Notes on the USTR Watch Lists and Reports*

James Love
July 15, 1999

The US government has an elaborate system for monitoring global national economic policies, including policies on intellectual property.

Every year the US Government (USG) publishes a "Special 301" report that purports to "detail the adequacy and effectiveness of intellectual property protection" in countries throughout the world. This report is usually announced at the end or April or the beginning of May. The Special 301 report on intellectual property includes information on WTO disputes, "out-of-cycle reviews" of policies in various countries, and putting countries on the "Priority Watch List" or the regular "Watch list."

The USG also publishes an annual report called the National Trade Estimate Report on Foreign Trade Barriers (NTE)" that surveys "significant foreign barriers to U.S. exports." The NTE includes intellectual property disputes plus everything else the USTR cares about. In addition, from time to time the USTR will issue various press releases and statements about particular trade disputes.

Generally, a country gets in these various reports and lists by having laws, policies or practices that the US government (a) doesn't like, (b) considers important, and (c) is trying to change through bilateral pressure.

Being on a list itself is considered a trade sanction, because the US government is advertising the country as an investment risk. But in my opinion, the lists are more significant as a source of information about USG policy. That is, being on the list is much less important that the bilateral pressures the USG applies to countries on the topics mentioned on the list.

Few Americans understand how powerful and feared the USG is in the global economy. No country can do well economically without access to the US market, and often without USG support or cooperation on a wide range on issues. This is particularly true for small countries and poor countries. The USG is a huge presence in the WTO, the World Bank, the IMF and dozens of multinational organizations. The USG makes foreign policy decisions, gives or withholds economic aid, raises or lowers tariffs, grants visas, sells technology, resolves dumping cases, or does a thousand other things that make a difference to foreign governments.

If the USG wants something from Australia, New Zealand, South Africa, Zambia or any other country, it has enormous leverage. For example, South Africa is negotiating a very sensitive dispute over steel exports to the USA. Thailand was in a difficult position regarding the IMF when the economy collapsed. China wants to join the WTO. India is concerned about the USG position in its disputes with Pakistan. Israel receives enormous amounts of aid from the USA. Each of these countries are also facing very difficult trade disputes with the USA over pharmaceuticals.

When the USG puts a country on a Watch or Priority Watch list or publishes complaints about a country in the NTE, it is also doing quite a bit on the ground, lobbying a country to change its policies. Everything is ultimately linked to everything. Or, as one USTR official said, "its about power." The list is simply a roadmap to what the USG is using its power for.

In developing countries, being put on a list or being included in a USG report can make front page news, and there is enormous pressure on governments to get off the lists.

When the USTR put South Africa on the Watch List on April 30, 1999, one of the US complaints was that:

"During the past year, South African representatives have led a faction of nations in the World Health Organization (WHO) in calling for a reduction in the level of protection provided for pharmaceuticals in TRIPS."

Before the report was issued, Dr. Zuma, the Minister of Health for South Africa, was slated to be a member of a Ministers only panel discussion at the World Health Assembly on strategies to deal with HIV/AIDS with Secretary Shalala. Secretary Shalala's staff was very concerned that Zuma would blast the US government for its trade pressures on compulsory licensing or parallel imports. However, after the USTR report was issued, Dr. Zuma announced she would be campaigning in South Africa, and she was taken off the panel. Earlier the South African government had removed a government member from a panel at a different Geneva meeting on compulsory licensing. The official South African government position was that this had nothing to do with USTR's April 30 report, but there was wide sediment that the USTR action has chilled free speech in these international forums. Most African countries are quite afraid to be seen as hostile to USG trade positions, and for good reason.

My main point is that the list is an indication of pressure, much more than a sanction by itself.

* from a note on pharm-policy