Abstract
This chapter introduces readers to the United States’ trade policy-making system and the constitutional, executive, legislative and judicial institutions that participate in the process, as well as the many (and changing) political policies involved. It clarifies the complexities involved in the recently concluded and future Free Trade Agreements, and introduces non-U.S. readers to the political realities associated with the U.S. internal/domestic process of “fast-track” or “Trade Promotion Authority”. It also identifies some of the future intellectual property issues in Asian FTAs and suggests some possible consequences.
R.E. Lutz: BA (Political Science) (University of Southern California), JD (University of California, Berkeley), Professor of Law; Member of the NAFTA Advisory Committee on Private Commercial Dispute Resolution, Former Chair of the ABA Task Force on International Trade on Legal Services, and Former Chair, ABA Section of International Law.
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Notes
- 1.
Free Trade Agreements provide one of several vehicles for preferential trade treatment. Others include bilateral investment treaties (BITs) and Generalized System of Preferences (GSP) treatment. FTAs are distinguished from ‘customs unions’ in that with respect to the latter member countries have a single external tariff.
- 2.
General Agreement on Tariffs and Trade, art XXIV, 30 October 1947, Stat A3, at A66, 55 UNTS 187, at 268 [hereinafter GATT], http://www.wto.org/english/docs_e/legal_e/gatt47_e.pdf.
- 3.
General Agreement on Trade in Services, 15 April 1994, 1869 UNTS 183 [hereinafter GATS].
- 4.
Art. XXIV(8) GATT. See also Art. V GATS.
- 5.
Art. XXIV(5) GATT. See also Art. V.
- 6.
Jackson (1969), pp. 576–577.
- 7.
Gantz (2009), p. 32.
- 8.
See World Trade Organization website: www.wto.org. Jagdish Bhagwati has referred to this effect as the ‘spaghetti bowl’ effect. Bhagwati and Panagariya (1996), p. 53. In various presentations, this author has expressed concerns regarding the pan-regional effects created by the interplay of the many interlocking FTAs. See also Bhagwati (2008): in which Bhagwati suggests that adherents to FTAs may be duping themselves into actually paying more for imports (generally paying less is cited as a consumer benefit of free trade), depriving countries’ treasuries of needed tariff revenue, and contributing to the potential demise of trade multilateralism (with the concomitant effect of ‘preference erosion’).
- 9.
See generally World Trade Organization (2013). The WTO reports that as of 15 January 2012, there were 511 notifications of regional trade agreements of which 319 were in force. Accessed 2 September 2012.
- 10.
Goodbye Doha (2012), p. 12.
- 11.
See Art. XXIV GATT, no 3–7 and accompanying text.
- 12.
See US Trade Representative (2013).
- 13.
Art. 1, Sec. 8, cl. 3 US Constitution states: ‘[The Congress shall have Power] [t]o regulate commerce with foreign nations, and among the several States, and with the Indian tribes.’
- 14.
There have been occasions when the Executive Branch of the US Government believed it had the constitutional authority to establish international agreements with other countries regarding trade without congressional support. Two prominent examples—one early one in the history of the GATT, and one quite recently—demonstrate some of the controversial constitutional aspects of trade regulation in the United States. The first relates the US approval of GATT by President Harry S. Truman pursuant to his executive authority and that which he claimed was given to the President via the Reciprocal Trade Agreements Act of 1934. Thus, GATT was never approved by the Senate nor submitted for approval by the full Congress as a congressional-executive agreement. It was not until 1994, when the Uruguay Round Agreements Act [Section 101(a)] was passed, that the GATT was elevated from provisional status in the United States. The second is the US government’s conclusion of the Anti-Counterfeiting Trade Agreement (ACTA) of 3 December 2010 as sole executive agreement. See Hathaway and Kapczynski (2011).
- 15.
Hornbeck and Cooper (2010), p. i.
- 16.
In 1974 (in Section 102 of the Trade Act of 1974), the President and Congress created the procedural mechanism for negotiating and approving international trade agreements. Once called ‘fast track’, now referred to as “Trade Promotion Authority”, it provides for Congress to approve trade agreements negotiated by the President (with no amendments permitted) by an ‘up or down’ vote. See generally US International Trade Commission (2003), pp. 7–16. See also Trade Act of 1974, Section 151 (19 USC §2191) for the process by which congress approves trade agreements under this authority, and S. Rep. No. 1298, 93th Cong., 2d Sess. (1974), 1974 USCCAN 7186, 7201-02.
- 17.
Under the Trade Act of 2002, Section 2103, Congress set negotiating objectives in three categories: overall objectives; principal objectives; and other priorities. Broad goals, such as enhancing U.S. and global economies, characterize the overall objectives. ‘Principal objectives are more specific and provide detailed goals that Congress expects to be integrated into trade agreements…[, such as] reducing … quotas or tariffs, protecting intellectual property rights, encouraging transparency, or ensuring trade partners’ environmental and labor laws.’ Other priorities relate to notification and consultation requirements with Congress. See Hornbeck and Cooper (2012), pp. 8–13.
- 18.
E.g., President William Clinton’s fast-track negotiating authority expired in 1993 after he had obtained Congressional approval of the WTO and NAFTA, and he never sought renewal. President George W. Bush secured fast-track negotiating authority in 2002 (changed then to ‘Trade Promotional Authority’), but it expired in 2007. The 112th Congress reinstated TPA for the Congressional approval of the United States’ most recent FTAs with Colombia, Panama and South Korea on 12 October 2012. All three were actually negotiated and signed under the TPA that expired in 2007, but implementation in the United States required Congressional approval without amendment.
- 19.
Hornbeck and Cooper (2010), p. 1.
- 20.
See United States Trade Representative (2007).
- 21.
- 22.
All three FTAs were signed in 2007 before the expiration of Trade Promotion Authority that had been enacted in 2002 and terminated on 1 July 2007 [see 19 U.S.C. § 3803(c)(1)(B)]. Since there were substantial post-signature negotiations and changes in the originally signed agreements between 2007 and 2012 when the agreements were ratified, questions were raised as to whether the TPA applied to the implementing legislation with the negotiated revisions. These were resolved in favour of applying the TPA to the final agreements. See Barbour (2011).
- 23.
As of March 2013.
- 24.
Hornbeck and Cooper (2012), p. 1.
- 25.
Section 301 of the Trade Act of 1974 is the principal US statute for addressing unfair foreign practices affecting US exports of goods and services. See 19 USC 2411–2420.
- 26.
US–Israel Free Trade Agreement, 22 April 1985, 24 ILM 653 (1985); see also Bowman et al. (2010).
- 27.
The US–Canada Free Trade Agreement entered into force on 1 January 1989, but was superseded by the North Atlantic Free Trade Agreement (NAFTA) that entered into force on 1 January 1994. See North American Free Trade Agreement Implementation Act, PL 103–182, 107 Stat 2057 (103rd Cong, 1st Sess, 8 December, 1993).
- 28.
See Gantz (2009), pp. 346–361.
- 29.
See United States Trade Representative (2012) and US International Trade Commission (2012), p. 4-1.
- 30.
USITC Year of Trade (2011), at p. 4-1.
- 31.
USITC Year of Trade (2011), at p. 4-1. Note that trade with Canada and Mexico (NAFTA partners) accounts for 81.6 % of total US trade with all FTA partners, and accounts for USD 972.8 billion in 2011.
- 32.
See Pub L 112-41 (Korea); Pub L 112-42 (Colombia); Pub L 112-43 (Panama). The Korean FTA (or ‘KORUS FTA’, as it is known) entered into force 15 March 2012. See ‘Proclamation 8783 of 6 March 2012, to Implement the United States–Korea Free Trade Agreement’, 77 Fed Reg 14265-67 (9 March 2012); and USITC Year of Trade 2011, Ch. 5-19–5–21. The Colombia Trade Promotion Agreement (CPTA) entered into force 15 May 2012. See ‘Proclamation 8818 of 14 May 2012, to Implement the United States-Colombia Trade Promotion Agreement and for Other Purposes’, 77 Fed Reg 29519–29523 (18 May 2012). See also Hornbeck (2011).
- 33.
See Office of the United States Trade Representative, www.ustr.gov.
- 34.
Office of the United States Trade Representative, www.ustr.gov.
- 35.
Permitted under WTO–GATT, GSP is a program designed to promote development in developing countries. Countries are designated and eligible products receive duty-free treatment until they graduate by becoming competitive with domestic products. On 21 October 2011, President Obama signed legislation authorizing the GSP Program through to 31 July 2013. See United States Trade Representative (2013).
- 36.
US Trade Representative (2013).
- 37.
See United States Trade Representative (2012). Australia, Canada, Japan, Korea, Morocco, New Zealand, Singapore, and the United States signed ACTA in Tokyo on 1 October 2011. The EU member states unanimously authorized signature and ratification of ACTA on 6 December 2011, and ACTA will remain open for signature until 1 May 2013. According to Arts 39 and 40 of ACTA, it will come into force 30 days after ratification by six countries. See USTR, The Final Text of the Anti-Counterfeiting Trade Agreement (May 2011) www.mofa.go.jp/policy/economy/i_property/pdfs/acta1105_en.pdf. Accessed 17 February 2013. However, on 4 July 2012, the European Parliament rejected the European Union’s joining the ACTA, even though 22 EU member states had previously signed, but not ratified, the ACTA. Although ACTA’s objective was to curb piracy, internet campaigners claimed it would pose a threat to online freedoms. The European Parliament’s vote of 478:39 suggests a revival of the ACTA, or similar anti-counterfeit agreement to standardize copyright protection measures, will be difficult for some time in Europe. BBC News Technology (2012).
- 38.
USTR, Anti-Counterfeiting Trade Agreement (ACTA). www.ustr.gov/acta. Accessed 17 February 2013.
- 39.
Section 337 of the Tariff Act of 1930 (as it is known), 19 USC 1337, provides that the US International Trade Commission (ITC) on its own initiative or via complaint of an interested person, may instigate investigations into practices involving the importation of ‘infringing articles’, defined as: (1) goods that infringe a valid and enforceable US patent, registered trademark, registered copyright, registered mask work, or registered vessel hull design; and (2) involves an existing domestic industry or one that is being established. Section 337 makes it unlawful for any person to import such goods into the United States, to sell them for importation, or to sell them within the United States after they have been imported. If the USITC determines the existence of a violation, it can issue an exclusion order directing US Customs and Border Protection to exclude the imports from entry, and a cease and desist order directing the violating parties to stop engaging in the unlawful practices. Such orders enter into force unless disapproved for policy reasons by the US Trade Representative (USTR) within 60 days of issuance.
Section 337 actions are conducted exclusively before administrative agencies: the investigation is conducted before an administrative law judge in accordance with the Federal Administrative Procedure Act, 5 USC 551 et seq., where the ALJ conducts an evidentiary hearing and makes an initial determination that is transmitted to the USITC. The Commission may adopt the determination by deciding not to review it, or it may choose to review it. In either case, if the Commission finds a violation, it must determine the appropriate remedy, the amount of any bond to be collected while its determination is under review by the USTR, and whether public interest considerations preclude issuing a remedy. See USITC, Year of Trade (2011), pp. 2-9–2-11, for an analysis of the 337 investigations and the Commission’s actions in 2011.
- 40.
Section 301 of the Trade Act of 1974 is the principal US statute for addressing unfair foreign practices affecting US exports of goods and services. See 19 USC 2411–2420. It is used to enforce US rights under bilateral and multilateral trade agreements and also is used to respond to unjustifiable, unreasonable, or discriminatory foreign governments’ practices that burden or restrict US commerce. Under the law, interested persons may petition the USTR to investigate foreign governmental policies or practices, or the USTR may initiate an investigation. If it is determined that practices are unreasonable or discriminatory, and that they burden or restrict US commerce, the USTR must determine whether action is appropriate and, if so, what type of action to take: 19 USC 2411(b). See USITC Year of Trade (2011), pp. 2-2–2-4.
‘Special 301’ requires USTR to annually identify and issue a list of foreign countries that deny adequate and effective IPR protection, or deny fair and equitable market access to US persons who rely on IPR protection. See Section 182 of the Trade Act of 1974, as amended, or 29 USC 2242. It directs the USTR to list so-called ‘priority foreign countries’ [19 USC 2242 (a)(2)] and, in less egregious situations, to establish a ‘priority watch list’ if the countries’ IPR laws and practices fail to provide adequate and effective IPR protection and warrant close monitoring and bilateral consultation. See USITC Year of Trade (2011), pp. 2-5–2-6.
Also, since 2006, the USTR has identified ‘notorious markets’; since 2010, the USTR has published a ‘Notorious Markets List’ that identifies both internet and physical marketplaces dealing in infringing goods that help to sustain global piracy and counterfeiting. USITC Year of Trade (2011), pp. 2–6.
- 41.
Gervais (2003), p. 10.
- 42.
The companies that were most prominent in this effort were: Pfizer, IBM and DuPont. During the TRIPS negotiations, 13 identified companies (Bristol-Myers, DuPont, FMC Corp, General Electric, General Motors, Hewlett-Packard, IBM, Johnson & Johnson, Merck, Monsanto, Pfizer, Rockwell International, and Warner Communications) actively participated and monitored the TRIPS negotiations.
- 43.
Prominent IP commentators describe the functions TRIPS plays in the WTO legal system: (1) Adopts generally applicable principles, such as most favoured treatment, national treatment, national ability to determine ‘exhaustion of rights’, and so on; (2) Prescribes minimum substantive standards of IPR protection for all WTO Members; (3) Requires Members to provide adequate and effective IPR enforcement; (4) Recognizes importance of maintaining competitive markets; (5) Provides special treatment to developing and least-developing countries; (6) Establishes institutional arrangements of TRIPS Council and continuing negotiations; (7) Incorporates dispute-settlement of the WTO and its Dispute-Settlement Understanding. Abbott et al. (2007), pp. 21–23.
- 44.
Mercurio (2006), pp. 215–237.
- 45.
See 19 USC 3802(b)(4)(A)(i)(II) (2004).
- 46.
A sample of the TRIPS-Plus provisions with respect to the subjects of copyright, patents, trademarks, and data protection are the following:
Copyrights—Adds to the TRIPS obligations the following: 20 additional years to the copyright term beyond the 50 years prescribed previously (that is, life of author plus 70 years); requires tracking copyrights established domestically by the Digital Millennium Copyright Act (DMCA) of 1998, PL 105–304, 112 Stat 2860 (1998) and outlaws circumvention of technologically copyright-controlled measure (e.g., descrambling a scrambled work, decrypting an encrypted work without authority of copyright owner); and prohibits removal or alteration of ‘rights management information’ (e.g., electronic information identifying a protected work and its author, as well as the terms and conditions of the use of the work).
Patents—Adds to the TRIPS obligations the following: 1-year grace period to patent applicants (i.e., 1 year from public disclosure of one’s invention to file a patent application); accession to the Patent Cooperation Treaty [28 UST 7645 (19 June 1970)]; term extensions based upon ‘unreasonable’ administrative delays, potentially extending the 20 year patent term under TRIPS; additional conditions on the grants of compulsory licences; and the patent proprietor not being required in instances of compulsory licences to provide additional undisclosed information or technical know-how that is related to the patented invention.
Trademarks—Adds to the TRIPS obligations the following: marks need not be visually perceptible in order to be registered as a mark, thus allowing sounds and scents to also be marks; licences for TMs need not be publicly registered to be valid; and disputes over Internet domain names be resolved through recourse to the principles established in the Uniform Domain Name Dispute Resolution Policy.
Data Protection—Adds to the TRIPS obligations the following: requirement for 5 year marketing exclusivity for pharmaceuticals utilizing new chemical entities; definition of ‘new product’ as ‘one that does not contain a chemical entity that has been previously approved in the territory of the Party’ [e.g., Dominican Republic-Central American Free Trade Agreement [DR-CAFTA] 15.10:1(c)].
Other Provisions—Other IPRs are also addressed, for example, certain levels of protection for ‘encrypted programme-carrying satellite signals’ (US–Australia FTA, Art. 17.7), minimum standards concerning litigation proceedings, remedies, and other intellectual property enforcement measures exceeding TRIPS obligations (e.g., US–Australia FTA, Art. 17.11; US–Singapore FTA, Chapter 20).
- 47.
See Office of the United States Trade Representative www.ustr.gov.
- 48.
Offering extensive ‘stakeholder’ meetings with the negotiators adds an interesting dimension to international trade negotiations and is being employed by USTR to respond to criticisms that the negotiation process is non-transparent. With current and frequent entries at the USTR website (www.ustr.gov), including press releases following negotiations and meetings, the process appears to the distant participant as transparent—at least after-the-fact.
- 49.
See Otto (2013).
- 50.
See Keck (2013).
- 51.
United States Trade Representative, TPP Overview (November 2011). http://www.ustr.gov/about-us/press-office/fact-sheets/2011/november/united-states-trans-pacific-partnership. Accessed 17 February 2013.
- 52.
USITC Year of Trade (2011), pp. 4–14.
- 53.
- 54.
Bhagwati (2012).
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The author is grateful to Southwestern Law School for its research support.
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Lutz, R.E. (2015). Linking Trade, Intellectual Property and Investment in the Globalizing Economy: The Interrelated Roles of FTAs, IP and the United States. In: Antons, C., Hilty, R. (eds) Intellectual Property and Free Trade Agreements in the Asia-Pacific Region. MPI Studies on Intellectual Property and Competition Law, vol 24. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30888-8_6
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