|
|
|
|
Science Technology and the Economic Future edited by Susan Raymond
Mark Bohannon
Chief Counsel for Technology and Counsel
to the Undersecretary for Technology,
U.S. Department of Commerce
Based on a paper delivered to the Center for Science, Trade, and Technology Policy of George Mason University in 1995.
The Uruguay Round Agreement is the most comprehensive trade agreement ever. This historic agreement cuts global tariffs, protects intellectual property, disciplines agricultural and industrial subsidies, and creates an effective dispute settlement mechanism.
One area that has received attention since the final round came to a close in December, 1993, is the Agreement on Subsidies and Countervailing Measures, and particularly one aspect of the code, the "green light" for certain research and development (R&D) and development activities.
In looking at this issue, four key points emerge. First, the Uruguay Round Subsidies Agreement established the strictest subsidy discipline ever on all members of the new World Trading Organization (WTO). There is widespread support for what was achieved in the Subsidies Agreement.
Second, the United States has provided, and continues to provide, more support to industrial R&D than any other country. U.S. investment in technology, reflected in long-standing bipartisan support for R&D programs, has contributed significantly to continued economic growth and the creation of jobs.
Third, the language related to R&D in the Subsidies Code was drafted with U.S. programs in mind. The draft language found in the earlier Dunkel Text tied U.S. hands when it came to working with industry, while leaving other countries' programs safe from action by U.S. countervailing duty laws.
Fourth, there is little or no danger that this provision will become a loophole under which countries will be able to provide production or marketing subsidies. To ensure that these provisions are fully and fairly carried by all signatories to the GATT, the effective monitoring of all the parties is key to implementing these provisions.
An Historic Agreement
It is worth reviewing the achievements of the GATT negotiations. Both workers and industries benefit from the GATT Agreement negotiated at the end of 1993. Significant new employment opportunities and additional high-paying jobs in export industries will emerge. U.S. business will directly benefit from emerging opportunities to export more products in the agricultural, manufacturing, and service sectors. Specifically, the agreement will:
cut foreign tariffs on manufactured products by over one third, the largest reduction in history;
protect the intellectual property rights of U.S. pharmaceutical and software industries from theft in the global marketplace;
ensure open foreign markets for U.S. exporters of services such as accounting, advertising, computer services, tourism, engineering, and construction;
greatly expand export opportunities for U.S. agricultural products by limiting the ability of foreign governments to block exports through non-tariff barriers, quotas, subsidies, and a variety of other domestic policies and regulations;
protect the right of the United States to provide relief from unfairly traded imports;
assure that developing countries live by the same trade rules as developed countries; and
create an effective set of rules for the prompt settlement of disputes.
Strict Subsidies Discipline
The subsidies agreement establishes a three-class framework for the categorization of subsidies and subsidy remedies:
prohibited subsidies;
actionable subsidies, which are subject to dispute settlement under the WTO in Geneva and counter available unilaterally under domestic laws if they cause adverse trade effects; and
non-actionable and non-counter available subsidies (the so-called "green light" category), structured according to criteria intended to limit their potential for distortion.
The strict new disciplines and effective new dispute settlement system includes a number of major changes that will benefit the United States:
The agreement will apply to all 117 members of the World Trade Organization, a vast improvement on the Tokyo Round Subsidies Code, which had only 27 signatories.
For the first time in the history of GATT, a subsidy is defined and the conditions which must exist in order for a subsidy to be actionable are set out.
The agreement extends and clarifies the 1979 Subsidies Code's list of prohibited practices to include de facto as well as de jure export subsidies, and subsidies contingent upon the use of local content.
The agreement also specifies how to prove "serious prejudice" (adverse effects) to a country's trade interests and creates an obligation for the subsidizing country to withdraw the subsidy or remove the adverse effects when they are identified. The absence of such a provision in the 1979 Subsidies Code was one of its greatest deficiencies.
The agreement introduces a presumption of serious prejudice in situations where the total ad valorem subsidization of a product exceeds 5 percent, or when subsidies are provided for debt forgiveness.
Integrating Technology and Trade
The language that was negotiated in the final round reflects both strong trade policy and competitive technology policy. These provisions will enable the United States to fight unfair subsidies that distort free trade, while at the same time protect U.S. firms that participate in technology programs here at home.
U.S. negotiators started with the universal view that the draft Dunkel Text presented a number of concerns for the private sector and for our commitment to public-private partnerships on technology, while achieving none of our trade goals.
R&D Infrastructure
The Dunkel Text undercut one of the primary advantages the United States has over its competitors: R&D infrastructure. The United States has been, and continues to be, the greatest supporter of industrial research in the world. In terms of total government R&D expenditures, the U.S. invests four-and-one-half times the amount of our closest competitors—Japan and Germany. Even when defense-related R&D is excluded, the U.S. spent $28.9 billion on civilian R&D in 1991. Germany, the next largest country, spent 55 percent less than the U.S. on civilian R&D.
The above figures are the latest evidence of a long-term, bipartisan commitment to technology investment to promote economic growth. The tangible examples of these investments include programs like the Advanced Technology Program at the Department of Commerce, as well as the dual-purpose initiatives embodied in the Technology Reinvestment Project at the Department of Defense. They also include the world-class biomedical research of the National Institutes of Health; Defense Department investments in flat panel displays and multi-chip modules; and an increased focus on civilian technology by the national laboratories. The U.S. commitment to technology investment through public-private partnerships is also reflected in the more than 2,000 Cooperative Research and Development Agreements that have revolutionized industry-government collaboration.
The Clinton Administration has reinvigorated the public-private partnership as a key means of achieving technology investments. The administration supports a policy that requires projects to be cost-shared (often 50 percent from industry and 50 percent from government), and the selection process merit-based. These initiatives reflect the proper role of government in working with industry to sustain the high-risk, enabling technologies that are key to economic growth.
Under the draft Dunkel Text, the more transparent U.S. technology programs would have been open to foreign challenge. It would have impeded what every administration has recognized: investment in research and development is a desirable, effective, and long-term investment in our future.
Basic and Applied Research
A second problem posed by the draft Dunkel Text was that it relied on definitions of "basic" and "applied" research that did not fit the model of U.S. technology programs. This ambiguity was compounded by the fact that thresholds of non-actionable government investment envisioned in the Dunkel Text were out of line with the fact that programs should be equally cost-shared.
Private Sector Concerns
The private sector was deeply distressed with the Dunkel Text's provisions related to "notification." In order to gain limited protection under the Dunkel Text, highly detailed notifications of programs would have had to be made to the GATT Subsidies Committee, possibly requiring the government to share extensive and competitively valuable information about activities of U.S. firms. Instead of seeing hope and protection in these notification requirements, the private sector saw greater regulation, more paperwork, threats to sensitive information, and less incentive to work with government in this important area.
The portion of the Uruguay Round Agreement that addresses R&D investment is a major improvement over the Dunkel Text, from both a trade and technology perspective. U.S. investment in "fundamental research" is fully protected.
U.S. negotiators have ensured that government involvement in "industrial research," a mainstay of our public-private partnerships, continues without threat. The government may be involved, either directly with funds, personnel, or in-kind resources in critical investigations aimed at the discovery of new knowledge, with the objective that such knowledge may later be useful in developing or improving new products, processes, or services. These kinds of partnerships are industry-focused and pre competitive, and have the potential to provide benefits across a number of companies and industries.
Consistent with such bipartisan, merit-based, cost-shared technology programs, government may partner up to 50 percent of a project that focuses on "pre-competitive development activity."
The Uruguay Round achievement also addressed the sensitive issue of "notification." The agreement maintains the ability to provide protection through special notification, but it does not mandate that such notification occur in order to protect an investment from trade measures under the R&D criteria. Instead, if there is ever a challenge, countries can at the time show how any support provided is consistent with the R&D provisions. The final Uruguay Round text also clarifies that the notification requirements will not force the U.S. to release any proprietary or confidential information to the GATT Subsidies Committee.
Conclusion
Had the United States not sought changes to the "green light" rules governing R&D, the result would not have prevented or discouraged foreign governments in their support for industrial research and development. Instead, our European trading partners would have enjoyed the protection of the Dunkel Text's green light rules, which were patterned after the European Community's own internal rules, while U.S. technology programs would not have enjoyed such protection.
The completion of the Uruguay Round represents the latest step in a long-term bipartisan effort to improve the world trading rules and enhance U.S. competitiveness. It represents an integration of trade and technology policy, an important facet of which is a continued commitment to fight unfair subsidies used by other countries.
Email this citation