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FOREST PRODUCTS TRADE POLICY HIGHLIGHTS - DECEMBER 1999

BEC AND JAS COMMITTEES MEET

The Building Experts Committee (BEC) and the Japanese Agricultural Standards Technical Committee (JTC) met in Tokyo, Japan, November 15-16, 1999. These committees were set up under the terms of the 1990 United States-Japan Wood Products Agreement to oversee the implementation of the codes and standards-related portions of the agreement, and are comprised of representatives from government, industry and academia from the United States, Japan, and Canada. This marked the tenth meetings of these committees. Discussions at the BEC focused on Japan's transition to performance-based standards in its revision of the Building Standards Law of Japan, interim inspections, the Housing Quality Assurance Law, and fire codes and regulations. Discussions at the JTC focused on revisions to the JAS system relating to Foreign Testing Organizations, and changes in specific JAS standards for wood products, including proposed changes in the formaldehyde emission levels.

ENVIRONMENTAL IMPACTS OF ATL FOREST PRODUCTS INITIATIVE SMALL

On November 2, 1999, the Office of the United States Trade Representative (USTR) and the Council on Environmental Quality (CEQ) released the results of an interagency analysis of the economic and environmental effects of the Accelerated Tariff Liberalization (ATL) initiative which is presently under consideration in the WTO. The ATL initiative would eliminate the remaining tariffs on forest products by no later than 2004. The study found that the environmental impacts from eliminating tariffs were mixed (both positive and negative) and small, and that liberalization will have little effect on forests worldwide. Globally, by 2010, compared to the baseline, the ATL is projected to increase world trade in forest products by a maximum of 2 percent, timber harvest by 0.5 percent, and world production and consumption of forest products by less than 1 percent. The primary impact of the ATL as it regards the United States will be on the composition of trade -- increasing the trade of value-added products and decreasing the trade of raw materials and semi-processed products. The ATL forest products initiative covers all the products in Chapter 44 (wood products), 47 (pulp), 48 (paper and paperboard), and 49 (printed material) of the Harmonized Tariff Schedule, as well as portions of Chapter 38 (wood chemicals), 46 (rattan), and 94 (wooden furniture and prefabricated buildings).

MEXICO RESPONDS POSITIVELY TO UNITED STATES COMMENTS ON PROPOSED REGULATIONS

On October 26, the Secretariat for the Environment, Natural Resources and Fisheries (SEMARNAP) published in the Diario Oficial its responses to comments received following the publication of draft regulations on the importation of sawn wood and pallets. An analysis of the comments indicates that SEMARNAP will drop the requirement that the United States certify that these products originate in pest free areas (areas free of the pests of concern). USDA had indicated in its comments following the publication of the draft regulations that the United States would be unable to meet this requirement due to the prevalence of some of the pests in the United States. SEMARNAP has agreed to accept language on the phytosanitary certificate indicating the "product was inspected and is free of quarantine pests, and practically free of other pests and diseases."

NETHERLANDS BANS TREATED WOOD PRODUCTS

On October 1, 1999, the Government of the Netherlands (GON) banned the use of creosoted wood in applications which bring creosoted wood in direct contact with groundwater or the ground. Further restrictions beginning January 1, 2000, will cover the use of copper compounds as wood preservative. The Dutch Association for Wood Preservation (DAWP) has started a legal procedure against the GON action. DAWP is hopeful that the Dutch court will rule against this (partial) ban on wood preservatives.

CHINA TO IMPLEMENT SOLID WOOD PACKING MATERIAL RULE

On November 1, 1999, China announced a new solid wood packing material (SWPM) regulation to prevent the spread of the pinewood nematode (PWN). A pest risk assessment was also made available that same day. The new rule will go into effect for all shipments leaving the United States on or after January 1, 2000. All shipments leaving for China on or after that date will require specific certification concerning SWPM. Exporters must certify that the packing material either contains no solid wood, contains no coniferous wood, or that the coniferous wood has been heat treated to a core temperature of 56 degrees Celsius for 30 minutes or more. In addition, if it contains coniferous wood, USDA's Animal and Plant Health Inspection Service (APHIS) must also certify that the coniferous wood in the packing material has been heat treated. APHIS is currently developing a new form and regulations for the certification of coniferous packing material destined for shipment to China. Chinese officials report they have intercepted the PWN 44 times in United States shipments since October 1998. China is the latest addition to a growing list of countries, including the United States and Canada, that regulate solid wood packing material to prevent the introduction of new pests.

UNITED STATES SUBMITS DEREGULATION REQUEST TO JAPAN

On October 6, the United States presented to the Government of Japan its submission on deregulation and competition policy. The 45-page submission, covering key sectoral and structural areas, calls upon Japan to adopt a number of regulatory reforms, and builds upon progress made over the past two years of the initiative, i.e., the Enhanced Initiative on Deregulation and Competition Policy. In the housing area, the United States has requested reforms in Japan's land use policies (e.g. Land and House Lease Law), housing finance policies (e.g. the establishment of a property quality appraisal and assessment system), and the Building Standard Law of Japan (e.g. allowing the construction of four-story, multi-family and mixed-use construction in certain areas and the adoption of international test methods for measuring the fire resistance of interior finishes). The Housing Experts Group (HEG) which was set up under the Initiative to specifically address housing-related issues will meet in Washington, DC in mid-December to discuss the United States submission. The United States-Japan Wood Products Subcommittee, which handles a range of issues specific to improved market access and wood utilization in Japan, will meet following the HEG meeting.

UNITED STATES WITHDRAWS APPEAL OF WTO PANEL DECISION IN FSC DISPUTE

On November 2, the United States withdrew its notice of appeal of the October 8 decision of the WTO's dispute panel that the Foreign Sales Corporation (FSC) provisions of the United States Internal Revenue Code constitute a prohibited export subsidy under the WTO Agreement on Subsidies and Countervailing Measures. The FSC provisions permit a portion of income generated outside the territorial limits of the United States to be exempt from United States income taxes under specified conditions. To qualify for the exemption, the FSC must have a foreign presence, and meet certain management requirements and economic process requirements. The United States withdrawal was conditional on the right to file a new appeal.

UNITED STATES, CHINA SIGN HISTORIC TRADE AGREEMENT

On November 15, the United States and China successfully concluded bilateral talks on China's accession to the World Trade Organization. The agreement provides significant access for United States agricultural, industrial products and services, and covers both tariff and non-tariff barriers. China has agreed to cut tariffs from an overall average of 22.1 percent to 17.1 percent. Tariffs in the wood and paper products sectors will be cut significantly more, going from the current level of 12-25 percent to a level generally between 5-7.5 percent. China has also agreed to provide trading rights and distribution rights for United States exporters for the first time.