Dateline: 12/05/02

The United States has announced plans to call on the World Trade Organization (WTO) to eliminate all tariffs on consumer and industrial goods worldwide by 2015.

According to U.S. Trade Representative Robert B. Zoellick, the ambitious U.S. proposal for worldwide zero tariffs is comprehensive, and would benefit both developed and developing nations.

The proposal, said Zoellick, when combined with the far-reaching U.S. agricultural reform proposal submitted to the WTO in July, would eliminate tariffs on the nearly $6 trillion in annual world goods trade, lifting the economic fortunes of workers, families, businesses, and consumers.

Adoption of both the agricultural reforms and zero tariffs proposals offered by the U.S. would both demonstrate continued U.S. leadership in the international Doha Development Agenda and complete the WTO's tariff-cutting agenda, which began in 1947 with the creation of the General Agreement on Tariffs and Trade (GATT).

Could save U.S. family of four $1,600 a year
"Our proposal would turn every corner store in America into a duty-free shop for working families," said Zoellick. "This historic proposal would benefit the average American family of four with an extra $1,600 a year, while also removing high foreign tariff barriers on more than $670 billion in U.S. industrial and consumer goods exports. Globally, tariff-free trade could help lift millions of people in developing countries out of poverty."

"President Bush believes that American workers, farmers, ranchers and businesses must have more than just the ability to compete globally, they must also have the opportunity to do so," said U.S. Commerce Secretary Don Evans. "This proposal says that ‘no one wins unless we all win' and ensures a level playing field for America's goods and ingenuity to compete fairly around the world."

U.S. will propose tariff-cutting 'two-step'
The U.S. proposal envisions a two-step approach to eliminating tariffs on a full-range of consumer and industrial goods ranging from women's shoes, to tractors, to children's toys.

• First, WTO members would be required to cut and harmonize their tariffs in the five year period from 2005 to 2010. Specifically, WTO members would eliminate all tariffs at or below 5 percent by 2010, cut all other tariffs through a "tariff equalizer" formula to less than 8 percent by 2010, and eliminate tariffs in certain highly traded industry sectors as soon as possible, but not later than 2010.
  
  
• Next, all WTO members would make equal annual cuts in remaining tariffs between 2010 and 2015. These cuts would result in zero tariffs. 

The proposal also calls for a separate program to identify and eliminate non-tariff barriers, which would run on a parallel track with the negotiations on industrial tariffs. The U.S. will put forward an initial list of such barriers in January of 2003.

How a duty-free world would help U.S. consumers
According to the Office of U.S. Trade Representative (USTR), eliminating U.S. tariffs would significantly benefit U.S. families and consumers through lower import taxes and a more competitive economy. Hidden import taxes cost American consumers $18 billion in 2001, alone. USTR contends that duty-free trade would eliminate these hidden costs and lower prices for consumers. While this proposal would offer substantial benefits to all Americans, it would particularly help low-income families. A recent study by the Progressive Policy Institute found that cutting U.S. import taxes especially benefits single-parent, low-income families, who typically pay a higher proportion of their income on import taxes than other households. A study done by the University of Michigan found that the U.S. economy would expand by $95 billion as a result of tariff-free trade - contributing to job-creation and higher wages. The University of Michigan study also revealed:

• exports of U.S. consumer and industrial goods totaled over $670 billion in 2001
• the U.S. exporting industry support an estimated 12 million American jobs
• jobs supported by exports typically pay 13 percent to 18 percent higher than the average U.S. wage
• the elimination of industrial tariffs by other countries could increase U.S. exports by $83 billion annually
• highly-traded goods exports, such as chemicals, paper, and scientific equipment, which are targeted in the U.S. proposal for total tariff elimination, account for 60 percent of all U.S. exports.

Going tariff-free would also help developing countries
Estimates by the World Bank project that tariff-free global trade would result in a worldwide income gain of $832 billion from trade in all goods including agriculture, of which $539 billion (65 percent) would flow to developing countries. Representing an income increase of about $544 for a family of four, the World Bank estimates that free trade in goods and services could help lift 300 million people out of poverty - a number greater than the entire population of the United States.

Background of the tariff-free proposal
The reduction and elimination of tariffs on consumer and industrial goods is a component of the WTO negotiations launched in Doha, Qatar in 2001 to be completed by January 1, 2005.

Throughout the year, United States leadership has continued to spur momentum on the Doha Development Agenda in the WTO:

• On July 1, the United States announced proposals for liberalizing global trade in services, designed to remove foreign barriers in areas such as financial services, telecommunications, and environmental services.

• On July 25, the United States became the first WTO member to put forward a comprehensive agricultural trade reform proposal, calling for elimination of export subsidies, cuts of $100 billion in annual allowed global trade-distorting domestic subsidies, and lowering average allowed global tariffs from 62 percent to 15 percent. The United States also proposed that WTO members agree in this negotiation to a specific date for elimination of agricultural tariffs and trade-distorting domestic support.

• On August 9, the United States submitted a proposal to expand transparency and public access to World Trade Organization dispute settlement proceedings. The proposal would open WTO dispute settlement proceedings to the public for the first time and give greater public access to briefs and panel reports.

• On October 17, the United States submitted a paper highlighting the importance of strengthening transparency and due process in the application of trade remedies (antidumping, subsidies, and safeguard actions). It addresses the basic concepts and principles of the trade remedy rules against unfair trade, and the importance of tackling the trade-distorting practices that are frequently the root causes of unfair trade. The U.S. also submitted a paper presenting a number of ideas and recommendations for addressing trade- and market-distorting practices in the steel sector. [Source: Office of US Trade Representative]