends a significant portion of his time traveling,
thus reducing the amount of time he can devote to his monitoring and
enforcement responsibilities in any single country.
The growing costs associated with maintaining an overseas presence in
an era of heightened security concerns may cause some agencies to scale
back their future overseas monitoring and enforcement efforts. For
instance, the cost of shared administrative expenses and accelerated
embassy construction schedules have contributed to the growing costs to
each agency of maintaining an overseas presence. Costs for overseas
administrative support services are distributed among 50 agencies
through the International Cooperative Administrative Support Services
system. These costs rose nearly 30 percent from fiscal year 2001 to
2003, when they reached a level of about $1 billion.[Footnote 31] In
addition, agencies share the cost of constructing new embassies and
consulates. The $17.5 billion required to construct overseas facilities
through 2018 will be allocated proportionally to each agency based on
the number of staff the agencies have in overseas posts worldwide. For
instance, Commerce's assessment is expected to increase from $4.5
million in 2005 to $40.2 million annually in 2009 through 2018, and
Agriculture's assessment is expected to increase from $0.6 million in
2005 to $16.3 million annually in 2009 through 2018.[Footnote 32] Some
agencies are concerned these increases could affect their ability to
accomplish their overseas missions. Officials from Agriculture and
Commerce have stated that without additional funding, their agencies
would have to cut their overseas staff and some ongoing activities at
numerous locations. For example, we have previously reported that
Commerce has projected that it may have to close offices at as many as
51 of its 152 overseas posts by 2009, reducing staff levels by 498
persons.
Trade Agencies Face Constraints to Developing and Accessing Necessary
Expertise:
Effectively monitoring and enforcing trade agreements requires
significant expertise, but agencies face constraints to developing and
accessing such expertise. Monitoring and enforcing trade agreements
typically involves staff with expertise in trade policy as well as
staff with knowledge about the foreign country and expertise in the
particular industry. One way to develop the additional trade policy
expertise necessary to monitor and enforce increasingly complex trade
agreements is through training, which Commerce and State in particular
have worked to improve. However, officials in all eight countries we
visited told us that additional training on monitoring and enforcing
trade agreements would help them fulfill their responsibilities in this
area more effectively.
Many staff responsible for monitoring and enforcement activities have
not yet attended State's Foreign Service Institute's trade agreement
compliance training. This course was developed by USTR, Agriculture,
Commerce, and State in response to a GAO recommendation regarding the
need to improve staff training for monitoring and enforcing trade
agreements.[Footnote 33] The agencies' stated goal was to offer trade
compliance training to monitoring and enforcement staff of all agencies
assigned overseas and in Washington, D.C. While the exact number of
U.S. government personnel responsible for monitoring and enforcing
trade agreements is hard to determine precisely, in reporting to
Congress,[Footnote 34] Commerce estimated that it devotes 602 staff,
Agriculture estimated devoting 222 staff, and State estimated devoting
775 staff to goals that include monitoring and enforcement activities.
However, in the 5 years since our recommendation, approximately 450
officials (or less than 30 percent of the nearly 1,600 staff identified
above) had taken the course; the vast majority (84 percent) of which
were from State. According to officials responsible for facilitating
the course, Commerce staff have accounted for about 15 percent of the
course attendees, and Agriculture staff less than 1 percent.
In addition, not all staff at overseas posts have been able to attend
monitoring and enforcement training. State has made efforts to target
its trade agreements compliance course to staff in need of the training
by offering the class at overseas posts. However, even when the course
was offered overseas, some interested staff were not able to attend.
For instance, Commerce staff in Japan told us that when State arranged
for the course to be taught in the Tokyo embassy, Commerce staff did
not attend because Commerce would have had to reimburse State for the
tuition.[Footnote 35] In addition, despite Commerce efforts to offer
training courses on trade compliance, staff who have not received such
training include those posted in key U.S. trading partners like Mexico,
where Commerce staff have received no formal training on monitoring and
enforcing trade agreements from fiscal year 2000 to date.
Similarly, FAS staff have been offered no formal training on monitoring
and enforcing trade agreements. FAS officials noted that this is due in
large part to the fact that the agency has a very limited training
budget. In 2005 its $2 million budget for training provides, on
average, $150 per employee to build subject matter expertise. FAS
officials added that they try to minimize the effect of this constraint
by spending 1 or 2 days focusing on trade compliance issues at regional
meetings of FAS overseas staff.
Although the four trade agencies worked together to design the Foreign
Service Institute course, recent efforts suggest a lack of
coordination. For instance, State and Commerce separately contracted
with the same company to provide training on trade agreement compliance
to their staff. State pays the contractor $15,000 to teach a 5-day
course discussed earlier for about 30 students, thus equaling an
average cost of $100 per student per day. Commerce contracted with the
same company to teach several 3-day courses covering similar material,
at a cost of $25,000 per class. According to Commerce records, about 30
Commerce staff attended one such class, thus equaling an average cost
of about $275 per student per day for that class.
In addition, while input from staff with specialized legal, technical,
or scientific knowledge may be necessary, depending on the nature of
the issue, agencies face limitations in accessing this expertise. Trade
agency officials told us that as trade agreements cover an increasingly
broad set of issues including regulatory issues, they are increasingly
relying on staff with specialized technical and scientific expertise.
For instance, officials from FAS rely heavily on officials in
Agriculture's Animal and Plant Health Inspection Service (APHIS) and
Food Safety Inspection Service (FSIS) to handle complex issues relating
to the WTO's Agreement on Sanitary and Phytosanitary
Standards.[Footnote 36] According to APHIS and FSIS officials, the
amount of work they perform to support FAS' monitoring and enforcement
of trade agreements has grown steadily over time, and they have tried
to dedicate sufficient resources to such activities. However, both
these agencies' primary missions are focused on U.S. public and
agricultural health.[Footnote 37] Officials from both agencies told us
that given existing resource constraints, they must place primary
emphasis on allocating resources to their primary mission areas. USTR
officials also told us that similar issues face the Food and Drug
Administration (FDA). USTR has utilized the expertise of FDA officials
for handling a variety of trade issues, most notably, trade in
biotechnology products. Several countries have blocked U.S. exports of
biotechnology products, and FDA officials have helped USTR attempt to
dismantle these barriers by supplying scientific research and analysis
demonstrating that such products do not pose a health risk. However,
USTR noted that it realizes that FDA's dedication of significant
resources to these efforts has caused it to make trade-offs with other
activities.
U.S. Government Lacks a Mechanism and Coordinated Strategy for
Assessing and Planning Future Resource Needs:
While trade agencies have established formal mechanisms and a strategy
for coordinating on trade policy issues, no such formal mechanism or
strategy exists for coordinating agency resource planning efforts for
trade activities. Agency officials told us that USTR, which leads this
formal interagency structure, holds regular discussions to develop
trade policy strategy. However, officials from all four key trade
agencies told us that the formal interagency process is not used to
assess or plan for future resource needs for trade activities in
general or monitoring and enforcing agreements specifically. Instead,
each agency independently assesses its resource needs for fulfilling
its mission.
While trade agencies have previously recognized that effectively
monitoring and enforcing trade agreements requires developing a
strategy for coordinating their respective resources, they have not
done so since 2001. At that time, the Administration recognized the
need for an integrated approach to improving U.S. capacity to monitor
and enforce trade agreements rather than having each agency address its
capacity independently. This approach, coordinated by the National
Economic Council, led interagency discussions aimed at enhancing
coordination in this area and increasing funding to bolster expertise
in key trade agencies. This initiative proposed a $22 million increase
in the resources for Agriculture, Commerce, State, and USTR. Following
this initiative, USTR agreed to continue to work with other agencies to
assess the monitoring and enforcement workload and the resources needed
to address it. However, trade agency officials told us that no such
coordinated, comprehensive effort has taken place since then.
Trade agency officials told us they recognize the need to coordinate
their resources and have taken some steps to address this
need.[Footnote 38] However, these efforts did not include involving all
trade agencies in developing a comprehensive interagency strategy for
resource planning. State officials told us that they recognize the
importance of coordinated resource planning and in the past have
invited officials from trade agencies to meetings at which the Bureau
of Economic and Business Affairs justifies its budget request to the
Deputy Secretary of State. State officials told us that the Deputy
Secretary often asks officials from other trade agencies whether they
have any issues with the bureau's requested resources, especially
regarding the posting of overseas staff. Commerce and State officials
also told us that there have been recent discussions regarding
coordinating their resources for handling commercial issues in other
countries. However, these efforts focused on overseas posts where
Commerce has no staff.
Officials from all four trade agencies told us that there is currently
no comprehensive interagency strategy regarding resources for
monitoring and enforcement efforts. We have previously reported that
without sufficient interagency coordination, scarce funds can be wasted
and the overall effectiveness of the federal effort is
limited.[Footnote 39] We have also previously reported that agencies
lack coordinated resource planning for trade activities.[Footnote 40]
In that report, we found that USTR relies heavily on other trade
agencies to staff negotiating teams but lacks a systematic approach for
addressing resource issues because formal interagency meetings do not
include any detailed discussion of these issues. Agencies reported that
while they have been able to meet USTR's needs, doing so has
complicated their own resource planning efforts and sometimes strained
their resources. We also found that at times it was necessary for
agencies to make trade-offs. For instance, according to Department of
the Treasury officials, they have had to "perform triage" on some
operations because of the heavy negotiating workload. We recommended
that USTR work with other trade agencies to develop more systematic
data and plans for allocating staff and resources across the full U.S.
trade agenda, including FTAs and other negotiating priorities. The
Trade Representative disagreed with our recommendation, stating that in
his view the straining of resources by an ambitious negotiating agenda
is mainly caused by the amount of resources available, not their
allocation. We responded that given limited resources, USTR needs to
develop a resource strategy based on solid data and planning and
coordinate with other agencies whose resources USTR routinely calls
upon during the course of negotiations. Without coordinated resource
planning for shared functions, each agency's individual resource
planning efforts are more difficult, and the government's ability to
effectively utilize the unique talents and skills of each agency can be
limited.
Conclusions:
The steps that trade agencies have taken to monitor and enforce trade
agreements since we last reported on U.S. government efforts, such as
the creation of formal structures to coordinate agency efforts, have
helped to increase the attention trade agency officials focus on
ensuring other countries comply with their trade agreement obligations.
However, as the monitoring and enforcement workload continues to
increase without commensurate increases in resources, USTR,
Agriculture, Commerce, and State will find it more difficult to ensure
countries comply with trade agreements while also fulfilling their
other trade responsibilities. For example, unless agencies address
communication issues, they may miss opportunities to open foreign
markets to U.S. exports. In addition, to the extent that some trade
agency officials, including those posted in important trading partner
countries, are not adequately trained to effectively monitor and
enforce complex and technical trade agreements, they cannot provide
effective service to U.S. exporters that face barriers in foreign
markets.
As we have noted in previous reports, without interagency coordination
on resource assessments and planning, fulfilling future monitoring and
enforcement responsibilities will be even more difficult. Agencies have
recognized the importance of assessing human capital needs in a
strategic way, as in the National Economic Council-led effort in the
early 2000s that resulted in a more coordinated human capital approach.
However, the benefits of this concept have not been institutionalized
or applied in a broader trade context for all monitoring and
enforcement activities. In an environment of growing workloads and
static or declining resources--particularly in vital overseas posts--
lack of an interagency coordination strategy regarding resource
planning means that the federal government cannot be assured that its
limited resources are sufficiently prioritized or targeted at the areas
of greatest risk.
Recommendations:
In order to improve efforts to monitor and enforce trade agreements so
that U.S. companies are able to take full advantage of the trade
agreements negotiated by the U.S. government, we recommend that the
Secretaries of Commerce and State work together to facilitate
communication between officials working on trade compliance issues.
Such steps could include installing a secure cable in Commerce
headquarters and encouraging State staff to send unclassified
information regarding trade issues using unclassified systems. We also
recommend that the Secretaries of Agriculture, Commerce, and State
jointly develop a strategy for meeting the training needs of staff
responsible for monitoring and enforcing trade agreements to better
equip them to effectively handle increasingly complex or technical
barriers to U.S. exports. This interagency strategy should include an
assessment of what trade compliance training exists, what knowledge and
skills will be necessary to effectively handle future trade compliance
issues, and what additional training is required to provide staff with
the necessary knowledge and skills.
Further, to most effectively utilize the unique talents and skills of
each agency to meet monitoring and enforcement objectives, we recommend
that the U.S. Trade Representative work with the Secretaries of
Agriculture, Commerce, State, and other trade agencies to develop and
update as necessary an interagency strategy for assessing and planning
for resource needs for monitoring and enforcing trade agreements.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Departments of Agriculture,
Commerce, and State, as well as to the Office of the U.S. Trade
Representative.
Agriculture acknowledged the merits of our recommendations and intends
to work with other trade agencies to implement the two recommendations
that apply to it.
Commerce had concerns regarding the completeness of our
characterization of its efforts in several areas, including emphasizing
its proactive monitoring and training activities. We added clarifying
language, where appropriate, to provide a more complete picture.
State commented that the report appeared factual and reflective of
State's efforts. State emphasized its variety of formal and informal
training that relate to trade agreement compliance and agreed to
implement our recommendation by improving coordination of training
activities. State also commented that it believes that the use of
classified communication systems to exchange information on trade
issues is rare.
Commerce and USTR also provided technical comments, which we have
incorporated where appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time we will send copies to other
interested congressional committees. We will also send copies to the
U.S. Trade Representative and the Secretaries of Agriculture, Commerce,
and State. We will also make copies available to others upon request.
In addition, this report will be available at no charge on the GAO Web
site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4347 or [Hyperlink, yagerl@gao.gov] [Hyperlink,
yagerl@gao.gov]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. GAO staff who made major contributions to this report are
listed in appendix VII.
Sincerely yours,
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
The Ranking Minority Member of the Senate Committee on Finance
requested that we review U.S. government efforts to monitor and enforce
trade agreements. This report addresses (1) how the nature and scope of
U.S. trade agreements has changed in the last 10 years and what effect
changes have had on agencies' monitoring and enforcement workload, (2)
how U.S. government agencies monitor and enforce trade agreements, and
(3) how the U.S. government allocates resources for monitoring and
enforcement of trade agreements within the context of other trade
activities.
To analyze how the nature and scope of U.S. trade agreements has
changed in the last 10 years and what effect changes have had on
agencies' monitoring and enforcement workload, we reviewed data on
trade agreements from the Departments of Agriculture and Commerce and
the Office of the U.S. Trade Representative (USTR) and interviewed
officials with each agency. In addition, to determine the types of U.S.
trade agreements currently in force, we analyzed archives of U.S. trade
agreements held by each agency. To categorize each agreement, we
generally used the official name of the agreement, though in some cases
the official name was too vague to determine the category, so we looked
at the agreement itself. We included each agreement in only one
category to ensure that there would be no double-counting, so in some
cases we made a determination to categorize an agreement when it could
have fit into more than one category. We counted the World Trade
Organization agreements to which all WTO members are party to as one
agreement. We also analyzed the combined list of U.S. trade agreements
to obtain trade agreement data by country and region.
Further, to determine the growth in the number of trade agreements, we
analyzed trade agreement data from USTR's Annual Report on the Trade
Agreement Program for each year from 1995 through 2004. Since USTR is
the only trade agency to publish its list annually, this was the only
consistent way to determine how many trade agreements were in force
each year. In addition, to determine the growth in WTO membership, we
compiled the accession years for each WTO member through 2004.
To assess the reliability of these data, we interviewed knowledgeable
agency officials about the data and performed visual and logic tests on
the data. We do not have complete assurance that we have identified
every trade agreement the United States has entered into because other
agencies beyond USTR, Agriculture, and Commerce may have additional
agreements. However, we believe that because USTR, Agriculture and
Commerce are the agencies most involved in the monitoring and
enforcement of trade agreements, their archives contain the vast
majority of U.S. trade agreements. We chose not to include data from
State's annual publication Treaties in Force, which includes some trade
agreements but does not clearly define what it considers to be a trade
agreement.[Footnote 41] We determined that the data are sufficiently
reliable for the purposes of this report.
To review how U.S. government agencies monitor and enforce trade
agreements, we began by determining whether the general monitoring and
enforcement framework we established in our 2000 report was still
correct. We did this by examining the activities of four key trade
agencies in Washington, D.C.: USTR and the Departments of Agriculture,
Commerce, and State. We focused on agencies' efforts to monitor and
enforce trade agreements that open foreign markets and did not focus
on, for instance, agreements covering foreign government subsidies or
trade remedy laws. We also visited 10 U.S. embassies and consulates in
eight countries and interviewed USTR, Agriculture, Commerce, and State
overseas staff involved with monitoring and enforcement. In addition,
we met with more than 35 private sector representatives in Washington,
D.C., and overseas to obtain their perspective on the role of the U.S.
government in monitoring and enforcing trade agreements. This included
representatives from business groups such as the American Chamber of
Commerce as well as individual company representatives from a range of
sectors, including insurance and other financial services,
telecommunications, pharmaceuticals, automotives, and software. The
private sector representatives overseas were chosen because they had
recently worked with U.S. government officials to resolve trade
compliance issues. Although some of the business groups we met with
include small and medium-sized companies, the individual companies we
met with were large and may not reflect the views of small or medium
sized companies. Furthermore, we analyzed U.S. government reports and
documents on monitoring and enforcement activities.
To select the overseas posts to visit, we considered several variables
and attempted to visit a variety of posts. Specifically, we considered
for each of 34 countries whether there was a Market Access and
Compliance Officer, the number of bilateral trade agreements, the types
of agreements (e.g., free trade agreements, bilateral investment
treaties, etc.), the number of open compliance issues listed in
Commerce's Market Access Database, the number of Commerce and
Agriculture staff at the post, the country's total trade with the
United States, and the country's gross domestic product. We then
selected countries to get a broad and varied understanding of
monitoring and enforcement activities conducted overseas. For instance,
we chose to visit some countries with many bilateral trade agreements
with the United States and others with few agreements. Similarly, we
chose to visit countries that frequently experience compliance issues
as well as others that experience few compliance issues. We also chose
to visit some countries with Agriculture staff and some countries for
which the responsible Agriculture staff were not posted in the country.
However, the posts we visited may not provide a representative view of
how all posts operate, and we cannot generalize our observations to all
overseas posts.
To review how the U.S. government allocates resources for monitoring
and enforcement of trade agreements within the context of other trade
activities, we interviewed key agency officials and reviewed agency
documents. We interviewed unit management officials in each of the
monitoring and enforcement units to understand how they make decisions
regarding allocating resources for trade activities, including
monitoring and enforcing trade agreements. We identified resource
constraints by reviewing agency performance reports, budget requests,
and staffing data. We also identified resource constraints by
interviewing unit managers and staff in Washington, D.C., and in
overseas posts. To analyze USTR's allocation of staff to various trade
activities, we reviewed its Fiscal Year 2005 Performance Plan under the
Government Performance and Results Act. This report includes USTR
office managers' estimates of the number of staff required to support
each activity. Because these estimates are not based on official
records, they should not be viewed as precise calculations of the
number of staff working on each activity. However, we compared the 2005
estimates with estimates for prior years. We concluded that these
estimates are reliable for the purpose of demonstrating the general
breakdown of USTR's staff into its self-identified key initiatives. In
addition, we met with Agriculture officials from units trade officials
rely on heavily for technical or other specialized expertise.
We also discussed agency training activities related to monitoring and
enforcement with Agriculture, Commerce, and State unit management and
training officials. We identified interagency structures and efforts to
assess and plan for resource needs by reviewing interagency reports on
monitoring and enforcement and interviewing key officials at each trade
agency. We also reviewed prior GAO reports discussing monitoring and
enforcing trade agreements, interagency resource planning, and the cost
of maintaining an overseas presence.
We conducted our work in Washington, D.C; Brussels, Belgium; Paris,
France; Rabat and Casablanca, Morocco; Ankara and Istanbul, Turkey;
Bucharest, Romania; Tokyo, Japan; Seoul, South Korea; and Singapore
from July 2004 through April 2005 in accordance with generally accepted
government auditing standards.
[End of section]
Appendix II: Additional Information about U.S. Trade Agreements:
You requested that we provide some additional information about the
scope and nature of U.S. trade agreements. This information is provided
below.
Countries and Regions with Which the United States Has Trade
Agreements:
The U.S. currently has bilateral trade agreements with 105
countries.[Footnote 42] With the vast majority (95) of these countries,
we have four or fewer bilateral trade agreements. In contrast, we have
five or more agreements with 11 trading partners (see fig. 5).
Figure 5: Trading Partners with Which the U.S. has Five or More
Agreements, as of 2005:
[See PDF for image]
[End of figure]
As shown in figure 6, the United States has more agreements with
countries in the Asia-Pacific region than with countries in any other
region, though there are also many agreements with European countries.
There are relatively few agreements with countries in Africa, the Near
East, and South Asia.
Figure 6: U.S. Trade Agreements by Region, as of 2005:
[See PDF for image]
[End of figure]
Types of U.S. Trade Agreements:
Trade agreements vary widely by type (see fig. 7). A large percentage
(41 percent) of agreements are industry-specific agreements, covering
such things as agricultural products, steel, telecommunications issues,
or textiles. There are also many framework agreements, which open trade
between two nations without directly setting conditions for trade in
any particular industry. There are over 40 bilateral investment
treaties, which concern the reciprocal encouragement and protection of
investment.
Figure 7: U.S. Trade Agreements by Type, as of 2005:
[See PDF for image]
Note: Subtotals for issue-and industry-specific agreements do not add
up to category totals because of rounding.
[End of figure]
Agency Trade Agreement Archives:
In order to determine the scope and nature of U.S. trade agreements, we
examined the trade agreement archives of three agencies: USTR,
Commerce, and Agriculture.[Footnote 43] USTR publishes a list of trade
agreements annually in its Trade Policy Agenda and Annual Report, and
Commerce and Agriculture each maintain an archive of trade agreements
that is available via each agency's Web site. Agencies keep archives
for a variety of purposes, including tracking for their own monitoring
and enforcement purposes, and providing the public with information on
agreements currently in force.
As shown in figure 8, of the 384 agreements that we identified, only 19
appear in all three archives, and each archive is the only source for
numerous agreements: USTR is the only source for 80 agreements and
Commerce is the only source for 90 agreements. Commerce's archive
includes active, binding agreements covering manufactured products and
services, and does not include agricultural commodity agreements.
Agriculture's archive contains agriculture-related agreements only.
Figure 8: Comparison of USTR, Commerce, and Agriculture Archives of
Trade Agreements, as of 2005:
[See PDF for image]
Note: WTO agreements to which all WTO members are a party to are
counted as one agreement.
[A] USTR data are from the 2004 Annual Report of the President of the
United States on the Trade Agreements Program and include trade
agreements since 1984.
[B] Commerce data are from its Trade and Related Agreements Database,
which includes active, binding agreements between the United States and
its trading partners covering manufactured products and services.
[C] Agriculture lists agriculture-related agreements on its Web site.
[End of figure]
[End of section]
Appendix III: Examples of U.S. Government Trade Monitoring and
Enforcement Activities:
U.S. trade agencies undertake monitoring and enforcement activities as
part of a larger U.S. government strategy to improve market access for
U.S. exports. In general, these monitoring and enforcement activities
tend to be similar across agencies. Once a market access or compliance
issue is identified, agency officials in the countries we visited told
us they will investigate the case and gather information. They will
then take whatever action is deemed appropriate to resolve the problem,
trying to resolve the issue as quickly and efficiently as possible.
Trade agencies tend to follow this procedure whether the issue relates
to a specific trade agreement or not.
Korea:
The U.S. government was recently successful in getting the government
of Korea to drop its plans to mandate a telecommunications technology
standard that would have become a significant barrier to trade. For
several years, a U.S. company has successfully marketed cell phone
"middleware" (the software that allows applications such as ring tones
and games downloaded on to the handset from the Internet to work with
the handset's operating system), reaching 7 million subscribers.
Because each mobile service operator used different middleware for its
phones, subscribers of one cellular provider could not share their
downloaded applications with subscribers of a different provider. With
the argument that this lack of interoperability constituted a market
failure, the Korean government announced a plan to mandate that all
mobile service providers exclusively use a technology called the
Wireless Internet Platform for Interoperability (WIPI) that was
developed by a state-financed research institute. The U.S. government
considered this to be a clear-cut case of protectionist industrial
policy that would have immediately closed the market to a U.S. company
that had already developed a relationship with 7 million Korean
consumers.
Representatives from the affected U.S. company complained to USTR and
the U.S. embassy in Korea about the problem. U.S. embassy officials
embarked on an extended series of meetings at all levels of the Korean
government. This intervention went all to way to the ambassadorial
level, as the U.S. Ambassador raised this issue in meetings with Korean
ministers on more than one occasion. The Ambassador also used this
trade dispute as a key point in all his speeches dealing with economic
issues. In addition, State's Coordinator for International Information
and Communications Policy and Commerce's Assistant Secretary for Market
Access and Compliance visited Korea, in part to raise this issue with
their Korean counterparts. USTR and Commerce officials became involved
in the case not only during the quarterly U.S.-Korea trade meetings,
where this topic was given a high priority, but also through visits of
the Deputy USTR and USTR's chief telecommunications negotiator. After
approximately 3 years of negotiations, the two governments reached a
compromise in which carriers may use any middleware in addition to
WIPI, which was satisfactory for the U.S. company. During the
negotiations, several embassy staff rotated to assignments in different
countries and were replaced by new embassy staff, but company
representatives said the U.S. government's efforts never faltered in
persuading the Korean government to allow multiple protocols.
Japan:
Many trade compliance issues that the United States faces in Japan
pertain to regulatory issues and competition (antitrust) policy. To
address these and other issues, the United States and Japan created the
U.S.-Japan Economic Partnership for Growth, which provides a broad
framework for addressing ongoing trade compliance issues. It
establishes working groups whose purpose is to address measures to
promote regulatory reform and competition policy. The working groups
are required to report to a high-level officials' group, which is in
turn required to report annually on the progress the working groups
have made in their respective fields. The most recent report, published
in 2004, lists progress made in key U.S. export sectors such as
telecommunications, information technologies, energy, and medical
devices and pharmaceuticals. For example, the report notes that the
government of Japan has removed various barriers to e-commerce and will
ensure that its ministries and agencies continue to do so in order to
promote free and diverse e-commerce activities. U.S. government
officials noted that the agreement is valuable to the United States
because it provides a forum for discussing key compliance issues and
allows U.S. agency officials to monitor progress on these issues.
Turkey:
In July 2002, a U.S. company's high-fructose corn syrup facility in
Turkey was threatened with being shut down because of alleged
deficiencies with its zoning permits. The U.S. company immediately
contacted the embassy and the Departments of Commerce and State.
Commerce, in turn, called in the Acting Turkish Ambassador to meet with
the Deputy Secretary of Commerce, and the U.S. Ambassador voiced
similar concerns in Ankara. All embassy activities were closely
coordinated. Soon thereafter, the Turkish Prime Minister passed a
ministerial decree that allowed the plant to continue operations and
promised to change the zoning law to permit the facility to operate
free of these constraints. According to U.S. officials, last year the
Turkish Parliament passed amendments to the Industrial Zone Law that
were signed into law by the President. These amendments allow the U.S.
company to retroactively seek all the necessary permits it needs to
operate its facility.
Morocco and Singapore:
Since 2000, the U.S. government has entered into free trade agreements
with 12 countries, including Morocco and Singapore. Trade agency
officials realize that increased trade with these countries will
undoubtedly create market access or compliance issues and increase the
monitoring workload. Commerce therefore developed a set of guidelines
for formulating a blueprint for monitoring recent free trade
agreements. The plan includes the detailed commitments made by the
foreign government and therefore lays the groundwork for U.S. trade
agencies' future monitoring and enforcement activities. Agency
officials told us that this blueprint greatly facilitates monitoring
activities in Singapore, and they expect similar results in Morocco
once implementation of the free trade agreement begins.
[End of section]
Appendix IV: Comments from the Department of Agriculture:
USDA:
United States Department of Agriculture:
Farm and Foreign Agricultural Services:
Foreign Agricultural Service:
1400 Independence Ave, SW:
Room 5071-S:
Stop 1001:
Washington, DC 20250- 1001:
Mr. Loren Yager:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Yager:
Thank you for providing the U.S. Department of Agriculture (USDA) with
your draft report entitled "INTERNATIONAL TRADE: Improvements Needed to
Handle Growing Workload for Monitoring and Enforcing Trade Agreements."
Your report offered three recommendations, two of which impact USDA.
The two recommendations of consequence for USDA are:
(1) "..that the Secretaries of Agriculture, Commerce, and State jointly
develop a strategy for meeting the training needs of staff responsible
for monitoring and enforcing trade agreements to better equip them to
effectively handle increasingly complex or technical barriers to U.S.
exports"; and:
(2) "..that the U.S. Trade Representative work with the Secretaries of
Agriculture, Commerce, State, and other trade agencies to develop and
update as necessary an interagency strategy for assessing and planning
for resource needs for monitoring and enforcing trade agreements."
We have carefully reviewed the report, and we acknowledge the merits of
these recommendations. Therefore, we intend to work very closely with
the above mentioned trade agencies in order to implement these two
recommendations.
In closing, I again want to thank you for allowing us to comment on
this draft report.
Sincerely,
Signed by:
A. Ellen Terpstra:
Administrator:
[End of section]
Appendix V: Comments from the Department of Commerce:
UNITED STATES DEPARTMENT OF COMMERCE:
The Under Secretary for International Trade:
Washington, D.C. 20230:
JUN 14 2005:
Mr. Loren Yager:
Director:
International Affairs and Trade:
Government Accountability Office:
Washington, DC 20548:
We appreciate the opportunity to provide advance comments on the May
26"' draft of your proposed report, Improvements Needed to Handle
Growing Workload for Monitoring and Enforcing Trade Agreements. Below I
have highlighted a few general facts that we suggest be considered for
inclusion in the final report to give the reader a complete view of our
compliance program.
Our Proactive Commerce Monitoring Program: The Government
Accountability Office (GAO) report says that Commerce focuses on
complaints that are brought to us by U.S. industry, but we feel it
under emphasizes our proactive monitoring efforts. The report also does
not highlight Commerce's extensive outreach efforts designed to ensure
that we find industry complaints about foreign government practices and
trade barriers that might be challenged to the benefit of overall U.S.
industry interests. Assistant Secretary for Market Access and
Compliance William H. Lash III has been highly active in this area, and
has visited approximately seventy countries over the past four years to
advocate compliance cases with foreign government officials and to
outreach to the local U.S. business community about Commerce Department
compliance services.
To comprehensively monitor implementation of and compliance with an
agreement, we must look at both the changes a country makes in its
domestic laws to bring them in line with the obligations of the
agreement and how it changes its practices to implement these
obligations. These two aspects require different monitoring approaches.
The monitoring of trade agreement implementation measures taken by a
foreign partner is undertaken by Commerce on a systematic basis, driven
by headquarters through various tools, including meetings of the
Compliance Coordinators, performance plans, strategic goals, and
implementation matrices. As an illustration, we have developed a
template in a matrix format setting out the crucial obligations of a
Free Trade Agreement (FTA) for the purpose of monitoring recent FTAs.
Our country specialists use the matrix to follow and document the
status of foreign government efforts to meet these obligations and
ensure that any outstanding issues are addressed. One use of this
template is referenced on page eight of GAO's report with regard to the
Singapore FTA, but is described merely as a useful tactic of the
Commercial Service in Singapore, rather than an element of our
proactive monitoring program in Washington and overseas. Similar
templates have been used for recent FTAs, such as Australia and Chile,
and will be used in forthcoming FTAs.
Similarly, although GAO did report that Commerce assigns an individual
to serve as a Designated Monitoring Officer (DMO) for each agreement,
this information was contained in a footnote, which describes the DMO
as a point of contact, but does not reference the importance of the DMO
as an expert on the assigned agreement and the responsibility to
monitor the status of any changes in implementation of the agreement.
There is a DMO for each of the 270 agreements in our database.
The second component of our monitoring program looks at the day-to-day
impact on U.S. business of each agreement. With discreet case evidence
in hand showing how market access was denied in contravention of a
country's obligations under an agreement, it is possible to challenge a
country's practices. Thus, Commerce not only puts a great deal of
emphasis on cases voluntarily brought to it by U.S. exporters or
investors, but also has a systematic and routine program for doing
outreach, engaging the members of trade associations, Congress, and
other members of our Compliance Liaison program, and soliciting
assistance of our field offices in USEACs and the Foreign Commercial
Service to proactively identify instances of potential non-compliance.
We also coordinate our activities on specific cases with other U.S.
government agencies through a monthly report on new cases and through
interagency meetings of the Monitoring and Enforcement Subcommittee
chaired by the Office of the U.S. Trade Representative.
Training: The report emphasizes some of the formal training sessions in
which the Commerce Department participates, but gives less recognition
to the numerous informal training practices in which we engage.
Commerce routinely briefs Senior and other Commercial Officers during
home visits and prior to overseas postings on the Commerce Compliance
Program, reiterating the priority the Administration and Congress place
on compliance and ensuring that each officer knows how to use the
market access and compliance database and understands the importance of
compliance in our daily work. Commerce also provides training on trade
agreements compliance and specific trade issues through
videoconferences and teleconferences, visits to USEACs, regular
participation in Commercial Service regional events, industry team
sectoral conference calls, and other USEAC-sponsored events. The
Department believes that these sessions are some of the most effective
and cost-efficient tools available for training.
On page 27, it is suggested that ITA overpaid for training services,
when compared to a similar State Department procurement. Our records
show that the initial training investments served closer to 80 or 90
people over several fiscal years, rather than the 30 indicated in the
report.
DOC Statutory authority: DOC's statutory authority gives it a major
role in monitoring. On page 4, the GAO report states that USTR "has
primary statutory responsibility for monitoring and enforcing U.S.
trade agreements." USTR clearly has primary statutory responsibility
for developing, and for coordinating the implementation of, United
States international trade policy and related direct investment
matters, and lead responsibility for the conduct of international trade
negotiations and enforcement. The Department of Commerce, however, has
specific authority to monitor compliance with international trade
agreements pursuant to the Reorganization Plan No. 3 of 1979. We
propose that the sentence state: "The Office of the U.S. Trade
Representative (USTR) has primary statutory responsibility for
implementation of U.S. international trade policy. In addition, the
Departments of Commerce, Agriculture, and State perform their own
monitoring activities and support USTR's efforts."
Communication: Increasing the effectiveness of communications is a
valid goal but we note that most compliance problems do not involve
classified information. We believe that the report somewhat confuses
the questions of access to a classified email system and access to
classified information as if they were the same problem. We believe
that the real problem explained in the report is that unclassified
information that might be utilized in compliance work seems to be
frequently transmitted over the classified email system. However, the
Commerce Department, of course, has access to classified information
and is in the process of obtaining access to the secure system for
email used by the State Department.
Compliance on unfair subsidies: Finally, we also note that the report
apparently did not have within its scope the responsibilities and
efforts of the Department of Commerce's Import Administration (IA),
which is responsible for monitoring and enforcement of disciplines
against unfair government subsidies and application of foreign trade
remedy laws that affect U.S. exporters. IA's broader focus on
compliance issues includes the Unfair Trade Practices Task Force, which
was established as one of the initiatives proposed in Commerce's
Manufacturing Report. Building upon existing programs, IA seeks to
address potential unfair trade problems at their sources, and at the
earliest stage possible, as a complement to the enforcement of the
antidumping and countervailing duty laws.
We offer these comments to clarify certain facts and provide you with a
more complete picture of our efforts. We hope you will consider
reflecting these points in the appropriate sections of the report.
Thank you for a good working relationship and for your professional
review of such an important issue. We look forward to the finalized
report.
Sincerely,
Signed by:
Timothy J. Hauser:
The following are GAO's comments on the Department of Commerce's letter
dated June 14, 2005.
GAO Comments:
1. Since our report attempts to provide a description of monitoring and
enforcement activities performed consistently across U.S. government
agencies, we did not initially include information on some of
Commerce's proactive outreach and monitoring activities. We have
revised the report to include additional information on Commerce's
efforts in these areas, including citing some of the specific examples
mentioned in Commerce's letter.
2. We highlight the specific trade agreement compliance training
courses because they are solely focused on training staff regarding
monitoring and enforcing trade agreements and because officials we met
with identified them as useful courses. However, we have supplemented
our report with additional information regarding Commerce's and State's
other related formal and informal training efforts.
3. Based on documents obtained from Commerce and State, we note that
both agencies contracted with the same vendor to provide similar
training, but that Commerce paid significantly more per student, per
day. Commerce provided a participant list for the July 2003 course,
which included 27 Commerce staff. Our point was to demonstrate the cost
differential between the two similar courses.
4. We have revised the report to clarify the various trade agencies'
statutory authority and their role in monitoring and enforcing trade
agreements.
5. Based on comments from Commerce and State, we have revised the
report to clarify that the two agencies disagree about the extent to
which unclassified information about trade issues is sent using
classified systems. We also note that while Commerce is in the process
of obtaining access to the secure system for email used by State,
Commerce officials told us that this process has taken more than four
years.
6. Foreign trade remedy laws and subsidies were not within the scope of
this review. We have clarified this in our scope and methodology, which
is discussed in appendix I.
[End of section]
Appendix VI: Comments from the Department of State:
United States Department of State:
Assistant Secretary and Chief Financial Officer:
Washington, D.C. 20520:
Ms. Jacquelyn Williams-Bridgers
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
JUN 16 2005:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report,
"INTERNATIONAL TRADE: Improvements Needed to Handle Growing Workload
for Monitoring and Enforcing Trade Agreements," GAO Job Code 320274.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Andrew Dilworth, Foreign Affairs Officer, Bureau of Economic and
Business Affairs, at (202) 736-4021.
Sincerely,
Signed by:
Sid Kaplan (Acting):
cc: GAO - Judith Williams;
EB - E. Anthony Wayne;
State/OIG - Mark Duda:
Department of State Comments on GAO Draft Report:
INTERNATIONAL TRADE: Improvements Needed to Handle Growing Workload for
Monitoring and Enforcing Trade Agreements, (GAO-05-537, GAO Code
320274):
The Department of State appreciates the opportunity to participate in
the work of the Government Accountability Office (GAO) in examining how
we can improve our role in monitoring and enforcing trade agreements.
Although we currently coordinate extensively within our Department and
with other agencies on trade agreement monitoring and enforcement, we
are always open to suggestions for improvement. Overall, the draft
report appears factual and reflective of current practices at the
Department. Upon closer inspection of the draft report, however, we
would like to offer a few comments for GAO's consideration prior to its
publication of the final report.
1. FSI's Trade Agreement Implementation Course:
Throughout the report, GAO makes it appear that .there is only one
course at the Foreign Service Institute (FSI) related to trade
agreement compliance. Although there is only one FSI course titled
"Trade Agreement Implementation," there are many other courses that
directly or indirectly train staff to monitor trade agreements,
including the nine-month Economics and Commercial Studies course and
shorter courses on telecommunications, intellectual property rights,
biotechnology, and aviation. Foreign Service nationals (FSNs) are
eligible to take most of these courses but FSI also offers one course
per year for FSNs on economic issues that touch on trade agreement
compliance. We also offer two distance-learning courses related to
trade agreement compliance (Basics of International Trade and World
Trade Organization History and Core Principles) that can be accessed
through the Internet.
The Department of State also fosters informal training that touch upon
trade agreement compliance. Foreign Service Officers and FSNs conduct
consultations with Washington-based trade officials, participate in
short-term bridge assignments in Washington trade agency offices, and
receive ad hoc on-the-job training as necessary.
GAO notes that there is a need for more training on trade agreement
compliance (p. 25). FSI offers the "Trade Agreement Implementation"
course to meet the demand for the course as determined by those who
register. If there is excess demand, those students are added to a
waiting list and we have the option of adding more classes. Based on
this measure of demand, in contrast to GAO's measure of students who
need or would like to take the course, we feel we are offering a
sufficient number of courses per year. As needed and with appropriate
funding, we could add additional offerings of "Trade Agreement
Implementation."
Lastly, GAO recommends that State, Commerce, USTR and Agriculture
increase coordination on training activities. We will continue to
coordinate with these agencies and consider any ways to improve
coordination.
2. Usage of Classified System for Trade Monitoring and Enforcement:
GAO reports that communication between Commerce and State can be
difficult due to Commerce's limited access to the classified
communications systems that State staff use with increasing frequency
(p. 18). As a general rule, posts conduct almost all trade agreement
implementation reporting on the unclassified email system. It is very
rare that issues dealing with trade agreement monitoring and
enforcement appear on the classified email system.
3. U.S.-Japan Economic Partnership for Growth:
GAO incorrectly refers to the U.S.-Japan Economic Partnership for
Growth as a signed "agreement." On page 42, the report states, "To
address these and other issues, the United States and Japan signed the
U.S.-Japan Economic Partnership for Growth agreement. The agreement
provides a broad framework for addressing ongoing trade compliance
issues."
The Partnership is really a Presidential-Prime Ministerial initiative.
Here is a suggested revision: "To address these and other issues,
President Bush and Prime Minister Koizumi launched the US-Japan
Economic Partnership for Growth. This initiative provides a broad
framework for addressing ongoing trade compliance issues."
The following are GAO's comments on the Department of State's letter
dated June 16, 2005.
GAO Comments:
1. We highlight the Foreign Service Institute's specific trade
agreement compliance training course because it is solely focused on
training staff regarding monitoring and enforcing trade agreements and
because officials we met with identified it as a useful course.
However, we have supplemented our report with additional information
regarding Commerce's and State's other related formal and informal
training efforts.
2. Based on comments from Commerce and State, we have revised the
report to clarify that the two agencies disagree about the extent to
which unclassified information about trade issues is sent using
classified systems.
3. We have revised the report to clarify the fact that the U.S.-Japan
Economic Partnership for Growth was not a signed agreement. However,
both USTR's and Commerce's publicly available lists of trade agreements
in force list this agreement. Further, agency officials in Japan and
Washington, D.C. told us this is the key trade agreement that covers
the compliance issues they monitor.
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager, (202) 512-4347:
Staff Acknowledgments:
In addition, Anthony Moran, Jason Bair, Leah DeWolf, Judith Williams,
Ernie Jackson, and Jamie McDonald made key contributions to this
report.
[End of section]
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(320274):
FOOTNOTES
[1] For the purposes of this report, we use the term "trade agencies"
to collectively refer to the Office of the U.S. Trade Representative
and the Departments of Agriculture, Commerce, and State.
[2] GAO, International Trade: Strategy Needed to Better Monitor and
Enforce Trade Agreements, GAO/NSIAD-00-76 (Washington, D.C.: Mar. 14,
2000), and International Trade: Improvements Needed to Track and
Archive Trade Agreements, NSIAD-00-24 (Washington, D.C.: Dec. 14,
1999).
[3] The WTO administers rules for international trade, provides a
mechanism for settling disputes, and provides a forum for conducting
trade negotiations.
[4] For more information about U.S. trade agreements, see appendix II.
[5] USTR works with the following federal agencies in monitoring and
enforcement activities: the Departments of Agriculture, Commerce,
Defense, Energy, Health and Human Services, Homeland Security,
Interior, Justice, Labor, State, Transportation, and Treasury, as well
as the Council of Economic Advisers, the Council on Environmental
Quality, the Environmental Protection Agency, the Office of Management
and Budget, and the U.S. Agency for International Development.
[6] 19 U.S.C. 1872.
[7] See GAO/NSIAD-00-76.
[8] The Chinese WTO accession agreement contains commitments in eight
broad areas of China's trade regime--e.g., import regulations,
agriculture, services, and intellectual property rights--covering
nearly 700 individual commitments. These obligations include
commitments to reduce tariffs on more than 7,000 products and remove
600 other restrictions.
[9] Since 2000, the United States has negotiated FTAs with 12
countries. These countries are Australia, Bahrain, Chile, Costa Rica,
the Dominican Republic, El Salvador, Guatemala, Honduras, Jordan,
Morocco, Nicaragua, and Singapore. Prior to 2000, the United States
entered into FTAs with 3 countries--Canada, Israel, and Mexico.
[10] For more information on U.S. efforts to improve intellectual
property protection, see GAO, Intellectual Property: U.S. Efforts Have
Contributed to Strengthened Laws Overseas, but Challenges Remain, GAO-
04-912 (Washington, D.C.: Sept. 8, 2004).
[11] For examples of how trade agencies have handled some market access
and compliance cases, see appendix III.
[12] For the purposes of this report, we use the term "market access
issue" to include all barriers to U.S. exports to foreign markets,
regardless of whether there is a trade agreement that relates to the
barrier. We use the term "trade compliance issue" to refer to a barrier
covered by the provisions of one or more trade agreement.
[13] Commerce has identified specific individuals to serve as
Designated Monitoring Officers who serve as the primary point of
contact for inquiries regarding trade agreement. According to Commerce,
these officers are experts on their assigned agreements.
[14] Commerce is the only trade agency that maintains a database that
tracks market access issues, including compliance with trade
agreements.
[15] For additional information on the U.S. government's process for
monitoring and enforcing trade agreements see USTR, Coordinating the
Interagency Monitoring and Enforcement of Trade Agreements: Report to
the Senate and House of Representatives Committees on Appropriations
(Washington, D.C.: 2004).
[16] Foreign Service Nationals are non-U.S. citizens employed to work
in U.S. embassies and consulates throughout the world.
[17] U.S. companies do not use debarked wood pallets, claiming that the
internationally agreed upon measures that they follow for treating
softwood logs and timber adequately eradicate all pest and fungi.
[18] For additional information on the Joint Commission on Commerce and
Trade, see GAO, U.S.-China Trade: Opportunities to Improve U.S.
Government Efforts to Ensure China's Compliance with World Trade
Organization Commitments, GAO-05-53 (Washington, D.C.: Oct. 6, 2004).
[19] For additional information on WTO dispute settlement, see GAO,
World Trade Organization: U.S. Experience to Date in Dispute Settlement
System, GAO/NSIAD/OGC-00-196BR (Washington D.C.: June 14, 2000); World
Trade Organization: Issues in Dispute Settlement, GAO/NSIAD-00-210
(Washington D.C.: Aug. 9, 2000), and World Trade Organization: Standard
of Review and Impact of Trade Remedy Rulings, GAO-03-824 (Washington,
D.C.: July 30, 2003).
[20] The government of Morocco ratified the FTA in January 2005. As of
April 2005, U.S. officials were awaiting the King's signature and the
exchange of notes between USTR and the government of Morocco before the
agreement goes into effect.
[21] GAO, International Trade: Advisory Committee System Should Be
Updated to Better Serve U.S. Policy Needs, GAO-02-876, (Washington,
D.C.: Sept. 24, 2002).
[22] The Compliance Liaison Program is a public/private partnership
that consists of 250 congressional offices, 96 trade associations, 71
District Export Councils, 53 state government offices, and 26 other
business or trade organizations.
[23] According to Commerce, a fourth standards attaché position has
been approved and will be posted in Beijing, China, in August 2005.
[24] See GAO-05-53.
[25] State officials noted that while the use of classified
communication systems has increased in recent years, this is not
necessarily its primary means of communicating information on trade
issues.
[26] State officials told us that even though the information may not
be classified, State staff use classified systems to send some
information in order to protect the sources of the information.
[27] Title XXI of the Trade Act of 2002, Pub. L. No. 107-210.
[28] These countries are Botswana, Colombia, Ecuador, Lesotho, Namibia,
Oman, Panama, Peru, South Africa, Swaziland, Thailand, and the United
Arab Emirates.
[29] The number of State economic officers has increased since 2000,
but State officials noted that if other agencies reduce their number of
staff overseas, the workload for State officials will increase.
[30] These data include Commercial Service Officers and Foreign Service
Nationals.
[31] GAO, Embassy Management: Actions Are Needed to Increase Efficiency
and Improve Delivery of Administrative Support Services, GAO-04-511
(Washington, D.C.: Sept. 7, 2004).
[32] GAO, Embassy Construction: Proposed Cost-Sharing Program Could
Speed Construction and Reduce Staff Levels, but Some Agencies Have
Concerns, GAO-05-32 (Washington, D.C.: Nov. 15, 2004).
[33] See GAO/NSIAD-00-76.
[34] Office of the U.S. Trade Representative, Coordinating the
Interagency Monitoring and Enforcement of Trade Agreements: Report to
the Senate and House of Representatives Committees on Appropriations
(Washington, D.C.: 2004).
[35] In another overseas post (Beijing, China), Commerce staff were
able to participate in the course without paying tuition to State
because Commerce staff provided the classroom and administrative
support for the course.
[36] Sanitary and phytosanitary standards are measures taken to protect
animal and plant health.
[37] APHIS is responsible for protecting and promoting U.S.
agricultural health, administering the Animal Welfare Act, and carrying
out wildlife damage management activities. FSIS is responsible for
ensuring that the nation's commercial supply of meat, poultry, and egg
products is safe, wholesome, and correctly labeled and packaged.
[38] According to USTR, the most recent interagency effort regarding
resources for monitoring and enforcing trade agreements was in response
to a 2004 congressional mandate. In this effort, USTR surveyed all the
Trade Policy Staff Committee subcommittees regarding their efforts to
monitor and enforce trade agreements and the resources necessary to
undertake these efforts.
[39] GAO, Managing for Results: Barriers to Interagency Coordination,
GAO/GGD-00-106 (Washington, D.C.: Mar. 29, 2000).
[40] GAO, International Trade: Intensifying Free Trade Negotiating
Agenda Calls for Better Allocation of Staff and Resources, GAO-04-233
(Washington, D.C.: Jan. 12, 2004).
[41] After reviewing Treaties in Force and meeting with officials from
State's Office of Treaty Affairs, we determined that State relies on
other agencies to report trade agreements to them and does not have a
reliable procedure for removing any trade agreements from its list that
were no longer in force. Therefore, we determined that the information
was not sufficiently reliable for the purpose of accurately determining
the number of trade agreements currently in force.
[42] The United States has no bilateral trade agreements with 87
countries.
[43] These three archives do not represent the entire universe of trade
agreements. For example, State also keeps track of some trade
agreements in its annual publication Treaties in Force. Other agencies
may track trade agreements for their own purposes as necessary.
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