FERF1I.A. BOGOMIL (1992): K|c si Amerika. GtaMni marketing Ljubljana HIBBS DOUGLAS. (1977): Political Parties and Macrocconomic Policy, American Political Science Review 71 JJNEBERRY. L ROBERT (1949) Government in America. Scott. Foresmann and Company. Boston VERNON. RAYMOND (1985): Storm over the Multinationals. Harvard University Press. Cambridge MARK A. COHEN* Slovene-U.S. trade relations: developments since Slovene independence and prospects for the future Although the potential volume in trade, investment, and other areas of commercial cooperation remains high between the U.S. and Slovenia, neither the United States nor Slovenia have shown the concerted level of dynamism and interest necessary for relations to flourish. The last two years have primarily been a period of lost opportunities on both sides of the Atlantic. Current volume of trade and investment According to Slovene government statistics total imports from the United States in 1992 equalled USD 175.4 million, while total exports to the United States equalled USD 143.5 million. This represents 3.1% of total Slovene exports and 2.7% of total Slovene imports. As a percentage of U.S. trade, these numbers are almost inconsequential. The overall volume of Slovene trade with the United States is also low compared with the volume of trade conducted by Slovenia's developed neighbors with the United States, or of Slovenia's turnover with Germany, Croatia, Italy or France1. More discouraging than bilateral trade volume is the level of U.S. investment in Slovenia. According to the database of the CICD. there were 20 U.S. investments in Slovenia from 1985-91, valued at only 11.6 million DEM. These investments represented 1.9% of total foreign invested capital in Slovenia.5 This number is also when compared to U.S. investment in another former Communist country, Hungary, where U.S. investment in Hungary totaled $ 269 million during the same ' Copyright by Mark A. Cohen. Washington. DC. This article is dedicated lo my wife. Ehssa J D . Columbia University School of Law (19S4); M.A. University of Wisconsin (1979); B A. SUNY Albany (1977); Certificate • Nanyang University. Republic of Slovenia (1976) The writer is currently a visiting Fulbfight Lecturer lo the law faculties at the University of Maribor and University of Ljubljana under the Support for Eastern European Democracy ("SEED") Program of the United States Government He is also of counsel to the law firm of Moore ft Bruce in Washington. DC. The views expressed in this article are the writer's own opinions and should not be construed as representing in any way the opinions of the governments of Slovenia or the United States, of any company of individual, or of the writer himself in any future proceeding or situation. 1 Center few International Cooperation and Development ("CICD"). Doing Business in Slottnia. at 30 (1993) 1 Id at 34-35. 101 Teorifa in praksa. let. 31. II. 1-2. Ljubljana 1994 period.' Also, by comparison, U.S. investment in Poland was about 12% of total foreign investments or about 8% of total foreign invested capital in 1991.4 Of course, considering the relatively low level of invested capital throughout the region, any significant investment could make one country a leader in attracting U.S. investment. Slovenia's attractiveness to foreign investors is, however, generally unbalanced. 91.9% of its investments originated in Germany, Italy and Austria. These three countries also represent 76.3% of total invested capital. A large proportion of this investment capital originated in the Slovene diaspora in these neighboring countries.' A more optimistic view of U.S.-Slovene trade may be made by comparing it with the volume of U.S. trade with other former communist countries in the region. In the early 1990's, the United States has generally conducted as much trade with Slovenia as with a number of formerly communist countries including Albania, Bulgaria. Czech and Slovak Federal Republic, and all three of the Baltic states combined.' The early period of sanctions Many Slovenes blame the United States with beginning relations with a "wrong step" forward. In early December 1991 President Bush sanctioned all of the "break-away" Yugoslav republics without any demonstrable positive effect on U.S. political interests or human rights. President Bush's sanctions included termination of eligibility of eligible Yugoslav exports for duty free import into the United States under the U.S. Generalized System of Preferences program ("GSP"). termination of textile visa arrangements, and a general suspension of foreign aid grants under the SEED Program subject to limited exceptions. Certain foreign aid to alleviate the suffering of innocent victims of the bloodshed between Serbia and Croatia was also authorized. The U.S. government at first appeared to be following EC initiatives in imposing sanctions. One month prior to the sanctions announcement, on November 9, President Bush announced he would strongly back EC sanctions against Yugoslavia by implementing comparable measures. Although the EC stated it would impose sanctions that were in fact similar to those announced by the United States, it also withdrew them and opted to recognize Slovenia and Croatia before the U.S. sanctions were implemented. The United States ultimately became the principal sanctioning country of Slovenia with many countries extending complete recognition and withdrawing sanctions effective January 15,1992. The U.S. decision to maintain sanctions and withhold recognition was in actually an independent process that ultimately served to the damage the perception of America in Slove- ' See U.S. Trade Representative. Sational Trade Estimates Report (I»93). at 115. 4 US A FCS, Poland Country Marketing Plan. FY 1992 (US Foreign 4 Commercial Serv«. Wanav. 1991) al 5-6. ' See Matj)a Rojcc. Foreign Direct Investment in Slovenia. Some Aspects of Foreign Investors' Considerations (Ministry of Economic Relations and Development 1995). at 17 ("ll n quite probable that In approximately one third ol FDI |foreign direct investment | protects in Slovenia foreign investors arc directly or indirectly of "Slovene origin Due to the large number of "Slovene" companies in Germany and Austria, this category of foreign investors in Slovenia is especially relevant in the case of these two countries.") * U S International Trade Commission. Trade Between the United States and China, the Former Soviet Vnum. Central and Eastern Europe, the Baltic Nations. and Other Selected Countries During July ■ September 1992 (Feb 1993) 102 nia. Even the U.S. government's timing was wrong: the sanctions against Slovenia came into effect 15 days after their announcement - on December 24, 1991 - a "Christmas Gift" to Catholic Slovenia and Croatia.7 In implementing certain of the sanctions. President Bush not only deviated from the European policies he had intended to follow, but also the mandates of U.S. law. The GSP program was established by the Trade Act of 1974, as amended. Sections 504(a)(2) and 502(a)2 of this legislation mandate that the withdrawal or suspension of the "designation of any country as a beneficiary developing country," or "any order which has the effect of terminating such designation", requires at least 60 days advance notification to the House of Representatives and Senate of such actions, together with the considerations for this decision. No such advance notice was provided. This 60 day advance notice would have provided a smoother transition to affected importers and delayed implementation to early February 1992, when the poorly conceived nature of the sanctions may have been more self-evident. Ultimately, the loss of GSP benefits cost Slovene exporters millions of dollars in extra duties, as well injecting an unneccesary element of uncertainty into commercial affairs. Termination of the textile visa program, although styled as a sanction, was an effort to help Slovenia. Slovene exporters were unable to export textiles to the United States for some time previous to this "sanction" because Belgrade had made the visas unavailable to Slovene manufacturers. No similar official termination of Belgrade authority was, however, apparently undertaken in other regulated areas such as food and drug imports. The embargo on arms to Slovenia which was initiated at about the time of President Bush's sanctions, has also had its own negative effects. Since recognition, Slovenia has however received so-called "dual use" goods (civil/military) from the United States, including an air traffic control system and may find a more receptive U.S. government in the case-by-case analysis undertaken of such exports. Slovenia and former Yugoslavia - the continuing comparisons Merely blaming President Bush and the sanctions policy for the current state of U.S.-Slovene commercial relations is to ignore independent factors that have limited U.S.-Slovene trade. The most important difference in Slovene attractiveness to U.S investors is that the Slovene market is considerably smaller than the Yugoslav market, and apart from all other considerations may very well not be worth the effort for some U.S. companies. The constant association in the U.S. media of Slovenia with Croatia as a "break-away republic" and an unsafe place has also had a commercial effect. Even long-term customers of imported Slovene goods began to question the reliability of supply, while potential investors were disinterested in the perceived risks of Slovenia. Moreover, many older Americans, remembering Croatia and Serbia's positions in World War II, as well as the role of the Yugoslav partisans, also had initial difficulties believing that Serbia was the "enemy" while Slovenia and Croatia were fighting for autonomy and human rights. 7 Presidential Proclamation 6389 of Dec 3. 1991. to Amend the Generalized Syucm of Preferences. 56 Fed Reg 64467 (Dec. 9. 1991). 103 Teorija in praku. let 31. U. 1-2. L)uN|ana 1994 At the same time, various individuals and institutions that formerly functioned to facilitate trade, such as the U.S.-Yugoslav Business Council, encountered serious difficulties in trying to assist individual republics and maintaining its membership.» Many educated Americans continue to remain confused about the geography of Slovenia. To this date, for example, it is nearly impossible to arrange a tour of Slovenia from the United States except through certain specialized tour agencies.* During my several months here, I have also noticed that mail from the United States to Slovenia is also routinely misdelivered - Americans resident in Slovenia routinely receive letters that were routed through Slovakia, Hungary and Poland by the U.S. Postal Service. Mail delivery to Slovenia from the East Coast of the United States is frequently slower than mail to East Asia. It may take as long as 21 days. This slowness, coupled with the exorbitant costs in Slovenia of making overseas telephone calls has impeded the free flow of communication and trade. Amb. Albright's referring to Slovenia as a "Balkan" country on her visit in January, has been perceived by many Americans friendly to Slovenia as a welcome mistake that may hopefully lead to further corrections in American thinking. It also appears that the Slovene government never fully understood the full effects of disrupting over one hundred years of commercial ties and legal structures with former republics of Yugoslavia. The State Department's official record-."Treaties in Force" has, for example, recorded a Treaty of Commerce signed in Belgrade October 1881 and entered into force November 15, 1882.'° Other legal arrangements that were over 60 years old included an extradition treaty dating to 1901 (signed at Belgrade); a consular convention of 1881 (signed at Belgrade); a money order convention (1924) (signed at Washington); and an agreement relating to the exchanged at Belgrade)." The collapse of Yugoslavia jeopardized these agreements as well as a range of other government programs supporting trade: Overseas Private Investment Insurance for political risk; Export/Import Bank for export credit and export insurance; Commodity Credit Insurance Program for sale of agricultural commodities, etc. Slovenia also was prohibited from participating in the range of new programs for the emerging democracies in Eastern Europe - including the SEED Program, U.S.-government funded consortia for American businesses, trade missions, bilateral investment treaties and bilateral tax treaties, etc. Some of these programs may still not have been fully reinstituted. Ultimately, even if Slovenia had been immediately recognized by the United States, the former privileged status of Yugoslavia as a friendly non-aligned country ' The U.S.-Yugoslav Business Council ultimately rettructured itself by establishing business councils lot individual republic* Apart from lh» restructuring, it it now actively seeking to establish organizations of American investors within the former republics, and has decentralized itself in the hope of attracting wider membership and wider involvement On December 31, 1993. Mr Richard Johnson, the long-term President of the Council, retired. Certain Slovene.American organizations were, of course, active in supporting diplomatic and commercial lies with Slovenia after the sanctions were imposed In addition, the Slovene-American Business Community has itself established a non-profit corporation in New York City to assist it in the U.S. market A similar organization has also been established in Canada. * The U.S. government in its official Consular Information Sheet also notes that although Slovenia "is essentially unaffected by the war in Bosnia-Herzegovina, tourist facilities |that) are available may be limited, especially in more rural pans of the country " (Sept. 1993). 10 Treaties in Force. A List of Treaties and Other International Agreements of Ihe United States tn Force on January 1. 1992 (State Department 1992) at 270. " Id at 269-272. 104 would have been lost. During the cold war era, many of the U.S. trade rules which discriminated against communist, non-market or state-controlled economies by denying them GSP benefits, imposing onerous antidumping duties under a special non-market economy calculation or by permitting special actions to be filed against increasing imports from communist countries (Section 406 of the Trade Act of 1974).13 These punitive measures were not imposed on Yugoslavia even when it was a self-avowed communist state. Imports from Yugoslavia were also not subject to the separate customs reporting system for the flow of imports and exports with "non-market economy countries" under Section 410 of the Trade Act of 1974." Some scholars may believe that those determinations to treaty Yugoslavia more favorably than other communist countries were political and not economic." Such a belief is supported by recent decisions in the United States which have found that social ownership is the same as state ownership for purposes of U.S. sanctions against Yugoslavia - thereby suggesting that Yugoslavia should have been considered a non-market, or state-controlled or communist economy country under the various U.S. trade laws. Milena Ship Management Company v. New-comb. 995 F.2d 660 (5th Cir.1993). An apparent similar reversal was made by the Canadian Import Tribunal when it recently ruled that imports from Macedonia of steel products produced by from Rudnici Zelezara Skopje are, in fact, products of a state-controlled economy, and imposed preliminary antidumping duties at an average level of 40.9%" Apart from its loss of a privileged status, Slovenia must compete for the attention of U.S. business people with the Czech Republic, Poland and Hungary - all of which are seen as in the "front-line" of market reform. Delays in privatization and denationalization have jeopardized Slovenia's potential to be viewed as a "front-line" former Communist state. Response to the new order in Slovenia One of the most rapid official acts in continuing bilateral trade occurred on April 29,1992 when the U.S. Department of Agriculture. Food Safety and Inspection Service ("FSIS") published an interim rule with immediate effectiveness to authorize Slovenia to continue to be eligible to import meat into the United States. As noted before, the U.S. government, when it imposed sanctions, had not divested Serbia of its regulatory authority over exports to the United States. Yugosla- " 19 U.S.C. Sec 2436 11 19 U.S.C. Sec. 2440. see. eg. Trade Between die United Stales and China, the Former Soviet Union. Central and Eastern Europe, the Baltic Nations, and other Selected Countries, supra. " For a discussion of U.S. policy towards unfair pricing activities from Yugoslav enterprise, sec Robert A Anthony. The American Response to Dumping From Capitalist and Socialist Economies - Substantia? Procedures After the /977 Gaa Code. 1969 Cornell Law Review at 1S9 - 231, especially at p. 200 et seq. ("The Treasury [Department) has evolved a special test of (air value for the products of countries having controlled economies.' and has consistently through the 1960 s applied it to merchandise »ported from communist nations other than Yugoslavia ' |f£mphasts added|) (p. 200). For a general dnrussion of current U.S import relief policy towards "economies in transition" set Stephanie Mitchell. "The 1988-89 Department of Commerce Study on the People's Republic of China and Its Implications for Economies in Transition'." The Commerce Department Speaks 1990. vol. 2. 501 (1990). U Canadian Import Tribunal. Statement of Reasons Certain Hoi Rolled Carbon Steel Plate And High Strength Low Alloy Plat. Heal Treated or Not. Originating In or Exported From Belgium, Brazil. The Ctech and Slovak Federal Republic. Denmark. The Federal Republic of Germany. Romania. The United Kingdom. The United Stales of America and the Former Yugoslav Republic of Macedonia (preliminary determination), Jan. 6. 1993. Note that Slovcnskc Zelezarnc (the Slovene Steelworks) had succeeded in excluding itself been excluded from this investigation and was not a pan of this determination. 105 Teorifa in praksa. let. 31. II. 1-2. Ljubljana 1994 via had been listed as eligible to import meat products by the United States on June 25, 1959. On October 18, 1991, Serbia notified FSIS that it could no longer maintain supervisory control over meat facilities in Slovenia. At the same time, Serbia continued to certify a meat facility that had been destroyed in the Serbian-Croatian war as eligible to export meat to the United States. On April 17, 1992 Slovene inspection officials notified FSIS that they continued to maintain supervisory control over the meat inspection system, that they enforced these rules prior to October 18, 1991, and that the standards for inspection. sanitation, quality, species verification, residues and other requirements were appropriately applied. Because of these efforts, the FSIS deemed it unnecessary to reevaluate Slovenia's meat inspection regime - a process that could have taken several years, resulting in a loss of customers and reputation." Similar flexibility was demonstrated by the U.S. government in handling of treaty-trader visas. The treaty-trader visa program with Yugoslavia permitted Slovene representatives in the U.S. to obtain one year renewable visas. In response to an inquiry made by this attorney on behalf of the Slovene business community, the U.S. State Department formally advised that Slovenes could continue to benefit from the former Yugoslav treaty- trader program the same day the inquiry was made. Sometimes such U.S. efforts at flexibility may not have been fully supported by Slovene authorities. In the fall of 1992 I had been informed that the State Department had considered reinstating Slovenia in the GSP program earlier that spring, before the actual recognition of Slovenia as an independent state. This was considered permissible under U.S. trade law, and would have provided considerable comfort to Slovene government officials who had agonized over U.S. delay in recognition. Yet, this effort was not widely known in the business community and may not have been well known to the Slovene Embassy in Washington. Inconsistent Slovene arguments about Slovenia While Slovenia may have been eligible to re-obtain GSP prior to recognition, it appears that the wood furniture industry in Slovenia may have played an instrumental role in delaying the return of GSP benefits to Slovenia generally. GSP benefits for certain wood furniture products in the 1980's. In apparent response to pressure from the wood furniture industry, the Chamber of Economy of Slovenia argued that wood furniture should requalify for eligibility under the GSP program: The Chamber of Economy of Slovenia respectfully requests the [U.S. Government] to grant GSP eligibility to the... four wood furniture items. Slovenia should not be subject to the limitations placed on Yugoslavia. Slovenia is a newly recognized (by the United States), independent, sovereign nation. Slovenia is not a successor country to the rights and liabilities of Yugoslavia. Slovenia should be permitted to enter the GSP program de novo and ab initio, form the beginning and anew or afresh." " U S Department of Agriculture. Food Safety and Inspection Service. Imported Product Addition of Croatia and Slovenia 10 the Lut of EUgibieCouniries.il M. Keg 1807» (Interim Rule ■ April 29.1992); 57 Fed. Reg 368*9 (Final Rule -August 17. 1992). " Submission of The Chamber ol Economy of Slovenia to Office of the United Stales Trade Representative. June 9. 1992, at 6 (nonconfidential version). 106 A less expansive and more reasonable argument was made by Slovene Government in support of GSP treatment for wood furniture: As a matter of law, the limitations applied to wood chairs and parts thereof from Yugoslavia do not apply to Slovenia because the President has not determined to withdraw GSP for wood chairs from Slovenia. Moreover, fundamental fairness dictates that the President should make an independent determination concerning Slovenia and that Slovenia should not be prejudged and required to automatically bear the burden of adverse GSP determinations previously applied to Yugoslavia." The Slovene Government and Chamber of Economy provided no comparable public written support for the manufacturers of products other than wood furniture. More importantly, Slovene authorities also did not explicitly disavow the contention. in the submission of the Chamber of Economy, that Slovenia is not a successor to the rights and liabilities of Yugoslavia. These positions were inconsistent with Slovenia's continued eligibility to export meat, participate in treaty trader arrangements and continue other agreements that had formerly been entered into by Yugoslavia. The notion that Slovenia is "completely new" naturally invited a review of the statutory criteria of Slovene eligibility for the GSP program anew, thereby delaying GSP benefits for all manufacturers. Such criteria include a review of Slovene labor, intellectual property, arbitration, investment protection and other practices." Of course, the arguments of the wood furniture industry were also inconsistent with other Slovene efforts to ensure a continuity of legal relationships domestically and with other countries. The Slovene government had eloquently argued in numerous contexts that Slovenia should continue the GSP arrangement, because "nothing had changed." The Deputy Foreign Minister of Slovenia had argued such in response to a government questionnaires as well as in public writings: The Republic of Slovenia will continue to apply all the... regulations previously used by the Yugoslav government.. Ultimately, the United States was among the slowest in returning GSP benefits to Slovenia - most developed countries, including Norway, Finland, Sweden, Canada. Austria, Taiwan and member countries of the European Community-'1 had extended GSP or similar benefits to Slovenia immediately after recognition or with retroactive effect." Bilateral trade disputes Trade friction is inevitable in the development of bilateral relations. The rather low level of trade, a lack of recognition of Slovenia as such, and an apparent " Submission of Hon Emeu Pctric to USTR, June 10. 1992 11 p. 13. " 19 U.S.C Sea 2561-24*5 ;0 Vojka Ravbar. "In Search o( Lou Trust." Slovenian Builnesi Report Feb. 1992 at 8.9. :> According to the CI CD. Ibe following countncs lud «tended GSP treatment to Slovenia as of June 199}: Austria, Australia, Canada. Crech Republic. Slovak Republic. Finland. Japan. Norway. Sweden. Switzerland. Taiwan and the USA. The CICD also notes that "These countries have recognised the general preferential lanff treatment according to GSP to Slovenia in the same extent as with regard to former Yugoslavia." Doing Businra In SUn-enia. tupra. at 73. " Non-wood furniture manufacturers had also argued that GSP should be reinstated retroactively and had nearly convinced USTR of this, with the support of sympathetic congressmen such as Dennis Eckerr and James Oberstar These producers had a kind of moral victory when the GSP statute was extended the following year after a hiatus in benefits and reinstated with retroactive effect for all countries The idea for such retroactivity may have in fact originated with Slovenia. 107 Teorifa in praksa. let. 31. II. 1-2. Ljubljana 1994 record of being a fair trader have contributed to a near absence of bilateral trade disputes. The last U.S. antidumping case filed against Yugoslavia" also foreshadowed the breakup of Yugoslavia. Slovenia's sole producer of the subject product, Mer-cator, was separately represented from other Yugoslav producers. Nonetheless, all Yugoslav manufacturers of the affected product were able to defeat this antidumping case at the "preliminary investigation" stage by demonstrating that there was no reasonable indication that imports of this product were injuring the U.S. industry. More recently, in the United States, a massive antidumping case" did not name Slovenia as a party to the investigation, most likely bccause of Slovenia's limited presence in the U.S. market and relatively low level of threat to U.S. manufacturer. The fact that Slovenia has not been a named party to an unfair trade investigation does not preclude the possibility of being named in the future. One particular problem is the lack of Slovene succession to the GAIT subsidies code or similar agreements. By failing to sign the GATT subsidies Code (Yugoslavia did not) or entering into similar disciplines with the United States, Slovenia is vulnerable to being the subject of countervailing duty (anti-subsidy) investigations by healthy U.S. industries who will not need to prove that such subsidized imports are injuring them. " If Slovenia signed the GATT Subsidies Code, U.S. industries would have to demonstrate injury by reason of these imports in order for special duties to be imposed. Slovenia should also be careful in drafting its foreign trade laws and regulations, and in executive decisions, that any subsidies to adjust to imports or export promotion conform to the GATT Subsidies Code. Non-conforming legislation or regulations could otherwise create a "road map" for foreign protectionist industries intent on excluding Slovene exports. Further, protectionist foreign interests could easily argue that any subsidy extended in Slovenia is intended to promote exports because of Slovenia's overall dependence on exports, thereby possibly establishing a prima facie case that a subsidy exists. Notwithstanding these risks. Slovene manufacturers who depend on exports can structure the benefits they receive from the government or pricing of their exports to limit the impact of unfair trade allegations. They might, in particular, ensure that they are not selling below cost or home market prices and thereby limit the adverse impact of antidumping investigations. They should also take steps to insure that they are not viewed as posing a threat to industries in large markets such as the United States. Unfortunately, Slovenia faces the basic problem in the U.S. market of sometimes having to price at low levels in order to gain an entry to the U.S. market. 23 Tart Cherry Juke and Cherry Juice Concentrate from Germany and Yugoslavia. Inv. Noi. 731-TA-512 Mid 513 (Preliminary). USITC Pub. 2378