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U.S.: Simplify Trade Restrictions

WASHINGTON -- The U.S. on Monday made formal requests of World Trade Organization nations to knock down trade barriers in distribution services, which often hamper American retailers from wholly owning their stores or building large stores...

WASHINGTON — The U.S. on Monday made formal requests of World Trade Organization nations to knock down trade barriers in distribution services, which often hamper American retailers from wholly owning their stores or building large stores overseas.

This story first appeared in the July 2, 2002 issue of WWD.  Subscribe Today.

The U.S. is requesting “full market access” for retail, wholesale and franchising services rendered either directly to customers from a fixed location, like a store, or away from a fixed location via direct person-to-person, catalog, telephone, video or electronic sales.

It is one stage in the ongoing WTO trade negotiations launched in Doha, Qatar, last November, which are aimed at lowering trade barriers among the 144 member countries.

The U.S. will also negotiate whether to lower duties on apparel and textiles later in the talks, which are slated to be completed by 2005.

Besides distribution services, the U.S. made requests Monday on banking, telecommunications, computers and express delivery services.

Each country with an interest in services has the right to make requests of its trading partners, which are then negotiated to create an agreement covering all WTO members.

“Liberalizing services has a force multiplier effect, reverberating across an entire economy — every product, idea or consumer benefits from a more effective and efficient service sector,” said U.S. Trade Representative Robert Zoellick, in a statement. “To the extent that the service sector is opened and modernized, countries will receive an economic boost.”

Service industries account for 80 percent of U.S. employment and 63 percent of the U.S. Gross Domestic Product, according to the USTR. The U.S. is also the world’s largest exporter of services, and service exports have doubled over the last 10 years, increasing to $279 billion in 2000, according to the U.S. Department of Commerce.

The proposals suggest that WTO members remove “cumbersome and often costly” regulatory procedures that make it difficult for U.S. service providers to conduct business in foreign countries.

“The problems of distribution services [in foreign countries] read like a laundry list, ranging from equity restrictions to limited repatriation of profits,” said Erik Autor, vice president and international trade counsel at the National Retail Federation, which represents the interests of hundreds of retailers. “For retailers, nontransparent regulations translate into restrictions on the size and location of stores and what product retailers can sell.”

A case in point is China, which joined the WTO last December.

As part of its joining, China agreed to allow single-brand retailers like Nike and Gap to expand in the country in three years without selling a stake in the business to local investors.

[For a related story on China and the WTO, see page 11.]

But China’s current rules for foreign retailers are strict.

The Chinese maintained a rule mandating multibrand retailers, like department stores and mass merchants, to have local investors if they want to open more than 30 stores in the nation. That rule also applies to foreign-owned stores larger than 65,616 square feet.

Many experts say it will be years before barriers to China’s market are fully dismantled, as local governments continue to impose burdensome rules on foreign firms.

Autor noted that China also requires retailers to produce a certain percentage of products locally and export a certain percentage of products.

Peter Allgeier, a deputy U.S. Trade Representative, said in a teleconference Monday that the U.S. has made broad service requests of China, though he refused to say whether the U.S. is asking China to completely lift ownership restrictions.

“Our general principle is there should not be restrictions on equity,” said Allgeier. “We are aware that countries that have just acceded to the WTO have made a number of commitments, but we don’t think that should end liberalization of services in China or any other country.”

Retailers also face other service issues around the world, including the transport of products within a country and warehouse ownership.

Autor said the problematic countries, in terms of increased market access for retailers, are the “big emerging markets,” such as Brazil, China and India. He also pointed to Germany and Japan.

“We want to see more countries commit to a schedule [of commitment to liberalize] and advance market access rather than embrace the status quo,” Autor said.”