[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                   WTO SINGAPORE MINISTERIAL MEETING

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 26, 1997

                               __________

                             Serial 105-83

                               __________

         Printed for the use of the Committee on Ways and Means


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 58-930 CC                   WASHINGTON : 1999
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                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky                WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri

                     A.L. Singleton, Chief of Staff
                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman

BILL THOMAS, California              ROBERT T. MATSUI, California
E. CLAY SHAW, Jr., Florida           CHARLES B. RANGEL, New York
AMO HOUGHTON, New York               RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
WALLY HERGER, California
JIM NUSSLE, Iowa


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of January 31, 1997, announcing the hearing.............     2

                               WITNESSES

Office of the U.S. Trade Representative, Hon. Jeffrey M. Lang, 
  Deputy U.S. Trade Representative...............................    10
U.S. General Accounting Office, JayEtta Z. Hecker, Associate 
  Director, International Relations and Trade Issues, National 
  Security and International Affairs Division....................    40

                                 ______

American Farm Bureau Federation, Ed Wiederstein, as presented by 
  John Keeling...................................................   103
American Forest & Paper Association, Maureen R. Smith............   167
Boidock, John, Texas Instruments, Inc., and Semiconductor 
  Industry Association...........................................    72
Christian-Green, Hon. Donna M., a Delegate in Congress from the 
  U.S. Virgin Islands............................................   163
Coalition of Service Industries, Robert Vastine..................   112
Cornell Dubilier, James Kaplan, Jr...............................    78
Corning, Incorporated, Timothy J. Regan..........................    65
Cross, Aaron W., IBM, and Information Technology Industry Council    57
Distilled Spirits Council of the United States, Inc., Fred A. 
  Meister........................................................   179
Grocery Manufacturers of America, Inc., Karil L. Kochenderfer....   172
IBM, Aaron W. Cross..............................................    57
Information Technology Industry Council, Aaron W. Cross..........    57
Iowa Farm Bureau Federation, Ed Wiederstein, as presented by John 
  Keeling, American Farm Bureau Federation.......................   103
Kaplan, James, Jr., Cornell Dubilier, and Passive Electronics 
  Coalition......................................................    78
Keeling, John, American Farm Bureau Federation, presenting 
  statement of Ed Wiederstein, Iowa Farm Bureau Federation, and 
  American Farm Bureau Federation................................   103
Kemet Electronics Corp., Don Poinsette...........................    78
Kochenderfer, Karil L., Grocery Manufacturers of America, Inc....   172
Labor-Industry Coalition for International Trade, Laird Patterson   123
Meister, Fred A., Distilled Spirits Council of the United States, 
  Inc............................................................   179
Passive Electronics Coalition:
    Don Poinsette................................................    78
    James Kaplan, Jr.............................................    78
Patterson, Laird, Labor-Industry Coalition for International 
  Trade..........................................................   123
Philips Components, Kevin Rafferty...............................    90
Poinsette, Don, Kemet Electronics Corp., and Passive Electronics 
  Coalition......................................................    78
Rafferty, Kevin, Philips Components..............................    90
Regan, Timothy J., Corning, Inc..................................    65
Sandstrom, Mark, Thompson Hine & Flory LLP.......................   146
Semiconductor Industry Association, John Boidock.................    72
Smith, Maureen R., American Forest & Paper Association...........   167
Stewart, Terence P., Stewart and Stewart.........................   134
Texas Instruments, Inc., John Boidock............................    72
Vastine, Robert, Coalition of Service Industries.................   112
Wiederstein, Ed, Iowa Farm Bureau Federation, and American Farm 
  Bureau Federation, as presented by John Keeling, American Farm 
  Bureau Federation..............................................   103

                       SUBMISSIONS FOR THE RECORD

American Iron and Steel Institute, statement.....................   186
American Textile Manufacturers Institute, Carlos Moore, letter...   189
Bacardi, LTD., Miami, FL, Steven Naclerio, statement.............   192
Philips Electronics, Patricia A. Franco, letter..................   194
Puerto Rico, Government of, Jaime F. Morgan-Stubbe, statement....   196
Software Publishers Association, statement.......................   198



                   WTO SINGAPORE MINISTERIAL MEETING

                              ----------                              


                      WEDNESDAY, FEBRUARY 26, 1997

                  House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:04 a.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

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    Chairman Crane. Will all of our guests please take their 
seats?
    Good morning and welcome to the first hearing in the 105th 
Congress of the Ways and Means Trade Subcommittee. The purpose 
of this hearing is to examine the outcome of the WTO Singapore 
Ministerial Meeting held in December, especially the 
Information Technology Agreement endorsed by the Ministers at 
the meeting, and the basic telecommunications services 
agreement concluded last week.
    In addition, we will study the prospects for the future of 
the WTO, including the built-in agenda set for further 
negotiation, additional market access, liberalization, the 
extended services negotiations and potential new issues for 
further negotiation.
    I led a delegation of the Ways and Means Members to the 
Singapore meeting in December and had an opportunity to meet 
with WTO officials, representatives from delegations of our 
trading partners and business representatives. I believe that 
the meeting successfully provided a significant opportunity for 
us to assess how the WTO Agreements have been functioning and 
to look to the future, laying the groundwork for future 
negotiations on tariffs, services and the built-in agenda.
    The most significant outcome was the endorsement of the 
Information Technology Agreement, an agreement that will reduce 
tariffs on information technology products. I look forward to 
hearing what the impact of this agreement will be on various 
U.S. industries.
    In addition, although it was not a formal focus of the 
Ministerial, I was gratified that our discussions with a wide 
variety of other delegations demonstrated that our trading 
partners agree with the U.S. view that accessions to the WTO 
should take place only under commercially acceptable terms.
    Finally, I would note my agreement with the conclusion of 
the Ministers that the WTO should focus on trade related issues 
only and that labor issues are best addressed by the 
International Labor Organization.
    I now recognize our distinguished Ranking Member, Mr. 
Matsui, for any statement he would like to make.
    Mr. Matsui. Thank you, Mr. Chairman.
    I want to thank you and congratulate you for holding this 
hearing and also for leading the delegation to the Ministerial 
Meeting in Singapore. I might just point out that Karen 
Thurman, our newest Member, was also part of that delegation 
and she is here today. Although, not a Member of the Trade 
Subcommittee, we welcome her here.
    I would just like to congratulate the administration for 
both the information technology agreement and also the recent 
telecommunications agreement. I know it was very, very 
difficult. On the other hand, I think you achieved quite a 
miracle and a double-header, so to speak, and I think as a 
result of this the United States is going to be very well 
positioned as we approach the 21st century to compete and 
certainly it is going to create hundreds of thousands of jobs 
over the next 10, 15, 20 years.
    And, so, congratulations for that effort and we look 
forward to working with you on other issues that Chairman Crane 
has spoken about, obviously investment issues and others. And, 
so, again, Mr. Chairman, thank you and I look forward to 
working with you, as well.
    [The opening statements follow:]

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[GRAPHIC] [TIFF OMITTED] T8930.506

      

                                


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[GRAPHIC] [TIFF OMITTED] T8930.508

      

                                


    Chairman Crane. Thank you, Mr. Matsui.
    Today we will hear from a number of distinguished witnesses 
and in the interest of time, I would ask that you try to keep 
your oral testimony to 5 minutes, and we will include longer, 
written statements in the record.
    Our first witness will be Deputy U.S. Trade Representative 
Jeffrey Lang.
    Ambassador Lang, let me congratulate you on your hard work 
in concluding the WTO basic telecommunications services 
negotiations last week.
    I believe that this agreement is a tremendous example of 
how opening markets abroad will benefit our businesses and U.S. 
consumers. And I might add, parenthetically, that Ambassador 
Barshefsky, as I understand it, is tied up with the meetings in 
anticipation of President Frei's speech to the Congress 
tomorrow. It is probably just as well because you can pay her 
appropriate tribute that she could not claim herself for the 
outstanding job she did in Singapore.
    With that, I yield to you, Mr. Lang.

     STATEMENT OF HON. JEFFREY M. LANG, DEPUTY U.S. TRADE 
    REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE

    Mr. Lang. Thank you, Mr. Chairman and thank you, Mr. 
Matsui. You are absolutely right about Charlene Barshefsky, she 
has picked up this job in midfield and run hard with the ball 
and done what I think is just a spectacular job here. I truly 
regret that she cannot be with you, especially since so many 
Members have shown up. I think there is a lot to do this year 
in trade.
    I was going to give an oral statement which was supposed to 
be half of the written statement, I scratched out half of that 
and I will now remove half of that and see if I can cut through 
this quickly and leave plenty of time for questions.
    But I do think there are a couple of important points that 
I should make on behalf of the administration. First, the WTO 
is the center of the system. Remember the trading system is 
designed to ensure a rising standard of living for our people, 
not just opportunities for firms, but opportunities for workers 
and communities and everybody else in this country.
    These are things that the WTO is tailormade to do and to do 
in a new world where we are going to have to be faster of foot 
and more flexible than we have been in the past with the old 
system of rounds.
    Now, the Ministerial in Singapore was a significant 
meeting, because it was the first meeting of the WTO when we 
were going to try and put these principles into effect. So, we 
had to make some breaks with the past and move into an 
organization that was going to be able to deal with a world of 
18-month product life cycles. This is going to require some 
different ways of doing things.
    Obviously, the main things we were looking at was how the 
agreements are being implemented? How were we going to advance 
the ongoing work? And then the area that received the most 
press attention about these new areas that have to be explored 
in the future.
    We are, as I take it some of you are, pleased with the 
results from Singapore. The ITA is obviously a major 
accomplishment. But also the businesslike way the meetings were 
conducted, the precedents they set for future Ministerials in 
terms of the work that can be done on paper, without Ministers 
having to get involved, is enormously important because we have 
to chew through so much more treaty text today than we ever 
have had to do in the past.
    Ministerials are absolutely essential. We have to have 
political oversight of the trading system. And it was very 
important not only that there was an interagency team from the 
administration there, but that there was strong representation 
from the Congress and, in particular, this Committee. Everybody 
in the world knows exactly how the American political system 
operates and they know that without support and active 
participation by the Congress, the administration cannot move 
forward on a trade policy without bipartisan Congressional 
support.
    Now, let me just mention a couple of things that I think 
were important at the meeting. One was, in terms of this issue 
of implementation--which is not particularly high-profile or 
sexy but is enormously important--the key thing that went on in 
Singapore was that the United States was able to get the system 
working early in 1996 to produce the basic implementation 
reports that we needed Ministers to approve in order to be able 
to move the system forward in the next 2 years.
    If you take a subject like agriculture, for example, there 
is obviously a lot of resistance from some of our major trading 
partners about moving forward in agriculture in accordance with 
a built-in agenda.
    A lot of the work that led to the decision at Singapore to 
immediately begin an exchange of information and analysis on 
agriculture depended on the Committee work that had gone on 
sort of below the surface in Geneva all year. Using those 
Committees in Geneva is an important way to advance American 
interests. It does not get much coverage but it does advance 
our interests very substantially.
    With regard to the enforcement action, I would emphasize 
here that, of course, the high profile thing is dispute 
settlement and we are far and away the most active user of the 
dispute settlement system. Probably 40 percent of the cases 
involve the United States mostly as a plaintiff.
    But it is also important that we use the committee system 
in that regard. There are many countries whose trade practices 
are objectionable to us. We can raise those practices in 
committees, like the balance of payments committee, for 
example. Seven or eight countries gave up balance of payments 
cover in Singapore because of the committee work. I think that 
helps all of us. It means Turkey is more open to our exports 
today than they were before the Singapore meeting, just to use 
a small example.
    I think it bears repeating, whenever I talk about dispute 
settlement, even if no question has ever been raised about it, 
that this system in no way impairs the national sovereignty of 
the United States; only Congress, not the WTO, can change the 
laws of the United States.
    Now, with regard to the built-in agenda, this is the agreed 
agenda of things we are going to be doing in the future, that 
is, beyond 1997. We know the things that are coming up in 1997, 
things like the rules of origin negotiation and the financial 
services negotiation which I understand some of you might want 
to talk to me about.
    But beyond that, there is an agenda beginning in 1999 of 
extremely important negotiations. I would be glad to go through 
it with you in detail in the Q and A, but things like 
agriculture, services, and safeguards are all the subject of 
scheduled negotiations that will go on in the future in this 
organization. That whole built-in agenda was approved in 
Singapore and it is important.
    Now, let me just say with regard to the emerging issues, 
that we might want to discuss this in some detail, this is 
trade and labor standards, investment, competition, those kinds 
of issues. I think with respect to labor, I know it is a 
controversial issue on the committee, but we did move forward 
in the sense that we were able to get agreement from our 
trading partners, I think, on two basic ideas.
    One is that core labor standards should be respected, and 
second, that the ILO and the WTO should continue to work 
together. We would like to work with you on how this issue can 
move forward in accordance with the requirements of section 131 
of the act.
    With regard to investment and competition, we have very 
modest study programs in place. We have some problems with 
diverting attention to investment from the OECD negotiations in 
Paris. But we think educating our developed country trading 
partners about the investment issue is important. Competition 
is not a well-developed issue in the WTO except for one place 
where it is remarkably well developed and that is in the 
results of the telecommunications services negotiations which I 
will speak about in a minute.
    Let me just say with respect to market access, obviously 
the ITA is an enormously important agreement. It phases out 
tariffs on a wide range of products over a very short period of 
time mostly by the year 2000, $500 billion in annual trade 
flows, and I think that it did help to do the ITA to be able to 
then to ahead and complete the telecommunications negotiations.
    Many of the important things we did in Singapore were 
meetings that occurred at American initiative on the margins of 
Singapore. On the margins of Singapore, for example, we had a 
meeting with African trade delegations to find out what their 
concerns about the trading system were. Similarly, we had a 
telecommunications meeting to which we invited representatives 
of the World Bank and the FCC and so on. That is when the 
improved offer process began.
    I could talk all night about this telecommunications 
agreement, but I think it is a remarkable achievement in and of 
itself. It is even more remarkable in connection with the ITA 
because it increases the advantage to our workers and companies 
of the ITA because we will be building redundant 
telecommunications networks all over the world. I think it 
shows that we can move forward and negotiate in this forum on 
an ongoing basis on one basic condition. That is, a lot of 
other countries are willing to come forward and make 
commitments in the system and not just be free riders. If 
countries are prepared to make commitments it appears now that 
we can move forward on an ongoing basis.
    So, there is a lot here I should have said but these are, I 
think, some of the most important things. I know there are a 
lot of issues all of you have to raise with us, but on behalf 
of Charlene I just want to say that working together on a 
bipartisan basis is important. This is an important area of our 
economic development and we have an administration which I 
think is intent on moving forward in the area and we want to 
work closely with you to find ways to do that.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

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    Chairman Crane. Thank you, Jeff.
    At the Singapore Ministerial Meeting was the U.S. capacitor 
manufacturing industry consulted during these negotiations and 
would the inclusion of capacitors in the ITA agreement affect 
our national security? And, finally, how do you respond to the 
other arguments raised by the portion of the capacitor industry 
in opposition to the agreement?
    Mr. Lang. We have been aware since last spring that the 
capacitor industry in the United States was divided about the 
ITA and that was a concern to us. It was the reason we did not 
include capacitors in the U.S. offer on the ITA. However, it 
was true that our major trading partners who were important 
markets for our exports of these information technology 
products insisted that capacitors were an essential ITA 
component and that if they were excluded the deal would 
unravel. So, we advised all the major domestic parties, 
including the capacitor parties, of those considerations.
    Now, we, in consulting, as the law requires us to do, with 
these folks along with everybody else in this industry, we 
discovered that they do have some significant export concerns 
in the nontariff barrier area. And that is one of the major 
reasons that we pushed so hard on those nontariff barrier 
provisions that are included in the agreement.
    We would like to work with the whole industry to make this 
agreement work for them. Exports have been increasing rapidly 
in recent years. Imports have actually declined.
    As far as the national security issue, it was not raised 
until after the ITA was concluded in Singapore. And since the 
industry has been expanding rapidly it still is unclear to the 
administration what specific risks might be posed by this 
agreement.
    I might say, at the request of the industry, the Department 
of Defense in 1995 allowed the procurement of capacitors from 
offshore plants. DOD appears to believe that a broad 
procurement base, including both offshore and onshore supplies, 
enhances rather than detracts from national security.
    But, obviously, we take any national security concern very 
seriously and if the Department of Defense determines that 
inclusion of capacitors in the ITA jeopardizes our security 
interests then we will take whatever action is necessary to 
rectify the situation.
    Chairman Crane. Thank you.
    Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman.
    Again, I would like to congratulate you and Ambassador 
Barshefsky, Ambassador Lang, for the two agreements that you 
have entered into recently.
    Mr. Lang. Thank you.
    Mr. Matsui. What I would like to ask is in view of the fact 
that you have been very successful in sectoral agreements in 
the last few months, is this the approach that you believe will 
be the wave of the future, rather than comprehensive trade 
agreements?
    How do these interrelate and is there anything instructive 
from this or is this anecdotal?
    Mr. Lang. It is early days and it is tough to say. I think 
that there have always been sectors in the system that require 
what I call internal deals. That is, in agriculture, for 
example, we could not make a deal on agriculture that was 
disadvantageous to American agriculture and tell them that the 
reason for it was we had a great deal in the banking sector. We 
always had to make that kind of deal work in that rather large 
sector.
    I think that we are going to have to negotiate 
simultaneously on a lot of things and there may be tradeoffs. 
If you look ahead to the scheduling of the built-in agenda 
which is not based on any planning that I am aware of, it just 
is the result of the outflow of the Uruguay round negotiations, 
you can see that there is a great deal of simultaneity. It is 
not a round and I do not think a round is in our interests when 
we have such a flexible economy, workers that can adjust so 
quickly to changes in the competitive environment.
    On the other hand, I think what telecommunications does 
demonstrate, in both the success this year and the failure last 
April, is that we are going to have to work very hard with a 
much broader range of countries than we did even 10 years ago 
in order to get the necessary level of commitments to be able 
to justify these agreements to the American people.
    We cannot get by without substantial commitments in major 
countries in Latin America and Asia, Central Europe, even 
Africa and Southern Asia. All those countries are going to have 
to make commitments to the system and it is going to be 
difficult. I can tell you it is time-consuming work. You have 
got to go to those capitals and meet those people and talk with 
them for months at a time in order to do it.
    But I do not think a round makes it any easier. It is 
important to remember for people who say that you have to have 
everything on the table in order to make a deal that these 
issues--telecom, for example--were on the table in the Uruguay 
round and they were the things that were too tough to get done 
when everything was on the table.
    So, I am not sure that a round is the solution to the 
problem. The real solution to the problem is a commitment among 
our trading partners to be prepared to undertake legal 
obligations in the WTO. If they are prepared to make 
commitments commensurate with those of the United States, 
adjusting for their stage of development, I think we can move 
forward on this continuing basis and do quite well for the 
American people.
    Mr. Matsui. Last, one of the concerns I have is the recent 
actions by the Europeans taking the Helms-Burton legislation to 
the WTO. And with this recent success, I think almost all of 
the negotiating parties, countries were advantaged by both the 
ITA agreement and the telecommunications agreement.
    I believe frankly that they are jeopardizing the WTO and I 
want you to know that certainly Members, like myself, support 
what you are doing. The fact is that you are unwilling to allow 
jurisdiction to attach to the United States on this issue 
because it is clearly a foreign policy issue, although trade 
issues are attached to it, it is clearly a foreign policy 
issue.
    This is how this issue emanated from Mr. Helms and Mr. 
Burton, who were not at all interested in the trade aspect of 
this, and you have significant support on the Hill, I believe 
on this, maybe not from all circles, but at least significant 
support.
    And I hope the Europeans understand that this could 
jeopardize the WTO because even Members like myself could have 
questions about it if, in fact, sanctions are held against us 
for this act. We may have some reservations about the 
legislation, some of us internally, but this was clearly a 
foreign policy decision. I might disagree with it, but it was 
clearly a foreign policy decision.
    Mr. Lang. I appreciate that and we will enforce the law. We 
have made our position clear in Geneva.
    Chairman Crane. Mr. Thomas.
    Mr. Thomas. Thank you, Mr. Chairman.
    I, too, am sorry that the U.S. Trade Representative 
Designate Barshefsky is not with us. My understanding is she is 
with the President and the President of Chile. It is 
unfortunate that had you folks not wanted to push a fundamental 
revision of fast track, we would have already had a fast track 
agreement with Chile and perhaps she could have been with us.
    You made a statement just a moment ago to the gentleman 
from California that you could not make a deal that was 
disadvantageous to agriculture. Disadvantageous to agriculture 
is a rather broad statement. I have discovered repeatedly that 
you have made decisions that are disadvantageous to segments of 
agriculture.
    And I happen to represent an area that is about $3 billion, 
value-added, most of it specialty agriculture, on a broad-based 
structure. I will not visit on you the sins of your elders and 
revisit NAFTA and the commitment on paper that Ambassador 
Kantor made to us, in part, the wine industry and failed to 
deliver on.
    Nor will I look at the recent problem with Mexico on broom 
corn and the fact that they have chosen to go after relatively 
narrow segments for retaliation, one of them, once again, wine. 
That failure to deliver continues to be compounded.
    I am especially disturbed by what happened between the 
United States and Canada on the dairy/poultry agreement, in 
which we entered into in what we thought--agriculture--was an 
understanding between the United States and Canada which even 
preceded NAFTA but certainly carried through NAFTA and which 
with the overlay of the WTO wound up with a decision that was 
disadvantageous to the United States.
    I guess the decision does not bother me as much as the 
five-O decision, meaning even the U.S. representatives failed 
to support what we thought was a fundamental agreement on our 
side. And I guess I just have to ask you, when you say you 
could not make a deal that was disadvantageous to agriculture, 
most of us visiting the recent past find that an astounding 
statement since you have done so repeatedly, especially in 
terms of segments of agriculture.
    I invite a response.
    Mr. Lang. Well, I am certainly concerned about the dairy/
poultry panel decision. It is wrong. And----
    Mr. Thomas. I agree it was wrong. But our guys voted with 
them.
    Mr. Lang. Well, they are still wrong. And----
    Mr. Thomas. Well, are they still employed?
    Mr. Lang. They are not employees of----
    Mr. Thomas. I understand, are they still citizens? 
[Laughter.]
    Mr. Lang. But I would say as to the larger issue, I think 
that we have to be concerned about the individual sectors of 
agriculture and I encourage you to bring these kinds of 
problems to me or Charlene and we will try to work on them.
    Mr. Thomas. I can assure you, we brought them repeatedly 
and we have gotten written letters from the then Ambassador 
about what was going to be done, a timeframe for correction and 
how it was going to be corrected and it was never done.
    I hope as we enter into this new era and as you folks come 
to us with a fast track agreement, which--and I know you put a 
nice little spin in your opening statement on the labor 
agreement that occurred in Singapore--but I do hope that gets 
you to understand maybe you have got to revise the position 
that you had in the past on the question of labor, the 
environment and fast track.
    But at least I would hope that you would not undercut the 
tariff levels and reductions that were agreed to in the Uruguay 
round on specialty agricultural products. And hold that as a 
firm line without trading off particular segments or resist it 
in terms of retaliation.
    If I can get that out of you, at least I have a minimum 
comfort level.
    Mr. Lang. I will take the message back.
    Mr. Thomas. Well, I would take a personal commitment from 
you that you would not reduce them below the Uruguay round.
    Mr. Lang. Well, I am not sure I completely understand but I 
do not have a problem with that if that is what you are asking. 
The question is, if we have an overall negotiating authority, 
are you asking if it would exclude specialty agriculture?
    Mr. Thomas. I guess my point is we have gone through a 
round of reduction. We have made fundamental changes in the 
entire agricultural system in the United States. That area 
ought to set a while and not enter into new arrangements with 
folks in terms of further reductions on the world scene, either 
in terms of specialty agriculture, and I would push it to 
general agriculture, but especially specialty agriculture.
    And if you would not be opposed to that, that is as good as 
a letter I guess, based upon the way in which folks have 
honored previous written statements.
    Thank you very much.
    Chairman Crane. Mr. McDermott.
    Mr. McDermott. Thank you, Mr. Chairman.
    Mr. Lang, you could probably look around this Committee for 
a long time for anybody to understand what a capacitor is or 
what it really does. And I think those kinds of issues are hard 
for us to understand in any kind of specificity. But what I am 
concerned about, in listening to Mr. Matsui's remarks and your 
response, I would like you to give me the arguments that the EU 
uses as an explanation for why they have brought the Helms-
Burton Act to the World Trade Organization.
    My life experience tells me that there is always another 
side to something. And the EU must have good arguments why they 
think it fits under the rubric of WTO or at least they have 
constructed some way that they bring it to it where we say it 
is foreign policy, they must have another theory under which 
they are bringing it to the WTO. And in order to understand how 
the United States involves itself with the WTO--and one of the 
objections in the Congress was whether we would lose our 
national sovereignty if we involved ourselves in the WTO--I 
would like to understand what their argument is on the other 
side.
    What would a representative from the EU say if they were 
sitting where you are?
    Mr. Lang. Well, what they would say is that because it may 
have an effect on commercial operators, it should be something 
that is taken up in the WTO, a commercial organization.
    Mr. McDermott. Would that be a nontariff barrier? What is 
the construct they are using?
    Mr. Lang. Well, it is, in fact, unclear exactly what WTO 
concerns it would raise. It is certainly not a tariff issue. 
They might argue, at some stage in this proceeding, if it were 
to go forward--which as I say, I hope it does not do--that 
somehow limiting visas for commercial operators was 
inconsistent with the professional services agreement or 
something like that.
    But it has no effect on goods trade, and it has no effect 
on trade that I can see at all. But, as Mr. Matsui said, the 
problem here is that this is not a trade matter. It is a 
foreign policy and national security matter. And we have always 
said throughout our history--it is not new to this 
administration--that no foreign panelist or other person is in 
a position to judge the national security or foreign policy 
interests of the United States. That remains true today.
    Thus, I am not a very good advocate for this position 
because it is so far off the mark and so dangerous for the 
system.
    Mr. McDermott. So what?
    Mr. Lang. Dangerous for the system.
    Mr. McDermott. Basically, you are characterizing their 
position as being one in which they say ``this is the only 
forum in which we can address this issue.'' So, they just grab 
the WTO?
    Mr. Lang. Well, actually that is not true. They have been 
working with my colleague, Stu Eisenstadt, and in those 
arrangements we have been able to deal with some of their 
problems. In addition, they have already retaliated by enacting 
what they call blocking legislation, legislation that is, in 
effect, to offset the effects of title IV of the Helms-Burton 
legislation.
    So, it is not clear to me that they do not have other 
remedies. In fact, they are exercising other remedies, I think, 
quite effectively from their perspective. I am not sure, to be 
perfectly frank, why this WTO matter needs to move forward, 
from their perspective.
    Mr. McDermott. Does this mean that when we want to 
implement something, if we frame it as a foreign policy issue, 
that we would then be able to exclude it from WTO?
    Mr. Lang. Well, I suppose taken to its extreme it might 
mean that. But, in fact, for over 50 years the Congress has 
been very cautious in such matters. I mean the Helms-Burton 
legislation arises from a pretty repugnant act--shooting down 
these unarmed civilian aircraft.
    And, in my experience, when the Congress enters into this 
area, it exercises a great deal of caution. I would urge it to 
continue to do so, because so much is at stake here in a 
commercial sense--the standard of living of our people, 
potentially.
    On the other hand, I think it comes close to being 
irresponsible to take an issue like this which is clearly a 
foreign policy and national security matter to the WTO because 
it puts us in the position of having to assert those basic 
propositions. Remembering now that Europe is not just 
challenging the Helms-Burton law. It is also challenging 30 or 
40 years of legislation with respect to Cuba, including the 
embargo and all kinds of other actions that have been on the 
books as foreign policy or national security actions since the 
late fifties or early sixties.
    Mr. McDermott. So, it is really more than Helms-Burton that 
is at stake here?
    Mr. Lang. Yes, sir, it absolutely is.
    Mr. McDermott. Thank you, Mr. Chairman.
    Chairman Crane. Mr. Nussle.
    Mr. Nussle. Thank you, Mr. Chairman.
    There is a witness that is going to be in the second panel 
who is from my home State, the Iowa Farm Bureau president. 
Since he will not have an opportunity to visit with you 
personally about this, I thought I would try and just touch on 
a couple of things here. In his testimony he said that part of 
the reason why the U.S. agricultural leaders went to Singapore 
was to try and push a twofold agenda.
    One was to make sure that we were proceeding successfully 
toward renegotiating the GATT in 1999. And the second was that 
they would be taken a little bit more seriously as a player in 
the world and that our government would be more willing to 
commit to resolving some of the agricultural trade problems.
    I guess what I am curious about is how did they do in 
fulfilling that two-pronged agenda?
    Mr. Lang. Well, I hope they feel they did very well. They 
certainly had an effect on galvanizing the U.S. delegation. As 
I said in my opening statement, the issue here, in taking 
agriculture in general, was to make sure that our negotiating 
partners who are reluctant about moving forward with opening 
their markets for American agricultural exports be prepared to 
do so in accordance with this built-in agenda which has 
negotiations beginning in 1999.
    And the accomplishment that they wanted--and I met with 
them several times during the meetings in Singapore--was to 
make sure that we begin exchanging data and analysis now so 
that there is no reason for stalling those negotiations when 
they are supposed to begin in 1999.
    I am going to Geneva in a couple of weeks and I think it is 
time to begin that process of working out the exchange of data 
and analysis with our trading partners. I encourage the Iowa 
group to come talk to me directly about what their specific 
concerns are.
    Let me say on this agricultural issue that this is a huge 
portion of our exports--something like $60 billion in exports 
last year. It is actually a high-technology sector that is very 
successful. We have been concerned about the implementation of 
the agriculture agreements.
    Let me give you one example. When the agreements first 
kicked into place in July 1995, we discovered that Europe was 
putting into place a so-called reference price system which was 
not giving us the benefit of the bargain. We did not wait for 
the industry to file a 301 petition or hire lawyers or anything 
like that. We asked them if they had any objection to our suing 
Europe. And when they did not, we proceeded to do so on our own 
initiative.
    Now, we are still working on that matter and Europe has 
been extremely reluctant to come into compliance with that. But 
it is not for lack of attention on our part, I do not think.
    In any event, if there is something they need to talk to me 
about in a specific crop area or something like that, I welcome 
them coming in and seeing me as soon as possible.
    Mr. Nussle. Well, my understanding is that it was just 
yesterday the administration received a letter from, I believe, 
26 different groups suggesting that their concerns have not yet 
been adequately addressed in agriculture. The president of the 
Farm Bureau from Iowa is going to be here later on suggesting 
that farmers and ranchers are not convinced that the WTO and 
NAFTA Agreements are actually helping them.
    I think the message that Mr. Thomas was suggesting and that 
I am suggesting is that for fast track to be successful we have 
got to have that kind of support. It is number one. It is not 
as sexy as some of the other issues and condensers and all 
sorts of things that Mr. McDermott was talking about--
microchips and processors--that is for him to worry about. We 
are just talking about corn and beans.
    It is not quite as sexy, but as a result there are a lot of 
votes in them there hills and when we are talking about fast 
track we have to show success.
    My understanding from the testimony is that we are going to 
receive today, as well as my own constituents in Iowa, they are 
not convinced and that is the message that we need to be able 
to report to you.
    The final thing that I was curious about is what effect do 
you believe passage of the farm bill, recent reforms in farm 
legislation, has had on the 1999 negotiations? What effect do 
you see that having on our long-term agriculture strategy with 
regard to trade, now that you have had a chance to monitor 
that?
    Mr. Lang. Well, let me say first that with an increase last 
year in agricultural exports of something like 14 percent from 
$53 or $54 billion to $60 billion, we are doing considerably 
better in agriculture. I remember a lot of years when we were 
under $30 billion in agriculture exports. So, we are doing a 
lot better. But I continue to offer to work with your people 
and find out what the problems are and jump on them.
    With respect to the farm bill, I think that our trading 
partners are going to have to go a long way to come up to the 
standards of that farm bill. We are, in terms of domestic 
policy, ahead of our obligations and many of them are behind in 
their obligations. That is why we are bringing so many cases on 
these matters in the WTO, on beef hormones, on grains, on 
barley, on rice, on wheat, on corporation and we are going to 
continue to push to enforce those agreements.
    I think the 1999 negotiation is going to be very tough 
because a lot of these folks are not ready for a competitive 
farm environment and the fact is, our farmers are ready for 
that.
    Mr. Nussle. But, see, that is not the message they 
necessarily need. We know they are going to be tough, they have 
always been tough.
    But the point is that if, in fact, we are ahead--and we 
are--and they are behind, and nothing seems to be resolved in 
the meantime, granting fast track and giving more authority to 
have continuing agreements that do not seem to hit the mark and 
cannot get us to that mark will be frustrating to agricultural 
sectors of all kinds and make it very difficult for us who 
would like to support fairer and freer trade, and understand 
the need of the administration to have a little bit of more 
autonomy in these negotiations through the fast track, it would 
be very difficult for us to support those things.
    Mr. Lang. Well, as I say, I will take that concern back but 
I do not accept that we are not doing better because of these 
agreements. I think I can go through crop-by-crop and show you 
that.
    Mr. Nussle. Well, food sells itself.
    Mr. Lang. Sir.
    Mr. Nussle. Food sells itself.
    Mr. Lang. Yes. But you have to have access to the market.
    Mr. Nussle. Thank you, but we have to eat and the world has 
to eat. So, with all due respect, I do not think it is because 
of you that we are doing $30 billion better. I think we are 
doing better because food sells itself. And I think that we 
miss our mark in many respects if we forget that. If we have 
open markets, if we have the ability to trade, we do quite 
well, food sells itself.
    Mr. Lang. Yes, that is right, if the markets are open. That 
is a big ``if'' in a lot of these things.
    Mr. Nussle. That is the job we are asking you to help us 
with, otherwise, it is going to be difficult to get that kind 
of legislation in the future.
    Mr. Lang. OK.
    Chairman Crane. Mr. Jefferson.
    Mr. Jefferson. Thank you, Mr. Chairman.
    In a few minutes, I suppose after the second panel, you 
will hear from Representative Donna Christian-Green about a 
concern she has about rum of the Virgin Islands. Inasmuch as 
you may not be available to answer her question, I wanted to 
raise one for her, if I might.
    Mr. Lang. Yes.
    Mr. Jefferson. I understand that white spirits are included 
in the Singapore tariff package as a concession to the EU in 
view of their status as a major exporter of white spirits, 
particularly vodka and gin.
    Can rum be excluded from the agreement reached in Singapore 
without undermining the purpose or balance of the agreement?
    And can you detail for the Subcommittee the potential 
effect on the economy of the U.S. Virgin Islands if the tariff 
phase-out includes rum?
    Mr. Lang. Say the second part again, I am sorry.
    Mr. Jefferson. Can you detail for the Subcommittee, the 
potential effect on the economy of the U.S. Virgin Islands if 
the tariff phase-out includes rum?
    Mr. Lang. Yes. I appreciate your raising this question. I 
have discussed it a couple of times with Congresswoman 
Christian-Green. In fact, I talked to her yesterday or the day 
before.
    We are very concerned about this. It is going to be 
difficult to remove rum from the agreement because it is so 
critical to the balance of concessions. You have to remember 
that Europe is making a bigger tariff cut than the United 
States is. Part of that is compensated for by this distilled 
spirits agreement which includes rum that we negotiated on the 
margins of the ITA.
    However, the important thing to preserve in the case of the 
Virgin Islands is their access to the U.S. market on favorable 
terms. It turns out that we think we can negotiate a type of 
side agreement with Europe that will preserve the benefits the 
Virgin Islands get.
    I was working on that negotiation earlier this morning. It 
is not completed yet. But we do seem to be within reach of 
being able to do that. It essentially has to do with the 
differential price of the rum and it would be covered by the 
agreement. We may be able to exclude from the agreement rum 
that would be of importance to the Virgin Islands and that 
would preserve the tax carryover that they need and so on. So, 
we are hopeful that we can work something out with the 
Europeans on the matter.
    In fact, they have a similar problem which makes it a 
little easier to work it out. But I am in close touch with her 
and I am open to any suggestions you have about how to resolve 
the problem. It is a critical part of the overall agreement, 
but I think we do not need to pull all of the rum out in order 
to solve the Virgin Islands' problem.
    Mr. Jefferson. Well, it is a very important issue and I 
hope you will continue working hard to square it away.
    Mr. Lang. Yes, sir.
    Mr. Jefferson. You mentioned that on the margins, there was 
some discussion about African trade policy in these 
negotiations in Singapore. Can you elaborate on that for a 
moment?
    Mr. Lang. Yes, sir.
    We are very aware that Members of the Subcommittee have 
been concerned about trade with Africa and at the same time we 
have been carrying out the statutory mandate to study this 
matter. In connection with that study we decided that it would 
be useful at the Singapore Ministerial to ask African Trade 
Ministers, who were uniquely collected at this meeting, to come 
to a meeting with my colleagues and from other Federal agencies 
to discuss their concerns as a way of having some sort of 
direct input to our policy formulation process. That was very 
helpful and they were extremely forthcoming and frank. There 
were some very interesting things they said.
    For example, they said they knew the era of foreign aid was 
over and they had to rely on trade and investment in order to 
develop. Their thinking is quite advanced and we have moved 
forward on that basis trying to develop a program that will be 
responsive to both congressional concerns and concerns of 
countries in the region.
    I think this matter should be the discussion of continued 
consultations with the Committee over the next couple of weeks 
and hopefully we can come up with legislation that would be 
consensus bipartisan legislation and a real important addition 
to our trade policy. It is a very important area. There are 600 
million people who are not participating very actively in the 
trading system there and that is a loss to us and to them.
    Mr. Jefferson. How do you see it as being structured in the 
next several months, this continuation of the contacts and the 
discussion?
    Mr. Lang. Well, we would be happy to structure it any way 
you want to do it. I think meetings with individual members or 
groups of concerned members would be fine. I think it is our 
responsibility to propose some ideas to you.
    One interesting thing about this subject is that in the 
past the trade agencies, development agencies and financing 
agencies like the Treasury Department have not worked closely 
on this kind of problem.
    I am pleased to say that in this situation we are working 
very closely together. My colleagues and I at Treasury and 
State and AID and so on have had an interagency working group 
on this subject since about October or November, I cannot 
remember exactly when it was. We are moving forward and we hope 
to have some pretty concrete suggestions for you in the next 
few weeks.
    Mr. Jefferson. Thank you very much, Mr. Chairman.
    Chairman Crane. Mr. Houghton.
    [No response.]
    Chairman Crane. Mr. Neal.
    Mr. Neal. Thank you, Mr. Chairman.
    Mr. Lang, not long ago Ambassador Barshefsky reached an 
agreement between the television monitor advocates and the 
computer monitor advocates for the television screen. While the 
compromise seemed satisfactory and congratulations in your 
direction, how are you going to monitor those agreements?
    Mr. Lang. Actually, we have several ways of doing that. One 
is there is a review mechanism in the ITA which will allow us 
to consult informally with our trading partners. This 
particular area you are talking about has been very sensitive, 
particularly in Europe where some reclassifications have gone 
on that we are very concerned about.
    So, I think that a monitoring and consultation process may 
be a helpful way of getting some early warning about what they 
are thinking and how they are going to implement the agreement.
    In addition, this agreement will fall squarely within the 
dispute settlement process of the WTO. And I have not said this 
before but I should say it somewhere in this hearing, that 
dispute settlement process is turning into a more powerful 
weapon than we had anticipated because it cannot be stalled the 
way the old GATT system could.
    So, most of our cases, where we are a plaintiff, are being 
settled on favorable terms before a panel is even appointed, 
usually in 4 or 5 months. I would hope that in this case the 
system would prove useful too. But we will certainly monitor 
the situation closely and be glad to stay in touch with you, 
whatever you need us to do to make sure it works out the way it 
is supposed to work out.
    Mr. Neal. Thank you.
    The second question, worker rights, pages 8 and 9 of your 
testimony. It is fairly descriptive about how you treat the 
issue of worker rights. But could you verbally speak a bit to 
how you intend to enforce worker rights?
    Mr. Lang. Yes, sir.
    First, worker rights are an element of U.S. law in a number 
of programs, for example, the Generalized System of 
Preferences. We continue to receive information and petitions 
from nongovernmental organizations and other organizations 
about worker rights' problems with respect to the GSP Program 
and we are investigating those actively.
    We have just had a team come back. I understand there is 
going to be a report on my desk when I get back to the office 
today about an investigation we just carried out in Indonesia 
where we will have interviewed not only government officials 
but labor leaders and opposition leaders and other people 
concerned about the problem.
    Second, we have, in accordance with section 131 of the act, 
raised the question of core labor standards in the WTO as a 
whole, which is a difficult issue to move forward. There is a 
lot of fear and concern about it. Frankly, there is some 
division of opinion among your colleagues on the question. But, 
nonetheless, as I said in my opening statement, we were able in 
Singapore to get other governments to recognize these core 
labor standards, the right to organize, freedom from child 
labor and so on, and we were able to get recognition that the 
ILO and the WTO should work together closely in the future.
    We now have to decide how to proceed with those kind of 
basic understandings, how to move forward on them in other 
words, and I think we are going to have to consult closely with 
you on it. It will, obviously, I think, based on the discussion 
today, be an element of the fast track debate. But we are 
trying to move forward on it in a multilateral context as well 
and we have some support.
    Mr. Neal. I do not profess to know more than my colleagues 
on the democratic side but I can say that worker rights is a 
unifying theme on our side and we will be monitoring it very, 
very carefully.
    Mr. Lang. I understand.
    Mr. Neal. Thank you.
    Chairman Crane. Mr. Herger.
    Mr. Herger. Thank you, Mr. Chairman.
    Mr. Ambassador, the longest standing section 301 case 
before your agency is a case involving canned fruit. Europe has 
been subsidizing their canned fruit producers with hundreds of 
millions of dollars annually for many years. Fifteen years ago 
the California canned peach producers and the U.S. Government 
sought to stop the EU from disrupting the world market by 
challenging EU practices in GATT dispute settlement. They won 
that case and a bilateral settlement was subsequently reached 
with the EU.
    We now have data developed by the USDA that shows that the 
bilateral settlement has collapsed. EU canned fruit subsidies 
are way up as are EU production and exports. The Greeks now 
have so many peaches in the ground that they are dumping them 
into pits the size of football fields.
    I am aware that the United States joined with five other 
countries last week in Brussels to protect EU canned fruit 
practices. I also understand that continued informal talks such 
as these are expected by no one to produce the type of broad-
based reform we need from Europe in this sector. section 301 
law requires that if a bilateral accord is not being 
satisfactorily implemented, USTR would take all measures in its 
power to correct the problem.
    Can you tell me what measures will be taken to get this 
longstanding dispute resolved on a permanent basis?
    Mr. Lang. I certainly agree that this is a longstanding 
dispute. I was actually involved 15 years ago in this dispute, 
so, nobody is more frustrated with the European lack of 
implementation than I am and the people at USTR.
    Charlene has repeatedly raised this issue with Sir Leon 
Brittan, her opposite number in Europe. So far there has been 
nothing forthcoming. We have been forced to take the matter 
back to the WTO. I do not want to say exactly what we will do 
but we are very concerned by this. We are going to pursue it 
and one way or another we are going to have to resolve this 
thing.
    But our objective is to get rid of the practice and sell 
more canned fruit, not to retaliate for the sake of 
retaliating. But, in any event, we will take the necessary 
actions to get some action on this. You are absolutely right, 
this has been a long standing dispute.
    Mr. Herger. Now, the end of your answer was that you say 
you will take steps to correct this. Now, the big concern that 
I have and I am sure that many of us have is that if accords 
like this one which are a direct result of international 
settlement are not adhered to----
    Mr. Lang. Absolutely.
    Mr. Herger [continuing]. It really brings grave question 
into just how effective these settlements are. So, I would urge 
you to follow through with your last statement that we will 
stand very firm and take appropriate actions.
    Mr. Lang. I appreciate your saying that especially in 
public. Thank you, sir, we will follow up on that.
    Mr. Herger. Thank you.
    Chairman Crane. Mr. Ramstad.
    Mr. Ramstad. Thank you, Mr. Chairman.
    Ambassador Lang, good to have you here. I know that my 
colleagues Mr. Thomas and Mr. Nussle referred to agriculture 
and fast track and coming from Minnesota I must also.
    As you know, under the WTO built-in agenda timeframes, the 
deadline for reaching an agreement on agriculture is December 
31, 1999. And given what is left to do as far as fast track is 
concerned, that is not much time. It is really a short 
timeframe.
    And I am concerned, like my constituents, that without the 
clout of fast track authority we are not going to aggressively 
be able to push for greater access for our agricultural 
products or participate in the discussions at all.
    I have two questions, Ambassador Lang. The first, when will 
the administration present a fast track proposal? And, second, 
if we are not involved, how aggressive would any agreement be 
in this area, as far as agriculture is concerned?
    Mr. Lang. With respect to the first question we are working 
through a proposal now and consulting widely in the Congress. I 
am hopeful we can get up here with a bill fairly soon. I do not 
want to predict a time now because I have learned from sad 
experience that predicting timing in the administration is a 
difficult business. But this is----
    Mr. Ramstad. Next month is reasonable though?
    Mr. Lang. Yes. I think so. It is well advanced and I would 
be hopeful about that kind of timing. The problem without fast 
track becomes very serious. I might say I was out at Farm Fest. 
I do not think Farm Fest was in your district, it was out in 
southwestern Minnesota. But I got a chance to interact with 
some people who actually farm for a living, which I have not 
done for a long time.
    It is obvious that we need to explain to people who do this 
for a living why these trade agreements are important. I think 
it is absolutely essential that we have this authority on as 
broad a basis as possible. Because we are going to have to be--
this is, in part, an answer to Mr. Matsui's question earlier 
pretty opportunistic about trade agreements.
    If we can do better on a regional basis then we can on a 
multilateral basis, we ought to do it. We ought to have the 
freedom, after consulting with you all and with the interested 
industry people, to make those kinds of choices without having 
to come back repeatedly over short periods of time for the 
authority.
    But I agree with you that we have to establish the 
confidence in the agricultural community which is going to be 
used in a way that serves their advantage. I think we just have 
to work that out in the process of figuring out what this bill 
actually says to make sure that we earn that confidence from 
our constituents.
    Mr. Ramstad. And certainly the administration and the 
Congress have had a good track record in recent years of 
working together in a bipartisan, pragmatic way on trade 
issues. I really hope that continues and carries over as far as 
fast track is concerned, because it is so critical as you 
recognize and know first hand.
    I think you make a good point about the need to communicate 
that better. All of us need to communicate the importance of 
that more effectively.
    Let me just shift gears if I may in my remaining minute or 
so. Let me ask you, Ambassador Lang, what are the 
administration's objectives for dealing with the issues 
surrounding import-oriented state trading enterprises in the 
WTO discussions? Is there a consensus for dealing with this 
issue?
    Mr. Lang. Yes, I think there is a developing consensus 
about it. We are very concerned about these State trading 
enterprises. We have actually raised it with some of our 
trading partners. Generally I find they object very strongly to 
our assertions that these wheat boards and milk boards and 
things like that are essentially monopoly buyers and that state 
agencies are distorting markets and do not behave in ways that 
are consistent with commercial considerations.
    But Congress has been concerned about this since at least 
1988 when the provision about article XVII was inserted in the 
law. We have received a lot of letters, not only from you but 
from many of your colleagues, particularly in the midwest about 
these problems. We have been raising them but I think until we 
get into a real negotiation where there is some give and take 
going on, it is probably unlikely that we will get much done 
about it. But we continue to raise the issue, for example, in 
the WTO agriculture committee.
    I appreciate your concern.
    Mr. Ramstad. Finally, Ambassador, let me ask you whether or 
not you believe the Ministerial Meeting adequately addressed 
whether there have been significant problems with the WTO 
member countries meeting Uruguay round implementation 
obligations.
    Mr. Lang. No, I do not think it did completely. I am afraid 
a number of those problems are going to have to be addressed in 
dispute settlement.
    It is just that some of the countries are unwilling to move 
forward just on the basis of consensus and we are going to have 
to use dispute settlement which we are using today. In fact, 
today or yesterday, the dispute settlement body met in Geneva 
and we pressed forward on several agricultural cases including 
barley, wheat, corn, rice. So, we are going to have to use that 
remedy, I am afraid.
    Mr. Ramstad. Are the notification obligations too onerous? 
Is that part of the hold up?
    Mr. Lang. I think in developing countries the notification 
obligations are proving burdensome. We have been trying to 
provide some technical assistance but we do not really have 
adequate funds to be able to do as complete a job as we would 
like.
    But there is no excuse for the failures to implement among 
our industrialized trading partners. They know how the law 
works and they have all the people they need. And those are the 
cases--I mean we have cases that we are planning to move 
forward on pork in the Philippines and some other cases in 
developing countries where we have tried to work with them for 
a period of time, been unable to work them out, so, we will 
have to proceed in dispute settlement.
    But that is not the situation in these industrialized 
countries. They know what the obligations are.
    Mr. Ramstad. Of course.
    Well, thank you very much, Ambassador Lang. I appreciate 
your responses to all three areas of inquiry. I am particularly 
encouraged by your representation that we will see a fast track 
agreement from the administration next month.
    Mr. Lang. Well, I hope I can deliver.
    Mr. Ramstad. I do not mean to put you on the spot or 
anything but I will yield back to my Chairman.
    Thank you.
    Chairman Crane. Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman.
    I appreciate the chance to participate in this hearing. The 
main focus of it, as scheduled, was on the information 
technology agreement. So, I do not want to veer too much from 
that. But, you know, it is has been interesting to hear the 
discussion between a number of members and Mr. Lang about 
agriculture and about the attitude of many within the 
agricultural community about the impact of fast track and there 
has also been reference here to the need for pragmatism.
    I would just suggest that we take to heart those comments 
and that we be willing to apply them to other sectors of the 
American economy including the industrial and the service 
sectors. Because I think one of the problems with fast track 
has been this. There was an effort early on in this hearing to 
shift the onus to the administration and say the President of 
Chile is coming and if the administration had acted more 
quickly we would have had a fast track agreement. But I do not 
think, as evidenced by the comments on agriculture, that is 
really a fair comment.
    There are some complexities to the proposal to renew fast 
track. And I think there has been some inflexibility about, for 
example, the ability of the administration to talk about 
environmental and so-called labor issues. And I think if the 
agricultural sector is asking for some pragmatism and some 
attention to the complexities of fast track relating to 
agriculture, there has to be the same willingness to provide 
the ability of an administration to negotiate on issues that 
are relevant to the industrial sector and to the service 
sector.
    And I think one reason fast track is where it is today is 
because there has been some inflexibility on those issues 
relating to the environment and labor.
    And, so, I think this hearing has been important in showing 
the need for openmindedness and setting aside inflexibility on 
those issues. So, I simply wanted to say that to you. We are 
looking forward to a proposal from the administration on fast 
track but if it is going to go anywhere there is going to have 
to be a willingness on the part of people on both sides of the 
aisle in this institution, in the Congress, to provide the same 
kind of flexibility to the administration that some have asked 
for in the agricultural sector.
    Thank you, Mr. Chairman.
    Chairman Crane. Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman.
    I would like to say a special thanks to you and the Members 
of the Committee for allowing me to come by and participate in 
this particular outstanding Subcommittee of Ways and Means, the 
Trade Subcommittee. So, I want to say thanks to you and the 
entire Committee.
    Chairman Crane. You are welcome.
    Mr. Watkins. Mr. Lang, I am pleased with the progress that 
has been made on several fronts, especially the World 
Telecommunications Agreement at the Singapore Ministerial 
Conference. I think you should be commended.
    I have watched with great interest on numerous fronts what 
has transpired in our dealings with the WTO and also our role 
in the United States.
    But, Mr. Lang, I do have a real concern pertaining to 
agricultural issues. I think that Congressman Nussle here and 
others have brought that to your attention on a more general 
front. I have a real concern, specifically about our lack of 
progress in getting the European Union's ban on hormone treated 
beef lifted. It has been in effect for more than 8 years or 
longer, and has cost our producers hundreds of millions of 
dollars.
    There have been numerous scientific studies over the last 
number of years by the EU, as well as the United States, that 
these hormones are safe. I have a chronological listing of 
every step that has been taken in this case, dating back into 
the eighties. I submit to you these are nothing but stalling 
tactics. I think the latest study, which confirmed the safety 
of the hormones, was released in December 1995. This was 14 
months ago and still nothing has happened. The ban is still in 
place.
    And it is my belief that this proves we are up against 
people who are violating their agreements. This ban is 
unmerited and basically illegal.
    Now, I hope we can see some actions taken to move this 
matter forward. So, I would like to ask the USTR's Office, what 
it feels might be achieved in getting this ban lifted, and 
maybe installing a longer term mechanism into place that might 
prevent this from happening again with the WTO.
    There are some real questions concerning the WTO, about 
whether or not it is working against us here. Could you bring 
us up to date on the latest meeting concerning this on February 
17, 1997. They met on this case and they are planning to have a 
report April 1. Could you enlighten me?
    Mr. Lang. Yes, sir.
    This has been a continuing problem with Europe. Your 
position is exactly the same as ours, that it is inconsistent 
with their trade agreement obligations. Now, originally what we 
did was to just retaliate against them. Forget about the GATT 
or whatever it was and just take an offsetting action.
    Unfortunately, that did not move them. They continued to 
keep the ban in place. So, we have now taken this matter to the 
WTO dispute settlement system. We started out on that late last 
fall. We have now submitted our briefs. Earlier this week, as 
you mentioned, or maybe late last week--I forget when it was--
the team of experts that had been appointed by the dispute 
settlement panel to advise them on the sound science about this 
thing reported subject to questions by us, by them.
    As your question indicates, even European scientists have 
said that these six hormones are completely harmless and have 
no adverse health effects. We are expecting that panel to 
report and we would hope report favorably on whatever the 
deadline is. I would hope it was sooner than April 1, but 
anyway by April 1.
    Mr. Watkins. I would hope you would keep the Committee and 
my office up to date on this. Because you are going to be 
asking for fast track authority and this has sure not been on a 
fast track in getting a solution over the past 8 years. It has 
been delay after delay after delay, illegal tactics. I know I 
am not only speaking for Oklahoma, but a lot of the States in 
the southwest that are deeply concerned about whether they can 
support fast track if we cannot get something done to end such 
illegal tactics.
    So, Mr. Lang, I hope you will try to do everything in your 
power, the power of USTR, to try to get this ban lifted by 
April 1. Please let us know where we might stand on this 
particular issue.
    Mr. Lang. I will be glad to keep you advised and I will 
push with everything I have got to get this resolved in a 
favorable way.
    Mr. Watkins. Mr. Chairman, I do thank you and the 
Subcommittee for allowing me to be here to discuss this issue.
    Chairman Crane. Mrs. Thurman.
    Mrs. Thurman. Thank you, Mr. Chairman.
    And thank you, Mr. Matsui for inviting me today. I really 
appreciate this opportunity and also to let me participate.
    Ambassador, it is nice to see you again.
    Mr. Lang. Thanks.
    Mrs. Thurman. Ambassador, I guess you know that I actually 
am surprised at this Committee because I did not realize there 
was that much interest in agriculture. I love it. Because it is 
an area that I am very concerned about with Florida and just 
coming off of the Agriculture Committee certainly has made this 
an emphasis.
    Prior to this meeting, I did talk with Florida and the 
Department of Agriculture there to just get some sense of what 
some of their concerns might be, particularly as it relates to 
some of our exports and some of the problems that they are 
having and with the fact that we are coming up, in 1991, to 
really look at the agricultural agreements.
    Just to maybe ask some questions, particularly as it 
relates to phytosanitary measures. This seems to be an issue 
that has been discussed and rediscussed and was supposed to 
have been taking place in Canada in the agreement and then with 
NAFTA and has just kind of been laid to the side.
    And yet, for a State like Florida it is $150 million that 
we have spent. And on the other side of it, it is actually 
causing us barriers of not being able to get into places like 
Korea, Sweden, Mexico and areas of that. Can you give me some 
indication of whether there is discussion going on in this area 
or if this might be included?
    Mr. Lang. It absolutely is. Sanitary and phytosanitary 
measures were the subject of a special standards agreement in 
the Uruguay round. Essentially the idea of that agreement is to 
prevent the use of these measures as a disguised barrier to 
trade but still allow us to determine the risks we are going to 
take. So, that means any country can choose any risk level they 
want for something that is going into the food supply. But then 
they must take measures with respect to that risk level that is 
based on sound science.
    Now, we have had a lot of concerns, as you indicate, in a 
lot of countries about the application of this agreement. In 
Europe, it affects biotechnology products, principally. In 
Asia, it tends to affect pharmacological issues, such as 
pesticides, Alar in apples and that kind of thing.
    In Asia, we tend to be able, it seems, to work these 
problems out through consultations and negotiation. In Europe 
we have more difficulty, although so far after a lot of 
struggling and hand wringing we have gotten most of these 
biotechnological products in, BT corn, the round-up ready 
soybean and so on.
    It continues to be a very important area especially in 
light of the almost worldwide consumer concern about what is in 
our food supply. And we are very careful about those things, of 
course, in the United States and we need to be able to continue 
to be careful and choose our own risk levels on a completely 
sovereign basis. But we are able to do that on the basis of 
sound science. We need to hold our trading partners to that 
standard. We are trying very hard to do that. If you have got 
specific problems or the Florida people do, I would encourage 
them to get in touch with us as soon as possible and we will 
try to address them.
    Mrs. Thurman. So, you believe that we are challenging them 
on those areas where we have the science?
    Mr. Lang. Yes, and if there is one we are missing, I need 
to know about it. I mean we do not increase by 20 percent 1 
year and 14 percent another year our agricultural exports 
without somebody opening their market somewhere. That is a 
success story in agriculture. We need to keep saying that and 
in these places where the system is not delivering what was 
promised, we need to know about those cases and take them 
forward urgently.
    Mrs. Thurman. Actually I think we would have probably a 
better number than the $60 billion if some of these other areas 
were taken care of.
    So, I certainly will bring these to your attention and make 
sure that the Department of Agriculture in Florida has that 
opportunity to discuss these with you.
    Mr. Lang. Great, I appreciate it.
    Mrs. Thurman. Thank you very much for being here.
    Mr. Lang. Thanks for your help.
    Chairman Crane. And I want to thank you also, Ambassador 
Lang, for coming to testify this morning and give Charlene our 
best. We look forward to her appearance in a couple of weeks, 
and we look forward to working with you, too, to continue to 
advance our bipartisan trade agenda.
    Mr. Lang. Thank you, sir.
    Chairman Crane. Thank you.
    Our next witness will be JayEtta Hecker, Associate Director 
for International Relations and Trade Issues at the U.S. 
General Accounting Office.
    Welcome, Ms. Hecker and let me remind you, as I did the 
Ambassador earlier, if you could try and keep your presentation 
to 5 minutes, any other written testimony will be made a part 
of the permanent record.
    You may proceed as you will.

      STATEMENT OF JAYETTA Z. HECKER, ASSOCIATE DIRECTOR, 
INTERNATIONAL RELATIONS AND TRADE ISSUES, NATIONAL SECURITY AND 
 INTERNATIONAL AFFAIRS DIVISION, U.S. GENERAL ACCOUNTING OFFICE

    Ms. Hecker. Thank you, Mr. Chairman.
    Mr. Chairman and Members of the Committee, I am really very 
pleased to be here today, to share GAO's observations on the 
results of the first Ministerial of the WTO. Today, we will 
focus on three areas: the new liberalization that occurred, the 
progress and continuing commitment to the implementation of the 
Uruguay round as well as the built-in agenda and, finally, an 
overview of some actions on the new issues.
    Before I begin, I would like to acknowledge the hard work 
and dedicated GAO staff, who have supported me in this review. 
Obviously, we could not speak to the scope of these issues 
without their hard work, Adam Cowles, Anthony Moran, Carolyn 
Black-Bagdoyan and others.
    To give you the highlights, the short version really is 
that, there was some notable and significant progress in new 
liberalization. There was a real continued commitment--no 
backsliding--to the substantial commitments that were reached 
at the Uruguay round. There was actually progress, as 
Ambassador Lang noted, on some of the built-in agenda by taking 
advantage of the members and the Ministers being brought 
together, particularly on basic telecom. There was some action 
in each of the areas of what is seen as the next generation of 
issues.
    So, there really was some movement in each area and, in 
that sense, a lot of people have called Singapore a success. We 
think it really is necessary to look behind all that and take a 
deeper look at each of those issues. I will do that in a very 
short version.
    On liberalization, I think what is important is, that the 
ITA was not on the agenda. This makes it even more notable that 
with what really was a private initiative, the United States 
and other countries moved to force it. On the agenda, it was 
discussed at the Quad and then it got more momentum at the APEC 
meetings. The idea that a brandnew item, a new liberalization 
could be placed on the agenda really brought to life the 
original concept that this Ministerial could bring together 
political leaders and could provide a forum for continuing 
liberalization. So, I think that is really significant. This 
was not a built-in agenda item. There was not a deadline. There 
had been no commitment to negotiate in this area. So, that 
makes this liberalization all the more significant.
    Now, regarding the stock taking, what we did really, 
typical GAO, was dig into the WTO committee reports. Really, 
that is the nitty-gritty of where you see the progress, where 
you see the monitoring, where you see the assessment of 
progress. Now, it is tough reading, because those are 
definitely negotiated documents. It is not the kind of material 
that you pick up and you say, ``OK, so that is what is going on 
in agriculture or SPS or any other given issue.'' We went 
through those reports basically.
    In general, people were concluding, Ministers were 
concluding that implementation was good ``generally 
satisfactory'' is the word that they used. But a couple of 
areas were noted. I talked about this before, before this 
Committee.
    Notifications are not satisfactory. The countries are not 
really submitting the required details of their implementation 
plans about law changes to the WTO committees. That 
fundamentally can impair the oversight process.
    On the built-in agenda, as I said, there was progress on 
telecom, which was important. Because there had been concern 
that deadlines passed in each of these areas, there was some 
question about the viability of sector-specific negotiations. 
This recent success really is testimony that this is a viable 
option.
    The new issues were diverse, from government procurement 
transparency, investment, labor, environment, and competition 
policy. If I could take just another minute, I will highlight 
the results very quickly.
    In procurement, there was a promising result, which is 
important to the United States because we really have not had a 
lot of results from the strategy that was being followed in 
procurement. This is a new approach, not an all-or-nothing 
approach, but an approach that allows countries to have some 
moderate contribution by opening and providing more 
transparency in their procurement.
    The second and third areas are investment and competition. 
There are, as Ambassador Lang said, new working groups--but 
with very modest work programs and absolutely no consensus on 
any future commitment to negotiate. So, even though there is 
some sense that these areas do represent new barriers, there 
are limited prospects for major progress in those new groups 
with a lack of consensus on their scope of debate and general 
scope of work.
    I think that is also reflected in the environment committee 
where there was very limited progress. Unfortunately, all the 
Ministerial did was, basically, renew the charter of that 
committee to work under the same terms of reference. There was 
no review why they had made no progress and why they had not 
been able to come to any conclusions. They just said, ``keep 
working under the same terms of reference.''
    Finally, in the labor area, it really was a modest result, 
if anything. The Ministers' recognition of core labor standards 
intrigues us because we are not able to find anyone who has 
defined core labor standards. Congress has in different laws, 
had different definitions. The ILO does not have one 
definition. There are 174 conventions that the ILO has that set 
different labor standards. Our concern is that, this result is 
not as promising and fruitful as it sounds--although the ILO 
took from this outcome a renewed commitment to deepen and 
broaden their own effort in this area.
    That concludes my summary, Mr. Chairman.
    Chairman Crane. Thank you, Ms. Hecker.
    What steps do you think should be taken to assure that an 
appropriate assessment of notifications and implementation 
obligations are being made within the WTO?
    Ms. Hecker. Mr. Chairman, I think that something actually 
is occurring in every committee. They know when there are not 
notifications being made. There is a working group within the 
WTO that is working on giving consolidated report cards to 
countries saying, ``OK, you owe us these 22 notifications.'' 
There is even an effort, particularly with the least developed 
countries, to give them more help, saying. ``Well, here is what 
we need from you on this one and here is what we need on that 
one'' and also providing some technical assistance to support 
countries doing that.
    So, I think procedurally, there are definite efforts to 
stay on top of what countries have not notified and to work 
with them to complete that process.
    [The prepared statement follows:]

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    Chairman Crane. What do you believe are the best vehicles 
for progress within the WTO? For example, another Ministerial 
Meeting or higher level meetings or the launching of a new 
round, what in your opinion is the best way to go?
    Ms. Hecker. Well, you know, the Ministerial was an 
interesting process to observe. I know you were there. 
Actually, the Ministers' meeting was in a room that was as big 
as a football field. So, I am not sure that the actual 
gathering of Ministers in one room is where meaningful progress 
takes place.
    Actually, I would turn it around to a topic that has been 
discussed here today. I think fast track and the negotiation of 
this Committee, and the rest of the Congress, to reach 
agreement with the administration of what our trade agenda 
should be will play a big role in giving renewed focus and 
direction to the administration's efforts. I think frankly 
that, absent fast track, they clearly do not have a mandate. As 
to and whether it is a Ministerial, or a new Round, or sessions 
in Geneva, I think that mandate is one of the key factors to 
further direction and progress.
    Chairman Crane. Thank you. Mr. Matsui.
    Mr. Matsui. I have no questions, Mr. Chairman.
    Chairman Crane. Mr. Nussle.
    [No response.]
    Chairman Crane. Mr. McDermott? He is not with us.
    Mr. Jefferson.
    Mr. Jefferson. Thank you, Mr. Chairman.
    I want to ask a question about this notification. How 
serious an issue is that in the overall process, where you find 
deficiencies?
    Ms. Hecker. It is a serious process, because the basic, 
underlying element of compliance is the transparency of 
countries reporting what they are doing to implement their 
obligations. So, the substance of it is important. But, also 
understanding and flexibility and support for developing 
countries for whom this burden is quite substantial is 
similarly important. That is why this working group has been 
set up and procedures are being worked on to try and facilitate 
that process for developing countries.
    Mr. Jefferson. Well, have you made any suggestions as to 
how this can be dealt with from your point of view? I know this 
suggest ``working group'' is set up to look at it, but what do 
you think should be done in this area, if you can come up with 
any suggestions?
    Ms. Hecker. We have not evaluated it in detail. This is one 
of a number of issues that we have concerns about, but that 
would be something that we would have to look at in greater 
detail to evaluate how effective this new working group is, and 
whether it is really taking effective measures.
    Mr. Jefferson. Don't you think the major problem is the 
burden it places on individual developing countries to comply 
with notification requirements as opposed to simply not living 
up to the--not taking the requirements seriously enough to live 
up to them?
    Ms. Hecker. I think it may be a little bit of both. I think 
the burden, without any doubt, is far greater than anyone 
anticipated. A lot of these agreements were negotiated 
separately, by separate negotiators. I think at the end of the 
day, no one had any idea that there were over 200 notification 
requirements that were in place by countries. It took a lot of 
work to even get an overview pulled together. So, I think there 
was a breadth to it that no one anticipated, but I think there 
have been issues of noncompliance as well that may be 
associated with the late reporting. There have been a number of 
WTO reports about countries requesting waivers and other 
actions that are really delaying effective implementation.
    Mr. Jefferson. What timeline do you see for this Committee 
to do its work?
    Ms. Hecker. I do not have the information on that. I could 
provide it for the record.
    Chairman Crane. Mr. Houghton.
    [No response].
    Chairman Crane. Mr. Herger.
    [No response].
    Chairman Crane. Mr. Neal.
    [No response].
    Chairman Crane. Well, we want to thank you, Ms. Hecker, for 
your testimony.
    We will now convene our panel made up of company 
representatives from various sectors of the information 
technology industry, to discuss the information technology 
agreement that was endorsed at the Singapore Ministerial 
Meeting.
    The panel is made up of Aaron Cross, public policy director 
of IBM in Washington, DC, who serves as chairman of the 
Information Technology Agreement Coalition and chairman of the 
International Committee of the Information Technology Industry 
Council. Second, Timothy Regan, division vice president and 
director of public policy at Corning; John Boidock, vice 
president and director of government relations at Texas 
Instruments and chairman of the government affairs committee of 
the Semiconductor Industry Association; Donald Poinsette, vice 
president for Asia, at Kemet Electronics and James Kaplan, Jr., 
vice president of the Cornell Dubilier Co., both here on behalf 
of the Passive Electronics Coalition; and, finally, Kevin 
Rafferty, senior marketing manager of Philips Components, a 
division of the Philips Electronics North America Corp.
    Gentlemen, I would remind you, probably unnecessarily that, 
any printed statements you have will be made a part of the 
permanent record, but please try and confine your oral 
presentation to 5 minutes or less. We will proceed in the order 
in which I introduced you.

   STATEMENT OF AARON W. CROSS, PUBLIC POLICY DIRECTOR, IBM; 
   CHAIRMAN, INFORMATION TECHNOLOGY AGREEMENT COALITION AND 
   CHAIRMAN, INTERNATIONAL COMMITTEE, INFORMATION TECHNOLOGY 
                        INDUSTRY COUNCIL

    Mr. Cross. Thank you, Mr. Chairman. I am Aaron Cross, 
public policy director in IBM's Governmental Programs Office in 
Washington, DC. Today, I appear on behalf of the Information 
Technology Industry Council where I chair ITA's International 
Committee. I also chair the ITA Coalition. It was also my 
privilege to be a member of the U.S. delegation at the 
Singapore WTO Ministerial Meeting.
    The ITA breaks new ground with significant implications for 
U.S. trade policy. This was one of the most successful 
negotiations in U.S. trade history. We should consider the 
precedent set by the ITA, because the United States stands much 
to gain if we can learn from its innovations.
    First the ITA departs from the world's traditional approach 
to trade talks. Very importantly, it places the focus of trade 
negotiations where it rightly belongs, on meeting the needs of 
consumers and not on balancing trade concessions among product 
sectors. Next, the ITA points to the importance of having the 
right people in office, for insuring that the United States is 
represented by the most highly qualified people possible.
    In delivering the ITA and the recent global basic 
telecommunications agreement, Ambassador Barshefsky has proven 
the case for her confirmation as U.S. Trade Representative. 
Third, the WTO proved itself to be a worthy and more flexible 
organization that its predecessor, the GATT. The ITA might have 
been negotiated under the GATT, but it would have probably 
taken another GATT round.
    The ITA also serves as a model of industry-government 
cooperation on trade issues. The USTR worked closely with our 
coalition throughout the entire process. This was augmented by 
the industry advisory system authorized by U.S. law. Clearly, 
such communications vehicles give our negotiators a significant 
leg up during trade talks by having them so well prepared.
    Fifth, we can expect more such negotiations in the future 
and we need your support. In October, European Commission Vice 
President Sir Leon Brittan, started talking about the ITA 
formula, saying he expects more such industry-led initiatives 
soon. Indeed, he said he would promote them. In light of this, 
we reiterate our strongest support for expanding USTR's 
negotiating authority through fast track this year. We need 
this negotiating authority because we are already planning for 
ITA II. These are negotiations provided for in the agreement 
which will cover additional and new nontariff elimination 
measures.
    We are looking forward to using these new talks to promote 
further liberalization in global IT trade and investment.
    Mr. Chairman, our enthusiasm obviously stems from what the 
ITA means for the future of our industry. The tariffs savings 
will be substantial, but that is only a small piece of a much 
larger picture. Throughout the negotiations, we focused on one 
message; that this is a global initiative aimed at putting the 
power of information technology in the hands of the users of 
the global information infrastructure or GII, what many call 
the information superhighway. While much of our focus was on 
the Quad countries, we knew that we could turn a good agreement 
into a landmark initiative if we could get non-Quad countries 
to join.
    The tariff rates in many of these countries are quite high. 
A number of them, most of them are developing or advanced 
developing economies, now understand that leveling the global 
playingfield for users in terms of access to IT products is 
essential to their economic growth. In short, the ITA will 
narrow the gaps between the world's information haves and have-
nots.
    Beyond these immediate benefits, the ITA will have a 
broader beneficial impact on our corporate performance in 
American trade policy. My written statement elaborates on some 
of these.
    Staff has asked me to address the product coverage under 
the agreement, particularly regarding capacitors.
    As we built our coalition, we had in mind an agreement that 
would cover computer hardware and software, semiconductors, 
semiconductor manufacturing and test equipment, 
telecommunications products and other high technology 
instruments. From the start, we established a process to 
evaluate requests for including other products. We had only one 
guideline. For a product to be included on our recommended 
list, we had to have a consensus among the coalition members.
    Very early in our work, two of our member associations told 
us that several of their member companies opposed including 
capacitors. They also reported, however, that a number of their 
other members wanted these components to be included. These 
opposing views led us to a neutral position on including 
capacitors and we informed the USTR of that position.
    As you know, in the final outcome, capacitors and other 
passive components were included. Our coalition regrets it 
some, but not all capacitor companies are unhappy with the 
agreement. My own company and virtually every other coalition 
member company regard these firms as valued suppliers. All of 
us need a vital, global passive components industry.
    In conclusion, Mr. Chairman, the ITA is a landmark 
agreement. It is a model for how industry and government can 
work cooperatively to achieve common goals. The basic aim of 
these negotiations were exceeding in almost every respect. That 
aim, to significantly enhance the degree to which the benefits 
of the GII will be made available quickly and less expensively 
to IT users worldwide.
    We note in closing that, by the year 2000, the global IT 
industry will be the world's largest. The ITA will help to make 
this happen.
    We are pleased to have been invited to testify today. We 
appreciate Mr. Crane's and Mr. Matsui's initial opening remarks 
this morning endorsing the ITA. We look forward to working with 
you and the Subcommittee to make the ITA a success and a 
reality.
    Thank you.
    [The prepared statement follows:]

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    Chairman Crane. Thanks, Mr. Cross, very much.
    Mr. Regan.

  STATEMENT OF TIMOTHY J. REGAN, DIVISION VICE PRESIDENT AND 
     DIRECTOR OF PUBLIC POLICY, CORNING, INC., CORNING, NY

    Mr. Regan. Mr. Chairman, thank you for the opportunity to 
appear here. I want to talk about a unique situation, a little 
different than that others might talk about.
    As is the case with most negotiations, this one involved 
give and take. They always do. Unfortunately, Corning and the 
industries we are involved with, the fiber optics industry and 
the television industries, were on the give side of that ``give 
and take'' equation. The European Community wanted some major 
concessions from the United States which would have hurt both 
of these industries and there was not going to be anything in 
the agreement that was going to offset the pain.
    Now, of course, Corning, being a leader in these industries 
resisted and, as a result, we became a bit controversial. That 
is why I am here today.
    Fortunately, with the help of Members of this Committee, in 
particular, Mr. Rangel, Mr. McNulty, Mr. Neal, Mr. Houghton, 
yourself as well as Mrs. Thurmond, we were able to work with 
USTR to find some solutions. USTR was openminded. They allowed 
us to work with them and figure out a way to come up with some 
solutions that worked for them and for our trading partners, 
but at the same time, did not sacrifice our fundamental 
interests.
    In the final analysis, USTR established a good process and 
a good process always results in a good outcome.
    Now, before I get into the details, what I want to do is 
show you some props. This is a copper cable. It has 400 wires 
in it, 200 copper pair. This little piece of fiber, which you 
cannot even see, has the information carrying capacity, using 
relatively inexpensive, off the shelf electronics, as 48 of 
these. Now, if you want to do really sophisticated electronics 
that is available off the shelf today, this little fiber here 
can do the work of 781 of these. If you want to use the 
advanced technology that we have tested in the lab, this little 
fiber can do the work of 6,400 of these.
    Now, this is a great technology and it was invented in this 
country. Unfortunately, the ITA negotiations were headed toward 
undermining the ability to be able to make fiber optics here in 
this country. Thankfully, we were able to get into the ITA 
process early enough and to get some changes.
    Specifically we told USTR not to put this product on the 
table. We said do not put optical fiber, optical, cable optical 
couplers on the table. They said: Why? We are the best in the 
world in these areas. We are the world's leaders. We ought to 
put them on the table.
    The response really is quite simple. The ITA was exporting 
designed to deal with tariffs. The problems we have exporting 
these products overseas is nontariff barriers. So, any zero for 
zero tariff deal is, by definition, imbalanced against us. We 
face nontariff barriers that must be dealt with and they could 
not be dealt with in the context of the ITA.
    So, USTR accepted our position. Unfortunately, the European 
Community continued to press and they pressed very, very hard 
on these issues. In the end, Ambassador Barshefsky was forced 
to compromise or face the prospect that the ITA would not be 
successfully concluded. Now, she worked with us to find a 
compromise. In the end, she agreed to cut the tariff on fiber 
optic cable to zero by the year and to exclude optical fiber 
and optical components from any tariff cuts whatsoever.
    More importantly, she said, OK, guys. You have a problem in 
export markets. I am going to help you. I am going to help you 
tear down those nontariff barriers to your exports, outside of 
the context of the ITA, bilaterally. I will use other tools to 
make sure that we can push these products overseas.
    So, from our perspective, this was a good result. We are 
working closely with her right now to implement a plan that 
will aggressively promote export of this very, very important 
technology and make sure it is made here and not over overseas.
    The other issue is televisions. Now, televisions are a 
different situation all together. It is related to fiber optics 
only in the sense that Corning also makes glass for televisions 
as we do fiber optics.
    The television industry is one which really has had a 
terrible saga, a saga of dumping and of unfair trade that spans 
20 years. Realizing this USTR wanted to exclude the TV products 
from the ITA and we applauded that decision. Unfortunately, a 
big issue arose over the definition of a monitor. Normally that 
would not be a big deal, but in this case, it was controversial 
because there is a technological change occurring in the 
marketplace.
    This is fundamentally rooted in the fact that distinction 
between a television (and related video monitor) and a computer 
and (related computer monitor) is being blurred by 
technological change. The two are beginning to merge. We call 
this convergence.
    In the past, a television had a big screen and relatively 
poor resolution and a computer monitor had a small screen and 
very good resolution. That is changing. HDTV, for example, and 
standard digital television now are going to have higher 
resolution with picture quality that approximates 35 millimeter 
film. On the other side, computers are going to get larger 
screens and broadcast video capabilities. So, the 
distinguishing factors will be eliminated. Yet, we still had to 
come up with a definition for a monitor.
    We worked very hard to work up one, but we encountered all 
kinds of problems. The computer industry and television 
industry worked together to find a solution. We could not work 
it out. USTR took the lead and came up with a compromise. That 
compromise defined a computer monitor by three primary 
characteristics. Number one, it has a dot pitch of below 0.4, a 
technical term for resolution. Number two, it has used cathode 
ray tube technology. Number three and most importantly--and 
this wording is kind of carefully done--it must not be capable 
of receiving and processing television signals without the 
assistance of a computer.
    Now, in addition, USTR said we are going to revisit this 
definition in 2 years. So, that gives us some time to work this 
thing out. We will have some more market data. We will be able 
to make a decision about modifying this. We frankly wanted to 
have a resolution definition below what USTR proposed, but we 
understand why USTR had to accept this definition and why USTR 
had to close the deal.
    We are going to work very hard over the next 2 years 
monitoring the market. If we find monitors coming into the 
United States that are principally used as televisions, we 
anticipate that USTR will be quick to act to make sure that the 
duties are properly assessed.
    Thank you, Mr. Chairman and thank you everybody in this 
Committee for all your help throughout this rather difficult 
process.
    [The prepared statement follows:]

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    Chairman Crane. Thank you very much, Mr. Regan.
    Mr. Boidock.

    STATEMENT OF JOHN BOIDOCK, VICE PRESIDENT AND DIRECTOR, 
 GOVERNMENT RELATIONS, TEXAS INSTRUMENTS, INC.; AND CHAIRMAN, 
     GOVERNMENT AFFAIRS COMMITTEE, SEMICONDUCTOR INDUSTRY 
                          ASSOCIATION

    Mr. Boidock. Thank you, Mr. Chairman. I appreciate this 
opportunity to present the views of the Semiconductor Industry 
Association on the Information Technology Agreement.
    The members of our association along with our customers and 
our suppliers believe that the ITA will substantially open 
foreign markets. We believe it is a major accomplishment for 
the whole world trading system. By signing on, countries have 
agreed to eliminate their tariffs on information technology 
products by the year 2000. This is something that our industry 
has been working on for over a decade.
    Semiconductors are increasingly a pervasive part of 
everyday life. They are the enabling technology for the 
information age and the Internet. They have enhanced the 
functioning of such diverse products as the family car, 
advanced medical equipment and modern defense systems. We in 
the semiconductor industry employ 250,000 people throughout the 
United States. We are the technology behind the nearly $400 
billion U.S. electronics industry, which employs two and a half 
million people.
    We are currently the world market share leader with 1996 
world sales reaching $60 billion, which represents 46 percent 
of the world's semiconductor market. We are a global industry. 
Roughly half of our revenues are derived from overseas sales. 
As a consequence, we have dedicated ourselves since the 
inception of the Semiconductor Industry Association to 
promoting free trade and opening world markets and we have made 
much progress, especially in Japan.
    We have not always been the world leader, however. In the 
mideighties, we lost the lead due to a combination of Japanese 
dumping of semiconductors on the world market and nontariff 
barriers in Japan, which I might add is the second largest 
market for semiconductors. During that period, concerns about 
the continued existence of our industry in the United States 
were voiced by many, both in and out of government, because of 
the significant implications that its demise would have for our 
Nation's security.
    The industry's response to this problem was a several part 
strategy, which included, first, the elimination of tariffs on 
semiconductors and related products throughout the world, 
including here in the United States. At our urging, the United 
States, Canada and Japan eliminated their tariffs on 
semiconductors in the mideighties. As a result, our industry 
has had to compete on the basis of quality, technology and cost 
in our home market for over 10 years, unprotected by tariff 
barriers.
    Second, we worked to secure more equitable access for 
foreign semiconductor suppliers in the Japanese market. We did 
this with the help of the Office of the U.S. Trade 
Representative. As you know, Mr. Chairman, the United States 
recently secured the third United States-Japan semiconductor 
trade agreement, thanks to the tireless efforts of Ambassador 
Barshefsky and her highly dedicated staff.
    As a result of these and other efforts, the U.S. 
semiconductor industry has regained the world leadership 
position and we remain the most competitive semiconductor 
producers in the world. Today, the SIA along with our suppliers 
in the semiconductor manufacturing equipment industry and our 
customers in the information technology business are pushing 
for other nations to eliminate their tariffs on information 
technology products through the Information Technology 
Agreement.
    Currently many nations of Asia as well as the European 
Union maintain duties on semiconductors. For example, EU duties 
on semiconductors range up to 7 percent. Elimination of these 
duties will save U.S. semiconductor makers and our European 
customers $1.4 billion between now and the end of the century. 
The benefits do not end there. Consumers and businesses that 
utilize information technology products worldwide will also 
gain.
    The ITA, by lowering the costs of access to computers and 
software, has the potential to increase educational 
opportunities for children throughout the world, and by making 
computers and telecommunications equipment more affordable for 
small businesses, productivity will rise. This agreement truly 
provides a win-win scenario for all nations choosing to 
participate.
    Mr. Chairman, thank you very much for the opportunity to 
present the views of the semiconductor industry.
    [The prepared statement follows:]

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    Chairman Crane. Thank you very much, Mr. Boidock.
    Mr. Poinsette and Mr. Kaplan, I think you are sharing the 
time; is that right?
    Mr. Poinsette. Excuse me, sir?
    Chairman Crane. I think you are sharing your time, the 5 
minute time; is that right?
    Mr. Poinsette. That is correct.
    Chairman Crane. Go right ahead, please.

 STATEMENT OF DON POINSETTE, VICE PRESIDENT, KEMET ELECTRONICS 
CORP., GREENVILLE, SOUTH CAROLINA; AND JAMES KAPLAN, JR., VICE 
PRESIDENT, CORNELL DUBILIER, LIBERTY, SOUTH CAROLINA, ON BEHALF 
              OF THE PASSIVE ELECTRONICS COALITION

    Mr. Poinsette. Mr. Chairman and Members of the Subcommittee 
on Trade, my name is Don Poinsette, vice president of Kemet 
Corp., located in Greenville, South Carolina, with facilities 
also in North Carolina and Texas. Sitting to my left and also 
testifying today is James Kaplan, Jr., vice president of 
Cornell Dubilier. Also with us today but not at the witness 
table are my colleague, James Jerozal, chief financial officer 
of Kemet, Mike Ritter, national sales manager of Industrial 
Midwec Corp., which is in the Chairman's congressional 
district, Joe Bstandig, communications manager for Vishay 
Intertechnologies, with facilities in 14 States and Les Glick 
of the law firm of Porter, Wright, Morris and Arthur here in 
Washington.
    We represent the newly formed Passive Electronics Coalition 
that includes many companies producing capacitors and resistors 
in 18 different States and 25 congressional districts. We share 
a commonality of interests in preserving our companies, 
preserving our technologies and protecting the more than 20,000 
jobs threatened by this information technology agreement. A 
complete list of these companies is in the written statement 
filed on Monday and we request that it be included in full in 
the hearing record.
    Mr. Chairman, I will begin by saying that, the word passive 
in our name should not mislead you. The word defines our 
products but not our members. Mr. Chairman, we are a very angry 
and extremely motivated group, due to what we consider has been 
a grave injustice, perpetrated on us, on our industry and 
perhaps, even on the very security of these United States 
themselves by the U.S. Trade Representative in negotiating the 
ITA.
    That negotiation took place without a single consultation 
with any company in our part of the electronics industry. It 
took place without regard for the Federal statutes which 
require that consultation. It took place in spite of two 
letters sent by Senator Strom Thurmond in May and December of 
last year, neither of which were even acknowledged by the USTR.
    I digress here just a minute. He did in fact bring it to 
the attention of the USTR at that time, that there was a 
defense issue involved, counter to what Mr. Lang said this 
morning.
    It took place in spite of several repeated assurances by 
the USTR itself that capacitors were not included in the 
agreement. The latest of these assurances was made when the 
USTR was meeting with other country representatives in the far 
away reaches of Singapore, far from the communications channels 
in Washington. Once again, both we and our attorneys were told 
that capacitors were not included. Then in the December 11 
issue of the ``New York Times'' we were stunned to read that 
capacitors were in the ITA.
    Mr. Chairman, by definition, successful negotiations are 
supposed to result in win-win situations for the parties 
involved. In this ITA, as far as passive electronic components 
are concerned, it is all win-win for everyone outside the 
United States and is totally lose-lose for the American 
companies inside the United States. The Europeans win. The 
Koreans win and even Iceland can win if they want to. The big 
winner, one more time, is the Japanese. The Japanese give up 
absolutely nothing--I repeat--absolutely nothing in order to 
get these huge concessions. This is because their tariff is 
already zero.
    They use a complex system of nontariff barriers in Japan 
which make it impossible for our companies to sell there. So, 
what do we get in the ITA as it is currently written? In a 
word, we get had, to wit, number one, the Japanese finally get 
that which they have wanted for a very long time, totally duty-
free access to an already open and competitive market in the 
USA. Number two, American companies get no additional access to 
the totally closed Japanese markets since duties have never 
been an issue there.
    Number three, while we are told that Europe has been 
insisting on the inclusion of passive devices in the ITA, we 
know for a fact that the EU has been heavily influenced by 
Japanese companies already located there. Number four, true, we 
get a reduction of duties such as Australia, Canada and Norway. 
It is also true that such reductions make absolutely no 
difference to any of us in this room.
    Number five--and this may be the single most important 
point of all. Our own USTR has handed to the other countries, 
again, most notably to the Japanese, a 9.4-percent reduction in 
their cost of doing business in the USA. Mr. Chairman, I assure 
you and other Members of your Committee that a near 10-percent 
reduction of costs in this already extremely competitive and 
low margin business can only be compared to a gift from God.
    Finally, as if protecting American companies, technologies 
and 20,000 jobs was not sufficient, we would respectfully draw 
your attention to the national security. I would like to quote 
from a decision brief prepared by the Center for Security 
Policy directed by a former deputy Secretary of Defense, dated 
February 7, 1997. The article was entitled: ``Hold Everything, 
Barshefsky's New Infotech Trade Deal Promotes Trade at Expense 
of U.S. Security Interests.''
    The article notes that, and I quote: ``Should the United 
States lose the one or two American companies still available 
to supply capacitors and resistors required for such systems, 
military readiness could be materially degraded.'' The 
newsletter goes on to say:

    And this is no abstract proposition. In Operation Desert 
Shield/Desert Storm, U.S. officials were alarmed to discover 
that dependency on foreign suppliers for spare parts or 
replacement components of vital weapons systems could translate 
into unacceptable shortfalls in defense capacities and/or 
serious strains in relations with allied nations. For example, 
Washington had to ask the Japanese government for supplies of 
display screens for U.S. weapons systems that were not 
available for U.S. manufacturers.

    Mr. Chairman, we have raised these concerns with the Armed 
Services Committee in both Houses and hopefully you and Acting 
Trade Representative Barshefsky will be hearing from them soon.
    Gentlemen, the simple fact is, not a single integrated 
circuit, not a single microprocessor will work without having 
many of our type of products alongside it. Our best estimates 
are, today, on average, every integrated circuit has five 
Tantalum capacitors, 100 ceramic capacitors and an equal number 
of resistors arrayed around it. Not only does that allow your 
television to work, your VCR to work, the engine in your car to 
run, the security system in your house to work, but it also 
permits the Patriot missile to work. It permits Trident to 
work. It permits TOW antitank systems to work and it permits 
our space shuttles to make their way back and forth.
    Kemet Corp. and Vishay are the two lone surviving American 
companies manufacturing these two capacitor products. The rest 
of the world is supplied, for all practical purpose, by the 
Japanese. Except for the presence and continued success of 
these two American companies, Japan can control the world 
markets of Europe, South Africa, South America, Asia, China, 
NAFTA and, of course, Japan itself. If our government, this 
time the USTR, persists in destroying every competitive 
advantage we might have in the United States then all we can 
look forward to is being held hostage by foreign suppliers and/
or to foreign manufacturing operations.
    Chairman Crane. Well, Mr. Poinsette, are you about to 
finish up?
    Mr. Poinsette. Yes, just if I may----
    Chairman Crane. We are in a bit of a time bind here.
    Mr. Poinsette. Thank you, Mr. Chairman, if I might have 2 
more minutes, please.
    Chairman Crane. Well, I will tell you, we have to go and 
vote.
    Mr. Poinsette. OK.
    Chairman Crane. If you could sort of wrap it up in about 30 
seconds, I would appreciate that.
    Mr. Poinsette. I will do that.
    Chairman Crane. Then I have sort of an announcement to 
make.
    Mr. Poinsette. I will do it. Thank you, sir.
    It should be clear then that these products are not--
repeat--not related in any way to information technology. They 
do not store or transmit information. They do not belong in the 
Information Technology Agreement.
    So, what does our coalition want? Do we ask that the ITA be 
destroyed?
    No, but what we do ask is that you and your Committee with 
all urgency insist that the USTR remove passive components from 
this agreement. Our best estimates are that these components 
make up less than 1 percent of the value of the agreement. Now, 
I think it is much less from what I heard earlier. It cannot 
possibly harm the agreement to have them removed. Please help 
us preserve our companies, our jobs and our very ability to 
compete. We ask you to please not be a party to giving away 
another vital industry to overseas interests.
    Thank you, Mr. Chairman.
    [The prepared statement and attachments follow:]

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    Chairman Crane. Thank you very much, Mr. Poinsette. I am 
sorry we did not hear from you, Mr. Kaplan.
    Gentlemen, we have got to go and vote and there are going 
to be three votes between now and 12:30. So, what I would 
suggest because of other business, if you can, you come back at 
1:30.
    I am sorry, Mr. Rafferty, that we have not been able to 
hear your testimony. We would like to do it at that point. Then 
we can ask some questions. If you cannot stay here or come 
back, we would perfectly understand. If you can, it would 
certainly help us. So, we are adjourned until 1:30.
    [Whereupon, at 12:02 p.m., the Subcommittee recessed, to 
reconvene at 1:30 p.m., the same day.]
    Chairman Crane. First, we want to apologize to our 
witnesses for the disruption. I think Mr. Rafferty is the only 
one who has not yet testified.
    Mr. Rafferty. Correct.
    Chairman Crane. Will you proceed, please.

STATEMENT OF KEVIN RAFFERTY, SENIOR MARKETING MANAGER, PHILIPS 
 COMPONENTS, PHILIPS ELECTRONICS NORTH AMERICA CORP., JUPITER, 
                               FL

    Mr. Rafferty. Thank you, Mr. Chairman. Good afternoon and 
Members of the Subcommittee as well. I am Kevin Rafferty. I am 
the senior marketing manager for capacitors for Philips 
Components.
    Philips Components is an operating business of Philips 
Electronics North America Corp., which is in turn a subsidiary 
of Philips Electronics N.V., headquartered in Eindhoven, The 
Netherlands. Philips Electronics North America Corp. has more 
than 20 business operations in North America, employing 35,000 
people. It has more than $7 billion in annual sales in a 
variety of electronics businesses, including semiconductors, 
consumer business electronics, lighting, consumer 
communications, electronic components, security systems and 
information technology services.
    Philips Components, headquartered in Jupiter, Florida, 
supplies passive, magnetic and professional components to the 
electronics market. Philips Components employs approximately 
1,000 people in locations in, again, Jupiter, Florida, 
Columbia, South Carolina, Slatersville, Rhode Island and 
Saugerties, New York. We manufacture capacitors, resistors, 
magnetics, camera tubes and imaging products. Our broad line of 
components serves the major electronic original equipment 
manufacturer markets, including automotive, telecommunications, 
computer and industrial.
    I am here to testify today to support the Information 
Technology Agreement or ITA, which was agreed to by the United 
States and many other countries, as you know, at the World 
Trade Organization in Singapore last December and which will 
eliminate tariffs on information technology products by the 
year 2000. In particular, I am here to support the inclusion of 
capacitors in the ITA.
    As a general matter, Philips supports the ITA because it is 
a free trade company and believes that the elimination of 
tariffs on a broad range of information technology products 
will profoundly benefit high technology suppliers and the 
American economy generally. Philips chose to support the ITA 
despite the cost that such support portends for our company. 
While Philips would stand to gain from an ITA in terms of 
tariffs savings per year, the company would also lose 
significant tariff protection presently applicable to numerous 
products manufactured in the United States and elsewhere.
    Despite such losses, Philips supported the ITA because it 
believes it is in the best interests of the company as well as 
the United States and world economies to embrace such 
competition-forcing measures.
    Today, I would like the record to emphasize that the 
decision to include capacitors in the ITA is logical because of 
the capacitor's role in information technology products and 
their inclusion would facilitate open markets that will 
stimulate the world economy. As you may know, capacitors are 
electronic components that are storage devices for electric 
energy that are found in various applications within the 
electronics industry. There are many types of capacitors. Some 
form of capacitor is almost universally found in hardware that 
supports information technology products.
    Capacitors are found in information applications, such as, 
computer motherboards, disk drives, modems and cellular 
telephones. Worldwide, Philips manufactures many different 
kinds of capacitors, such as, ceramic multilayer, film foil and 
aluminum electrolytic. We manufacture capacitors in the United 
States at our plant in Columbia, South Carolina where we employ 
approximately 400 people. In South Carolina, we manufacture 
aluminum electrolytic capacitors; production value is 
approximately $50 million per year. We have invested 
substantially in all our U.S. locations in the past 2 years, 
upgrading our facilities so as to better serve our U.S. OEM 
customers.
    At present, capacitors are subject to approximately a 9 
percent tariff. Philips recognizes that it loses 9 percent 
tariff protection if the ITA is ratified.
    We have decided to support the inclusion of capacitors in 
the ITA nonetheless for several reasons. First, given that 
capacitors are found in hardware that support information 
technology products, it seems only logical that they be 
included in the agreement. Second, we believe our growth to be 
based on customer partnerships. Eliminating tariffs on 
capacitors and other components will allow our U.S. customers, 
OEM manufacturers to be more competitive.
    Finally, Philips believes that the inclusion of capacitors 
would both allow the ITA to achieve its goal of providing 
access worldwide to information technology, and force the 
competitive open markets that are so necessary for the 
development of the global economy. As a company, we are willing 
to take this competitive challenge.
    In closing, Philips supports the ITA again and commends 
Acting U.S. Trade Representative Charlene Barshefsky and her 
staff in negotiating an agreement that will, through the 
inclusion of among other electronics products, passive 
components such as capacitors, enrich the American economy. 
Philips hopes that other companies are also willing to accept 
competitive challenges and opportunities that only an ITA can 
provide.
    Mr. Chairman, we appreciate this opportunity to comment. 
Thank you.
    [The prepared statement follows:]

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    Chairman Crane. Thank you, Mr. Rafferty.
     Mr. Cross, you have described that two members of your 
coalition are opposed to the inclusion of capacitors. Two 
questions. One, could you describe the position of other 
capacitors within your coalition and how many are there?
    Mr. Cross. Well, Mr. Chairman, in my statement, I believe 
that I said that, two of the member companies of two of our 
associations that belong to the coalition expressed opposition 
to the inclusion of capacitors. Besides Philips, we also have 
AVX, which is a major company based--it is 75 percent Japanese-
owned but its headquarters are in South Carolina. They have, I 
think, 4,000 employees down there. They are entirely U.S. 
managed and U.S. staffed. They are listed specifically as a 
corporate member of our coalition.
    In addition to that, Mr. Chairman, I would like to go back 
to one of the things that I was trying to get across in my 
message. That is, throughout the negotiation of the ITA, the 
central message that we tried to carry forward--and I know the 
U.S. Trade Representative's Office did the same--was that if 
this agreement was going to succeed, first, we had to recognize 
that it was a nontraditional trade negotiation where you were 
not going to get exact balance in terms of tariff offers from 
the various countries involved.
    We knew that, for example, as it was pointed out, Japan has 
virtually no tariffs on information technology products. The 
U.S. rates were much lower than those of Europe. So, if you are 
going to be looking for trading concessions or balancing 
concessions, you were never going to win that argument in the 
first place. The key to the success of the ITA was, therefore, 
not in terms of trying to look at it from a product by product 
balancing effort, but to look at it from the viewpoint of the 
users of the information technology products that are covered 
under the ITA.
    From that standpoint, as far as the capacitor issue goes, 
we have a very broad and substantial number of members of the 
coalition. I do not think I could give you an exact number 
right now--who are the users of capacitor, who buy these 
capacitors and, therefore, in terms of their own production 
costs would like to see those costs come down. Therefore, they 
were very supportive of including capacitors under our proposal 
for ITA coverage.
    We, however, because of the opposition of just two 
companies out of a coalition that probably represents about 
7,000 companies in total, when you consider all the members of 
the associations, because of that opposition, we took no 
position on whether or not capacitors should be included under 
the ITA. Now, that it is done, now that we have an agreement, 
our strong position despite this concern about capacitors is, 
that we need to go ahead and get this done.
    There are 397, I believe, tariff line items that are 
included in the ITA. The only organized opposition we have 
heard since then has been expressed on one. Now, baseball 
batting averages, that comes out to a 998 batting average and 
it is not bad.
    So, we applaud Ambassador Barshefsky. We think that despite 
this concern about capacitors, we regret that we have this 
problem, but we would like to see it resolved.
    Finally, just one point in passing that I would like to 
point out.
    The representative that we had earlier talking about the 
capacitor issue had mentioned the lack of balance because of 
nontariff barriers in Japan and elsewhere. That specifically is 
provided for in terms of future negotiations under the second 
phase of the ITA. We invite, as we did from the very beginning, 
we invite these companies to my left and any others who have 
concerns about nontariff measures in terms of increased access 
and information technology, to come and join with us as we 
prepare for ITA II.
    Thank you.
    Chairman Crane. Thank you.
    For Mr. Poinsette or Mr. Kaplan, does the elimination of 
tariffs on inputs such as capacitors made in the United States 
in return for tariff elimination on a broader range of products 
in the information technology industry help your customers buy 
more of your products?
    Mr. Poinsette. I think that is a very good question. The 
answer to the question is probably fundamentally yes. A better 
question is, does it have them buying more of our products? 
That is our issue with this. The answer to that is 
fundamentally no. I would take exception with several of Mr. 
Cross's comments.
    First of all, he said earlier that the ITA's mission was to 
put information technology into the hands of the users. I would 
defy any user to know that he had a capacitor laying in his 
hand, should it have been put there. We think that capacitors, 
as a part of information technology, are as includable as 
steel, glass, plastic, screws, nuts and bolts. It is to say 
that, if you are putting a personal computer together, you have 
to have plastic. You have to have screws and nuts and bolts. 
Well, why aren't they in the agreement?
    You cannot have an electronic circuit without the 
capacitors that we produce, predominantly the ceramic and the 
Tantalum.
    Now, let me say again, our issue is not with the ITA. I say 
that again. Our issue is with the inclusion of these capacitors 
in this ITA. We are the two surviving companies, Vishay and 
Kemet, in the United States, American-owned and American-
headquartered with a lot of employees at stake.
    Having said that, a reference was made to AVX earlier. That 
AVX is 75 percent Japanese-owned. Three years ago, AVX was 100 
percent an American company. Shortly, after that, it was 100 
percent owned by Kyocera and only recently for financial 
reasons, did they go on to the U.S. stock market. My 
recollection is that, they actually issued 20 percent of their 
stock on to the U.S. stock market.
    So, what has happened to AVX? What has happened to the 
Corning capacitors, for that matter? Corning used to be in the 
capacitor making business. They are no longer. Philips, for 
that matter, used to manufacture the kinds of capacitors that 
we make in the United States and they do no longer. They closed 
those facilities. We are the two remaining companies.
    It comes down to a decision. Does this country want to 
sacrifice these two remaining companies as well as a lot of 
other smaller companies--Jim Kaplan here can speak for 
himself--but a lot of other smaller companies in the niche 
business of capacitors? Jim, you might say a word--on the 
address he never got to make, just about 10 or 20 seconds.
    The USTR, as I said earlier, with the granting to these 
competitors that we have around the world, predominantly 
Japanese, of 10 percent off the cost is an enormous number in 
our business. This is not a high margin business. This is a 
commodity, very high volume product, both in ceramic capacitors 
and Tantalum capacitors. I realize that it may be difficult to 
understand this technology, but when you appreciate that there 
are multiples of these capacitors alongside every IC, no matter 
where it is used, every microprocessor, we are getting ready to 
sacrifice these companies on that altar of expediency called 
the ITA.
    We are suggesting that we should not be doing anything like 
that. At this juncture, that would be the end of my points.
    Mr. Kaplan. I would like to add, if you do not mind, that 
there are hundreds of types of capacitors. Vishay and Kemet are 
large and they supply Tantalum and ceramic, but there are 
literally hundreds of types of capacitors. We are one small 
player. We do about $60 million in capacitors, but ours go in 
the military. We are sole-sourced capacitors in the military 
programs. We supply capacitors for the F-16, the Bradley 
Fighting Vehicle, Northrup, Gruman Lucas, Aerospace and 
Hewlett-Packard. These are some of the types of capacitors we 
make. Less than 5 percent of our product is affected by this 
agreement. The rest do not go into informational devices or 
computers.
    Yet, 95 percent of our product is going to be affected and 
we get tremendous pressure from the Japanese. So, everybody 
gets affected by this, not just Kemet and Vishay. There are 
hundreds of family-owned businesses like ourselves who are 
employing thousands of people. It just makes it very difficult 
for us to even stay in business and we do a very good job. Our 
capacitors are significantly cheaper than the Japanese 
capacitors.
    Not only can we not get into the Japanese market, but we 
have been in this business for 60 years. We cannot get into the 
Japanese original equipment manufacturers located in the United 
States. We can offer them cost savings of up to 20 percent, and 
our capacitors are good enough for Northrup and Lucas and the 
U.S. Government, but the Japanese will not buy them and we can 
still save them 20 percent. They are bent on buying exclusively 
from Japan. We just feel that it is not fair.
    We are just giving them another foothold, letting them get 
more of our market. We are giving them 9\1/2\ percent more 
profit. It is just going to go right to their bottom line, to 
give them more money for more equipment to automate, to compete 
with us more effectively. It just makes it difficult for small 
businesses like us to stay in business.
    Mr. Poinsette. Mr. Chairman, if I may add a point as well 
to Jim's comments.
    On the subject of recourse, when it comes to addressing the 
nontariff barriers of Japan, we do not have enough years left 
in our lives or enough resources in our company to address that 
issue in Japan. I have been trying to sell in Japan four 
different products for 33 years. I have not succeeded in doing 
any of them. When I took over this present job that I have with 
Kemet Electronics in 1979, we made a pact and a commitment to 3 
years of resources to finally break through the veneer in Japan 
and sell our products.
    We finally had to decide that a company of our size, 
especially then--we were a $185 million company at that time--
we decided at that time that, if we were going to spend those 
resources on breaking markets, we were going to have a great 
deal more success, a great deal more benefit for our employees, 
for our stockholders and what not, if we went after markets 
that would be more receptive to us. Therefore, we addressed the 
markets of Singapore. We addressed the markets of Taiwan, Hong 
Kong, even the European market. We have not had difficulty 
entering and competing well in the European market. The 
Europeans buy from us. There is a trade between these two areas 
of the world.
    However, it is not possible in Japan and we cannot 
tolerate, when Japan has given up nothing, to provide for them 
this 10 percent duty.
    Now, I will say this, we have been open to discussion with 
the USTR all along. We have been absolutely willing to discuss 
any sort of solution. The USTR has refused--I say refused. 
Maybe that is too strong a word--simply avoided us, has not 
come to address these issues with us. Vishay and Kemet, as big 
as we are, have the same problems that Mr. Kaplan's Cornell 
Dubilier has. It does not matter where the Japanese customer 
company is. They will not buy our products.
    Now, having said that, if the USTR can get a commitment 
from the Japanese that details what their side of this bargain 
is in the ITA, that details what they are going to do to open 
their markets to the Tantalum capacitors, the high grade 
aluminum capacitors, the ceramic capacitors in Japan, we say, 
fine. You have our blessing and let's do this. But let's have 
no reduction in duty in these capacitors for, let's say, 2 
years. If in the third year the Japanese have demonstrated good 
faith by opening that market or providing some sort of document 
through negotiation with the USTR that we can enter that 
market, we will drop half of the duty right then, the third 
year. Maybe the fourth year, we will drop the other half of the 
duty. It is not much longer than we are talking about right 
now. Let's do it that way.
    Let's get something in return when it comes to that 
Japanese market in return for what we are giving up. Why do we, 
the U.S. market, the singular most powerful market in the 
world, not get something in return when we do this? It is a 
mystery to us, sir.
    Thank you.
    Chairman Crane. Thank you.
    Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman.
    Gentlemen, it is nice to see you.
    I sort of relate to the issues that you two gentlemen, Mr. 
Poinsette and Mr. Kaplan, are talking about because industry 
after industry in the components of the consumer electronics 
business has just been cut away. It is really hard when you can 
enter somebody else's market and prevent those companies or 
that industry from entering their markets and, therefore, you 
can price whatever you want and still make money and dump on 
the rest of the world.
    Let me just ask you a question. Do you gentlemen, your 
companies produce outside of the United States?
    Mr. Poinsette. Are you addressing the question to me?
    Mr. Houghton. Yes, Mr. Poinsette, do you?
    Mr. Poinsette. Yes, yes, we have----
    Mr. Houghton. Why did you go outside the United States, I 
mean, for an outside the U.S. market or do you produce there to 
bring back here or what?
    Mr. Poinsette. Why?
    Mr. Houghton. Yes.
    Mr. Poinsette. It was a matter of synergism. In order to 
remain competitive in this market, our philosophies of doing 
business were that we had to have what we called a focused 
plant philosophy. That means building as much stuff of the same 
kind, of the same order of product in one place as we possibly 
can. As that----
    Mr. Houghton. You produce outside to sell here?
    Mr. Poinsette. Excuse me?
    Mr. Houghton. You produce in another country to sell here 
in this country?
    Mr. Poinsette. No, the way our production works--I will 
start from the beginning. We have two primary products, 
multilayer ceramic capacitors and solid Tantalum capacitors. 
Within both of those capacitors there is what we call a raw 
element or a key element. In the case of a Tantalum capacitor, 
it is called a Tantalum anode. We manufacture all of those 
anodes in the United States. In ceramic capacitors it is called 
the ceramic element or the chip element. We manufacture most of 
those in the United States.
    Now, those--as we have developed over the years--and by the 
way, we have been in Mexico now about 30 years. That is where 
we have our facilities. They are in Mexico and in the United 
States.
    What we do is----
    Mr. Houghton. They interchange products back and forth, 
right?
    Mr. Poinsette. No, not really. It is a continuation of the 
integrated line. We build what we call a higher technology----
    Mr. Houghton. This is what I am trying to say. If you have 
a plant outside, that most of the products ultimately end up 
back here in the United States.
    Mr. Poinsette. Oh, no, sir. We export about somewhere 
between 40 and 45 percent of our production.
    Mr. Houghton. I see and that will be back here into this 
country?
    Mr. Poinsette. These two areas are synergistic. I want to 
make an important point here. We have not moved----
    Mr. Houghton. I do not think I got an answer on the first 
one. Then you can make yours.
    What you are saying is, about half of your production from 
Mexico comes back here into the United States?
    Mr. Poinsette. In a sense, yes.
    Mr. Houghton. Is that right? OK, go ahead. Go ahead with 
your question.
    Mr. Poinsette. What we are doing is, we are continuing the 
manufacturing process that we begin in the United States and we 
finish a lot of it in Mexico.
    Mr. Houghton. Right, right.
    Mr. Poinsette. Not all of our product, however, is finished 
in Mexico. That part of the product that is finished in Mexico 
goes around the world. About 40 percent goes somewhere else. 
Fifty percent goes around the world and the other 50 percent 
back to the United States.
    May I make one point, because I think it is very important?
    Mr. Houghton. Yes and then I would like to get Mr. Kaplan 
because I have a couple of other things.
    Mr. Poinsette. Sure.
    This question comes up. Well, if you are so interested why 
do you have these facilities in Mexico and haven't you really 
moved jobs over? I want to emphasize the synergistic point. In 
1987, we had about 3,000 employees. About 1,500 of them were in 
Mexico and about 1500 of them were in the United States. Today, 
we are approaching 11,000 employees and about 5,000 of them are 
in Mexico and about 5500 are in the United States.
    The point being that, for every time we are adding a job in 
the United States, we are adding a job in Mexico and vice-
versa. If it was not for the existence of both of those places, 
Kemet Electronics, Kemet Corp. would not exist. We could not 
compete in the world.
    Mr. Houghton. I see. What would it require to have all of 
those jobs here in the United States?
    Mr. Poinsette. What would it require?
    Mr. Houghton. A higher tariff?
    Mr. Poinsette. I do not believe it is possible and the 
honest answer to that is labor rates.
    Mr. Houghton. OK. All right, now let me ask Mr. Kaplan 
because you come from a very distinguished company that has 
been in business I do not know how many years, but years and 
years.
    Do you produce overseas?
    Mr. Kaplan. We had a facility in Taiwan. We were the second 
American company in Taiwan. Nine years ago, we shut it down and 
moved it to Mexico. That product is an old product. It was 
invented in 1912, 1913. It has changed relatively little in 
that time and it is very difficult to automate. It has about 40 
percent labor and the only way we can continue to stay in the 
business is to provide that product with low labor as well. So, 
we chose to move it to Mexico, but we never had the jobs here 
in the States that we moved to Mexico.
    Mr. Houghton. I guess, Mr. Chairman, that what I am trying 
to reach for is an understanding of what some of the economic 
dynamics are here, not from the standpoint of you gentlemen and 
you make your case very well, but from what the U.S. policy 
should be. The fact is, that despite some of the inequities in 
the marketplace, it is not a high tech business and there is 
nothing wrong with that.
    The DOD, if I understand, has not said that this is 
military necessity to have production capabilities in this 
country.
    Mr. Poinsette. They should. I am surprised at that.
    Mr. Houghton. They do not, do they?
    Mr. Poinsette. That this is a military necessity? Yes, sir, 
I think----
    Mr. Houghton. Yes, the DOD has not said that it is 
essential that we have this capacity because you can buy it in 
so many ways and in so many forms.
    Also, if I understand it, Kyocera really sort of dominates 
this. Is that right?
    Mr. Poinsette. They?
    Mr. Houghton. Dominate the market?
    Mr. Poinsette. Kyocera?
    Mr. Houghton. Yes.
    Mr. Poinsette. No, I would not say that. Are you talking 
about Kyocera AVX or are you talking about Kyocera as a----
    Mr. Houghton. I am talking Kyocera Japan.
    Mr. Poinsette. Kyocera is a long----
    Mr. Houghton. But only 75 percent of AVX.
    Mr. Poinsette [continuing]. Kyocera is a dominant player in 
the ceramic materials business. That is not capacitors. That 
is----
    Mr. Houghton. Who is the leading producer of capacitors in 
this world?
    Mr. Poinsette. The leading producer of multilayer ceramics 
is Muraa, Japanese. The second leading producer is TDK, 
Japanese. The third leading producer is AVX Kyocera, Japanese. 
The fourth leading----
    Mr. Houghton. So, it is all Japanese, right.
    Let me ask Mr. Regan a question, because you know a little 
bit about the capacitor business also. Also, you were touching 
on these nontariff barriers. That is something that you worry 
about as far as fiber optics is concerned and I am sure other 
people worry about in terms of their own products. Could we 
talk a little bit about the nontariff barriers?
    You say that you have to monitor this thing very carefully. 
We are all right for the moment. You are saying, if I 
understand it, that you produce at a lower cost than the 
Japanese. There is a zero tariff and you still cannot get in 
the market.
    Mr. Regan. That is correct.
    Mr. Houghton. So, are those nontariff barriers something 
which is germane to all the discussion we have had today? Maybe 
others would like to join in this. I do not want to take too 
much time, Mr. Chairman, but I think this is an essential 
issues.
    Mr. Regan. Well, I think the point the gentleman down at 
the end of the table made was precisely the same point we were 
concerned about in fiber optics. The U.S. market is 40 percent 
of the world market for fiber optics. The only barrier to our 
market is the tariff. However, we have a very difficult time 
breaking into foreign markets.
    Why? We have discriminatory government procurement we have 
to deal with. We have behaviors which demonstrate a clear 
preference for domestic product. In some countries, we have 
investment requirements which basically say, look, if you want 
to sell it here, you have to make it here, which involves a 
transfer of sensitive technology to other parts of the world. 
We have the discriminatory application of domestic taxes which 
tends to raise the price dramatically for a product that is 
imported versus one that is made domestically.
    We had one case in one country, which I will not mention, 
where were prepared to go in and supply the product. The big 
buyer which is a PTT has said, you guys have the greatest fiber 
in the world, but we are not going to certify you. We are not 
going to give you certification to sell in our market, not 
because you do not meet a standard, not because you are not 
good, but because you do not have a plan to make it here. That 
is the kind of unfairness that we face around the world.
    Our concern about the ITA was that we were going to engage 
in unilateral disarmament. We were going to give away our 
tariff and hence, the access to our market and get nothing of 
meaningful back. I think what we were able to get was something 
like the gentleman down the table presented, a commitment to 
work on these nontariff barriers going forward and on a 
commitment to work very hard on it. Now, in exchange for that, 
we have given up a modicum of protection as it applies to fiber 
optic cable, not to optical fiber or not to optical 
componentry.
    We hope that this works out. If in fact USTR is successful 
in opening up these markets, then we will have negotiated a 
good deal. If not, I am probably going to get fired. No, I am 
only kidding. [Laughter.]
    Mr. Houghton. Would anybody else like to make a comment? 
Yes, Mr. Boidock. Would you mind if I continue this just a 
minute, Mr. Chairman? We will not take too much longer.
    Mr. Boidock. No, I will be brief.
    I just want to say that you asked an excellent question. 
This is a very, very important agreement and provides $1.4 
billion, as I said in my testimony, in duty reductions or 
savings for our companies in Europe alone just because the 
Europeans are lowering their 7 percent tariff. However, that 
pales in getting access to the Japanese market, which these 
gentlemen are having trouble with.
    Now, we had trouble with it in the semiconductor industry 
in the eighties and we have worked very hard getting access to 
it. That has been a significant boost to our revenues. So, I 
think it is an excellent point and you need to be aggressive 
and you need to work it everyday.
    Mr. Houghton. Mr. Cross, do you have anything? Mr. 
Rafferty, would you like to say anything?
    Mr. Cross. Again, on the nontariff measures side, I think 
every company here at the table share concerns about nontariff 
measures. My concern is that we have singled out Japan for all 
of the criticism here. Nontariff measures are common throughout 
the world, included in the United States. So, we have to look 
at this in terms of the overall balance of interests to the 
United States.
    Therefore, when we are looking, for example, at the second 
round of ITA negotiations when nontariff measures specifically 
will be brought up, we want first of all to be aggressive in 
going out and pursuing market-opening measures. At the same 
time, we want to do so in such a way that it is consistent with 
the overall interests of the United States.
    The round of questions I have heard you raise, Congressman 
Houghton, I think they are all very good and to the point in 
terms of where do you manufacture, where do you source from, 
why do you make these kinds of economic decisions. The plain 
fact of the matter is, there is no more global industry than 
there is in the information technology industry.
    Mr. Houghton. Yes.
    Mr. Cross. If you take a look at Kemet, if you take a look 
at Vishay, if you take a look at IBM, if you look at Philips, 
if you look at Texas Instruments, if you look at Corning, we 
are all global companies. We invest widely around the world 
because of any number of economic factors. Some companies, for 
example, may choose Israel or they may choose Mexico, not only 
because of lower wage rates but also because you get advantages 
of free trade agreement preferences. So, there are advantages 
built into the system there.
    But do not tell me as a consumer of a product that I am 
going to have to pay a 10 percent penalty for buying a product 
that is competitive. I want, as a consumer of that product, to 
be able to go in there and get the best quality at the best 
price.
    Mr. Houghton. Well, if I could just interrupt you.
    You know, that may be fine for a consumer and that consumer 
can buy a variety of different products with his or her money. 
It is sort of tough for the fellow whose job is totally 
dependent upon that product. I guess maybe we are all set.
    Thank you very much for your time.
    Chairman Crane. Well, thank you and I want to thank all of 
our panelists for their patience and your testimony today. We 
look forward to further communication with all of you.
    With that, this panel is adjourned.
    Chairman Crane. Our next panel is composed of--and I would 
like for you to testify in this order--Ed Wiederstein, 
president of the Iowa Farm Bureau Federation on behalf of the 
American Farm Bureau Federation; Robert Vastine, president of 
the Coalition of Service Industries; Laird Patterson, counsel 
at Bethlehem Steel on behalf of the Labor-Industry Coalition 
for International Trade; Terence Stewart, partner with Stewart 
and Stewart; and Mark Sandstrom, partner with Thompson, Hine & 
Flory.
    [Pause.]
    Chairman Crane. I understand, Ed, that you have a flight to 
catch.
    Mr. Keeling. Well, in fact, I am not Mr. Wiederstein. I am 
John Keeling with the American Farm Bureau. He had to leave 
even earlier than he thought because of an emergency back in 
Iowa. So, I would like the indulgence of the Chair, if I could 
summarize his testimony.
    Chairman Crane. Oh, certainly, absolutely.

   STATEMENT OF JOHN KEELING, DEPUTY DIRECTOR, AMERICAN FARM 
  BUREAU FEDERATION, PRESENTING STATEMENT OF ED WIEDERSTEIN, 
   PRESIDENT, IOWA FARM BUREAU FEDERATION, AND AMERICAN FARM 
                       BUREAU FEDERATION

    Mr. Keeling. I will be very brief. I know it is getting 
late in the day.
    At the risk of refocusing the Committee, I would move from 
capacitors to soybeans and corn and hogs and chickens and other 
things agricultural. We really bring a very simple message to 
the Subcommittee today and it is a success story I think.
    Agriculture last year did over $60 billion in exports. We 
had a $28 billion export net balance of trade which ranked us 
very high in all the sectors of the economy. We are doing well 
in world trade. We could do much better if we could lower the 
barriers that exist to our products moving into other 
countries.
    Recently Dean Kleckner, who is president of the American 
Farm Bureau, attended the WTO Ministerial Meeting in Singapore. 
Just to give you an idea of how important agriculture thought 
that meeting was and thought the future of the WTO is and the 
success of the WTO, of the 100 private-sector representatives 
who were in Singapore, about 50 percent of those were 
representatives of agricultural groups, agricultural, 
agribusiness.
    And that is at a time when the focus of those meetings was 
not even particularly agricultural. So, we view our future as 
exports. Right now we are sending 30 percent of our products 
overseas and we have a tremendous opportunity to continue to do 
better than that.
    What did we want to get out of the Ministerial Meetings and 
what happened there and what was our reaction? We really wanted 
to see two things. We wanted to be sure that the negotiations 
that are to begin in 1999 are still on schedule and set to go 
forth on that timeframe.
    Number two, we wanted to ensure that in the time period 
between now and when those negotiations begin in earnest, that 
the proper background work is done, that the data is collected 
so that we could flat-out hit the ground running in 1999.
    We cannot afford in agriculture another trade round that 
takes seven or 8 years to get accomplished. We have immediate 
needs and need to make some changes immediately. I will get 
into some of the political problems in the countryside a little 
bit later.
    We were pleased with the WTO meetings. Deputy Secretary 
Rominger from USDA was there. He was not allowed to present a 
paper and we were a little bit disappointed at that but we were 
generally pleased with the Trade Ambassador's stance on things. 
We are, however, offering some ideas for change in USTR that we 
think would better position agriculture.
    We feel strongly that we need a Deputy Ambassador for 
Agriculture in USTR. If you look at the trade disputes that are 
being brought before the WTO, a significant portion of those 
trade disputes are relative to agriculture. If you look at the 
barriers that exist out there, a significant portion of them 
are relative to agriculture. Having someone in USTR who's 
primary job is to focus on expanding the successes of a very 
successful sector we think is very important.
    We sometimes believe that because we have been so 
successful in terms of exports, that we are really not looked 
at as the squeaky wheel. If you have two kids and one of them 
makes all As and the other one makes Cs you tend to focus on 
the one that makes Cs. Now, as the one who is getting the good 
export numbers, we want some attention too and I guess that's 
the message we are trying to send to the administration and to 
USTR.
    I guess I will finish with looking at where we see the 
political landscape and what problems that is causing us. I 
think that agriculture had a very significant impact on 
delivering both NAFTA and GATT. We were there very solidly as a 
block to counter some of the protectionist measures that were 
being talked about at that time.
    If we do not see significant wins coming from the trade 
dispute arena and a strong, strong stance by the administration 
to ensure that they are very, very serious about continuing to 
negotiate hard for agriculture, although our organization 
remains committed to supporting an extension of the fast track, 
supporting continuing to grow into South America with NAFTA and 
to supporting MFN, we are going to be short on the political 
grassroots base to do that unless some of our people out there 
in the country can see some wins. The Canadian dairy decision 
and poultry decision, things like that really undermine our 
strength and our ability to be strong spokesmen for that.
    So, I guess we look to you all for your leadership and help 
and appeal to those in the administration to ensure that 
agriculture remains important on the negotiating table.
    Thank you.
    [The prepared statement follows:]

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 STATEMENT OF ROBERT VASTINE, PRESIDENT, COALITION OF SERVICE 
                           INDUSTRIES

    Mr. Vastine. Good afternoon, Mr. Chairman.
    The Coalition of Service Industries was founded in 1982 for 
the exact purpose of ensuring that liberalization of trade in 
services was made a major focus of international trade 
negotiations. The service sector now creates three-quarters of 
U.S. GDP, 80 percent of U.S. employment. Last year, 2.4 million 
of the 2.6 million jobs created here were service jobs.
    The U.S. service sector racked up a trade surplus of almost 
$75 billion last year on record exports of about $225 billion. 
To give you an idea of the pace of growth of services exports 
and its potential for U.S. business and U.S. jobs, the service 
surplus in 1985 was only $300 million, about a 75 percent 
average annual growth a year since then.
    The Uruguay round was the first multilateral trade 
negotiation to include services. But its major service 
achievement was the general agreement on trade and services, 
the GATS, which provides the general framework for services 
trade. But there was little effective liberalization of trade 
and services as a result of the Uruguay round.
    Since the end of that round in 1994, the WTO's main task 
has been to complete the round's unfinished agenda of 
financial, telecommunications, professional and maritime 
services negotiations. Its record has not been one of success 
until Saturday, February 15, when a tremendous success was 
scored in a broad agreement to liberalize basic 
telecommunications services.
    That was a huge achievement because the telecommunications 
agreement is the very first trade agreement to open up world 
commerce in a single service sector and this is important for 
several reasons. Mainly it proves that negotiations 
concentrated on one sector can, in fact, succeed. Ever since 
the failure of the first round of financial services talks in 
1995 it has been popular in some policy circles here and in 
Europe to decry sectoral negotiations as impossible because it 
was argued there was not enough trading material in any given 
sector to make a deal.
    It was argued, for example, that perhaps concessions could 
be made in agriculture and the United States could make 
concessions in agriculture in order to achieve benefits in 
financial services in other countries.
    The success, in fact, of the telecommunications sectors 
quashes these speculations. The world trading community knows 
now that it can proceed with a sectoral trade agenda and that 
it can succeed.
    Another major reason why this is an important negotiations, 
telecoms, is that it makes much more likely the success in 
financial services can be concluded this December, and the 
progress can be achieved later in the professions and in the 
maritime services.
    With regard to the Singapore Ministerial and service sector 
liberalization as the Committee has heard and knows, the 
Singapore Ministerial concentrated on information technology 
products and other issues not directly related to services 
trade. Indeed, the final declaration of the Ministerial 
contains conflicting messages about services trade. But, while 
the Ministerial did not significantly advance the 
telecommunications financial and other services negotiations, 
its declaration did provide a very necessary endorsement for 
the completion of the key elements of the services trade 
agenda.
    We believe that the next major test of the WTO is to 
complete the negotiations on trade and financial services with 
a broadly liberalizing agreement. I would like to let you know 
briefly about the efforts of the U.S. financial community to 
achieve this success. As background you should know that the 
United States has a surplus of $4.5 billion in financial 
services in 1996 on exports of $6 billion.
    The financial services group of CSI has led in forming an 
international group of businessmen to create a network of 
private-sector support for the financial services negotiations. 
On February 4, this group issued at the World Economic Forum 
Annual Meeting in Davos, a statement of objectives for 
financial services negotiations which is attached to my 
statement.
    This statement of objectives expresses the unanimous 
agreement of these financial leaders that offers on the table 
at the end of the negotiation in 1995 were not sufficient. That 
new and improved offers must be tabled for the negotiations to 
succeed this time.
    In short, the U.S. financial services community is united 
in its desire to achieve an agreement that brings true 
liberalization. It has developed an international program to 
support the negotiations and it is optimistic that the 
negotiations can succeed this time but it is aware that they 
will be difficult and that 9 months is not much time to 
generate the momentum and sense of urgency that motivated the 
telecommunications talks.
    The Singapore Ministerial regrettably gave very scant 
attention to the requirement for the new year 2000 services 
round. Our government should begin soon to consult with others 
to prepare for the year 2000 round because these negotiations, 
the negotiations ahead must clear away the residue of 
restrictions to trade in the most promising and dynamic sectors 
of the world economy, that is the transportation, 
telecommunications and financial services areas.
    Opening trade in these crucial sectors will help improve 
standards of living and the pace of growth for people, business 
and governments worldwide.
    Thank you, Mr. Chairman.
    [The prepared statement and attachments follow:]

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    Mr. Houghton [presiding]. Thank you very much, Mr. Vastine.
    Mr. Patterson.

    STATEMENT OF LAIRD PATTERSON, COUNSEL, BETHLEHEM STEEL, 
   BETHLEHEM, PA, ON BEHALF OF LABOR-INDUSTRY COALITION FOR 
                      INTERNATIONAL TRADE

    Mr. Patterson. Thank you, Mr. Chairman.
    My name is Laird Patterson. I am here on behalf of the 
Labor-Industry Coalition for International Trade or LICIT and 
its sister organization, the Coalition for Open Trade or COT. 
These organizations bring together companies, unions, and 
organizations to develop mutual positions on international 
trade policy issues.
    While LICIT has been active across the spectrum of WTO 
issues, this statement will focus on a few select areas that 
are of particular importance to our membership in the aftermath 
of the Singapore Ministerial.
    The first is the formation of the new competition working 
group. This is an area that LICIT and COT, in particular, have 
been very active in over the past few years. Attached to our 
formal statement are executive summaries of two reports that 
COT has produced on this. They cover multiple sectors--paper, 
glass, steel, autos, auto parts, heavy electrical equipment, 
and so forth--pointing out the way that private anticompetitive 
practices can be a very effective barrier to market access 
around the world.
    And it is only logical that as we are increasingly 
successful through the Uruguay round and its aftermath in 
breaking down other, more formal governmental nontariff trade 
barriers that there will be increasing resort to private 
anticompetitive practices and, in fact, their toleration by 
governments as a market access barrier.
    So, we think the formation of this working group could 
provide a very useful forum for, in particular, educating the 
WTO population on the perniciousness of these practices and the 
need to eliminate them. I do not think it is appropriate at 
this point to see that process going into the dispute 
settlement area, but as an educational process we think it can 
be a very valuable and useful exercise.
    A caveat, there clearly was at Singapore an effort on 
behalf of many nations to include in this exercise the issue of 
antidumping. The United States and the EU made it very clear 
that they thought this was not an appropriate area for this 
exercise. Indeed, there is an antidumping committee in the WTO 
and that is where the antidumping should stay. And our 
membership very strongly supports the position of the U.S. 
administration that as the competition policy exercise goes 
forward that it not get into antidumping or other trade matters 
covered elsewhere in the WTO.
    A second issue of particular concern to our membership at 
this point is the terms of the Chinese accession. We have been 
doing some reports on that, and I believe another one is in 
progress.
    But in one particular area we have a special concern and 
that is the continued use of nonmarket economy practices for 
antidumping investigations involving China. It is a priority 
objective of the Chinese to eliminate that and to be treated as 
a market economy. They are not. And certainly we believe that 
the terms of accession should explicitly require the Chinese to 
be treated as a nonmarket economy for as long as any transition 
period provided in the accession.
    Just very briefly, there are a couple of areas that are up 
for reconsideration, the first being dispute settlement which 
has to be renewed in another 2 years. We think the system has 
been working well but we think it is important that it continue 
to be complemented by bilateral measures where the WTO does not 
have jurisdiction. We think it is important that we preserve 
our sovereignty, be willing to take measures unilaterally and 
compensate, if necessary, but not afraid to do that. And we 
certainly endorse the efforts of the United States to improve 
the transparency of the WTO dispute settlement system.
    Finally, just very quickly, the WTO subsidy rules are up 
for renewal at the end of a 5 year period. We think it was very 
unfortunate that the concept of green-lighting subsidies got 
into the Uruguay round and we would hope that when this comes 
up for renewal at the end of the first 5 years that that green-
lighting concept not be continued.
    Thank you, Mr. Chairman.
    [The prepared statement and attachments follow:]

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    Mr. Houghton. Thanks, Mr. Patterson.
    Mr. Stewart, and then Mr. Sandstrom.
    Mr. Stewart.

STATEMENT OF TERENCE P. STEWART, MANAGING PARTNER, STEWART AND 
                    STEWART, WASHINGTON, DC

    Mr. Stewart. Thank you, Mr. Chairman.
    It is a pleasure to be here this afternoon. For the record, 
my name is Terence Stewart, managing partner of Stewart and 
Stewart, a law firm here in town.
    I am here on my own behalf today. With regard to the panel 
that preceded this, I think there is general agreement that the 
ITA is a very substantial positive benefit. What is unfortunate 
for both the ITA and I think for the basic telecommunications 
agreement is that there are disputes between the Congress and 
the administration on lack of clarity with regard to whether or 
not these agreements conform to existing law or need to be 
implemented through additional law. For an agreement of this 
magnitude, I think that is a great misfortune and one that 
hopefully the Congress and the administration will resolve 
quickly.
    I would like to focus on an issue that has not been much 
addressed that is highly technical but for most companies is 
the heart of the WTO and that is the implementation of the 
various obligations. In the reports that came out in Singapore, 
it was acknowledged that the implementation and notification of 
implementation across-the-board has been quite weak.
    And, in fact, there are a few areas where implementation 
and notifications have exceeded 50 percent. This should be of 
substantial concern to the Congress, as I know it is to the 
administration and our major trading partners, and should put a 
caution on the speed with which one expands a trading system. 
If you cannot implement that to which you have agreed there is 
a question, why are you seeking to agree to more?
    In that connection I would have three recommendations for 
the Subcommittee's consideration. First and foremost is to 
assure through other committees that there is adequate funding 
for both USTR and the other agencies that are responsible for 
the oversight of the implementation of our trading partners, as 
well as our own implementation of our obligations.
    What you see in Geneva and what you see in most agencies is 
a reduction in staff, and what has happened in Geneva is that 
there has been an exponential growth in demands on the time 
such that even the United States is not able to cover all of 
the committee meetings that occur in Geneva on a day-to-day 
basis.
    Second, there needs to be a cooperation between the 
Congress and the administration to speed the public 
dissemination of information from the WTO. One of the major 
accomplishments in the first 2 years was an agreement that USTR 
was instrumental in accomplishing to release, make public the 
vast majority of the material that is submitted to the WTO--the 
laws, the regulations, the practices, the decisions.
    That was done in July of last year. We are now at the end 
of February 1997. Virtually no information has been 
disseminated since that point despite this very important 
agreement. Private organizations, labor groups, companies are 
the best guarantee that there will be implementation of 
obligations abroad. The data base is the best way to accomplish 
that.
    Third, much of the lack of implementation abroad is due to 
the fact that the countries that have not implemented it are 
developing or least developed countries. There is a grossly 
inadequate technical assistance funding----
    Mr. Houghton. Say that again, I did not hear what you said 
last sentence.
    Mr. Stewart. If you take a look at the countries who have 
not implemented their obligations under the WTO, the more than 
roughly 50 percent of countries, the vast majority of them are 
least developed or developing countries and a substantial 
reason that they have not implemented their obligations is that 
they do not have the technical means in-country to do so.
    The WTO has technical assistance but that technical 
assistance is minuscule in amount and the United States and our 
trading partners need to assure that there is adequate funding 
from multilateral organizations or otherwise to permit that to 
go on.
    The same thing I believe is true with regard to the built-
in agenda. I agree with the comments of the gentleman from the 
Farm Bureau. I would note that one of the lacks that currently 
exists is a coordination between our domestic legislative 
initiatives and our negotiating objectives. Last year in the 
farm bill those sectors of U.S. agriculture that are vulnerable 
because of large subsidies abroad that saw their own subsidies 
reduced, over time, faced substantial dislocations because of 
the fact that we do not have as a primary negotiating objective 
the leveling of the playingfield with a reduction of subsidies 
abroad.
    I have other issues, Mr. Chairman, and they are in my 
statement. I see that my time is just about out. Let me just 
turn quickly to two. I agree with Mr. Patterson with regard to 
the importance of the competition policy issue and the 
limitations on that initiative that are there.
    With regard to investment, I believe that what we 
accomplished in Singapore is not significant, that if we are to 
expand what we achieved through the OECD, it will first and 
foremost be through an expansion of the FTAA, through other 
regional and bilateral agreements, and I think through the 
experience of developing countries who have led the way in 
terms of liberalizing their investment regimes.
    With regard to textiles, I would like to note just briefly, 
that the Congress should be concerned with the developments in 
Singapore to the extent that those developments suggest a 
changing of the basic underlying agreement and I would suggest 
there are two shifts.
    One is the apparent belief amongst many countries in some 
panel decisions that the intermediary category of goods and 
textiles are subject to the same standard as an escape clause 
case. And, second, that all cases must have findings and 
recommendations even when there is not a consensus.
    Last with regard to dispute settlement, I agree with Mr. 
Patterson that the system has worked quite well or reasonably 
well to this point in time. I would only put a caution that the 
European Union challenge to the U.S.-Cuba policy presents a 
major problem, I believe, for the survival of the dispute 
settlement system. Hopefully we will get that resolved without 
a formal panel decision.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

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    Mr. Houghton. Thanks very much.
    Mr. Sandstrom.

STATEMENT OF MARK R. SANDSTROM, PARTNER, THOMPSON HINE & FLORY 
                      LLP, WASHINGTON, DC

    Mr. Sandstrom. Thank you, Mr. Chairman.
    My name is Mark Sandstrom. I am a partner in the law firm 
of Thompson Hine & Flory. I should point out that one of the 
reasons I was invited here today also relates to my involvement 
in various ABA initiatives and recommendations that are 
relevant to the focus of these hearings.
    At the initiation of the international section of the ABA 
and, in particular, its trade committee, the ABA has adopted a 
number of recommendations on issues that are before the 
committee and I think that both those recommendations and the 
reports will be of use to the committee in its deliberations on 
these issues.
    Beyond those recommendations, I should also point out that 
the views expressed are primarily my own personal views and not 
those of the ABA.
    I think, given the testimony we have heard today, most 
people would agree that the WTO, and its agreements have been 
successful, that the Ministerial was successful and that the 
main problems probably are that we have not done enough yet 
both in terms of other agreements to be negotiated and 
implementation of those that are already in place.
    That leads me to an issue that Mr. Stewart has already 
raised in his testimony. I believe this Subcommittee and the 
Appropriations Committee in the Congress have got to give very 
careful consideration to the funding of USTR and the related 
agencies. We are not talking about thousands or millions of 
dollars, we are talking about billions of dollars of potential 
benefits to the United States, assuming that these agencies can 
ensure enforcement of agreements or implementation of 
obligations by member parties to the WTO. I think that it would 
be penny-wise and pound-foolish not to give them the support 
that they need to perform that task.
    The other issue which is obviously relevant is the adoption 
of fast track negotiating authority. I realize that right now 
the ball is in the administrations court. Hopefully within the 
month that Mr. Lang mentioned this morning they will have a 
proposal to you. I would point out that the ABA has just 
adopted a recommendation at its midterm meeting last month in 
support of the extension of the fast track authority. I think 
that is also very important. I think it should be broad and 
long enough in its effective term so that effective agreements 
can be negotiated.
    I would like to address the rest of my time on one 
substantive issue that has come up briefly but I think it will 
become of greater importance to this committee and trade policy 
in general. That is the issue of competition laws of antitrust 
laws and trade laws.
    It has been pointed out in the WTO Ministerial Declaration, 
that the Ministers have agreed to the establishment of a 
working group on competition laws. I think a couple of comments 
would be useful.
    First of all, it is very clear that in terms of market 
access, where I think most of the U.S. potential growth and 
economic benefit from these trade agreements lies, is something 
that can be adversely affected by anticompetitive practices in 
foreign countries. Those that are promoted or implemented by 
governments are reasonably dealt with under our section 301, 
but they are not, I believe, adequately dealt with in the WTO 
or probably any other international agreement.
    Beyond that, private restraints are even more problematic. 
To the extent that they affect imports into this country, we 
have some sanctions, some ways to enforce U.S. antitrust laws 
and a way to protect producers and consumers from the private 
restraints.
    But on the export side, there really is nothing in 
existence either under U.S. law or under any international 
agreement that provides practical relief. The other problem 
here is that many of the private restraints that we would view 
as restricting access to foreign markets, such as 
nonmonopolistic refusals to deal which was the subject of some 
earlier testimony in the last panel--basically companies will 
not buy our products--or nonprice vertical restraints may well 
not be covered by antitrust laws, at least antitrust laws 
similar to those in the United States. However, these 
restraints do exist, they do have a negative impact on access 
to foreign markets on U.S. exports to those markets.
    I think frankly it may well be a subject of proper analysis 
by the WTO at some point in time because they certainly have 
negative trade impacts. The ABA adopted last year a 
recommendation in a report dealing with the relationship of 
competition laws and market access which deals with this in 
more detail.
    My final two comments, very briefly. There is right now an 
ongoing International Antitrust International Section Task 
Force that is trying to look at this issue head-on, that is the 
relationship between antidumping laws and the competition laws. 
Mr. Stewart is also a member of the task force, as am I.
    One of the things that has struck me is the almost 
unanimous feeling among antitrust practitioners in this country 
and I think that view is shared by the U.S. agencies, the FTC 
and Justice, as well, that these issues ought not to be dealt 
with in the WTO, but that the OECD is a more proper forum, for 
that. My own view is that I think the WTO has demonstrated a 
real ability to deal with nontraditional trade matters in an 
effective way and in a way which involves and requires 
commitments from a broad range of countries--not just the 
industrialized, but also the BEMs, the less developed, a whole 
gamut of countries.
    So, I think the WTO would not be a bad place to talk about, 
at least, internationally, certain antitrust issues, core 
practices that ought to be prohibited, such as monopolization, 
price-fixing, things like that.
    And, finally, I would conclude with an issue which has been 
argued over for a number of years, and that is the attacks 
against the antidumping laws from the antitrust practitioners. 
The idea that the antitrust laws and competition laws should 
replace the antidumping laws. I am a trade lawyer, so, 
obviously, I have my bias on this issue, but it seems to me 
that replacing the antidumping laws with competition laws is a 
little bit like replacing a baseball team with a shortstop.
    The reason the antidumping laws exist and are necessary is 
because they deal with cross-border, injurious, unfair pricing 
practices. There is absolutely no other remedy to protect 
industries in our country against these practices. Within 
geographic areas where antidumping laws have been eliminated or 
not required, you can look at the European Union or the United 
States, which I think is probably the most successful common 
market in history, you see that there is free movement of 
goods, free movement of capital, labor, the right of 
establishment--a number of conditions, including enforceable 
antitrust laws against parties within the jurisdiction. These 
conditions do not exist with respect to trade between the 
United States and other countries. To talk about eliminating 
the antidumping laws without establishing those other 
conditions to me is basically, essentially absurd.
    The final point I would make is that whereas the 
antidumping laws in this country are administered under a law 
that parallels almost identically an international agreement 
which has been signed by over 100 other countries, if you look 
at competition laws, internationally, there is essentially zip. 
So, before we talk about that replacement of or influence on 
the dumping laws by the antitrust laws, I think we ought to get 
some idea, at least internationally, about what we're talking 
about when we refer to the antidumping ``laws.''
    Thank you, Mr. Chairman.
    [The prepared statement and attachments follow:]

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    Mr. Houghton. OK. Thank you.
    Now, I want you all to think of yourselves as being in my 
position and having heard what you have said and how to cull 
this out to make sense, not so that it just goes into the 
Congressional Record and the reports of this Committee, but 
something specifically which is important right now. I mean we 
have intellectual arguments, we have structural arguments, we 
have certain things that affect the marketplace right at the 
moment. And I hear what you say about the competition and the 
antidumping laws. I think we all probably agree that fast track 
is something we ought to enact, get at it. If I am wrong, say 
that, tell me.
    Mr. Vastine talked a little bit about foreign control. And 
we may want to explore that but I want to put it all in 
perspective and then some of the structural things that we 
ought to do, such as having enough money the USTR and for the 
negotiating process and the cooperation between the 
administration and Congress, all those things that are 
important.
    But maybe if each one of you and if anybody has an idea in 
the process, cut in here, what is the single most important 
thing that I or anybody on this Committee--and, again, I'm 
sorry for this thing, because it has been a crazy week. I mean 
we did not have any votes on Monday, did not have any votes on 
Tuesday, we have a half hour of votes and now everybody is off 
the rest of the week, and, so, the people that should be here 
are not here, but we want to be able to give them a consensus 
of what are the most important things, prioritized, that we 
should be thinking about right now.
    So, why do we not start with Mr. Sandstrom. What do you 
think? What are those things out of all the talk, whether it is 
in antidumping laws or competition laws, antitrust, what are 
those things that this Committee should home in on right now?
    Mr. Sandstrom. Two quick responses. First of all, I have an 
awful lot of faith in this, and in previous administrations, in 
terms of their ability to accomplish economic benefits through 
the negotiation of international trade agreements. So, I think 
what we need to do is to give them the authority to go out and 
negotiate further agreements and I think we need to have a 
process, obviously, as required under the Constitution, which 
brings in the Congress as I think the old fast track procedure 
has done. So, that the Congress can review and ratify those 
agreements.
    The other thing that I think is important is that the 
reality of the international integration of our economy in the 
world economy is way ahead of the perception. One of the 
problems that we have, that you, Congressmen have when you go 
back to your constituents, is trying to explain to them why 
this is important to the United States. Why it is good thing to 
continue in this direction. I do not know where those 
educational efforts could be better undertaken but----
    Mr. Houghton. Slow down just a little bit.
    You are speaking in a muffled tone.
    Mr. Sandstrom. Yes, I am sorry. I think that if one leaves 
Washington and travels around the rest of the country, the 
message has not been clearly communicated to people why 
international trade is good, both for jobs and standard of 
living. We must find ways to communicate that message. I think 
this last round of agreements--telecom, ITA--will be helpful in 
doing that. That is something about which the administration 
could do a better job, the Congress could certainly use that 
help. Maybe bar associations and companies could help as well.
    Because one of the problems you have----
    Mr. Houghton. Why do you not take it upon yourself to be 
the czar or the emperor in this area. Because so many people 
come to this Committee and say, we should do this, we ought to 
do that, the country deserves such and such a thing and I could 
not agree with you more. If we are going to accept the fruits 
of more jobs because of international export opportunities then 
we have got to explain to people our position in the world.
    But, you know, this is not just the job of an individual 
Congressman who goes back to his district and goes to the 
various town meetings, it is everybody's job.
    I mean what is your firm and what is your industry doing to 
help us in this thing?
    Mr. Sandstrom. By the way, I want to make it very clear, I 
did not say that you should do this.
    Mr. Houghton. No. I understand that. But I mean it is a job 
for everyone.
    Mr. Sandstrom. I think we need to make it easier for 
Congressmen, I think we need to be the ones carrying that 
burden. We, being private industry and----
    Mr. Houghton. Why do you not tell me sometime within the 
next month what you specifically have done in this area and 
what more I can do to help you?
    Mr. Sandstrom. I will do that.
    Mr. Houghton. You probably have never had a request like 
that from this Chair, have you?
    Mr. Sandstrom. Not in a public hearing.
    Mr. Houghton. But it involves not only trade, but it 
involves our foreign aid program, the United Nations and 
whatever have you.
    Mr. Keeling. I accept that challenge. The president of our 
organization, the American Farm Bureau, has probably been the 
most vocal advocate of freer trade. And freer trade has not 
always been a pleasant banner to wear in agriculture. We have 
some sectors who feel they will be strongly disadvantaged by 
that. So, there are winners and losers. But we have advocated 
very, very strongly for free trade.
    I think what we would want and solicit your help in getting 
us to make sure that USTR has, one, the resources as other 
people have mentioned. And, then also the fire in their belly 
to go out there and be tough.
    I mean we have got to get reductions in export barriers, 
internal subsidies.
    Mr. Houghton. Can I interrupt you a minute? My impression 
is that the present Ambassador, Charlene Barshefsky, is doing a 
first-rate job.
    Mr. Keeling. I think we would agree with that. We have 
supported her.
    Mr. Houghton. I think it behooves us not only to back her 
up with words but also with money, too. And I think Mr. Stewart 
indicated that. Forgive me.
    Mr. Keeling. And that is why we ask for a Deputy Trade 
Ambassador specifically for agriculture. We think it is an 
important enough sector in the economy that it ought to get 
that kind of attention.
    The message that sends to our trading partners, the 
European Union and the Japanese, for instance, who essentially 
refused to let our products in. We will find it does not matter 
what you do to the Europeans in terms of trade negotiations 
they will always find a way to say, we are not going to take 
your agricultural products.
    Do you believe for an instant that our meat packing plants 
in this country are not up to the standards of those in Europe? 
I do not believe that, and neither does anybody else. And, yet, 
they use that as a way to keep our products out. So, having 
somebody at USTR who gets up every morning and thinks about 
what can I do for agriculture to expand trade would be a good 
step.
    Mr. Houghton. Yes. I think that as long as the most 
precious asset we have is our market and people want to sell to 
us rather than have us sell to them, that is the preference, 
that it is going to be an unending job.
    We are never going to finish this thing. And, so, what you 
are really talking about not only free, but also making sure 
that it is level, that it is fair. And that requires just man-
hours.
    But it also requires a bit of spine, too.
    Thank you very much.
    Mr. Keeling. We think WTO is the mechanism to get that done 
in the long run, but we have got to be tough.
    Mr. Houghton. Good.
    Mr. Vastine.
    Mr. Vastine. Thank you, Mr. Chairman.
    I think that the comment about negotiating authority is 
key. Congress has to provide the authority and the mandates, 
the direction, the policy direction, the impetus for the 
negotiations.
    Second, I think we need congressional understanding of the 
importance of the sectoral service negotiations and 
forbearance, patience, as WTO attempts these extremely 
difficult negotiations. I recall last year when I testified 
here, you asked me a question about telecommunications. I made 
the blanket statement that well, we had to open up foreign 
telecommunications markets so our firms could go in there and 
invest. You said, look, it has taken 25 years or something like 
that in this country to get our market more competitive. How 
can we possibly do it in foreign countries?
    No one dreamed that the result in telecommunications would 
be as extraordinary. I think it is possible to do the same in 
financial services, professional services, maritime, but it is 
going to take a series of years and congressional support.
    The third thing is accession. At Singapore, where I had the 
privilege of being, one Trade Minister after the other stood up 
and said, we have got to globalize immediately the WTO, we have 
got to accept 29 I think it is or 27 new members, including 
China, Russia, a few small guys like that.
    That is a strong impetus, that is a very powerful impetus 
on the part of other countries, they want to secure, they want 
to globalize this organization. We have to be very cautious 
there. I would ask this Committee to look at this carefully 
because in this is something, WTO accession is something the 
Chinese and the others really want. This is a point of key 
leverage. We have got to maximize this opportunity; we, the 
United States.
    Other countries are going to say and they do say, the EU 
particularly, do not worry about the terms of accession, just 
get them into the fold. When they are there we can take care of 
it. They will liberalize. Those are the same arguments made 
about Japan early in the fifties when Japan became but had 
exceptions from GATT rules for a long time.
    So, my point is that the Committee should join others of us 
in holding a strong line on the accession issues.
    I have a comment finally about my friend who called for a 
special USTR Trade Ambassador for Agricultural. If he gets one, 
we want one.
    This is a dangerous game, Mr. Chairman, it is like we ought 
to have a department of education, we ought to have a 
department of, you know, X, Y, Z. There is in the services, I 
will be positive, in the services area, there is a U.S. Trade 
Representative for services negotiations. She does a very good 
job for us. I am sure that the agriculture people try to do a 
good job for you all but if you want your own cabinet 
secretary, I want mine, too.
    Mr. Houghton. Well, I appreciate that. We will take both of 
those recommendations under advisement.
    Mr. Vastine. OK. Everybody wins.
    Mr. Houghton. Mr. Patterson.
    Mr. Patterson. Thank you, Mr. Chairman.
    I would certainly agree in terms of what the Committee can 
do that the proper funding of the trade organizations is 
critical and aggressive oversight by the Committee of the 
exercise of their functions is critical. I should say, 
continued aggressive oversight. The Committees have never been 
shy in that respect.
    Third, the role of the Committee in ensuring that we 
continue to have strong and effective unfair trade remedies. 
This is critical for American industry, American jobs. As hard 
as we are trying to break down foreign trade barriers, they 
still exist. Conditions permitting dumping continue to exist. 
And it is vital to certainly the LICIT membership that strong 
and effective trade remedies continue to be available.
    I certainly agree with Mr. Vastine that accession to WTO by 
current nonmembers be on commercially reasonable and sound 
terms. That is critical. We should not be dealing with the 
problem after it is already in the WTO.
    And, finally, there is just a point of information not on 
behalf of LICIT, but Mr. Sandstrom noted the importance of 
trade education and I would point out that the Business 
Roundtable under the instigation and leadership of the late 
Jerry Junkins has initiated a very active trade education 
program with companies using their internal communications to 
teach their own people the importance of international trade to 
their jobs, and so forth.
    And that effort is now being expanded to other business 
organizations around town and will continue. But I think we are 
working aggressively to educate our public on the importance of 
trade.
    Thank you.
    Mr. Houghton. Thank you, Mr. Patterson.
    Mr. Stewart, the last words of wisdom.
    Mr. Stewart. Always a dangerous thing.
    I would split my comments into five quick points.
    First, I believe that the trading system at the moment has 
a number of holes in it that should be filled and the 
Subcommittee and the Committee's task is to fill those through 
the negotiating mandate through fast track or otherwise.
    Let me just go through a couple quickly. Competition policy 
has been mentioned but there are a whole host of issues that 
Congress identified in the 1988 act that were not fulfilled as 
part of the Uruguay round. One was exchange rate policy in 
terms of greater stabilization.
    As you know the Yen has depreciated roughly 50 percent in 
the last 3 or 4 months. That creates tremendous havoc in terms 
of trade for companies whether here or abroad.
    Third, the longstanding issue on the difference between 
direct and indirect tax rebates, in terms of their 
permissibility under the WTO which puts U.S. commerce at a 
substantial disadvantage. I think those are all negotiating 
mandates and followthrough.
    Second, there is a tendency on the part of any 
administration and there is a tendency on the part of this or 
any other Committee with jurisdiction, to try to paint a very 
rosy picture of whatever has been accomplished in the past. I 
believe that you do the public a disservice if you do not 
obtain realistic appraisal of the cost/benefits of agreements 
that are made.
    The stories before NAFTA suggested great benefits or great 
losses. I would say that history has suggested that both are 
over-stated but there are substantial benefits and there are 
occasional significant losses. The appraisal that gets done 
this year should be a factual owe.
    Mr. Houghton. You do not expect me to disagree with that 
statement, do you? [Laughter.]
    Mr. Stewart. My hope would be that the evaluation of this 
and other agreements would be factually based and not done in a 
way to, if you will, beat the band.
    I think that is a question of oversight by this Committee 
or this Subcommittee.
    Third, we have to implement what we have. And that goes to 
the funding and oversight issues.
    Fourth, you need to get transparency in fact. Transparency 
in fact, means getting it out to the public and you have a huge 
opportunity that has yet to be fulfilled.
    And, fifth, at the end of the day you need a system that 
works, that gets balance in fact. I was a mathematician in 
college and higher math is a form of philosophy where you have 
a minimum number of assumptions, a minimum number of rules and 
try to explain the most data points that you come up with.
    It is only in international trade that we have created a 
system that is an absolute. Regardless of how well or how 
poorly the system we have devised explains the data points we 
get, we insist that the system is inviolate. At some point in 
time, Mr. Chairman, I would suggest that it may be appropriate 
to treat international trade as any other study, namely that if 
the rules do not explain the phenomenon that exists, you may 
wish to change the rules.
    Mr. Houghton. All right.
    Well, I really appreciate your patience and your 
contribution. I think this last bit has been very, very 
helpful.
    Thank you very much for being here today,
    Mr. Stewart. Thank you.
    Mr. Vastine. Thank you.
    Mr. Houghton. Now, Dr. Donna Christian-Green. Dr. Green is 
the Member of Congress from the Virgin Islands; I really 
appreciate your coming here. Again, I apologize for being so 
late here, but as you know the series of mechanical votes that 
we have gotten involved in has put this thing off to a really 
very late hour. Thank you very much.
    You may proceed with your testimony.

   STATEMENT OF HON. DONNA M. CHRISTIAN-GREEN, A DELEGATE IN 
             CONGRESS FROM THE U.S. VIRGIN ISLANDS

    Ms. Christian-Green. Good afternoon, Mr. Chairman.
    Thank you, Mr. Chairman, for giving me this opportunity to 
come here this afternoon and to discuss an issue that is of 
paramount importance to the people of the Virgin Islands, whom 
I am very privileged to represent in this body.
    The purpose of the hearing today as I understand it, is for 
the administration to update the Subcommittee and Congress on 
the outcome of the recent Ministerial Meeting of the WTO held 
in Singapore in December 1996.
    While the people of the Virgin Islands generally support 
free trade and would support the agreements reached, as a 
result of the Singapore meeting, one aspect of the Singapore 
agreements, that being the unexpected agreement between the 
United States and the European Union to phase out their tariffs 
on white spirits, particularly rum, by no later than the year 
2000, would deal a very severe blow to our already fragile 
economy if it is not changed.
    As you know, Mr. Chairman, rum is a unique product of the 
Caribbean. It is central to the region's history, culture and 
economy. The viability of our rum industry in the Virgin 
Islands is of critical importance to the stability of our 
economy.
    It is the second most important industry in our islands, 
next to tourism. It is for this reason, when we first learned 
that the United States was considering making such an 
agreement, that former Virgin Islands Governor Alexander A. 
Farrelly wrote to President Clinton in 1994 to express our 
strong opposition to having white spirits included in any duty-
free agreements.
    Through a special tax provision governing the relationship 
between the U.S. territories and the Federal Government our rum 
industry generates 10 percent of the total revenues of our 
government.
    Today's Virgin Islands economy, Mr. Chairman, is fragile at 
best. We have been battered by four hurricanes since September 
1989 and we are still struggling to reach full recovery. 
Against this backdrop, opening the U.S. markets to duty-free 
shipments from all countries would mean a severe loss of jobs 
in the territory and further undermine our already unstable 
economy.
    Mr. Chairman, the Virgin Islands Governor Roy Schneider and 
I have been working with the Trade Representative's Office in 
an attempt to address this problem. In particular, I have 
discussed the issue several times with today's hearing's lead 
witness Ambassador Jeffrey Lang, who has been very 
understanding of our concerns.
    It is my understanding that the USTR is in the process of 
working out a solution that would address our concerns. And I 
do want to take this opportunity to commend Ambassador Lang and 
the USTR for their efforts on our behalf and I look forward to 
working with the Ambassador in finalizing an acceptable 
resolution to this problem.
    In conclusion, Mr. Chairman, the people of the Virgin 
Islands realize that free trade agreements are, for the most 
part, the engine that is driving world affairs today. But we 
also understand that these agreements do not take place in 
isolation. We would ask that as we move toward the opening up 
of markets consideration be given to the impact that free trade 
will have on the fragile economies of these smallest members of 
the American family and that our interests, which are U.S. 
interests and U.S. jobs will also be protected.
    I thank you for allowing me to make these brief comments 
and I would be happy to answer any questions.
    Mr. Houghton. I thank you very much.
    I wish everybody's testimony was as short and succinct to 
the point as yours.
    That was very well done.
    Ms. Christian-Green. Thank you.
    Mr. Houghton. I guess the only basic question I have is 
this, we are moving in a direction of lowering tariffs. That is 
the whole concept of GATT and the WTO and NAFTA and the 
regional agreements, things like that. And the point being that 
in opening up your borders a little bit you increase your 
opportunity to export a great deal. Now, what is the answer to 
this thing as far as the Virgin Islands are concerned?
    Ms. Christian-Green. Well, Ambassador Lang is working 
toward an agreement that involves a price limit and while it is 
true that reducing tariffs could open up markets, for us it is 
a much bigger issue in that the Virgin Islands does receive 
over $50 million each year from duty placed on rum that is 
produced in our territory. And it does provide a significant 
portion of our government funding annually. And this is where 
the losses would be realized and this is why we are asking for, 
if not rum being taken out of the agreement, that some 
reasonable agreement be reached to protect our particular 
industry.
    Negotiations are still in progress. I think Ambassador Lang 
said this morning he is working on it as late as today and 
would involve a price limit on gallons, as I understand it.
    Mr. Houghton. You may not know these figures and they 
absolutely are not essential but if you do have them at the tip 
of your tongue, I would appreciate them. What percentage of the 
white spirits, of the rum, in this world or hemisphere are 
produced out of the Virgin Islands?
    Ms. Christian-Green. I do not really have that answer. I 
would imagine that it is a very small portion. Even compared to 
Bacardi, we are maybe a third.
    Mr. Houghton. And Puerto Rico----
    Ms. Christian-Green. Yes.
    Mr. Houghton [continuing]. And places like that, right.
    Ms. Christian-Green. They are three or four times as big 
producers as we are.
    Mr. Houghton. OK. But it is not over 50 percent.
    Ms. Christian-Green. Oh, no. It is quite small.
    Mr. Houghton. But although it is more than 10 percent of 
the basic economy of the Virgin Islands?
    Ms. Christian-Green. It is small on a world scale in terms 
of the entire market but it is very big for the Virgin Islands.
    Mr. Houghton. Now, one other specific question. In terms of 
rum production and the exporting of it, are there any major 
markets that you find difficult to get into that want to export 
their product? In other words, can you, for example, can you 
export your product to Puerto Rico?
    Or even within our own kin, are there nontariff barriers 
there? Or can you export it to Chile or to Brazil?
    Ms. Christian-Green. What I am being told by my legislative 
director is that under this agreement we would not be able to 
export to Chile or the South American countries. I know that we 
do not export to other Caribbean countries.
    Mr. Houghton. Let me just hold on here. Let me just give 
you an example. So, you might be willing to import Chilean 
Risling white wine into the Virgin Islands yet, they would not 
permit Virgin Islands rum to come into their country?
    Ms. Christian-Green. Well, I can speak to some of the other 
Caribbean countries where we are not allowed to export our rum 
there, but their rum comes in freely to the Virgin Islands, 
although there is a duty placed on it.
    Mr. Houghton. Well, one final question. If you were 
Ambassador Barshefsky, and obviously, your allegiance is to the 
American sphere, the protectorates, the States, the whole 
business. But, at the same time, you wanted to have the United 
States in the forefront, what would you say about the ultimate 
trade position in white spirits with the Virgin Islands? Would 
you say that this would be something which would have a zero 
tariff in 20 years or never or there will be other 
stipulations? What would the trade policy be?
    Ms. Christian-Green. Well, we realize that we would not 
have a zero tariff for a long period of time, but we certainly 
anticipate that we would have it past the year 2000, so, that 
we could further develop our markets. But we do need a bit more 
time, even the year 2000 would be a bit too short for us but we 
do not expect it to continue in perpetuity.
    Mr. Houghton. So, the objective is a good one but the 
timing is poor?
    Ms. Christian-Green. For us it is. For us the timing is 
poor. We would prefer to have it go on in perpetuity, but we 
realize that that is not realistic and so we would accept some 
limitation but not the year 2000 because we are still 
developing the market for our rum.
    Mr. Houghton. All right.
    Well, listen, I thank you very much for your testimony and 
you are very articulate and it was very helpful.
    Thank you.
    Ms. Christian-Green. Thank you, Mr. Chairman.
    [The prepared statement follows:]

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    Mr. Houghton. Thanks again for your patience.
    Well, since there are no other witnesses, anybody want to 
testify?
    Ooops, we have got it on the other side. I am sorry, I did 
not turn the page.
    So, we have Maureen Smith and Dr. Kochenderfer, and Fred 
Meister, sorry about that.
    Will you please come to the table.
    Now, Ms. Smith, would you like to testify?

 STATEMENT OF MAUREEN R. SMITH, INTERNATIONAL VICE PRESIDENT, 
   INTERNATIONAL AFFAIRS, AMERICAN FOREST & PAPER ASSOCIATION

    Ms. Smith. Thank you very much, Mr. Chairman.
    My name is Maureen Smith and I am the international vice 
president for the American Forest & Paper Association.
    The U.S. forest products industry had a lot riding on the 
outcome of the Singapore Ministerial. We were hopeful we could 
convince our trading partners to build on the results of the 
Uruguay round and support a proposal by the government of 
Canada to eliminate tariffs on paper products as of January 1, 
1998 and agree to zero-for-zero treatment of wood products as 
well.
    We had a lot at stake. First, an estimated $15 billion in 
additional export sales between now and the year 2004; second, 
some 28,000 direct U.S. jobs; and finally, our future ability 
to compete for the fastest growing export markets and our own 
domestic market, as well.
    When we testified before the Subcommittee last April in the 
company of the United Paperworkers International Union, we 
explained that the tariff agreement reached in the Uruguay 
round allowed our European competitors to maintain tariffs on 
paper products for an unreasonable 10-year period at levels 
which even today in some cases exceed 7 percent. In addition, 
the Council allowed Japan to keep its tariffs on wood products 
at levels which top 14 percent, while U.S. tariffs in these two 
sectors were already at zero or nominal levels.
    We viewed the December Singapore meeting as our last chance 
to reverse this inequity. At that time, we were encouraged by 
the statement of Ambassador Barshefsky that both wood and paper 
tariffs would be priority U.S. objectives in Singapore. 
Regrettably, and notwithstanding the efforts of our tireless, 
and for many nights, sleepless negotiators, and strong support 
from the congressional delegation in Singapore, we failed to 
get our trading partners to level the playingfield with us.
    In sum, neither Europe nor Japan appears ready to give the 
U.S. forest products industry the same level of access to their 
market that their suppliers have here in the United States. In 
Europe, although several individual member States and customer 
industries had weighed in with Brussels in support of a 
Singapore tariff package including wood and paper products, the 
EU appears to have paid more attention to the protectionist 
interests of some paper producers including, we understand, 
Finland, and blocked any progress on this point.
    Earlier this month, Deputy U.S. Trade Representative Jeff 
Lang met with Finnish trade officials to try to make some 
progress in this area. And we are deeply grateful for his 
personal involvement.
    Also, in Singapore, as in the Uruguay round, Japan once 
again blocked any progress on wood products tariffs. Japan's 
continuing refusal to even consider further wood tariff cuts is 
inconsistent with its stated desire to reduce housing costs in 
Japan. This also raises legitimate questions about how genuine 
reform of the Japanese housing industry can be accomplished 
without opening the wood products market.
    Ambassador Barshefsky has made it clear that the 
elimination of tariffs on wood products is the priority U.S. 
objective in APEC. And Japanese intransigence in Singapore 
makes the achievement of this objective both more difficult and 
more urgent.
    In conclusion, Mr. Chairman, our industry is forced to look 
beyond Singapore in our search for relief from a crippling 
tariff disadvantage. In doing so, we make the following 
recommendations for U.S. policy.
    First, market access must be the first priority of the 
United States in the WTO and the first job of the WTO. We urge 
the administration to take the lead in developing initiatives 
which will accelerate post-Uruguay round tariff liberalization 
and offer opportunities for expedited WTO action on proposed 
tariff measures.
    Second, the administration's existing tariff cutting 
authority which is bound by the zero-for-zero sectors is 
inadequate. USTR must have the ability to put together broader 
tariff cutting initiatives which will include items of 
sufficient interest to our trading partners and which could 
accommodate changing interests of U.S. companies and 
industries.
    And, finally, U.S. participation in the work of the WTO 
committee on trade and environment must focus on ways to asset 
trade disciplines in areas such as ecolabeling.
    Thank you, Mr. Chairman. That concludes my statement and I 
would be pleased to expand on any of these points during the 
question period.
    [The prepared statement follows:]

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    Mr. Houghton. Thank you very much, Ms. Smith.
    Dr. Kochenderfer.

  STATEMENT OF KARIL L. KOCHENDERFER, DIRECTOR, ENVIRONMENTAL 
        AFFAIRS, GROCERY MANUFACTURERS OF AMERICA, INC.

    Mr. Kochenderfer. Thank you, Mr. Chairman.
    My name is Karil Kochenderfer, and I direct environmental 
affairs for the Grocery Manufacturers of America. GMA is a 
member of the Coalition on Truth in Environmental Marketing 
Information. The Coalition's members are trade associations 
representing America's interests in the chemical, forest and 
paper, electronics, food and consumer product industries among 
numerous other industries.
    Together we represent over 1,200 companies in the United 
States doing over $1.2 trillion of business internationally. 
And with me today is Bruce Hirsch of O'Melveny and Myers to 
help me answer any questions.
    GMA's members support the sharing of environmental 
information with consumers through ecolabeling. But we are very 
concerned that ecolabels, particularly those being developed in 
Europe, provide misleading and incomplete information and can 
serve as a barrier to trade.
    The Singapore Ministerial addressed ecolabeling and 
achieved limited progress toward greater transparency and 
participation in ecolabeling programs. However, further steps 
are needed to protect U.S. exporters from those who may abuse 
ecolabeling schemes and to prevent misleading claims that 
undermine the legitimate objectives of ecolabeling.
    What are these objectives? They are to inform consumers and 
to encourage the development of use of products with reduced 
environmental impact. We agree with these objectives and they 
are broadly shared by government, industry and environmental 
groups alike.
    A system modeled on the FTC guides for the use of 
environmental marketing claims is an excellent means of 
achieving these objectives, while at the same time preventing 
misleading claims that can lead to trade disputes. They are 
based on truthfulness, science, verifiability, and 
nondeceptiveness. These guides have been praised by 
environmental groups and business alike and have led to an 
increasingly meaningful environmental labeling practices in the 
United States.
    We urge the U.S. Government to build on these results and 
to advocate an FTC approach to environmental labeling 
internationally. While the Coalition strongly supports 
ecolabeling based on the approach embodied in the FTC guides, 
we are deeply concerned over ecolabeling programs that are 
being called ecoseals.
    Namely, an ecoseal is a type of ecolabel that is awarded by 
a central certification panel that purports to judge the 
environmental effects of products and packaging, and to tell 
consumers with a single seal which products and packages are 
best for the environment.
    An example can be seen on the last page of my testimony. 
Our 20 years of experience with ecoseals in Europe and 
elsewhere have shown that these programs are inherently flawed 
and create unresolvable problems. Specifically, one, the 
selection of the criteria upon which ecoseals are awarded is 
subjective. It is not scientifically sound.
    Two, they are inherent barriers to trade and innovation. 
Three, they fail to educate consumers. The ultimate goal of 
these seals is to educate and bring a greater awareness about 
the environment but they fail to achieve even this.
    And four, fundamentally, they are barriers to trade because 
the criteria frequently discriminate and are protectionist in 
nature.
    I would like to go a little further, if I may, into the 
issue of science because it is integral to the criteria for any 
credible ecoseal program.
    At this time there is just no objective way to 
scientifically determine which products or packaging are best. 
Products have different strengths and weakness from 
environmental standpoint, even within the same category. For 
example, one product may have low energy consumption but 
generate high solid waste, and in another case one may have low 
solid waste but cause greater water pollution.
    And even within a single environmental parameter there are 
tradeoffs and even within geographic areas. The relative 
priority of environmental issues varies. For example, 
detergents that use less water are inherently more valuable in 
countries that are dry.
    The process of granting an ecoseal inherently is based on 
value judgments by the issuing organization and these ecoseal 
panels typically consist of government officials, companies and 
experts from the country establishing the program.
    Faced with no objective means for trading off environmental 
attributes of products, they are inherently sensitized to local 
concerns. We suspect that discrimination favoring these 
products to the local manufacturers is often intentional.
    Therefore, ecoseals have become sources of increasingly 
contentious trade disputes as Ms. Smith alluded to. Last year, 
the EU issued an ecoseal criteria for paper and pulp that 
threatened to shut the U.S. producers out of the European 
markets. We can expect trade disputes such as these to occur 
with increasing frequency as ecoseal programs proliferate in 
the coming months and years.
    And we are here to say that we cannot let U.S. products to 
continue to be discriminated against by protectionist measures 
disguised as environmental good deeds. We hope we have your 
support and thank you.
    [The prepared statement and attachment follow:]

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    Mr. Houghton. Thank you, Ms. Kochenderfer.
    I appreciate that and I have a question or two.
    Mr. Meister.

  STATEMENT OF FRED A. MEISTER, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, DISTILLED SPIRITS COUNCIL OF THE UNITED STATES, INC.

    Mr. Meister. Thank you, Mr. Chairman.
    I am Fred Meister, president and chief executive officer of 
the Distilled Spirits Council of the United States. We are the 
trade organization which represents U.S. producers and 
exporters of distilled spirits.
    I appreciate this opportunity to express our strong support 
for the tariff elimination agreement for distilled spirits, 
which was concluded at the WTO Ministerial conference held in 
Singapore.
    This agreement provides for the elimination of tariffs on 
so-called white spirits, including vodka, rum and gin, and 
liqueurs by no later than January 1, 2000. In addition, the 
agreement brings forward the schedule for eliminating tariffs 
on whiskey and brandy that was agreed to in the Uruguay round 
by 4 years, also to January 1, 2000.
    The agreement on spirit tariffs is an important step toward 
global free trade in the distilled spirits sector. The European 
Union is our leading export market totalling nearly 35 percent 
of our exports to the world. It is the largest market in which 
we still face tariffs and those tariffs are measurably higher 
than ours.
    As a result of the duty-free treatment secured by the 
Singapore agreement, we expect to substantially increase our 
sales to the European market to more than $200 million per 
year. Expanding exports holds the key to our industry's future. 
The Singapore agreement also provides an excellent basis for 
pressing other WTO members to eliminate their tariffs as well. 
For these reasons we urge the Congress to endorse the distilled 
spirits tariff agreement reached at Singapore and to continue 
to support the administration's efforts to secure tariff 
elimination commitments from additional countries.
    I also appreciate this opportunity to express our strong 
position that all distilled spirits should be included for 
tariff elimination. All of our products compete directly with 
one another for consumer preference, market share, and brand 
loyalty.
    The agreement reached at Singapore ensures for the first 
time that U.S. exporters of white spirits, such as vodka, rum 
and gin, and liqueurs will benefit from tariff elimination--
just like U.S. producers of whiskey and brandy--in the largest 
foreign market for us.
    Caribbean suppliers of rum have called for the removal of 
rum from the tariff elimination agreement. These suppliers 
already enjoy duty-free access for their rum both to the U.S. 
market and to the European market, while U.S. producers of rum, 
located almost entirely in Puerto Rico, face significant 
tariffs on their shipments to Europe. DISCUS, therefore, 
strongly opposes this attempt to remove rum from the tariff 
elimination agreement in order to maintain the Caribbean 
suppliers advantage over Puerto Rico in the European market.
    The European Union is a large and growing export market for 
Puerto Rican rum. With the removal of EU tariffs, U.S. 
producers in Puerto Rico will be able to expand their sales 
greatly to the EU. This will generate increased production and 
create new jobs in the rum industry in Puerto Rico, which 
currently accounts for more than 2,600 jobs and at least 5 
percent of the island's economy--an estimated $1.4 billion per 
annum.
    In addition to denying U.S. rum producers duty-free access 
to their largest export market, removing rum from the agreement 
would place them at a competitive disadvantage vis-a-vis all 
other distilled spirits which will receive duty-free treatment. 
Excluding rum from this agreement also would make it extremely 
difficult to secure duty-free commitments in other trade 
agreements in the future.
    Mr. Chairman, we have been working with the administration 
and members of the Congress to address the issues raised by the 
Caribbean rum producers and by the Virgin Islands rum producers 
and we will continue to do so. However, we cannot agree with 
their request that rum be removed.
    We urge the Congress to endorse this agreement and to work 
with the administration to ensure its full implementation.
    Thank you very much.
    [The prepared statement follows:]

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    Mr. Houghton. Thank you, Mr. Meister.
    Let me ask you a question in response to Donna Christian-
Green's comment about rum. Would you say that her industry 
would be better off if it agreed to the tariff dropping the 
restrictions that we have now in the Singapore agreement? Or 
would you say it would be better for her, personally, to have 
more time in order to stretch the adjustment period out?
    Mr. Meister. We would make a distinction, Mr. Chairman, 
between the Virgin Islands and the Caribbean Islands. In the 
case of the Virgin Islands we would not oppose some reasonable 
solution to their problem, which we recognize. But, at the same 
time, we would not support their contention that rum should be 
removed from the agreements. Nor, would we support the idea 
that it should be stretched out beyond the year 2000. But as 
Ambassador Lang said this morning, they are working on some 
agreements. We can be cooperative in that effort if it is, in 
fact, reasonable.
    In the case of the Caribbean Islands, however, it is an 
entirely different set of circumstances. In the case of 
Trinidad, and Jamaica, and Barbados, they have been exporting 
their rum to the United States duty-free and to the European 
Union duty-free. What this agreement does is to permit the 
Puerto Rican rum industry to have a level playingfield with the 
Caribbean producers. All of them should be able to compete in 
the European Union without tariffs on any of their products. We 
very strongly would oppose anything that would give them or 
permit them to have their continued preferential treatment to 
the disadvantage of the Puerto Rican rum industry.
    Mr. Houghton. Now, that makes broad sense.
    I do not disagree with that, but what does it say to the 
person who is producing rum in the Virgin Islands?
    Mr. Meister. Well, the Virgin Island producers to our 
knowledge have been interested only in shipping to the United 
States where they already have the advantage of duty-free 
access. We do not know of plans by the Virgin Islands rum 
industry to try to export their product to Europe and, so, the 
agreement would not have an impact on them on that basis.
    Mr. Houghton. Well, that probably is true but that is not 
what Ms. Christian-Green said.
    Mr. Meister. Well, I think we have some disagreement over 
the intentions of the Virgin Islands rum industry.
    Mr. Houghton. OK.
    Let us talk about the Uruguay round, Ms. Smith.
    Given the Uruguay round history on tariffs for paper and 
wood products, what is the incentive for the European Union and 
also for Japan to agree to liberalize tariff in your industry 
and, so, really, in effect, do you believe there is a forum for 
further tariff reduction in the near term?
    Ms. Smith. I am sorry, Mr. Chairman, the question is what 
incentives might be offered?
    Mr. Houghton. Yes.
    What is the incentive, why should the European Union and 
Japan agree to liberalize tariffs in your industry, I mean what 
is the incentive for them?
    Ms. Smith. I agree that on the face of it, the argument 
that has been offered by Finland is persuasive. Finland says 
they sell 75 percent of their paper exports to the European 
market and only 5 percent to the United States. So, on the face 
of it, they say they have no interest in pursuing tariff 
liberalization.
    However, if we look at the experience of the paper industry 
in the NAFTA when tariffs were eliminated between the United 
States and Canada as an example, the historical experience 
there is that shipments in both directions increased.
    If you look at European experience when the tariffs were 
eliminated between the original European Common Market 
countries and EFTA, and when the Scandinavians then gained 
duty-free access to the rest of the European market, in that 
instance the production on both sides in the paper industry 
increased remarkably.
    I would be very happy to submit for the record charts that 
we have which show that the time coincidence of these two 
economic developments precludes any other explanation other 
than the classic explanation that free trade does, indeed, 
benefit both partners.
    Mr. Houghton. Yes. But if I could just interrupt for a 
minute. The Uruguay round took place in what was it, it was 
1986, something like that.
    Ms. Smith. Yes.
    Mr. Houghton. And I think you indicated there has been some 
real problems as far as paper and wood products.
    Ms. Smith. Yes.
    Mr. Houghton. So, my question again is and maybe you have 
said it and I did not pick it up, is what turns that, what is 
the incentive? We can sit here and discuss these issues and 
maybe we can translate it into laws but what is the incentive 
for those people do to something they have been unwilling to do 
before?
    Ms. Smith. Well, I am sorry, my answer was that in the 
first instance we believe free trade is to their advantage and 
that would be an incentive. But, second, you are exactly right. 
If we approach it in terms of a traditional trade negotiation 
USTR needs authority to go beyond their existing zero-for-zero 
authority so they can put together a package of issues that 
might be of interest to our trading partners.
    Europe has answered that their existing authority which 
goes to industries where the United States is very competitive 
is not of interest to them in putting together a package.
    Mr. Houghton. Sure.
    Well, I would like to thank you very much for that.
    I would like to ask a question of Ms. Kochenderfer.
    What about the ecolabeling issue? Is there consensus among 
our nonEuropean Union trading partners that the ecolabeling 
scheme is discriminatory?
    Ms. Kochenderfer. There is a developing consensus. We are 
talking to our other Ministers at WTO and in other forums. 
Basically sharing with them our experiences trying to get into 
the EU market and are finding that their stories are very 
similar.
    And, so, I think there is a developing consensus that, in 
fact, these seals have become barriers to trade and there needs 
to be more openness, more honesty, more sharing of information 
and we are finding agreement with them.
    Mr. Houghton. OK.
    There needs to be, there should be. How does that happen?
    Ms. Kochenderfer. Well, what we see with the FTC guides is 
basically truth in advertising, be open, be honest. The market 
will determine whether a claim is false or not. Companies will 
bring claims against one another before the FTC and ultimately 
in the world, if you will, an international FTC.
    With true competition, two competitors will definitely say 
whether one is being truthful in advertising by saying 
something is nonbiodegradable or recyclable or whatever. And if 
the other is not being truthful, they will bring it to the FTC 
or an FTC-like forum in an international arena. And we think 
that competition, that market orientation brings about greater 
information sharing rather than just a kind of a seal which 
really does not convey anything.
    Mr. Houghton. OK.
    Well, that is all the questions I have. I want to thank you 
very much for your patience and for your testimony and this 
concludes our hearing.
    The record, as you may know, will be open until March 12.
    So, thank you very much, this hearing is concluded.
    [Whereupon, at 3:39 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

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