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



 
    TRADE RELATIONS WITH EUROPE AND THE NEW TRANSATLANTIC ECONOMIC 
                              PARTNERSHIP

                              ----------                              


                         TUESDAY, JULY 28, 1998

                  House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 11 a.m., in 
room 1100 Longworth House Office Building, Hon. Philip M. 
Crane, (Chairman of the Subcommittee) presiding.
[GRAPHIC] [TIFF OMITTED] T3650A.001

[GRAPHIC] [TIFF OMITTED] T3650A.002

[GRAPHIC] [TIFF OMITTED] T3650A.003

    Chairman Crane. Will everybody please take a seat so we can 
get underway here? We are going to be on an irregular and 
somewhat tight time constraint because of the services over in 
the Capitol Building.
    Our first witness that I want to welcome is our chairman of 
the House Agriculture Committee, Bob Smith, from the State of 
Oregon, and we will have you on, Bob, until they break us for 
that forum in the Capitol, which I think is going to be about 
11:30.
    And I want you to know that you have my admiration for your 
leadership in reducing trade barriers to U.S. agriculture 
exports and for the key role you're playing in maintaining the 
pressure for fast-track trade legislation. I know that we both 
agree that the trade agenda with the European Union, 
particularly in the agriculture arena will be severely damaged 
if Congress and the President aren't successful in enacting 
H.R. 2621, the Ways and Means fast-track bill. You have been 
working diligently, I know, to bring more of your committee 
members onboard, and we applaud your efforts.
    The focus of today's hearing is trade with Europe and the 
new transatlantic economic partnership initiative, which was 
announced by the two trading partners at the May 18 summit 
meeting. Europe is not quite our largest export market, but the 
totality of the bilateral trade and investment relationship 
makes Europe perhaps our most important economic partner.
    The reality of globalization and economic independence is 
illustrated by the large two-way flow of investment dollars 
between the U.S. and Europe. Three million U.S. workers are 
employed in European-owned factories, while another 1.1 million 
U.S. workers manufacture products that are directly exported to 
Europe.
    Witnesses today will address prospects for further trade 
liberalization under the auspices of the new Transatlantic 
Economic Partnership, TEP, and the companion private sector 
initiative, the Transatlantic Business Dialogue. Much of the 
potential for success, it seems to me, lies in the area of 
achieving harmonization of standards and mutual recognition 
agreements for regulatory procedures.
    Later, I will also welcome Ambassador Barshefsky, who will 
testify after you, Bob, and after our break. I appreciate her 
desire to keep the U.S. trade agenda moving forward in the 
absence of fast-track negotiating authority.
    However, I would caution that we must not let the TEP or 
any other bilateral talks deflect attention from the primary 
need to secure fast-track negotiating authority. Nor should we 
allow leverage to be diverted from our goal of achieving a 
successful result in the WTO negotiations on agriculture, which 
are set to begin in December of 1999.
    And with these comments, I will yield to our Ranking 
Member, Mr. Matsui.
    Mr. Matsui. Thank you very much, Mr. Chairman. I have a 
statement, and because of the time constraints and the fact 
that we will have a vote, or at least a call of the House, in 
about a half hour, I'd like to submit my statement for the 
record, and just welcome, obviously, Chairman Smith from the 
Committee on Agriculture and, of course, USTR Ambassador 
Barshefsky and David Aaron, as well.
    Thank you, Mr. Chairman.
    Chairman Crane. And with that then, we shall yield to you 
for your presentation, Bob.

  STATEMENT OF THE HON. ROBERT F. SMITH, A REPRESENTATIVE IN 
 CONGRESS FROM THE STATE OF OREGON, AND CHAIRMAN, COMMITTEE ON 
                          AGRICULTURE

    Mr. Smith of Oregon. Thank you, Mr. Chairman, and 
gentlemen. It is a privilege to be here to say hello to you and 
discuss for a moment agriculture's thoughts about the European 
Union and international trade.
    Mr. Chairman, as you well know, in 1996, the Congress 
changed agriculture from the previous 60 years of support and 
subsidy to a program of marketplace. And it was significant 
that we now are going to challenge farmers in America to use 
the marketplace to sell their goods and not the government. In 
doing that, of course, there were in this case, this year, 
great problems that developed, because commodity prices are 
down and there are all kinds of discussions about what we 
should do about low commodity prices. Should we revive the old 
subsidy idea, or should we stay on the track that we have 
established? And that is to find markets for our farmers' 
production.
    Now, heretofore, farmers relied on two markets. One was a 
subsidy from the government and the other was, of course, what 
they could get from their product. But since we have deprived 
them and we are phasing them out over the years--in the year 
2002, there will be no more subsidies--then it becomes our 
responsibility in government to provide them with the markets, 
which they are not capable of doing, nor should they.
    So it was part of our bargain in 1996 that the government 
provide the market and the farmers produce as best they could 
do so. That brings us to this whole question of what do we do 
about trade and markets for farmers. And I want to emphasize 
the essential responsibility for this Congress not only to pass 
fast track, but to pass full funding of IMF, and as we did, 
lift sanctions on Pakistan and India, as well as normal 
relations with China.
    But on fast track especially, historically this country has 
been a leader in international trade. And we believe in free 
trade principles. In the Uruguay Round, it was the United 
States that led the argument that there should be no barriers 
against products flowing from one country to another, no trade 
barriers. And we should go to tariffication rather than other 
problems we had in trade. So we were the leader.
    Now it becomes our responsibility to pass fast track, it 
seems to me, and give this President the opportunity to enter 
into agreements with other countries and to open trade for our 
products. It is happening all around us. Bilateral negotiations 
are going on. MERCOSUR is working out programs in South 
America; the European Union is identifying bilateral 
relationships with countries. Canada is doing so; so is Mexico.
    If we do not pass fast track, we will certainly injure this 
country's opportunity in the 1999 revisitation of the WTO to 
act for agriculture, certainly, but for the rest of this 
country in a positive manner.
    The European Union, Mr. Chairman, having taken my committee 
to Germany and Belgium and France recently, the European Union 
is our second-largest agricultural partner. In fact, last year 
we did about $10.5 billion with them, and we imported about 
$7.5 billion from them. It's a good market for agricultural 
products, but it still has very, very many problems and many 
barriers to our exports.
    For instance, it's a well-known fact that the European 
Union subsidized heavily. I always carry this chart with me, 
Mr. Chairman and members, wherever I go, be it Europe or Asia 
or anywhere else, because it shows graphically the difference 
between subsidization of the European Union and our own subsidy 
programs.
    In fact, it shows about $47 billion of European subsidies 
to agriculture products, while our subsidy program is $5.3 
billion and then phases out totally in the year 2002. So if we 
continue on, we can see that the European Union has huge 
subsidies and ours are phasing out. That gives us a strong 
position in the 1999 revisitation, but it is still a fact.
    And any way you want to cut it, we are suggesting to the 
European Union that rather than subsidize their crops and their 
commodities heavily, which distorts the world price and the 
market internationally, we don't want to quarrel with them 
about how much money they send to farmers, if that means that 
they maintain the environment that they have been farming for 
thousands of years, as they say. They have a greater 
sensitivity than we, they say, to the land.
    I point out to them our CRP programs and others, but we 
suggest that they decouple the program and pay their farmers as 
much as they want to pay them for the protection of the land 
and let the commodity go on the world market. That does two 
great things for Europe, the European Union. It takes care of 
their farmers and it reduces the cost of living in Europe 
dramatically. And then it gives the rest of the world an 
opportunity to compete in a world free trade system.
    So we have suggested that to them, and Mr. Fisher, by the 
way, has attempted to start down that line not totally, but he 
is considering it, at least. I must say, he is not too popular, 
by the same token.
    Any way you want to divide it up, the European Union 
heavily subsidizes against our products. For instance, there is 
another way of measuring this thing. It is the Organization for 
Economic Cooperation and Development, another measurement. By 
this measure, the European Union outspends the U.S. by more 
than three and a half to one for products.
    We know that exports currently are 30 percent of the United 
States farm cash receipts. We produce more than we can consume 
in this country and therefore, exports, we know, are essential 
to not only prosperity, but success of U.S. farmers and 
ranchers.
    When we look to the WTO decisionmaking in 1999, we know 
that it's an important precedent for TRQ's, for tariff rate 
quotas, as well, another problem that we face, of course, in 
international trade. In 1999, we believe with the proper tools, 
the United States can negotiate for further reduction of 
tariffs. We think we can open new markets, we can address 
unfair trade practices around the world. Of course, other 
issues that we have in great debate these days are 
biotechnology products that you know about, BT corn, Roundup 
Ready soybeans, et cetera. And future negotiations depend upon 
our ability to give ourselves the proper tools like fast track 
and other opportunities.
    So, Mr. Chairman, I thank you for this brief moment with 
you. I think it is important to remember that basically our 
opportunity to import is very little or restricted. In other 
words, there are very few barriers against products coming into 
the United States. The barriers we have are with our trading 
partners, and we still have problems with Canada and Mexico, 
but especially with the Europeans.
    And the European Union is a very, very large market and we 
ought to be tough in negotiating in 1999 to open the markets to 
not only agriculture products, but all the products we produce 
in this country. I thank you very much for the time.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.004
    
    [GRAPHIC] [TIFF OMITTED] T3650A.005
    
    [GRAPHIC] [TIFF OMITTED] T3650A.006
    
    [GRAPHIC] [TIFF OMITTED] T3650A.007
    
    Chairman Crane. Thank you very much, Mr. Chairman. Let me 
ask you a question, though, upfront about that $47 billion 
subsidy of agriculture in the European Union. If you'll just 
put those farmers on a direct pay dole and eliminate their 
subsidies, aren't all of our consumers buying their 
agricultural products taking that hit?
    Mr. Smith of Oregon. Well, we don't think so, because we 
believe, for instance, that we are the most competitive nation 
in the world in foodstuffs. Let me give an example. Today, 
wheat is probably worth $3 a bushel. If you were in France at a 
farm that I visited within the last few months, you would be 
receiving about $8 a bushel. If you had a cow in the United 
States worth $600, that cow is worth $1200. We don't mind the 
competition, Mr. Chairman. We just want the chance.
    I'd like to distribute this, Mr. Chairman, if I may, or ask 
the clerk to leave in front of the members----
    Chairman Crane. Are those extra copies that you have there, 
Bob?
    Mr. Smith of Oregon. Yes.
    Chairman Crane. Oh, yes, please. Will one of the staff do 
that?
    Is there a danger that negotiating with the EU on standards 
in the transatlantic economic partnership could diminish our 
leverage for achieving a successful launch of the WTO 
agriculture negotiations?
    Mr. Smith of Oregon. I don't think so. I don't mind a 
bilateral discussion with the emphasis as long as agriculture 
is included. If you recall, the first discussion we had in a 
bilateral basis with the European Union did not include 
agriculture. I don't think that you strain our opportunity in 
the WTO by talking to the European Union independently at all, 
as long as everybody is at the table.
    Chairman Crane. The U.S. has won two landmark WTO dispute 
settlement cases against the EU on beef hormones and bananas. 
In my view, a failure by the EU to implement these decisions 
would undermine the credibility of the WTO dispute settlement 
system to the detriment of the U.S. and the EU. Are we seeing a 
disturbing pattern on noncompliance on the part of the EU?
    Mr. Smith of Oregon. Well, I'm glad you mentioned that, Mr. 
Chairman. I have that in my prepared remarks, and I hope you 
emphasize and reemphasize that with Ms. Barshefsky because you 
are absolutely correct. If the WTO doesn't follow through with 
finality on beef hormones and bananas, then there is no purpose 
for a World Trade Organization whatsoever.
    They've ruled; they've found in all their judicial capacity 
that the European Union is violating these two issues. It has 
to come to finality, otherwise, as you intimate, the review of 
the Round will simply be a review of what hasn't happened. And 
we certainly don't need that. We don't need to look back and 
rehash these things that have already been decided. We ought to 
be looking ahead to the future.
    So you are right on point and I hope you will emphasize 
that with Ms. Barshefsky.
    Chairman Crane. Thank you. Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman. I just want to follow 
up to Mr. Smith on your question. Bob, how are the discussions 
going with the EU now on the beef hormone issue and the issue 
of bananas. Are you satisfied at this time in terms of whether 
they are going to implement or not?
    Mr. Smith of Oregon. No, I am not satisfied at all. In 
fact, I raised my voice when I was in Paris and Berlin and 
Belgium to those officials in the European Union because they 
seemed to continue to delay the implementation by one hook or 
another.
    Now, the banana issue we understand will be resolved by 
January of 1999. The hormone issue, they say, well, we have to 
have a new review which may take two to three years. We don't 
understand that. So I think we must keep the pressure on, 
because that is unacceptable. And I mentioned it, and I think 
we ought to say as a government, that is unacceptable.
    Mr. Matsui. Well, thank you, I appreciate this. Obviously, 
we have a lot of work to do. We have attempted to abide by the 
WTO rulings. The Fuji film case is a great example of that. 
Obviously, Kodak is being hurt by that, but we are doing 
certain things and we are certainly not violating the terms of 
the ruling. We would hope that the EU would follow the same 
kind of provisions we are. But thank you.
    Mr. Smith of Oregon. I thank the chairman.
    Mr. Matsui. Thank you.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman. Bob, good to see 
you.
    Mr. Smith of Oregon. Thank you.
    Mr. Houghton. Just two questions. One, if you were given a 
fair chance, literally, in terms of this market, what would 
this mean in terms of dollars? What are we talking about? Is it 
billions? Is it hundreds of millions?
    Mr. Smith of Oregon. Are we talking about the European 
Union now?
    Mr. Houghton. Yes, right, EU.
    Mr. Smith of Oregon. Well, as I mentioned, we are selling 
them about $10 billion in agricultural products. They are 
buying about $7.8 billion from us. The European Union is 
largely self-sufficient. They export very small amounts, maybe 
in the neighborhood of 10 percent.
    Because they think they are so self-sufficient, they raise 
these barriers. They are doing what we did 60 years ago with 
Smoot Hawley and others. They think they are self-sufficient, 
therefore, there is no reason to reduce barriers to incoming 
products. Well, they'll find out they are wrong. It is costing 
them a huge amount of money.
    So the amount of money that is a possibility to export to 
the European Union is in the billions. We export about $60 
billion worth of goods today in agriculture. That could 
possibly double if they would allow us to be competitive.
    Mr. Houghton. It would double just in the EU.
    Mr. Smith of Oregon. I think it could be very, very 
important.
    Mr. Houghton. All right. Now, let me just ask you the 
second question. We were meeting with a group of English and 
German parliamentarians and talking about science in general. 
We talked about information technology, environment. One of the 
things was genetic engineering, and I think you mentioned this 
before. It seems as if we are brewing for a trade war over 
that.
    Do you have any other comments you'd like to make?
    Mr. Smith of Oregon. Well, they are very sensitive about 
anything ``genetically modified.'' Genetically modified 
organisms are being debated today. In fact, France brought two 
genetically modified corn programs forward and they're arguing 
and debating today whether they should continue to do that.
    We say to them simply, look, defend whatever right your 
consumer has and you believe they have. We have been debating 
the question of labeling. I think the ultimate answer for the 
European Union and others who are sensitive is some sort of a 
fair kind of labeling. We know that, for instance, a tomato 
paste that was labeled ``may have genetically modified 
organisms,''--something like that, I don't know the language 
exactly--but it was offered in England and the GMO had no legs. 
The tomato paste, in fact, sold in more volume than it did 
before.
    So I think there are ways to do this without interrupting 
what we know is great progress. I mean, biotechnology has 
improved volume some 30 percent in the generation of products, 
so it is the future.
    Mr. Houghton. I guess, Bob, the thing I am worried about is 
they have taken sort of an idealistic stance on genetically 
manufactured products, that you could see that $7 billion 
evaporate just on ideology.
    Mr. Smith of Oregon. Well, we are not sending them any----
    Mr. Houghton. No, but the way we are going now.
    Mr. Smith of Oregon. Oh, the future may look very dismal, 
you are correct. But they are going to have to cope with this 
issue, and they are going to do it, because as I mentioned to 
Mr. Fisher, I said, look, I hope you go about doing exactly 
what you are doing because we'll outcompete you, we'll outsell 
you, and you're going to be in the dark ages of food production 
in the world. And he smiled at me and agreed, because that is 
the future and they know it.
    Mr. Houghton. Thank you very much.
    Chairman Crane. Mr. McDermott.
    Mr. McDermott. Thank you, Mr. Chairman. Do I understand 
that under the WTO, the agricultural subsidies will phase out 
by 2002?
    Mr. Smith of Oregon. That's correct.
    Mr. McDermott. So it's a fait accompli; it's going to 
happen.
    Mr. Smith of Oregon. Well, not under the WTO. Under our 
passage of the bill in 1996, that phased out all subsidies by 
the year 2002.
    Mr. McDermott. But that's really coincident with----
    Mr. Smith of Oregon. Coincident with it, yes.
    Mr. McDermott. Okay. Now, I listened to your talk about the 
need for fast track, and not understanding the mind set of 
people who voted against it from agricultural areas in the 
first place, I wonder what argument you would make to them that 
would change their point of view.
    I mean, I find it difficult philosophically to deal with 
the idea that you want the government out of everything but at 
the same time you want the government to create markets where 
they go out and negotiate for you. So I am interested in how 
you make that argument to those people in agricultural areas 
who turned fast track down in the past.
    Mr. Smith of Oregon. Well, as the chairman has agreed and 
Mr. Archer, I approached that issue like you did, and I 
realized that agriculturists are very suspicious of what has 
happened in the past. If you have bad markets, you blame NAFTA 
and you blame the WTO, and how could we bring them along.
    I have suggested, and the chairman has agreed, that 
language be added to the authorization for fast track which 
will allow the Agriculture Committee of the House and of the 
Senate and anyone else who is interested to be brought along, 
as is the Ways and Means Committee of the House and Finance 
Committee of the Senate, to be brought along in these 
negotiations as they are building so that no one is left in the 
dark. It will not be done in the dark of night, as is 
suspicioned, and then dumped on us in the last minute.
    Beyond that, the Agriculture Committee of the House and the 
Senate will have an opportunity to see the agreement before it 
is finally penned, before it is finally completed and signed. 
Therefore, if it is alien to agriculture, then likely no 
administration will bring an agreement to this Congress for 
confirmation if the agriculture community isn't satisfied with 
it, because they'll defeat it.
    Therefore, for the first time, agriculture people in 
America have a chance to be brought along, to watch as the 
negotiation is taking place and to view the document before it 
is penned, which gives them a great deal of satisfaction and 
protection that they have never had before so that they can 
come along today and say, yes, we can support fast track under 
those conditions and we do. That is why you'll see a big 
difference there. There are only 12 members of my committee 
that were supporting fast track last year when we finally 
dumped it. Now there are many more.
    Mr. McDermott. So it's a kind of modified fast track in 
that they would have the ability to say to the administration, 
don't sign this agreement that you have worked out with the 
WTO?
    Mr. Smith of Oregon. As you do. The same language that 
allows the Ways and Means Committee and the Finance Committee 
would merely be offered to the Agriculture Committee, the same 
language exactly.
    Mr. McDermott. Explain to me the concept of how the 
government creates markets. You sort of suggested that the 
trade-off was you get rid of subsidies and the government will 
provide markets.
    Mr. Smith of Oregon. I meant that the government has to be 
a representative of farmers in trade negotiations, in opening 
markets for our goods around the world. That's our future. 
Agriculture certainly does not want to take our domestic market 
for granted, but the future for agriculture is in trade. The 
future, because we are so efficient in our production, and we 
have such safe food and it is soefficiently produced, we can 
compete anywhere. All we need is an opportunity.
    So the government must be our ambassador to open markets. 
That's what I meant.
    Mr. McDermott. Thank you.
    Chairman Crane. Ms. Dunn.
    Ms. Dunn. I am glad you are here, Chairman Smith. On behalf 
of the wheat farmers in Washington State, we want to thank you 
very much for your leading that effort to get rid of the 
Pakistan sanctions. And I am very happy that we have decided 
that we will have that vote on fast track this fall. I think 
that is vitally important, certainly for your interest, but for 
the interests of all of us who purchase products from other 
nations.
    We want to be able to buy at competitive prices and I think 
fast track, in giving the President the negotiating authority 
without the role of the Congress at the table, with the role of 
the Congress to vote up or down on it, I think that is going to 
be very important for us. And I believe that if we do this 
right this time, we can come up with those six or seven votes 
that we were not able to secure the last time and put fast 
track back in action.
    But in the area of sanctions, I did want to take advantage 
of this opportunity, since we don't see you before this 
committee too often, I would like to ask you to take a look at 
the whole area of sanctions for us generally and tell us what 
your sense is now on their effectiveness as a tool of foreign 
policy, how they hurt or help the agriculture community and 
where you would like to see us go.
    Mr. Smith of Oregon. Well, thank you very much. I tend to 
lean towards those who believe that sanctions against 
agricultural products are not effective against governments. 
They might be effective against allowing people to starve, 
which I don't think is really any benefit from our policy point 
of view.
    So I am one of those who believes that we ought to 
eliminate agricultural sanctions from any sanctions that this 
government might use, because I don't think it is beneficial. I 
don't see how depriving Pakistan, for example, of wheat, 
advances our opportunity to punish them for setting off a 
nuclear device.
    It certainly punishes American farmers to be assistants of 
Australians and Canadians who are standing there at the door to 
take the market. But if you are really trying to punish a 
nation, I don't understand why it is a punishment to a nation 
to deprive them of agricultural products.
    Ms. Dunn. Thank you very much. Thank you, Mr. Chairman.
    Chairman Crane. Well, with that, we thank you very much, 
Bob, for your presentation and appearance here today. This is a 
quorum call and we will stand in recess subject to the call of 
the Chair at a quarter to with our Trade Representative 
Charlene Barshefsky.
    [Recess.]
    Chairman Crane. Would everyone please take seats. We shall 
resume the committee hearing and we have with us now our next 
witness, the Honorable Charlene Barshefsky, our noted U.S. 
Trade Representative. We appreciate your being here with us 
this morning. It is a little chaotic with scheduling, as you 
know, because of the events planned over in the Capitol 
Building, but we do certainly have time without interruption 
for your presentation.
    So I yield at this point to the distinguished Ms. Charlene 
Barshefsky.

       STATEMENT OF HON. CHARLENE BARSHEFSKY, U.S. TRADE 
    REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE

    Ms. Barshefsky. Thank you, Mr. Chairman. Good morning. Let 
me thank you for calling this hearing on American trade 
relations with the European Union.
    My testimony, which I will submit for the record, addresses 
the state of our trade relationship with the EU today, the 
transatlantic partnership launched by President Clinton, our 
trade disputes with the EU, the EU's expansion, and other 
issues.
    But let me begin by putting these issues in some context. A 
strong economic relationship with Europe is of fundamental 
importance to American workers, businesses, and agricultural 
producers. And in a larger sense, it is a necessary complement 
to a strong security relationship with Europe if we are to 
guarantee peace and prosperity in the next century.
    Our trade and economic policy thus seeks the following 
goals: A close strategic economic relationship with Europe; 
fair market access in Europe for American companies; removal of 
impediments to mutually beneficial trade and investment; 
ensuring that the growth and deepening of the European Union 
does not lead to the exclusion of American business; the 
integration of new market democracies in Central Europe, 
Southeastern Europe, and the former Soviet Union into the 
regional and international economic institutions of the West; 
further development of the multilateral trading system; and the 
promotion of shared values.
    In these areas, we build on an already strong relationship. 
In 1997, our goods exports to the European Union were $141 
billion, supporting 1.3 million jobs. Services exports to the 
EU were $77 billion, nearly a third of our worldwide total. And 
despite the perception of Europe as a mature market, our growth 
opportunities remain high. In 1997, for example, our goods 
export to the EU grew by $13 billion, more than our total goods 
exports to China.
    Our direct investment in each other's economies exceeds 
$750 billion, almost perfectly balanced. The EU's investment in 
America now supports three million jobs. This is particularly 
important in manufacturing where one in every 12 U.S. factory 
workers is now employed by a European firm.
    Through the transatlantic agenda announced in 1995, we have 
found ways to further improve this relationship, including the 
negotiation of a mutual recognition agreement that will reduce 
regulatory barriers facing sectors worth about $60 billion in 
annual two-way trade, including medical devices, telecom 
equipment, and pharmaceuticals. We have also concluded 
agreements on customs cooperation and shortly, on veterinary 
equivalency.
    And at the U.S.-EU summit in London last May, we launched 
an effort to bring this economic relationship to a new level, 
the TransatlanticEconomic Partnership will address some of the 
key problems in U.S.-European trade relations. It will seek to solve 
problems that affect both partners, and it will find areas in which we 
can cooperate at the WTO and in third markets.
    Thus, the initiative will engage the EU pragmatically and 
constructively to realize the remaining untapped potential of 
transatlantic markets, head off disagreements before they 
become crises, and enter into the new century with a further 
strengthened and mutually beneficial trade relationship.
    We have identified seven key areas on which to focus our 
efforts. First, agriculture, including food safety procedures 
and the transparency of regulatory processes in, for example, 
the biotechnology area. The TEP is, of course, only part of our 
efforts on behalf of agriculture.
    If I might digress for a moment, as we approach WTO 
negotiations in 1999 on agriculture, issues including 
implementation of existing WTO commitments, State Trading 
Enterprises, eliminating export subsidies, ensuring that 
farmers and ranchers can use safe, advanced scientific 
techniques, including biotechnology, transparency in regulatory 
policy, and further market access commitments clearly need 
attention.
    The EU's common agricultural policy presents a major 
challenge in a number of these areas, including extensive 
import protection, direct commodity-specific price support 
policies, and export subsidies.
    Second, we will address in the Transatlantic Economic 
Partnership, government procurement, a $200 billion market in 
the EU where small and medium-sized businesses face particular 
difficulties.
    Third, technical standards, where we are examining ways to 
reduce mutual barriers and standards while maintaining our high 
level of health and safety protection.
    Fourth, services, the area in which we can both expand 
market opportunities and bring on small common interests to 
boost the coming WTO negotiations.
    Fifth, intellectual property rights, where we can work on a 
number of areas, including worldwide enforcement. We have 
already begun with a successful effort to raise patent 
protection in Bulgaria and Cyprus.
    Sixth, electronic commerce, a market projected to grow to 
$300 billion in the U.S. alone by 2001; and finally, increased 
public participation in debates on trade policy, including 
labor, environmental, consumer groups and other important 
interests with the aim of promoting shared values.
    For example, we wish to seek common approaches to trade in 
the environment and the international promotion of core labor 
standards, as well as transparency at the WTO.
    In the months to come, we--and the EU--in consultation with 
Congress and other interested parties, will formulate a 
specific action plan to achieve the Transatlantic Economic 
Partnership's goals. This will include identifying specific 
areas for negotiation, as well as areas for WTO cooperation.
    At the same time that we announce this initiative, our 
present relationship with the EU is by no means free of 
disputes. We will not tolerate failure to comply with trade 
agreements or WTO rules, and we will use our own laws and our 
rights at the WTO to ensure that American trade interests are 
respected.
    Thus, for example, we have used special 301 procedures a 
number of times this year against the EU to ensure protection 
of our intellectual property rights, and we are effectively 
using WTO dispute settlements.
    Our active WTO complaints against Europe involve income tax 
subsidy cases against five EU member states and intellectual 
property rights against four member states. In two cases 
involving agricultural policy, specifically the EU import 
regime on bananas and the EU ban on beef from cattle grown with 
bovine growth hormone, WTO dispute settlement panels and the 
appellate body have ruled in favor of the United States. The 
European Union has an obligation to respect these results and 
we will insist on rapid and full implementation.
    The European Union has likewise initiated WTO cases against 
us. We will defend our interests in all of these. The challenge 
to our FISC tax provision, for example, is extremely troubling. 
The FISC rules were enacted over 14 years ago to settle a 
dispute with the EU, and to conform U.S. tax rules to our 
international obligations. In addition, there is no commercial 
harm to the EU. This case, as in all others, will be defended 
vigorously.
    Let me conclude with two subjects we face in the future. 
First, the EU is deepening its single market through the 
adoption of the euro, and further regulatory harmonization and 
expanding to take in new members.
    With respect to the euro, we have a strong interest in a 
stable and prosperous Europe. The more the single currency 
helps ensure that stability and prosperity, the more welcome 
that project will be. We support the integration of Central and 
Eastern European countries into the Western political and 
economic institutions.
    However, we are in close contact with the EU and 
bilaterally, with Central and Eastern European countries, to 
ensure that the process of European integration does not reduce 
market access for Americans.
    Second, we will seek cooperation from the European Union as 
the World Trade Organization admits new members and embarks on 
new negotiations. We have had good cooperation thus far on 
ensuring the accession of China and Russia to the WTO on 
commercially meaningful terms. However, U.S. and EU interests 
in future accessions may not always coincide, and we will 
ensure that our rights and interests are fully protected.
    The core of the negotiations to begin next year in the WTO 
will be the WTO's built-in agenda. In this, as in all areas, we 
will seek the cooperation of the EU as talks proceed.
    Mr. Chairman, our trade relationship with Europe is already 
one of the major forces for global prosperity. While we have 
disputes with the EU, which we are working to resolve, this 
should not obscure the bigger picture. Strengthening the U.S. 
and EU relationship will open new opportunities to millions of 
American workers, businesses, and agricultural producers; and 
in the larger sense, it will ensure that the wise policies the 
United States adopted after the Second World War remain in 
place after the Cold War, laying the foundation for a more 
peaceful and prosperous world in the next century.
    Thank you very much, Mr. Chairman, for having this hearing, 
and I look forward to your questions.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.008
    
    [GRAPHIC] [TIFF OMITTED] T3650A.009
    
    [GRAPHIC] [TIFF OMITTED] T3650A.010
    
    [GRAPHIC] [TIFF OMITTED] T3650A.011
    
    [GRAPHIC] [TIFF OMITTED] T3650A.012
    
    [GRAPHIC] [TIFF OMITTED] T3650A.013
    
    [GRAPHIC] [TIFF OMITTED] T3650A.014
    
    Chairman Crane. Well, we appreciate your appearance here, 
Madame Ambassador, and we are grateful to you. There is 
something I would like to put to you that is not necessarily 
immediately germane to your presentation, but it is something 
that is a matter of concern to a lot of us. That has to do with 
the renewal of fast track. You indicated that now is not the 
time to consider fast track.
    My concern, especially with regard to agriculture, is 
whether it is fair to make U.S. farmers and ranchers wait until 
next year before we start consideration of it. Secondly, I 
think it is impairing our strength in international trade 
relations for Congress not to have renewed that authority for 
the President.
    And as you know, there is a growing commitment on the part 
of at least the House leadership, and hopefully the Senate too, 
that we might bring fast track up. Chairman Bob Smith indicated 
that if we make some accommodation to the Agriculture 
Committee, that he thinks he can pick up roughly 24 to 30 
Members of his members. Originally, the count there was only 
about 12. And if that were so and we retained the numbers that 
we had last year going into November, that would be enough to 
put us over the top.
    What are your views on that?
    Ms. Barshefsky. Well, first of all, as you know, Mr. 
Chairman, the administration strongly supports fast-track 
authority. We were disappointed that the bill had to be pulled 
in November, but that was the most prudent course at the time.
    There is no question that fast track is essential and 
vital. If we look at the European Union alone, we see that 
Europe is now in the process of approving pre-trade agreement 
negotiations to begin with MERCOSUR--that's Brazil, Argentina, 
Paraguay and Uruguay, Chile and Mexico. This is obviously not 
in our interest inasmuch as we will not be a member of any of 
those pacts unless we have adequate authority to proceed with 
our own array of free trade agreements in this hemisphere, as 
well as around the world.
    Having said that, we don't wish to see fast track be 
brought up to lose. And at this juncture, we don't believe that 
the votes are there either on the Republican side or on the 
Democratic side. I appreciate the efforts that the Chairman of 
the House Agriculture Committee is making, but at this point, 
we don't perceive that the votes are there at this juncture.
    From the administration's point of view, we would like to 
see those pieces of trade legislation that can move forward 
before the election move forward. For example, the Africa bill, 
which you have cosponsored and been so instrumental on; CBI 
parity, which you were also instrumental on; shipbuilding, and 
several other areas; GSP, several other areas. We'd like to see 
those move forward because we believe that there is quite 
strong bipartisan support for those, and then take up fast 
track post-election.
    Chairman Crane. Well, I'm sure you followed our vote on 
renewal of normal trade relations with China. Going into that 
debate, we had a fear that while we were reasonably confident 
we could prevail, we anticipated a dropoff in the vote totals 
from last year. In the end, we actually got an increase.
    And if the fast-track vote were taken up in September and 
the primaries are essentially all behind us, those who are 
paranoid about labor union money being poured into their 
opponent's campaign kitty, except for general election fears, 
should not be all that exercised, it seems to me.
    And those that are going to anticipate that kind of 
reaction in general elections are going to get it anyway. I 
have talked to our ranking minority member on the Trade 
Subcommittee, and he feels reasonably confident that he can 
retain the numbers he had last year. Now, the burden then is on 
us to try and increase the numbers that we had, and ideally Bob 
can increase his a little, too. That would help.
    But if we were to get a pretty strong head count that 
looked like we could prevail, and we communicated that to you, 
then you guys ought to make a full court press from your end of 
Pennsylvania Avenue also. We will keep you updated on that and 
let you know.
    Let me ask you a question on the Transatlantic Economic 
Partnership initiative. Are you certain that it won't diminish 
leverage the U.S. will have in the WTO negotiations on 
agriculture where we can discuss the reduction of export 
subsidies in domestic support payments, something that when Bob 
was making his presentation, he pointed out that the EU spends 
almost $47 billion in agiculture subsidies, in contrast to our 
$5 billion.
    What Bob suggested is that they put all of their farmers on 
a dole and make direct cash payments to them and eliminate 
those subsidies, but I believe that stiffs us on any of their 
subsidied agriculture products coming in here. We are going to 
have to pay more, wouldn't we?
    Ms. Barshefsky. Right. Well, let me just say that the 
Transatlantic Economic Partnership and any talks under it will 
in no way prejudice our leverage in agriculture discussions in 
the WTO in 1999. And were we or I to perceive any remote 
possible diminution in our leverage for WTO talks, we would not 
negotiate those issues in the Transatlantic Economic 
Partnership.
    The 1999 WTO talks in agriculture are absolutely critical. 
But at the same time, to the extent some of our bilateral 
irritants can be resolved through the Transatlantic Economic 
Partnership, I'd like to go ahead and try and resolve those or 
try to reduce the nature of those disputes in advance of 
heading into the 1999 talks.
    Let me give you one example. We have a persistent problem 
with Europe with respect to trade in bioengineered or 
genetically-modified products. These disputes threaten to 
impair the bilateral relationship to a significant degree. At 
this juncture, we are awaiting approval from the French 
government of certain GMO varieties of corn which the European 
Union has already approved. And we have indicated to the French 
government in the strongest terms, including by the President 
and the Vice President, that undue delay by the French will not 
be tolerated.
    If we were able, in the context of the Transatlantic 
Economic Partnership, to even reform the process by which the 
regulatory process by which GMO varieties are considered, that 
would go a long way to helping lessen the unpredictability 
created by the current climate and the current lack of 
discipline on the EU regulatory process.
    That, it seems to me, would be worthwhile to try and 
accomplish and would in no way endanger our leverage in the 
1999 talks and would provide more immediate relief to our 
farmers who everyday plant more and more using GMO's.
    So we will not do anything that impairs our leverage, but 
where we can resolve disputes that are essentially bilateral in 
character, we'd like to move forward on those and successfully 
pursue them in the context of the Transatlantic Economic 
Partnership.
    Chairman Crane. Given the similarity in our economies, it 
has always been surprising to me how rarely the U.S. and the EU 
are able to cooperate in the WTO. Where couldcoordination 
between the U.S. and the EU and the WTO be improved?
    Ms. Barshefsky. I think there are a number of areas. First 
of all, your observation is very well taken. My observation is 
that when the U.S. and the EU fight in the WTO, most of the 
rest of the countries take a pass and just watch the fun. 
That's terribly counterproductive. It disempowers the United 
States, and it actually disempowers Europe.
    So we do need to find ways to cooperate better since we do 
share so many common interests. Certainly in services trade, 
where the U.S. and Europe are the world's largest services 
suppliers and largest services exporters, we should be doing 
more to cooperate so that we set very high standards for market 
openness in services trade through the WTO.
    In areas of WTO transparency, that is, giving credibility 
to the WTO through more open and transparent processes, 
including the dispute settlement process, we and Europe have a 
shared history of due process, of transparency in our legal 
regimes. That shared history should be brought to bear on WTO 
practices and on the practices of other large, multilateral 
institutions.
    Those are two examples of areas where we and Europe should 
do much more to cooperate and much less to fight.
    Chairman Crane. What's your timetable for agreeing on a 
specific action plan for the TEP with the EU?
    Ms. Barshefsky. I think we are looking at this fall. We 
should have a specific plan in terms of areas for negotiation, 
areas for cooperation, and so on, sometime in late September or 
October. And that is our current scheduling.
    Chairman Crane. Very good. I will now yield to our 
distinguished colleague, Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman. I am a little out of 
breath here, just having come back and I am sorry I did not 
hear the testimony. But it is always good to see you, Ms. 
Barshefsky.
    I just wanted to ask you a particular question. We approved 
here on the committee in October of last year a bill to extend 
trade authorities procedures with respect to reciprocal trade 
agreements. This was on fast-track legislation. And we offered 
an amendment on ensuring that the administration--let me just 
read this thing, because the question really is do you think it 
is a good idea and whether we should reinsert it. ``Preserve 
the ability of the United States to enforce rigorously its 
trade laws, including the anti-dumping and countervailing duty 
laws, and avoid agreements which lessen the effectiveness of 
domestic and international disciplines.'' I won't go on.
    But I have always felt that something like that is 
important to at least inscribe in law. I don't know how you 
feel about it.
    Ms. Barshefsky. I think it is very important at every 
opportunity to make clear to our trading partners that the U.S. 
will vigorously enforce its trade laws, including the anti-
dumping and countervailing duty laws; but also, of course, the 
full range of other laws that we have, whether super 301 or 
special 301 or regular 301 or Section 1377 for 
telecommunications and so on and so forth.
    To the extent that there is any doubt about that at all, 
then by all means, these issues should certainly be inscribed, 
whether in fast-track legislation or elsewhere. This 
administration, putting aside the anti-dumping and 
countervailing duty laws, which tend largely to be private 
remedies, has brought over 85 enforcement actions against our 
trading partners, including 41 WTO cases.
    So we are not at all shy about enforcing our trade laws. I 
think it is absolutely critical that we use all the tools 
Congress has given us, and reenforcing of that by Congress, I 
think is a good idea.
    Mr. Houghton. Thank you very much. Thank you, Mr. Chairman.
    Chairman Crane. Mr. Neal.
    Mr. Neal. Thank you, Mr. Chairman. I apologize for being 
late, but the ceremony in the rotunda is just coming to 
conclusion.
    Ambassador Barshefsky, beyond the fact that I think there 
is general agreement that you have done a terrific job during 
your tenure as our Trade Representative in every quarter of the 
globe, I have a specific question I would like to raise with 
you.
    It addresses the new transatlantic agenda. My question is 
how can this new partnership help Northern Ireland, which Bill 
Clinton has invested so much in, and many of us who have been 
longstanding players in that conflict are so grateful to him 
for. Do you have any specific recommendations?
    Ms. Barshefsky. Well, this is an issue I think we will be 
looking at. As you know, the Department of Commerce has been 
heading an effort with respect to Northern Ireland--and perhaps 
Under Secretary Aaron can testify to this when he comes on up--
but the Commerce Department has looked, for example, at 
matchmaking between the U.S. and Northern Ireland companies to 
try to spur investment in Northern Ireland and spur business 
and strategic alliances.
    In addition, the U.S. has been instrumental in setting up a 
fund for new startup businesses for Northern Ireland, and there 
are a number of other efforts that are ongoing, and I think 
Under Secretary Aaron can speak to those.
    The question from time to time has been raised, should the 
U.S. do a free trade agreement of some sort with Northern 
Ireland. I am not aware that the Irish government or the 
government of the United Kingdom or the European Union have 
expressed an interest in this. And of course, Northern Ireland 
is a subcentral entity, if you will, which complicates the 
situation.
    But I think from our point of view, we are pleased to look 
at all possible options. As you rightly point out, the 
President has been very instrumental with respect to the peace 
process in Northern Ireland. And to the extent that creating a 
stronger economic base in Northern Ireland will help that 
process, and we believe it will, we want to do everything that 
we can to encourage that.
    So we would look forward to working with you. Certainly, I 
would suggest that perhaps Under Secretary Aaron can speak to 
this issue also when he comes on up.
    Mr. Neal. Again, a note of gratitude. It is this 
administration that has elevated peace in Northern Ireland 
internationally and drawn attention to it, again from every 
sector of the world, and we are grateful for your interest. 
Thank you, Mr. Chairman.
    Chairman Crane. Well, again, I want to express appreciation 
to you, Madame Ambassador, for appearing here today. Because of 
the disruptions resulting from the murders that took place in 
the Capitol, it has led to change in everybody's schedule, but 
we felt that we probably ought to go forward with the hearing 
because of people having made the accommodations to be here.
    Wait a second. I have one more member here that I will 
recognize before we say goodbye, and that is Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman, and thank you, Madame 
Ambassador, for being here. I know this is a hard day for all 
of us on this side, and for you not to have the attention of 
the members, I apologize for that.
    I did have a question. I am sorry I had to miss your 
testimony, but I think I have a pretty good idea of what you 
talked about in relation to WTO and the EU. It relates to the 
beef hormone case, the banana case, to see where we are. I 
apologize again if you have gotten into this in any detail.
    But my question basically to you is where are we in terms 
of our litigation against the EU. You and Peter Shear have done 
a tremendous job, and I want to commend you publicly for that, 
for your work in litigating against the banana policy of the EU 
based on the WTO case and the two GATT cases which preceded it.
    My sense is that the EU is almost institutionally unable or 
unwilling to comply with the WTO case, and that this is indeed 
a test case, and indeed has implications well beyond the 
hormone issue or the banana issue. Both cases are test cases. 
The banana case is sort of first-in, first-out, and therefore 
needs a focus.
    With all the important interests that are at stake in this 
case, I guess my question to you is what can the U.S. do to 
stop European implementation of their new proposed regime, 
which I think is worse than the existing regime. Which is 
ironic that after the WTO case, they then push through a regime 
that is even more harmful to U.S. interests.
    It is my understanding that there is an EU-WTO deadline of 
January 1, 1999. How can Congress, this subcommittee in 
particular, but Congress in general, help you to achieve our 
objective of keeping the EU from implementing its new proposed 
banana arrangement and ensure full compliance with the WTO 
case?
    Ms. Barshefsky. Let me respond to both the banana and the 
beef hormone issue. You are quite right that the deadline for 
compliance by the EU with the panel's ruling in the banana case 
is January 1, 1999, and we expect full implementation by the EU 
by that time, which means a WTO-consistent banana regime, first 
off. That is most important. Second, and equally important, 
assurances that the Lomay rights, or the rights granted under 
the Lomay Convention, for example, for the Caribbean and 
others, are fully respected.
    The EU, as you know and as you have indicated, has come 
forward with a new banana licensing regime which we believe to 
be more discriminatory than the regime that it replaces. We 
have told the Commission this. We have indicated this, and I 
have indicated this personally to every one of the member 
States.
    The process we are now engaged in is to see if we can get 
the original panel to reconvene in essentially emergency 
session to take a look at this new regime and to render an 
opinion before the deadline for compliance on its WTO 
consistency.
    We are very confident that in that proceeding, we will 
prevail, and the regime as proposed will be viewed WTO-
inconsistent. We are holding Europe to the January 1, 1999 
deadline for compliance. And we certainly hope Europe revisits 
the regime it has put forward well before that date.
    With respect to beef hormones, the EU has left on the clock 
ten and a half months in which to comply. We have been working 
very closely with our industry. The EU, as you know, wanted 
four years to comply with a panel ruling indicating that its 
ban on our beef exports was WTO-inconsistent. We went to 
arbitration. This is after winning the panel decision and the 
appellate body decision. We then went to arbitration because 
the EU didn't get the point apparently the first two times, to 
make clear that they had the normal 15-month period in which to 
comply, which now on the clock leaves about 10 and a half 
months.
    That ban needs to be lifted. It is WTO-inconsistent. No 
further scientific studies need to be done. Sufficient science 
exists, both in the United States and in the EU, and it is time 
for the EU to get on with the process of full compliance.
    Here again, we are going to stick with the WTO-imposed 
deadline of May 1999 for full compliance. Obviously, if there 
is not full compliance, we will take action at that point.
    Mr. Portman. Again, if you have any recommendations as to 
how this Congress can be helpful, I think we would like to 
entertain those. Personally, I am frustrated by both of those 
cases, and I think the record is clear that the Europeans are 
not likely to comply without the United States government 
continuing to litigate it strongly, and in particular--and I 
know this is something that makes some of your trade lawyers 
shudder--but threatening retaliation.
    I think the banana case, it is a 301 case, and the beef 
hormone case has been dragged on. I personally believe that if 
you were to come to this Congress and lay out your case, that 
you would get strong support, not just for the compliance 
procedures under the new WTO, which are rather muddled as I 
read them, but for retaliation procedures.
    I just think it is better to go ahead and make our case 
very strongly. I commend you for your quote that was in your 
most recent press release. ``The United States will not 
hesitate to exercise its full rights under WTO. Our rights 
include withdrawal of concessions on EC goods and services.'' I 
think we have to not only make the threat, but I think we then 
have to stand by it if the Europeans continue to be in 
noncompliance, which is such an obvious position that they have 
put themselves in with this latest proposal, particularly.
    I would urge you to be aggressive on it, both with regard 
to continued litigation, which you are doing, but also not to 
be shy to come to this Congress. I think under 301--again, I 
know that many in the trade community hesitate to exercise that 
because it is unilateral, but sometimes you have to use 
unilateralism in order to enforce multilateralism, which is 
really what this is. I hope that you will do that.
    Again, if you have any comments today as to how we could be 
helpful, I would love to hear them. I know the chairman is a 
strong free trader, as am I and most members of this 
subcommittee and committee, thank goodness. But is tough for us 
to always be out on point, whether China MFN, now China NTR, or 
whether it is fast track or whether it is WTO, when in cases 
like this, where we are so obviously in the right, we cannot 
achieve our results.
    It is going to be more and more difficult for those of us 
who are free traders to prevail here politically. So if you 
have any thoughts today as to what this Congress or this 
committee could do to help you. And do you have any response to 
my suggestion?
    Ms. Barshefsky. Well, let me say simply at this point that 
we would be very pleased to work with you. We have told Europe 
that we will not hesitate to retaliate with respect to bananas 
and with respect to beef hormones if we reach the point at 
which they fail to comply on the deadline for compliance.
    And let me make one comment about that. Under WTO 
rules,countries normally are granted a period in which to comply with 
WTO rulings. And that period is normally 15 months. The United States 
was chief among those who argued for a period within which compliance 
could take place because of our concerns that were we to lose a case, 
and were we to have to come back to Congress for authority to undertake 
an action or perhaps revise regulatory rules or such other activity, we 
would need about that amount of time within which to complete our own 
work.
    So in the current case, the EU is not, in either bananas or 
hormones, beyond its due date for compliance. In both cases, we 
made clear the 15-month rule stands. In hormones, the EU 
thought they should fall outside the general rule and instead 
take four years. And of course, an arbitrator took our view and 
said, no, 15 months is normal; you can do this within 15 
months. And the clock on both bananas and hormones is ticking 
under those rulings.
    Because that time period within which to comply is one that 
we ourselves have utilized for the full 15 months just 
recently, it is my view that it would not be appropriate to 
undertake retaliatory action during a ruled legal period of 
compliance.
    However, once that period of compliance is done, if there 
has not been full compliance, then we should and will avail 
ourselves of all tools, including very, very likely 
retaliation.
    Mr. Portman. Thank you very much, and thank you, Mr. 
Chairman, for the indulgence. I would just make one final 
point, which is once they implement this new regime, it may be 
more difficult as a practical matter to alter that regime and 
to get to a GATT and WTO compatible regime. Therefore, I feel 
strongly that the threat of retaliation backed up by not just 
press releases, but perhaps even some indication of what that 
retaliation might be and therefore, a sense that it is real, is 
going to be necessary.
    I would hope that we go beyond the compliance procedures, 
which as I read them, really could end up with us going back 
full circle again through a process of appeals and almost a 
never-ending series of European appeals, and instead move to a 
much more aggressive threat of retaliation and then following 
through on that threat if necessary. And I hope it would not be 
necessary.
    Thank you very much, Mr. Chairman, and again, Ambassador 
Barshefsky, thanks for your outstanding work on this 
litigation.
    Ms. Barshefsky. Thank you.
    Chairman Crane. Well, we thank you, Mr. Portman. Again, let 
me express appreciation to you for being with us, Charlene, and 
apologize for the circumstances, which are beyond our control.
    But we appreciate your being here and spending the time 
with us. And to follow up on what Rob Portman was talking 
about, we look forward to working with you in all fronts 
involving trade. But I'd like to sit down and talk to you 
further, after Labor Day about fast track renewal.
    And with that, we will let you be excused, and again, thank 
you.
    Ms. Barshefsky. Thank you so much, Mr. Chairman.
    Chairman Crane. And our next witness is the Honorable David 
L. Aaron, Under Secretary of Commerce for International Trade 
with the U.S. Department of Commerce.
    And it is my understanding that we don't anticipate 
interruptions again until approximately 2:30. But we do have 
two panels after the testimony of Mr. Aaron and we routinely 
ask folks to try to summarize in their verbal presentation 
within five minutes roughly, and then all written testimony 
will be made a part of the permanent record.
    With that, you may proceed, Mr. Aaron.

 STATEMENT OF HON. DAVID L. AARON, UNDERSECRETARY OF COMMERCE 
      FOR INTERNATIONAL TRADE, U.S. DEPARTMENT OF COMMERCE

    Mr. Aaron. Thank you very much, Mr. Chairman. Let me begin 
by commending you for holding this hearing. The European Union 
(EU) is one of our most important commercial partners, as 
Ambassador Barshefsky pointed out. The EU buys over $1 trillion 
of goods and services made by U.S. firms, making it more than 
twice as large a market for American companies as Canada and 
three times as large as Japan. Furthermore, the EU is an 
important ally in opening markets to the rest of the world.
    But, like all good things, there is room for improvement. 
This hearing will help us focus needed attention on the 
opportunities and the challenges of this critical relationship.
    With your permission, I'd like to focus my remarks today on 
Commerce's partnership with industry and the Transatlantic 
Business Dialogue (TABD) and the commercial challenges we face 
in the coming year.
    As this committee is aware, the Commerce Department has 
played a pivotal role in building government support for the 
TABD, the unprecedented process of bringing U.S. and European 
CEO's into a dialogue with top trade officials on both sides of 
the Atlantic that has enormously contributed to reducing trade 
barriers and to further opening markets.
    Recent successes include the Mutual Recognition Agreements, 
or MRA's, and the Information Technology Agreement. The TABD 
has also been highly effective in increasing government 
attention in areas such as the EU-specified risk material ban, 
metric labeling, and electronic commerce.
    I want to emphasize the strong and innovative leadership of 
the TABD by the U.S. and EU chairs, Lodewijk deVink of Warner-
Lambert and Juergen Schrempp of Daimler Benz. Their leadership 
has been the driving force for this year's successes.
    Secretary Daley will lead the U.S. Government delegation to 
the 4th TABD conference in Charlotte, North Carolina in 
November. Three issues gaining momentum for this year's 
conference are electronic commerce, implementing and concluding 
additional MRA's, and metric labeling. These are all positive 
developments.
    But important issues remain to be resolved, including the 
EU's implementation of its data privacy directive, its policies 
on genetically-modified organisms, the accession agreements 
with Central and Eastern Europe, and the third generation 
wireless telecommunications equipment discussion.
    Europe has been very active in developing its privacy 
policy. Its directive on data privacy mandates acomprehensive 
regulatory approach to privacy that applies to all industry sectors. 
Were the EU under this directive to consider the United States' system 
not to provide an adequate level of data protection, the effects on 
data flows between the United States and Europe could be severe. For 
example, a multinational company could be prohibited from transmitting 
any data from its European operations to the United States and to other 
overseas locations.
    In March, I began bilateral discussions with my European 
Commission (EC) counterpart, John Mogg. We established the twin 
goals of ensuring effective data protection and avoiding any 
disruptions in data flows. This dialogue is an important step 
in avoiding any adverse effects of the EU directive that might 
occur on trade when it is implemented in October.
    With the announcement of the Online Privacy Alliance, the 
Better Business Bureau Online, and Trustee last week, I believe 
all the elements of effective private sector privacy policies 
are in place. The way is now open for the EU to decide that 
U.S. companies that sign on to those policies meet its privacy 
requirements.
    The marketing of genetically-modified organisms in the EU 
is another important issue. The EU, the major market for U.S. 
agricultural products, has a slow and unpredictable process for 
approving products developed through advanced biotechnology.
    Although technically a success, the delayed approval of 
three corn products resulted in a loss of $200 million in U.S. 
exports this year. The EC is trying to make up for lost sales 
by opening up more corn tenders this year and next. We plan to 
work closely with the EU in the coming months to develop a more 
timely and transparent approval process.
    As the EU expands, we are actively working to safeguard the 
interests of U.S. companies. Two areas, broadcast quotas and 
import tariff rates, are particularly troublesome. Some 
countries have adopted the most restrictive interpretation of 
EU broadcast directives. For example, all programming in Poland 
must have at least 50 percent European content, and Romania's 
draft legislation lacks any flexibility whatsoever.
    On tariffs, the EU association agreements grant 
preferential treatment to EU products, while maintaining the 
higher MFN rates for U.S. products. This preferential treatment 
calls into question the GSP eligibility of some Central and 
Eastern European countries. We are working to identify the 
products most directly affected, and look forward to the ITC 
study due next year. We are also working bilaterally and 
multilaterally to address these concerns.
    In our meetings with the Europeans last week, we discussed 
the EU's third generation wireless standards development in 
Europe and its relationship to the International 
Telecommunication Union's (ITU) third generation or 3(g) 
standards development process. The EC assured us that they will 
not preclude member States from licensing multiple 3(g) 
technologies, though they clearly stated a preference and a 
goal of having one common standard operating throughout Europe.
    We intend to follow the EU process closely, as we are 
concerned that it is premature to recommend any specific 
standard for third generation at this time. Third generation 
wireless standards are of critical importance to us, both in 
regard to future technology, as well as their impact on the 
current market for wireless technology. We believe that all ITU 
members should support any and all 3(g) standards which meet 
the ITU requirements.
    These, Mr. Chairman, are just some of the priorities we see 
for the near term to further build the transatlantic 
marketplace. In addition to the TABD, Secretary Daley and I 
have ongoing dialogues with trade officials from the European 
Commission, Germany and France.
    There is no question that the EU represents important 
commercial opportunities for U.S. companies, and in general, we 
can expect the EU to work with us productively in the world 
economy. In many ways, this extended open-ended commercial 
cooperation is a new way of opening markets and liberalizing 
trade. We look forward to working with this committee to shape 
the future of the U.S.-EU relationship.
    Before closing, I'd like to call to the committee's 
attention the ratification of the OECD Antibribery Convention. 
This Convention will enter into force in 1998 only if it 
ratified by five of the ten largest OECD economies. We hope to 
have Senate ratification of the Convention in August and 
congressional action on the implementing legislation in this 
Congress. U.S. leadership is essential.
    Thank you, Mr. Chairman. I'd be happy to answer any of your 
questions.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.015
    
    [GRAPHIC] [TIFF OMITTED] T3650A.016
    
    [GRAPHIC] [TIFF OMITTED] T3650A.017
    
    [GRAPHIC] [TIFF OMITTED] T3650A.018
    
    [GRAPHIC] [TIFF OMITTED] T3650A.019
    
    [GRAPHIC] [TIFF OMITTED] T3650A.020
    
    [GRAPHIC] [TIFF OMITTED] T3650A.021
    
    [GRAPHIC] [TIFF OMITTED] T3650A.022
    
    [GRAPHIC] [TIFF OMITTED] T3650A.023
    
    [GRAPHIC] [TIFF OMITTED] T3650A.024
    
    [GRAPHIC] [TIFF OMITTED] T3650A.025
    
    [GRAPHIC] [TIFF OMITTED] T3650A.026
    
    [GRAPHIC] [TIFF OMITTED] T3650A.027
    
    [GRAPHIC] [TIFF OMITTED] T3650A.028
    
    Chairman Crane. Thank you, Mr. Aaron. Does the 
administration support Europe's move to a single currency, the 
euro? Is this development in the interest of the U.S., and do 
you see any downside? Is there any possibility that a single 
currency will reduce the role of the dollar in the world's 
economy?
    Mr. Aaron. Thank you for that question, Mr. Chairman. We 
think the advent of the euro is a very important step in 
European unification, a process which we have supported for 
several decades.
    As for its effect on U.S. business, we think that there 
will be important advantages for U.S. exporters, particularly 
small and medium-sized exporters who will no longer have to 
deal with a multiplicity of currencies and can price their 
products not just in dollars, but in the local EU context.
    This will also help them simplify their distribution 
systems in Europe and perhaps rely on a single agent or 
distributor instead of having to have multiple distributors for 
different parts of Europe. So we see some particular advantages 
in this as far as U.S. small- and medium-sized businesses are 
concerned.
    The Commerce Department is trying to help our small and 
medium-sized businesses get prepared for the euro by holding a 
series of conferences. We have 13 scheduled between now and the 
end of October in different parts of the country to share with 
our small and medium-sized business clients all ofthe details 
of how the euro will go into effect, what they have to be thinking 
about, what opportunities are presented to them by the advent of this 
development.
    As for its impact on the U.S. currency, the dollar, as a 
reserve currency, we think that any change that takes place in 
the reserve currency holdings of other countries will take 
place only gradually; and our Treasury Department does not have 
any undue concern about this process.
    Indeed, there is a possibility that if other countries, 
particularly Asian countries, move to adopt the euro as part of 
their portfolio, our European countries will see with us a 
greater coincidence of interest in opening up the Asian 
markets. And the reason for that being, of course, that it 
could have an impact on the euro's strength itself. If it 
becomes a reserve currency for Asia, they will have an interest 
in making sure those Asian markets are open too.
    Chairman Crane. Are all of the members of the EU in favor 
of the euro currency?
    Mr. Aaron. Well, only 13 countries of the 15 are at the 
present time planning to join the euro. At this stage, I 
believe, in addition to the United Kingdom, I think Denmark is 
standing aside. Of course, Switzerland will still have its own 
currency because it is not a member of the EU. And the Eastern 
European countries that are candidate members of the European 
Union will continue to maintain their currencies.
    But it will be an enormous internal market and we believe 
that U.S. companies will be well-poised to take advantage of 
it. In some respects, our companies may be better positioned to 
take advantage of it than even European countries, because 
we've been looking at Europe as a single market for a long 
time. And just as we benefited enormously when Europe created 
the so-called single market by means of reducing its various 
barriers between trade among the countries, so we think 
American companies stand to gain significantly from the 
reduction of this remaining trade barrier which is the 
different currencies that now exist in the EU.
    Chairman Crane. Thank you. Mr. Neal.
    Mr. Neal. Thank you, Mr. Chairman. Mr. Aaron, you heard Ms. 
Barshefsky say you had all the answers in Northern Ireland.
    Mr. Aaron. I wish she would say that more often, actually.
    Mr. Neal. She was very skillful in suggesting that you were 
the man that held that knowledge. Let's talk for a second, if 
we can, about the Transatlantic Business Dialogue and economic 
development in Northern Ireland.
    I understood the point that she raised about some 
resistance in the Republic of Ireland and in the United Kingdom 
to a free trade accord similar to what is practiced in other 
quarters. Are those problems that can be overcome, or should we 
be looking past that to other solutions on how we might assist 
this fragile peace agreement?
    Mr. Aaron. Well, let me tell you what we are trying to do 
about it since Secretary Daley visited there a month or so ago. 
He brought 16 companies there, including 8 Fortune 500 
companies and they have established, I think, a number of 
important business leads that we believe will result in both 
investment and business relationships between Northern Ireland 
and the United States.
    We are supporting the Northern Irish effort. They are going 
to come to the United States and visit 11 different cities in 
an effort to secure greater business relationships, including 
investment, for Northern Ireland. We are facilitating that 
through our domestic field offices here in the United States, 
and believe that we can put together a really terrific program 
for them. This is, of course, one of the most important things 
that can happen, that this peace process be buttressed by 
greater foreign investment.
    We are also expanding our commercial service operation in 
Northern Ireland. We will have a larger staff there so we can 
both encourage and recruit more U.S. businesses to do business 
in Northern Ireland.
    In addition, while Secretary Daley was in Northern Ireland, 
he signed some cooperative arrangements on the scientific side 
with the Northern Irish authorities for monitoring the oceans 
in the region. This will be a NOAA-related project from the 
Department of Commerce that we think can be very important.
    The thing that people have to recognize is that Northern 
Ireland is superbly poised to be a high technology center. It 
has terrific educational opportunities. They have strong 
universities. They have a very well-educated population. And 
not to make light of it, but the possibility of a sort of a 
silicon bog in Northern Ireland is really a very realistic 
possibility and we are looking for mechanisms to tie together 
that interest in Northern Ireland with high tech cooperation 
with our own Silicon Valley.
    Finally, we will be establishing a trade mission with 
software and high technology to support that effort which will 
be taking place early next year. And of course, the President 
will be visiting Northern Ireland in early September and 
hopefully, we are looking for opportunities there as well to 
bring some commercial support to that mission.
    Mr. Neal. Thank you. Thanks, Mr. Chairman.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman. Mr. Aaron, good to 
see you. Thank you very much for being here.
    I'd like to hone in a minute on this MRA or the Mutual 
Recognition Agreement. You know, for years, the basic barrier 
has been one of setting standards, and it has been a real 
problem and the Europeans have not given in to this. Now you 
say that you have an MRA. First of all, is it working? 
Secondly, it only involves certain products, computers, 
telecommunications, pharmaceuticals, things like that. They are 
a whole raft of other products outside that. What is going to 
happen with them?
    Mr. Aaron. Well, we believe that there is an opportunity 
for further mutual recognition agreements to cover other areas. 
In particular, we are moving forward with one on automobile 
standards. As you probably know, our automobile industry has 
been concerned about the potential for the proliferation of 
standards which will keep our automobiles, our parts and so 
forth, out of other countries.
    In recent weeks, in the last month really, the United 
States has come to an agreement in the UN context, but 
supported by the Transatlantic Business Dialogue, to reach 
agreement on automobile standards. So we are very encouraged by 
this development and we see that as an important breakthrough 
as well.
    In addition to this, we see off-road equipment standards as 
being very important. We think that there's an important 
possibility in automobile tires. We think there are some 
important opportunities in chemicals. So there is a whole range 
of areas where mutual recognition agreements could be useful 
and helpful to us.
    For example, we think that the current mutual recognition 
agreement, which covers computers and telecommunications 
equipment, pharmaceuticals, medical devices, electrical 
equipment, electromagnetic interference, and recreational boats 
will be an enormous boon particularly to small and medium-
sizedbusinesses who have to depend on third parties to do their 
certification.
    What this means is that if U.S. businesses certify once in 
the United States under a system that the Europeans accept, 
then they don't have to do it again in Europe to gain access to 
the Europe an Market. This also applies to European businesses 
wanting to gain access the U.S. market. The can certify in 
Europe to U.S. standards with no need to duplicate this testing 
in the United States. As Charlene pointed out, this covers $60 
billion in trade across the Atlantic, and will probably reduce 
the cost of products on both sides by about $1 billion a year.
    So these are what I call the homely issues of international 
trade, but as homely as they are, they are extremely important 
from the standpoint of serving our consumers.
    Mr. Houghton. Well, what you are saying is it is working, 
it will be expanded, and it will help the United States?
    Mr. Aaron. I believe that's correct, sir.
    Mr. Houghton. Good. Thanks very much.
    Chairman Crane. Mr. Jefferson.
    Mr. Jefferson. Thank you, Mr. Chairman. In an effort to 
overcome U.S. export regulatory access problems to EU, we've 
negotiated some Mutual Recognition arrangements under which the 
EU certifies or inspects or tests products and sends them to 
us, and we do the same thing to them on a mutually agreeable 
basis. What insurances do we have, really, that they will test, 
inspect, and certify products and send to us in which will be 
comparable to what our internal agencies would require of 
products that go on the market for safety and quality and 
whatever?
    Mr. Aaron. Right. I think it's very important to recognize 
that these mutual recognition agreements do not constitute any 
lowering of our standards whatsoever, and, indeed, in sensitive 
areas of health and safety, laboratory testing for 
pharmaceuticals and so forth, we have arrangements for us to 
actually inspect and, in effect, certify for ourselves that the 
procedures and the medical and pharmaceutical laboratory 
practices that are going on, are, in fact, up to our standards. 
So, I think that there's a very strong built-in safeguard here 
which our FDA insisted upon.
    Mr. Jefferson. So, you say you set standards, and you make 
sure that the testing facilities are up to our standards, but 
can you be sure that the day-by-day testing that is done, is 
there some random way to look at the results of what the EU 
inspectors and testers actually do?
    Mr. Aaron. Yes. This inspection of the laboratories, 
doesn't just happen once--it continues. I'm not an expert in 
FDA procedures, but my understanding is that European products 
will be treated the same as U.S. products. That would fall 
outside the scope of this agreement and would be conducted the 
way the FDA believes is appropriate.
    Mr. Jefferson. Well, you know, there's a big preoccupation 
with, as there should be, with food safety, and that's a 
question that I guess you've answered as best you could, but it 
still leaves lingering doubts in the mind of the public, and I 
think it needs some reassuring there.
    But let me ask you something else. Do you believe----
    Mr. Aaron. Let me add that we do not have an MRA on food 
safety. We have an MRA on pharmaceuticals, and we have one on 
biologics safety and health issues.
    Mr. Jefferson. There are some what? I missed what you said 
at the end, I'm sorry. There are some what sort of 
certification processes with respect to food.
    Mr. Aaron. For phytosanitary regulations that we have 
between the United States and Europe.
    Mr. Jefferson. Do you believe that the Transatlantic 
Economic Partnership will help facilitate our negotiations with 
the EU on the broader U.S.-EU trade agenda issue?
    Mr. Aaron. Yes, I do. I think that we have set up a 
monitoring and coordinating process within our own government 
here, which I share, which looks at all the issues and 
proposals that the TABD has put forward, and at last year's 
Rome conference the TABD put forward about 130 proposals. By 
the end of this year, TABD wants the U.S. Government to have 
implemented about 50 percent of them. We will have about 30 
that we've, frankly, told them are non-starters; that just are 
either impractical or they off the list. And that leaves a 
residue of a number of important suggestions that we will be 
working on, many of them in the context of the new 
Transatlantic Economic Partnership. Others we will continue to 
work bilaterally the way we did the MRA under the New 
Transatlantic Agenda. We're going to keep all of them very 
active, and the TABD is making an important contribution to all 
of it.
    Mr. Jefferson. The last thing, of the items you have 
concluded, the 50 or so, which are the biggest ones you think 
will have the greatest impact for our country? And of the ones 
you think you may not get done, which of those do you think 
would make the biggest difference if you were to get them done?
    Mr. Aaron. I think the most important issues that we have 
on the table now relate to recognition of genetically-modified 
organisms. And there, we really have to go to the larger 
question of the role of science-based decisions in dealing with 
scientific progress as it affects food, pharmaceuticals, and 
all sorts of areas where public health and safety are involved. 
There is an increasing tendency in Europe to not regard science 
as even a relevant consideration in these decisions. It's sort 
of policy by public opinion. We recognize the trauma that the 
Europeans went through over the Mad Cow disease issue, and we 
realize the impact that this had on public opinion, especially 
with regard to the scientific community and the regulatory 
community in Europe. But, nonetheless, the fact of the matter 
is that public policy decisions ought to be based on sound 
science as best as possible. Right now that's not happening, 
and it's not happening in a transparent manner.
    So, I think the most important thing we can do given the 
size of our agricultural trade and the impact on everything 
from food to cosmetics to medical devices that are implanted in 
people's bodies, is to get a more regularized and sensible 
arrangement to deal with these issues. Establishing such an 
arrangement would have the most positive impact.
    I would note that we have a series of negotiations coming 
up in the WTO as well as in our bilateral relationship with the 
Europeans that ought to significantly liberalize trade across 
the Atlantic. This is the largest trading relationship. It is 
the most important trading relationship in the world. We and 
the Europeans are more alike than anybody else, and we ought to 
be able to come toimportant agreements where we have erased 
almost all of the barriers to trade across the Atlantic. That's the 
objective in the New Transatlantic Agenda, and I hope that can be 
fulfilled.
    Chairman Crane. Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman, and a couple of quick 
questions. One, just building on the standard setting that has 
already been discussed by Mr. Houghton and others. It has to do 
with standard setting on wireless technology. The WTO, as you 
know, has an agreement; a number of States are all committed 
not to pass laws that create technical barriers to trade and 
particularly not allow their standard setting body to set 
standards that are designed, in fact, to create barriers to 
trade.
    In the case of wireless technology, ETSI, which is the EU 
standard setting body for this technology, has come up with one 
standard, I understand. It's a single standard that effectively 
shuts out many of the American or other technologies from the 
European marketplace, and it's difficult to see, other than for 
trade reasons to protect their own wireless market, why they 
would do that. Has this been investigated? Are you all looking 
into whether they've violated the WTO agreement on technical 
barriers to trade through the ETSI standard setting?
    Mr. Aaron. Yes, we are looking into that quite carefully, 
and, indeed, we have been in the process of negotiating and 
discussing this issue with the EU including in discussions just 
last week. The EU would like to have a single standard, but 
they are not going to require that their member States have 
only a single standard. That's their position at the present 
time.
    Our view is that multiple standards should be allowed, and 
the marketplace should decide which of these standards is 
sufficient or appropriate. There are several different 
standards. As you know, there are several second generation 
standards--GSM, TDMA and CDMA--and there's the advanced third 
generation standards, which are being discussed. Competitive 
business pressures are being brought to bear on the European 
standard setting organization, ETSI. We are in the scrum 
dealing with these issues as well; trying to keep this process 
as open as possible.
    At this point, we are not taking the position that setting 
a single standard would be a violation of a WTO obligation, but 
we are looking at that carefully to make sure that this 
standard-setting process is not creating a barrier to trade.
    American businesses are taking a number of different 
positions on these standards issues. From a governmental 
standpoint, we want to press for the most open arrangement 
possible.
    Mr. Portman. With regard to the Central European accession 
negotiations ongoing--I understand those are your phase-out of 
tariffs over time--does that concern you as it relates to U.S. 
exports that those Central European countries would be getting 
preferential treatment as compared to U.S. products coming in, 
and is that something that the U.S. Government should be 
involved with?
    Mr. Aaron. Yes. We have taken this issue up both with the 
European Commission and with the countries concerned. These 
countries have all signed association agreements with the EU. 
Each of these agreements has a schedule of tariff reductions 
that will bring the affected countrys tariffs in line with the 
European common external tariff.
    We have no objection to that, but we do have an objection 
to these countries giving the Europeans a tariff preference 
before they are members of the European Union. Ironically, once 
these countries become members of the European Union, they'll 
be bound by the European Union's tariffs which are quite a bit 
lower than their own. The only interests advantaged by this 
process are European businesses which are given lead time to 
consolidate their position in the market before they face 
outside competition. This is unfair, and we have raised this 
with these countries. Also, it may not be possible for them to 
receive GSP if they continue these kinds of preferential 
tariffs.
    Mr. Portman. And that's a decision made by those individual 
countries and not by the EU?
    Mr. Aaron. That's correct. In other words, what they do 
with their own external tariff, apart from the EU, is at the 
purview of these countries.
    Mr. Portman. That's something that they would have the 
power to act on in order to sustain their GSP treatment of the 
United States, but that's a lever we have.
    Mr. Aaron. That's right. They have the power to not 
discriminate against us.
    Mr. Portman. I want to thank you for your testimony.
    Chairman Crane. Mr Aaron let me say that you are 
particularly adept at using the acronyms of trade.
    Mr. Aaron. I'll go through the ABC's of that with you, Mr. 
Chairman, any time you'd like.
    Chairman Crane. That's quite alright, Mr. Aaron. 
[Laughter.]
    We thank you for your testimony here today. We appreciate 
your responses and, again, apologize for the irregularities in 
our proceedings. We will excuse you now and invite our first 
panel, P. Vince LoVoi, vice president, government affairs and 
public policy, Warner-Lambert; Isabel Jasinowski, vice 
president, government relations, Goodyear Tire and Rubber; 
Ellen Frost, Senior Fellow, Institute for International 
Economics; Willard M. Berry, president, European-American 
Business Council; Mary Sophos, senior vice president, 
government affairs, Grocery Manufacturers of America.
    And if you folks will take seats, we will follow our five-
minute rule and that is if you will please try and hold your 
oral presentations to five minutes. All written statements will 
be made a part of the permanent record, and, with that then, we 
shall proceed in the order I introduced you. Mr. LoVoi.

   STATEMENT OF P. VINCENT LoVOI, VICE PRESIDENT, GOVERNMENT 
AFFAIRS AND PUBLIC POLICY, WARNER-LAMBERT CO.; AND U.S. WORKING 
 CHAIR, TRANSATLANTIC BUSINESS DIALOGUE; ACCOMPANIED BY ISABEL 
JASINOWSKI, VICE PRESIDENT, GOOD YEAR TIRE AND RUBBER CO.; AND 
   GROUP ONE WORKING CHAIR, STANDARDS AND REGULATORY POLICY, 
                TRANSATLANTIC BUSINESS DIALOGUE

    Mr. LoVoi. Thank you, Mr. Chairman. Mr. Chairman, members 
of the subcommittee, I am Vincent LoVoi, vice president of the 
Warner-Lambert Company. I'm testifying today as the U.S. 
working Chair of the Transatlantic Business Dialogue. I am 
accompanied by Ms. Isabel Jasinowski, vice president of the 
Goodyear Tire and Rubber Company who manages the TABD Standards 
and Regulatory Policy Group. I ask that her prepared comments 
be entered the record immediately following mine.
    Mr. Chairman, the TABD is a unique business-like process 
where American and European business leaders develop joint 
policy recommendations to improve the U.S.-EU marketplace. Over 
the past three years, we have worked closely with the U.S. 
Government and European Commission to address a broad range of 
specific issues. The TABD's pragmatic issue-driven process has 
made it possible for a variety of industries to engage 
officials and achieve meaningful results. We sincerely commend 
the U.S. Department of Commerce for its leadership vision and 
responsiveness.
    And, Mr. Chairman, we do not need to tell this subcommittee 
why our participating companies believe the European market is 
so important. This panel has focused on that subject for years 
and rather than repeating facts and figures from your own 
record, Mr. Chairman, I'll simply commend the subcommittee's 
foresight and underscore the TABD support for that view. This 
is particularly true given world events over the past year.
    The TABD supports the Transatlantic Economic Partnership 
initiative while encouraging negotiators to be mindful of the 
pragmatic results-oriented TABD approach. The theoretical 
should not get in the way of the practical. Real economic 
growth and real problems solved, rather than negotiating points 
scored, should measure its success. The TABD is heartened by 
USTR's commitment to an aggressive timetable and actions 
planned for the TEP. We believe that many of the 
recommendations should be ready for implementation prior to the 
year 2000, and we applaud USTR's implied endorsement of this 
view. Indeed, TABD urges Government to implement agreements 
immediately upon completion.
    Many TABD recommendations are addressed head on by the 
Transatlantic Economic Partnership. Let me emphasize, however, 
that we particularly support the stated aim to improve 
regulatory cooperation in such areas as manufactured goods and 
to reduce unnecessary regulatory impediments. Mutual 
recognition and harmonization of standards have been the 
hallmark of TABD since its inception.
    TABD also encourages governments to continue working on 
recommendations by our participating companies that do not fall 
within the corners of the proposed negotiations. An important 
example of such initiative is the pressing need for this 
Congress this year to act on legislation to implement the OECD 
convention on bribery and corruption.
    Before closing, Mr. Chairman, let me note that President 
Clinton, Prime Minister Blair, and President Santer commended 
the TABD as a new paradigm for advancing trade dialogue in 
their joint communique at the London Summit. They encouraged 
other constituencies to engage in parallel transatlantic 
dialogues.
    The TABD is both appreciative and honored by this 
characterization. We echo the call for parallel dialogues. We 
have already met at the staff level with the potential 
organizers of some of these efforts and would be pleased to 
share our experience with anyone committed to free trade in an 
open and harmonious transatlantic marketplace.
    In conclusion, Mr. Chairman, the TABD supports the 
Transatlantic Economic Partnership initiative. We believe that 
properly focused negotiations can simultaneously advance both 
those issues identified within the TABD scope as well as other 
TABD priorities. Thank you, Mr. Chairman.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.029
    
    [GRAPHIC] [TIFF OMITTED] T3650A.030
    
    [GRAPHIC] [TIFF OMITTED] T3650A.031
    
    [GRAPHIC] [TIFF OMITTED] T3650A.032
    
    [GRAPHIC] [TIFF OMITTED] T3650A.033
    
    [GRAPHIC] [TIFF OMITTED] T3650A.034
    
    [GRAPHIC] [TIFF OMITTED] T3650A.035
    
    Chairman Crane. Thank you.
    Ms. Frost.

   STATEMENT OF ELLEN L. FROST, SENIOR FELLOW, INSTITUTE FOR 
                    INTERNATIONAL ECONOMICS

    Ms. Frost. Thank you, Mr. Chairman, for this opportunity. I 
have just written a short commentary on what we know about the 
Transatlantic Economic Partnership thus far and where it might 
go from here. With your permission, Mr. Chairman, I would like 
to submit that commentary for the record.
    Chairman Crane. Without objection, so ordered.
    Ms. Frost. I will confine my verbal remarks today to a few 
brief observations about the global and domestic challenges 
facing the transatlantic powers. At the outset, I want to make 
it clear that I fully support the Transatlantic Economic 
Partnership, especially its regulatory component, and I greatly 
admire the achievements of the Transatlantic Business Dialogue.
    My concern is that the Transatlantic Economic Partnership 
may not be sufficiently ambitious. There are at least two 
reasons why negotiators should aim high. First, agreements 
between the United States and the European Union send a signal 
to the rest of the world about whether or not the two powers 
are serious about taking further steps towards a rule-based, 
market-oriented, global economy. The Partnership should back up 
its words with action. For the last 50 years, progress towards 
multi-lateral trade liberalization has depended heavily on 
agreements betweenWashington and Brussels. While other 
countries have become important players, future progress within the WTO 
presupposes some form of transatlantic consensus. It is hardly 
reasonable to expect other countries to make politically difficult 
choices to open their economies if the transatlantic powers do not 
continue to set an example.
    The Partnership announcement asserts that the United States 
and the European Union will give ``priority'' to pursuing their 
objectives through the WTO and that their primary goal is 
multilateral liberalization. This is good news, but thus far 
neither the European Union as a whole nor the Clinton 
administration has publicly committed itself to a clear-cut and 
truly ambitious WTO agenda in the form of either a ``Millennium 
Round'' or anything else. At best, certain pioneering 
agreements may emerge from the partnership that can serve as 
models for future WTO negotiations.
    Second, the Transatlantic Economic Partnership has acquired 
new urgency because of the Asian economic crisis and its effect 
on the rest of the world. In the United States, the crisis is 
likely to shave one-half to one percentage point from the 1999 
economic growth rate and to boost the U.S. merchandise trade 
deficit with the Asia to levels that undermine domestic support 
for trade.
    Recognizing the value of economic competition in 
stimulating recovery, members of APEC have reaffirmed their 
commitment to open trade and investment by 2010/2020, but no 
such commitment exists across the Atlantic. With the important 
exception of regulatory initiatives, the Transatlantic Economic 
Partnership is so limited that it runs the risk of diminishing 
the post-war tradition of transatlantic leadership within the 
global trading system, leadership that has contributed so much 
to Asian and global economic growth.
    Despite these two imperatives, the need for multilateral 
leadership and the Asian crisis, a transatlantic initiative 
does not appear to be a high priority either in Brussels or in 
Washington at this time. During a recent trip to Brussels, I 
found that too many other events and evolutions are competing 
for policy-level attention. Here in Washington, aside from 
Africa and the Caribbean basin, the Clinton administration does 
not appear to be focusing much on trade as a national priority 
or using the ``bully pulpit'' to communicate its benefits.
    Fast track is still in limbo, which inevitably undermines 
our credibility in the context of APEC, the Federal Trade Area 
of the Americas (FTAA), and the WTO. I do not have to tell 
Members of Congress why this is so. It is because trade has 
become a divisive issue in domestic politics, particularly 
within the Democratic Party.
    That brings me to my final point. Trade is a divisive 
domestic issue in part because it leaves some people behind. It 
follows that building support for trade calls for more 
effective efforts to help those people adjust to global 
competition.
    Several months ago, the Institute for International 
Economics held a conference on restarting fast track. Several 
leading Congressional opponents of fast track made it clear 
that they fully understand the benefits of trade to the 
American economy as a whole. They are holding fast-track 
hostage, they said, in order to draw attention to those who 
lack the skills and resources to compete.
    I am no expert in this area, but I imagine that Congress 
and the administration should be talking about such things as 
the portability of pensions and health care, local public-
private partnerships centered on community colleges, 
consolidated and flexible adjustment assistance designed to 
achieve a better match between training and jobs, dissemination 
of lessons learned, and a range of other measures that take 
advantage of the flexibility and creativity of our economic 
system. Some of these tools are in place, but taken together 
and explained in the context of global competition, they could 
help reassure Americans about their economic future.
    My conclusions are that the Transatlantic Economic 
Partnership is worthwhile, but that it has not lived up to its 
name as yet. It has not risen to the challenges I described: 
setting an example of global leadership by signaling a serious 
commitment to trade liberalization, devising trade initiatives 
to cope more effectively with the Asian crisis, and addressing 
domestic concerns.
    If the United States and the European Union want to 
reassert global economic leadership in a serious way, they 
should consider adopting a broad vision and a strategy with an 
overall deadline for open trade and investment. An exclusive 
commitment to external monetary policy cooperation would also 
be timely. Experience with APEC demonstrates that the mere 
existence of a commitment to open trade and investment by a 
date certain generates momentum. A broad commitment of an APEC 
variety would capture political attention and add political 
momentum to this unfulfilled partnership. On a more detailed 
level, the follow-on action plan now being negotiated could 
provide much needed momentum to both bilateral and global 
initiatives.
    Thank you very much, Mr. Chairman, for giving me this 
opportunity to present my views.
    [The prepared statement and attachment follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.036
    
    [GRAPHIC] [TIFF OMITTED] T3650A.037
    
    [GRAPHIC] [TIFF OMITTED] T3650A.038
    
    [GRAPHIC] [TIFF OMITTED] T3650A.039
    
    [GRAPHIC] [TIFF OMITTED] T3650A.040
    
    [GRAPHIC] [TIFF OMITTED] T3650A.041
    
    [GRAPHIC] [TIFF OMITTED] T3650A.042
    
    [GRAPHIC] [TIFF OMITTED] T3650A.043
    
    [GRAPHIC] [TIFF OMITTED] T3650A.044
    
    Chairman Crane. Thank you, Ms. Frost.
    Mr. Berry.

  STATEMENT OF WILLARD M. BERRY, PRESIDENT, EUROPEAN-AMERICAN 
                        BUSINESS COUNCIL

    Mr. Berry. Thank you, Mr. Chairman and members of the 
committee for the opportunity to testify. I'm Willard Berry, 
president of the European-American Business Council. The 
Council is the one transatlantic organization that regularly 
provides actionable information on policy development and works 
with officials in both U.S. and Europe to secure a more open 
trade and investment climate. A number of witnesses today have 
remarked on the size and the extent of this remarkable economic 
relationship, and it's also important to point out that it has 
an impact on nearly every congressional constituency.
    Perhaps, the most remarkable aspect of our trade and 
investment relationship with Europe is that it is balanced, 
free of the long-term deficits that have characterized our 
relationship with Asian countries, in particular. Today, 
economic relations with Europe--between Europe and the U.S. are 
stronger than they have ever been. Trade and investments 
continue to grow; long-standing disputes are being addressed; 
there is more cooperation than ever before in the WTO and other 
multi-lateral fora.
    The Transatlantic Economic Partnership demonstrates that 
governments on both sides of the Atlantic are committed to a 
positive agenda to increase trade and investments for our 
mutual benefit. Obviously, we have many points of friction, but 
that is inevitable in an economic relationship of this size. 
The Council hopes that while we try to manage the disputes, we 
do not let them characterize or define the relationship. For 
too long, problems in agriculture held up progress on other 
trade issues. Even now, disputes over the EU banana regime, 
hormone ban, and EU approval of genetically-modified food 
products have soured relations between the governments. Various 
U.S. sanctions measures--the Helms-Burton law in particular--
have been particularly damaging, threatening to disrupt EU-U.S. 
cooperation in the WTO and endangering other trade initiatives.
    We strongly support the TEP initiative announced in May. 
The EABC and its members caution, however, that these efforts 
should not detract from ongoing work in other fora. The EU and 
U.S. have correctly tried to structure the TEP so that it will 
be supportive of ongoing and future negotiations in the WTO. 
EABC, a strong supporter of the WTO, expects that EU-U.S. 
coordination, in order to promote WTO work, in agriculture 
services and other sectors will be a substantial benefit from 
the TEP. We see the TEP as complimenting the Transatlantic 
Business Dialogue. In fact, our expectations is with the U.S. 
and the EU who will use TABD recommendations as the basis for 
their negotiating objectives in relevant areas of the TEP. EABC 
also hopes that the U.S. and the EU will begin negotiations 
under the TEP as soon as possible. Increased cooperation on 
multi-lateral issues will be most useful if it has a positive 
impact on new WTO negotiations to be launched in 1999 and 2000. 
Many bilateral aspects of the TEP could be concluded in a short 
time which would build support for the process within the 
business community.
    I'd like to turn to sanctions. The proliferation of 
economic sanctions in the U.S. continues to strain the EU-U.S. 
relationship. The Clinton administration and the European 
Commission have reached an agreement on expropriated property 
and secondary boycotts that is meant to settle the dispute over 
Helms-Burton and ILSA. EABC strongly urges Congress to amend 
Helms-Burton so that the President can waive Title IV which 
requires that executive visas be denied for companies investing 
in expropriated property in Cuba. Congress' cooperation in this 
matter would allow the U.S. and EU to continue their 
cooperation in addressing the issue of illegal expropriation 
without using ineffective, unilateral sanctions.
    EABC also recommends that Congress enact the Crane-
Hamilton-Lugar bill to reform the process of considering new 
economic sanctions. Because of the concern of increasing local 
and State government initiated sanctions, we encourage Congress 
to discourage efforts by State and local governments to enact 
sanctions measures and to maintain its role in the conduct of 
foreign policy.
    Two issues I would like to briefly address which present 
problems currently in the relationship are online privacy and 
biotechnology. The EABC is a member of the Online Privacy 
Alliance which was mentioned by Under Secretary of Commerce. I 
would like to say that this issue we are beginning to address 
through a constructive dialogue between the administration and 
the EU and industry. Based on these efforts, we are cautiously 
optimistic this issue can be addressed without a disruption in 
trade or data flows.
    On biotechnology, the current dispute on the EU's failure 
to approve some genetically-modified corn which is blocking all 
U.S. corn exports to EU demonstrates the need for timely, 
predictable, and science-based regulatory processes, 
recommendations which are being advanced under the TABD. Thank 
you, Mr. Chairman, for the opportunity to testify.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.045
    
    [GRAPHIC] [TIFF OMITTED] T3650A.046
    
    [GRAPHIC] [TIFF OMITTED] T3650A.047
    
    [GRAPHIC] [TIFF OMITTED] T3650A.048
    
    [GRAPHIC] [TIFF OMITTED] T3650A.049
    
    [GRAPHIC] [TIFF OMITTED] T3650A.050
    
    [GRAPHIC] [TIFF OMITTED] T3650A.051
    
    [GRAPHIC] [TIFF OMITTED] T3650A.052
    
    Chairman Crane. Thank you, Mr. Berry.
    And our final witness, Ms. Sophos.

STATEMENT OF MARY C. SOPHOS, SENIOR VICE PRESIDENT, GOVERNMENT 
        AFFAIRS, GROCERY MANUFACTURERS OF AMERICA, INC.

    Ms. Sophos. Thank you, Mr. Chairman, for the opportunity to 
testify before the subcommittee. My name is Mary Sophos, and I 
am the senior vice president of government affairs of the 
Grocery Manufacturers of America. GMA is the world's largest 
association of food, beverage, and consumer product companies 
with U.S. sales of more than $430 billion. GMA members employ 
more than 2.5 million workers in all 50 States. We believe the 
Transatlantic Economic Partnership announced earlier this year, 
offers a excellent opportunity to reduce regulatory barriers 
between the United States and the European Union as well as 
provide a foundation from our comprehensive reductions in both 
tariff and non-tariff trade barriers in the next WTO round.
    GMA has initiated discussions among interested associations 
and corporations in the processed food and consumer product 
sector in response to the administration's request for comments 
to a system identifying specific issues for the TEP agenda.
    We plan to engage actively in the TEP process along with 
our European counterparts, CIAA and initially have identified 
three key areas for discussion. First, in the area of 
biotechnology, U.S. negotiators should focus on two key issues, 
establishing a clear methodology and a predictable timeline for 
approvals of biotech products. Several GMA members are pioneers 
in the area of biotechnology and have experienced significant 
problems in obtaining timely approvals for products in the EU. 
As a starting point, U.S. negotiators should look to the work 
of the Transatlantic Business Dialogue. GMA agrees completely 
with the TABD Working Group on biotechnology, but U.S. efforts 
should focus on the making the relevant U.S. and EU regulatory 
processes transparent, predictable, and compatible. My written 
testimony provides additional details.
    Second, U.S. negotiators should work to eliminate barriers 
for food additive approvals. U.S. products exported to the EU 
frequently must be reformulated to comply with European food 
additive regulations which are quite restrictive. We would 
recommend an approach similar to that being suggested by the 
TABD for biotechnology.
    Third, eco-labels continue to pose a non-tariff trade 
barrier to manufacturers seeking to import into the EU and its 
members countries. Labels like those currently being awarded in 
the EU are generally not based on sound science but are awarded 
on subjective criteria developed by local stakeholders. As 
such, they generally reflect local cultural value and 
environmental concerns and discriminate against international 
competition. The USTR has continually acknowledged the 
discriminatory nature of the EU program by placing it in its 
1997 and 1998 national trade estimate reports. The EU has 
promised bilateral discussions on this topic but they have yet 
to occur.
    GMA hopes that the U.S. will take up other issues with the 
EU during TEP talks such as metric-only labeling requirements, 
packaging issues involving extended producer responsibility; 
product formulation requirements and nutritional claims.
    Turning to the question of specific WTO complaints 
involving the U.S. and the EU, I would like to reaffirm GMA's 
view that overall the dispute settlement process established 
under the WTO works quite well. With respect to the two U.S.-EU 
disputes involving food products, specifically bananas and beef 
hormones, GMA is pleased that the WTO dispute panel found in 
favor of the U.S., and expect the EU to implement its 
recommendations within the 15-month time period established 
through WTO arbitration. Moreover, it is important to remember 
that safeguards have been built into the dispute settlement 
process in the event the U.S. is dissatisfied with the remedy 
proposed by the EU, and we encourage the U.S. to use them if 
necessary.
    Mr. Chairman, the TEP is a valuable process which GMA 
strongly endorses, first, to provide the forum for removing 
regulatory impediments in areas of highest interest to 
industry. Second, like the early liberalization process within 
APEC, the TEP can help build momentum leading up to multi-
lateral negotiations such as the 1999 agriculture round. Mr. 
Chairman, I appreciate the opportunity to appear before you and 
would welcome any questions you might have.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.053
    
    [GRAPHIC] [TIFF OMITTED] T3650A.054
    
    [GRAPHIC] [TIFF OMITTED] T3650A.055
    
    [GRAPHIC] [TIFF OMITTED] T3650A.056
    
    [GRAPHIC] [TIFF OMITTED] T3650A.057
    
    [GRAPHIC] [TIFF OMITTED] T3650A.058
    
    [GRAPHIC] [TIFF OMITTED] T3650A.059
    
    [GRAPHIC] [TIFF OMITTED] T3650A.060
    
    Chairman Crane. Thank you, Ms. Sophos. My first question is 
to you, Mr. LoVoi. Did the leaders of TABD have any concerns 
over how the TEP initiative was conceived and is now operating?
    Mr. LoVoi. Two parts to your question. The conception, 
there was some concern. There was--when the European Commission 
initially proposed the new Transatlantic Marketplace Agreement, 
there was--and I mention it in my statement--our concern that 
we didn't want the theoretical to get in the way of the 
practical. We were a little bit concerned it was too 
theoretical. TABD is very, very practical in its biases. We're 
pleased with the TEP proposal as it stands right now.
    The second part of our question, its operation, it's too 
early to tell. You know, it's very much being born as we speak, 
so we'll reserve judgment on that.
    Chairman Crane. Ms. Jasinowski, we didn't ask you to 
testify, but I'd like to put a question to you. I understand 
Goodyear Tire is serving as Chair of the Standards and 
Regulatory Working Group of the TABD. Could you tell us a 
little bit about this work and its importance to U.S.-EU trade?
    Ms. Jasinowski. Thank you, Mr. Chairman. Goodyear's CEO, 
Sam Gibara is the principal for Working Group I, which is also 
the Standards and Regulatory Working Group. There was a lot of 
dialogue among the members that were here and underSecretary 
Aaron over this important work. We like to think of ourselves as the 
``French truffle'' of trade, often overlooked but extremely valuable. 
And let me give you an example of that. We ran some numbers, Mr. 
Chairman, with respect to the U.S. exports to the EU of the members 
states on this subcommittee and of the $128 billion worth of the U.S. 
exports to Europe in 1996, $61.5 billion of U.S. exports are 
represented on this Subcommittee, among the States and local 
communities. So, obviously, it's to the advantage of businesses and 
communities in the United States to reduce the costs, the redundant 
costs in the standard setting practice, to our exports, to make them 
more competitive abroad. Some studies have shown that up to 15 percent 
of additional costs is added to U.S. exports by redundant testing. Now, 
I want to quickly add that it isn't a question of whether businesses 
either here or in Europe should be regulated. We concur that businesses 
should be regulated in terms of meeting the conditions of health, 
safety, and environmental protection. The question is, how to regulate 
most efficiently and that is what the working group is all about. We 
have 16 active sectors in Working Group I, including aerospace, 
automotives, transportation services, automotive parts including tires, 
pharmaceuticals, and agribiotech, so it's an extremely active working 
group and our work is important. Thank you, Mr. Chairman, for the 
opportunity of giving you a brief overview of our work.
    Chairman Crane. Thank you. And the next question, I'd like 
to put to Ms. Frost. How ambitious is the TEP initiative and 
would you characterize it as broad-trade strategy or is it 
limited to seeking the resolution of a few trade problems?
    Ms. Frost. It's broader than seeking the resolution of a 
few discreet problems and it is potentially ambitious. But its 
language on many topics is distressingly vague, especially when 
compared with the earlier initiative proposed by Sir Leon 
Britain in March of this year. I share the desire of my fellow 
witness from the TABD for concrete commitments, and it is in 
that area that I find the TEP somewhat too vague.
    For example, earlier this year, the Britain initiative 
proposed zero industrial tariffs by 2010; that's pretty 
concrete. The TEP says, by contrast, that they will explore the 
feasibility of their progressive elimination on a timetable to 
be agreed. Politically speaking, that's as far as they could 
go. I don't intend to criticize the negotiators. What I'm 
calling for, in effect, is a high-level political commitment on 
both sides, so that negotiators can go further than this rather 
vague language in the follow-on action plan.
    I think the TEP does reflect a strategic commitment to the 
WTO. I'm just looking for a few more details.
    Chairman Crane. Mr. Berry, you warn in your testimony that 
the U.S. and the EU should be careful to ensure that TEP 
doesn't undermine the TABD. Can you explain where there's a 
danger that this might happen.
    Mr. Berry. What I would be referring to is essentially what 
Mr. LoVoi mentioned is that there are, particularly in the 
regulatory area, some very concrete proposals. I think they're 
driven by some very practical interests in getting issues 
resolved, and I think the TEP put in certain situations, 
perhaps could be used as a way of postponing action because of 
some larger goal. Now, the way it is actually set up over the 
proposal that Ellen mentioned that Sir Leon first came out 
with. Now, he had envisioned a huge package where success in 
one area might be contingent upon success in another area which 
is not the way the TABD works, and that's the kind of thing 
that we were concerned about; that progress in one area not be 
held up because they want to get something in another area 
before.
    Chairman Crane. Mr. Sophos, what issues has TABD focused on 
that were out of the TEP initiative between government?
    Ms. Sophos. Well, from a food perspective, the TABD has 
been engaged in the biotechnology efforts for some time. 
However, TABD doesn't really engage in any of the other food 
areas. So, we were very pleased to see a rather more expansive 
agenda in the TEP for agriculture and has engaged in trying to 
enumerate some of those area beyond what traditionally have 
been the focus of the TABD discussion.
    Chairman Crane. And a final question for the entire panel: 
What does the TABD propose in the way of resolving the serious 
dispute with the EU over extraterritorial trade sanctions? 
Anyone want to volunteer?
    Mr. LoVoi. Yes, I'd be happy to, Mr. Chairman. The 
sanctions issues has been under discussion for some time within 
the TABD. The European business partners, obviously, are less 
concerned as our U.S. partners. Generally, the view is the 
Lugar-Hamilton approach and others, as well, of approaches is 
the wisest, and the TABD has encouraged Congress to look at 
that as a possible resolution.
    Chairman Crane. I've been told that we have unilaterally 
imposed more sanctions in the last 4 years than we have--well, 
half of all the sanctions in the previous 80 years have 
occurred in the last 4 years, and, unfortunately, it's one of 
those God, motherhood, and apple pie initiatives, but people 
don't stop to think of what the repercussions might be.
    Mr. Berry. Mr. Chairman, if I could add, actually, the 
first set of recommendations which came out at the TABD meeting 
in Seville had a unanimous position shared by European and 
American representatives there opposing unilateral 
extraterritorial sanctions. So, there has been a consistent 
policy at some point to the objection of the U.S. who were 
embarrassed and found it difficult to address, but there has 
been a real strong position from the very beginning from the 
TABD.
    Chairman Crane. Anyone else want to speak to the question? 
Well, if not, let me express my appreciation to you all. I'm 
sorry for the chaos here today, but we're grateful for your 
appearance and we look forward to ongoing communication with 
you all. Please don't ever hesitate to let us know what's the 
latest input from your perspective. And with that, I will 
permit this panel to disappear.
    Our next panel is Robert Harness, director, government 
affairs, Monsanto Company; Kyd Brenner, vice president, Corn 
Refiners Association; Jeremy Preiss, chief international trade 
counsel, United Technologies corporation, and finally, Kevin 
Kelley, senior vice president, external affairs, Qualcomm 
Incorporated.
    And let me welcome our final panel and please try and 
conform to our general guidelines of oral presentations of five 
minutes or less. All printed statements will be made as part of 
the permanent record.
    We shall proceed first with Mr. Harness.

 STATEMENT OF ROBERT L. HARNESS, DIRECTOR, GOVERNMENT AFFAIRS, 
                          MONSANTO CO.

    Mr. Harness. Thank you, Mr. Chairman. My name is Robert 
Harness. I'm director of government affairs for Monsanto 
Company. We applaud your interest in trade issues, particularly 
for holding this hearing focused on the European Union.
    As you know, over the next 50 years the world's population 
is going to grow significantly with most of the growth in 
developing countries where many of the world's most fragile 
natural resources exist. Food production over this same period 
of time will need to triple.
    Biotechnology offers the potential to gain tremendous 
agricultural productivity and to enhance nutrition with 
environmentally sustainable farming practices.
    We're committed to making the technology broadly available 
to all farmers. But meeting the increased global food demand 
requires a trade policy which enables all agricultural 
interests to succeed. In our effort to help meet the world's 
food needs using the best agricultural technology, U.S. 
agriculture could be derailed by trade barriers.
    Clearly, unfortunately, there are nations using non-tariff, 
non-science based-barriers to trade, to slow down trade and 
agricultural commodities and foods that have been developed 
through biotechnology. If these trade barriers are allowed to 
proliferate, the result will be a very chilling effect on the 
biotech industry and on U.S. agriculture.
    So, turning to the specific problems that we've faced in 
the EU, there are three general areas of concern. They are: 
one, the operation of the EU regulatory approval biotech 
products versus more than 30 in the United States.
    The European regulatory process had not produced a single 
product approval in well over a year. On March 18, the European 
commission completed the approval of three corn products and 
one oil seed rape product, however, two of the approvals had 
not yet received the final administrative approval required to 
complete the effort that would come from the French government.
    This is after over 2.5 years of really painstaking process 
and multiple scientific reviews. The result has been a 
significant trade interruption. The pending corn approvals are 
a good example of the problems companies face in Europe. U.S. 
and EU industry leaders have urged the European commission to 
make the biotechnology product approval process more 
predictable and transparent, such as the process we currently 
experience in the United States.
    Through the Transatlantic business dialog, which you've 
heard about through the last panel, there has been an effort to 
reduce trade barriers in this area. A number of specific 
recommendations were made, including four dealing specifically 
with the regulatory process.
    First, the clarity and consistency be incorporated into the 
regulatory programs and that specific guidance be issued; 
second, that a common road map for regulatory approvals be 
adopted; third, that product data requirements be harmonized 
between the two sides, and fourth, that a common time-line for 
decisionmaking be used.
    The second trade issue is product labeling, which is a 
matter of ongoing debate in Europe and one which has 
significant potential to impact trade. In the United States, 
food labels are used to inform the public of nutritional and 
safety differences in food they eat. Foods produced through 
biotechnology are not singled out as a specific category for 
labeling.
    The policy debate in Europe is based on the use of a food 
label to inform consumers of the presence of ``a product of'' 
biotechnology, regardless of whether the food is different from 
a safety or nutritional standpoint.
    We fully support the science-based approach to food 
labeling used by the U.S. FDA. While we recognize that the 
labeling programs can be used to provide information to 
consumers, such information and process must not be allowed to 
create non-science based segregation requirements in commodity 
crop markets that will lead to trade disruptions and 
significant cost increases for consumers.
    The third and final point is the public awareness and 
confidence in biotechnology. Broad acceptance of biotechnology 
requires that consumers be given relevant and accurate 
information about the foods they eat. Public confidence in the 
regulatory system is also important in gaining acceptance of 
biotechnology. In the end, gaining broader public acceptance 
naturally means less chance of trade issues, and industry and 
government must work together on this important effort.
    So, in conclusion, Mr. Chairman and members of the 
committee, we appreciate your interest in reducing trade 
barriers around the globe. As you meet with your European 
colleagues or discuss these matters here in the United States, 
I urge you to raise these issues. It's important to seek 
meaningful changes in the EU regulatory system to make it 
operate successfully and to seek ways to build public awareness 
and confidence in agricultural biotechnology.
    In terms of the upcoming WTO round focusing on agriculture, 
we ask the U.S. to address the issue of biotechnology to 
achieve a greater degree of transparency and harmonization in 
every nation's regulatory regime.
    Thank you very much, Mr. Chairman. I appreciate the 
opportunity to be here.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.061
    
    [GRAPHIC] [TIFF OMITTED] T3650A.062
    
    [GRAPHIC] [TIFF OMITTED] T3650A.063
    
    Chairman Crane. Thank you, Mr. Harness.
    Mr. Brenner.

  STATEMENT OF KYD D. BRENNER, VICE PRESIDENT, CORN REFINERS 
 ASSOCIATION, INC. ON BEHALF OF THE CSC BIOTECHNOLOGY COMMITTEE

    Mr. Brenner. Thank you, Mr. Chairman. I'm Kyd Brenner, vice 
president of the Corn Refiners Association. I'm here today on 
behalf of the CSC Biotechnology Committee which is comprised of 
the American Soybean Association, the Corn Refiners 
Association, the National Corn Growers Association, the 
National Cotton Council, the National Oilseed Processors 
Association, and the U.S. Grains Council.
    These groups share a common concern about the trade impact 
of differences in worldwide regulatory processes for the 
approval of biotechnology products. To date, the most serious 
trade problems we have encountered have been in the European 
Union.
    We are here today to express our support for the 
Transatlantic Economic Partnership, which we see as an 
excellent opportunity to address these problems.
    America's farmers and processors have rapidly adopted the 
new technology of transgenic crops, and this year, 25 to 30 
percent of U.S. corn, cotton, and soybeans, will come from 
transgenic varieties. The U.S. has an effective and efficient 
regulatory system that enjoys the trust of consumers. This is 
not the case in the European Union. The EU approval process for 
new biotech products is lengthy, non-transparent, and 
unpredictable.
    I'd like to emphasize that the regulatory process is the 
source of many of the problems more than the substance of the 
regulations. In the United States, regulatory approval can be 
achieved in about a year. Some products have been in the EU 
pipeline for well over two years and are still not fully 
approved. This disparity in time frames creates trade problems. 
Crops approved and planted in the U.S. can't be exported to 
Europe until they receive EU approval. However, it is not 
feasible, on any large scale, to segregate crops in bulk in 
commodity handling and transportation systems. Therefore, our 
Europeans markets remain at risk as long as the approval 
processes are on entirely separate tracks.
    This is exactly the problem U.S. corn growers encountered 
this year. U.S. growers stand to lose sales of about $200 
million because of the delay in regulatory processes in Europe. 
Repetition of these problems year after year will only 
exacerbate the problem, jeopardizing nearly $4 billion in U.S. 
soy, corn, and cotton exports.
    The TEP can provide a vehicle for some long-term solutions 
for this problem, and we agree that biotechnology should be a 
high priority item on its agenda. The important ingredient, in 
our belief, for progress on these issues is political will. 
Regulatory officials in the U.S. and Europe have been 
discussing these issues for years. However, regulatory 
officials cannot resolve the issues if the political will to 
find a solution is lacking.
    If the cooperation demonstrated at the May summit is 
extended to discussions on biotechnology under the TEP, we 
believe the process can be substantially improved without 
undermining legitimate national objectives of protecting public 
health and safety.
    While harmonization of world processes would be a long-term 
goal and would help to eliminate many problems, we have no 
illusions that harmonization can be achieved quickly. Given the 
short time frame envisioned for the TEP, we think the greatest 
benefit would come from rapid agreement on several points.
    First, a documented commitment to work toward harmonization 
in biotechnology based on principles of sound science, 
transparency, predictability, and timeliness.
    Second, development of a common and publicly available 
tracking system for products in the approval process would be 
immensely helpful for producers and processors who are not the 
actual applicants in the biotechnology regulatory system.
    And last, an early warning system to let commercial 
partners know if there are any unexpected delays in the 
regulatory process, including a reasonable expectation of how 
long it should take a product to move through the approval 
system. Agreement on these points would certainly not solve our 
problems, but would help build confidence among the interested 
parties.
    Mr. Chairman, we believe the TEP does offer an excellent 
opportunity progress on biotechnology regulatory development, 
and we are certainly prepared to support the initiative in any 
way we can. Thank you.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.064
    
    [GRAPHIC] [TIFF OMITTED] T3650A.065
    
    [GRAPHIC] [TIFF OMITTED] T3650A.066
    
    [GRAPHIC] [TIFF OMITTED] T3650A.067
    
    [GRAPHIC] [TIFF OMITTED] T3650A.068
    
    Chairman Crane. Thank you.
    Our next witness is Mr. Preiss.

   STATEMENT OF JEREMY O. PREISS, CHIEF INTERNATIONAL TRADE 
 COUNSEL, UNITED TECHNOLOGIES CORP., ON BEHALF OF THE NATIONAL 
 FOREIGN TRADE COUNCIL AND FOREIGN SALES CORPORATION COALITION

    Mr. Preiss. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify here today. My name is Jeremy Preiss, 
and I'm the chief international trade counsel for United 
Technologies. I'm here today representing United Technologies, 
the National Foreign Trade Council and the FSC Coalition, an 
umbrella group of large and small companies seriously concerned 
about the European Union's WTO challenge to the foreign sales 
corporation, or FSC, tax provisions.
    In earlier testimony today, we heard how the Transatlantic 
Economic Partnership's proposed trade liberalization program 
will create many economic benefits. The goals of the TEP are no 
doubt laudable, and it's undeniable that greater trade and 
investment liberalization will yield economic gains for both 
the United States and European Union. But the good will and 
cooperative spirit accompanying the TEP initiative are at odds 
with the EU's pursuit of a misguided WTO challenge to the FSC 
tax provisions.
    The companies I represent here today have a difficult time 
reconciling the forward-looking goals of the Transatlantic 
Economic Partnership with the EU's unwarranted attack on the 
FSC. Because the EU's WTO challenge distorts the FSC tax 
provisions, I believe it's important to review briefly what the 
FSC is and what it is not.
    First, as all of you know, the FSC program was drafted and 
enacted by Congress in 1984 expressly to conform to a detailed 
GATT ruling that articulated the proper relationship between 
different systems of taxation and international trade rules. 
The FSC replaced the Domestic International Sales Corporation 
or DISC, which, along with the tax practices of three European 
countries, had previously been found to be a prohibited export 
subsidy under GATT rules.
    Despite the great care that Congress and other U.S. 
officials took to ensure that the FSC was, and still is, 
consistent with applicable trade rules, the EU has decided 
after more than 13 years to challenge the program. Curiously, 
it has taken the EU considerable time to acquire the view that 
the FSC is inconsistent with the GATT and WTO rules. And, at 
the same time, the EU has not shown how their commercial 
interests have been disadvantaged by the FSC.
    The intent of the FSC and the DISC before it is to give 
U.S. exporters tax treatment comparable to the treatment 
provided to their foreign competitors who benefit from European 
territorial-style tax systems. The territorial tax system 
generally exempts all income earned outside the country from 
income tax, and all exports from value-added, and other 
consumption taxes.
    In contrast, the U.S. worldwide tax system generally taxes 
all the income of U.S. companies, regardless of where it is 
earned.
    The EU would have the WTO believe that the FSC is an unfair 
subsidy. This is simply untrue. In fact, the FSC merely applies 
the same principle of territorial income taxation long enjoyed 
by EU companies to U.S. exporters who choose to establish a 
qualifying foreign sales corporation outside the United States. 
And by permitting U.S. exporters to exempt a portion of their 
export-related income from taxation, the FSC neutralizes some, 
though not all, of the tax advantages that European companies 
receive under their territorial tax systems. In short, the FSC 
attempts to level the tax playing field on which U.S. exporters 
and foreign exporters compete.
    Before I go any further, I'd like to underscore an obvious, 
yet very important point. The U.S. companies concerned about 
the EU's challenge to the FSC are not taking issue with the 
WTO, an institution we strongly support. Rather, we're taking 
issue with the EU's actions. The WTO did not, on its own 
initiative, seek to adjudicate this dispute. Rather, it's the 
EU that has sought to shoe-horn a highly complicated, highly 
technical tax matter into the dispute settlement process of a 
multilateral trade organization.
    In doing so, the EU has ignored more appropriate fora where 
tax issues such as this have traditionally been handled. The 
EU's challenge to the FSC has the potential to bog down the WTO 
in the technicalities of tax policy. And the EU precedent may 
spur additional WTO challenges to other countries' tax 
policies. Indeed, the tax policies of many member States of the 
EU are vulnerable to the same trade arguments and theories the 
EU is now advancing against the FSC. The U.S. trade 
representative has identified at least five such States: 
Belgium, France, Greece, Ireland, and the Netherlands.
    I think that we can all agree that making the review of tax 
policy a regular part of the WTO's diet would be neither good 
for the WTO, nor tax policy. It's a result we're working hard 
to avoid, in conjunction with the office of USTR.
    In sum, the EU's challenge to the FSC is deeply flawed and 
could produce unintended, adverse consequences for both the WTO 
and for tax policy. And, to paraphrase recent comments by 
Ambassador Barshefsky, the EU's challenge cannot help but 
significantly detract from joint U.S.-EU efforts to explore 
greater cooperation in the trade and economics spheres.
    Thank you again for the opportunity to speak here today and 
I'd be happy to answer any questions you may have.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.069
    
    [GRAPHIC] [TIFF OMITTED] T3650A.070
    
    [GRAPHIC] [TIFF OMITTED] T3650A.071
    
    Chairman Crane. Thank you, Mr. Preiss.
    Mr. Kelley.

  STATEMENT OF KEVIN KELLEY, SENIOR VICE PRESIDENT, EXTERNAL 
             AFFAIRS, QUALCOMM INC., SAN DIEGO, CA

    Mr. Kelley. Thank you, Mr. Chairman. My name is Kevin Kelly 
and I am Senior Vice President for External Affairs of Qualcomm 
Incorporated. Based in San Diego, Qualcomm is a leader in 
digital wireless telecommunications and the chief developer of 
Code Division Multiple Access--CDMA--the world's fastest 
growing wireless technology. On behalf of Qualcomm, I would 
like to thank you for providing me with this opportunity to 
testify before you today regarding the Transatlantic Economic 
Partnership.
    Qualcomm applauds the Administration for its role in 
forming the TEP and forging closer ties with the European 
Union. We support the goals outlined in the joint statement 
announcing the TEP, especially those designed to reduce 
technical barriers to trade and open markets to new services 
for the benefit of consumers and enterprises.
    We would suggest that the wireless communications sector is 
a good place for the U.S. and the EU to begin this process. Why 
is this sector so important? Currently, over 200 million 
wireless phones are in use around the world, and that number is 
expected to exceed 1 billion by the year 2005. As this industry 
expands, more companies, more employees, more investment, will 
be needed to keep pace with this demand.
    In that sector, however, the EU, for years, has closed its 
market to all but one wireless technology, one that happens to 
be manufactured mainly by large European concerns. Europe's 
exclusionary industrial policy has created an impossible 
environment for developers of alternative wireless technologies 
now wishing to compete in the European market.
    Now, the EU is on the verge of passing legislation that 
would perpetuate its exclusionary policy by barring competition 
from alternative U.S. technologies for the next generation of 
wireless communications. As a starting point, we believe that 
the administration's ability to work with the EU to overcome 
this flagrant of protectionism will signal whether the U.S. and 
the EU are truly committed to an economic partnership. 
Specifically, the administration needs to take immediate steps 
to encourage the EU not to pass the pending legislation.
    The pending decision would adopt an exclusionary wireless 
standard set by the European Telecommunications Standards 
Institute, ETSI. ETSI's next generation wireless standard is 
based on Qualcomm's CDMA technology. ETSI's acceptance of CDMA 
technology is a testament to the CDMA's superior capabilities 
or other standards, including those now used exclusively in 
Europe.
    Qualcomm supports, and actually prefers, the idea of a 
single CDMA standard for 3(G), and is willing to accept 
technical alterations that improve its capabilities as long as 
the standard is compatible with current CDMA systems. The ETSI 
standard, however, adopts technical features that offer no 
substantial improvements and appears to be specifically 
designed to make it incompatible with both current and next 
generation CDMA systems.
    In other words, the legislation would mandate use of CDMA 
technology, while simultaneously barring CDMA's developers from 
effectively participating in the European market. Obviously, 
the pending legislation and its underlying policy of 
protectionism are directly at odds with the stated goals and 
objectives of TEP, and if implemented, raise serious questions 
as to the Europeans' willingness to forge a meaningful economic 
partnership with the U.S.
    The ETSI process and the EU-proposed legislation raise 
serious questions about the EU's compliance with its 
obligations under current bilateral and multilateral trade 
agreements, let alone its commitment to the TEP. The EU has an 
obligation under the Technical Barriers to Trade Agreement to 
ensure that no standard is set or any regulation passed that 
would create an unnecessary obligation to trade.
    ETSI's adoption of a standard that lacks technical or 
economic advantages over a competing standard and, unlike the 
alternative, is incompatible with most existing standards, is 
an action that creates an unnecessary barrier to trade in 
violation of the TBT. Even more troubling is the EU's active 
consideration of legislation to mandate the standard for the 
entire community, again in contravention of its obligations 
under the TBT.
    Mr. Chairman, if the EU is not willing to adhere to the 
agreed-to principles laid out by the WTO, what are we to think 
about the EU's commitment to the TEP? If the TEP is to mean 
anything, then the EU must immediately reverse its course 
regarding the pending legislation and work with the U.S. to 
allow fair consideration and open competition among existing 
technologies. If the TEP is to be a success, it must alter the 
status quo, end protectionism, encourage competition. Only 
then, will Europe and the United States be true economic 
partners.
    Once again, thank you for the opportunity to testify.
    [The prepared statement follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.072
    
    [GRAPHIC] [TIFF OMITTED] T3650A.073
    
    [GRAPHIC] [TIFF OMITTED] T3650A.074
    
    [GRAPHIC] [TIFF OMITTED] T3650A.075
    
    [GRAPHIC] [TIFF OMITTED] T3650A.076
    
    [GRAPHIC] [TIFF OMITTED] T3650A.077
    
    [GRAPHIC] [TIFF OMITTED] T3650A.078
    
    [GRAPHIC] [TIFF OMITTED] T3650A.079
    
    [GRAPHIC] [TIFF OMITTED] T3650A.080
    
    Chairman Crane. Thank you, Mr. Kelley.
    Mr. Harness, what are your concerns about non-science based 
segregation and labeling requirements?
    Mr. Harness. Well, I think the primary concern, Mr. 
Chairman, is that any kind of labeling proposal should be 
science-based. It shouldn't create any kind of arbitrary 
distinction that would require segregation without a basis for 
segregating and differentiating.
    The concern would be that if a non-science based approach 
forced segregation, first of all, it probably isn't possible in 
the U.S. system for commodity products. Secondly, if it were to 
be made possible, it would be extremely expensive and the cost 
would be past the relative system and our technological 
advantages in agriculture would be lost in terms of the 
economic efficiencies that would be eaten up by such a costly 
process.
    So, in some, the cost and feasibility of such a non-science 
based approach would bother me a lot.
    Chairman Crane. Mr. Brenner, is the goal of associating a 
greater degree of transparency and harmonization of regulations 
related to biotechnology products better addressed in bilateral 
negotiations with the EU or with the WTO agricultural talks?
    Mr. Brenner. Mr. Chairman, I think, it's something that I 
think should be addressed in both forums. We have a current and 
very serious problem with the EU and we have anopportunity to 
address that in a short-term fashion before the WTO process fully gets 
into gear on the technical side.
    Certainly, we're not pre-judging where this issue is going 
to end up in the WTO. There are a number of different avenues 
they may follow there. But, perhaps we could get some early 
sign using the TEP process of things which were achievable, not 
just with the EU, but around the world.
    Chairman Crane. Mr. Preiss, it seems to me that Europe's 
challenge to the FSC tax structure is a violation of a 
longstanding understanding we've had with the Europeans going 
back to 1984, when we changed the DISC tax arrangements 
specifically to respond to their trade concerns. Why did Europe 
wait 13 years to challenge the FSC?
    Mr. Preiss. It's difficult, Mr. Chairman, to say what 
exactly is running through the mind of a EU policymaker. But 
the fact that the EU has waited 13, almost 14, years after the 
FSC was put in place to challenge the program does invite the 
very question you have asked and certainly invites speculation 
as to whether there might be ulterior motives behind their 
challenge.
    One ulterior motive that has been advanced that is that the 
EU is frustrated with having recently lost two high profile WTO 
cases to the United States, both of which were discussed 
earlier today--the bananas case and the beef hormones case. 
With the challenge to the FSC, therefore, the EU is trying to 
even the score with the United States at the WTO or, at least, 
be more proactive in litigating at the WTO instead of 
constantly being on the defense.
    Chairman Crane. Mr. Kelley, as international standards 
become increasingly critical on world trade, many observers 
worry that European standards entities are more and more 
dominating in controlling international standards-setting 
bodies, and that this will put U.S. exporters at a distinct 
disadvantage. In your opinion, what should the U.S. Government 
do to address European domination in the international 
standards area?
    Mr. Kelley. Well, Mr. Chairman, I think that is exactly the 
issue we're talking about the third generation standard. What 
the U.S. Government should do is exactly what it started to do 
regarding this issue. Just raise the consciousness of the 
European regulators and let them know that we are aware of what 
they're doing and we're not going to stand for it.
    Another thing that they should consider doing is being 
stronger advocates of U.S. standards in these international 
markets, and make sure that these foreign markets are open to 
U.S. standards.
    A perfect example of that is what's going on in China, now 
with the existing second-generation standards. The Europeans 
have done a wonderful job of selling their standard into China. 
We are trying to get the administration to open the Chinese 
market to our technology, and we're having some success. But we 
need to continue to encourage the United States to make sure 
they advocate U.S. standards abroad.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Yes, thanks, Mr. Chairman.
    Very briefly, Mr. Kelley, in terms of the Transatlantic 
Economic Partnership--really, the question is, what are you 
doing? And also, what are you doing with USTR? So that's number 
one. Can I go through the questions first?
    As far as Mr. Preiss is concerned, I agree with you that 
the FSC, eliminating arguable GATT issues, but to increase the 
tax benefit that it defers, I think you are absolutely right on 
there. Mr. Harness my impression is that the European 
community--and I've only really taken soundings with the 
English and the Germans--are worried about Monsanto because you 
have such a strong competitive edge. You've put so much 
research, you've done such a great job in this area, that you 
may be setting the standards for everyone there. You may want 
to comment about that.
    As far as Mr. Brenner is concerned, you talked about the EU 
approval process for biotech products, it's a non-transparent 
and unpredictable, but we had the Under Secretary of Commerce 
here and he felt that things were moving along pretty well, and 
that there was much more exposure and sun light involved here. 
You might like to comment briefly on those.
    Anyone--Mr. Brenner.
    Mr. Brenner. We'll do this in reverse order. Yes, not to 
contradict the Under Secretary, I believe the process itself on 
paper, and the way products move through it, is still quite 
unpredictable. Certainly, in the last year we have had a number 
of changes in the process and deviations as products were 
moving through. I would certainly agree we may be turning a 
corner. There are certainly people in the commission and in 
many of the member States who fully recognize that the process 
they have been using is not functioning, and they're sincerely 
committed to try to make a better process. They do have some 
procedural reforms underway, which will take some years to 
complete.
    So, I think, working with those people to recognize the 
problems through the TEP, among other things, is a way of 
helping to ensure we are turning a corner there. I feel were 
right at the edge of it, we're not around it yet.
    Mr. Houghton. Thank you.
    Mr. Harness. Well, certainly there can be no doubt that 
agricultural biotechnology has been controversial in Europe and 
we, Monsanto, have been in the middle of that controversy. 
We're not trying to set the standards for anyone except to meet 
the standard that we think is the most important, and that is 
to provide technology that will help produce food for everyone 
on the planet.
    We do think the technology has enormous benefits for the 
future. The initial products are aimed at the farmer. 
Subsequent products are going to have--not just by Monsanto, 
but by other companies as well--are going to have consumer 
benefits, nutritional enhancements, and other benefits that 
really are going to, I think, be significant for people around 
the world.
    So, just about every new technology has its challenges, 
some in the technology area alone, some with public acceptance, 
and I think that's what we're experiencing here.
    Mr. Houghton. I guess the only thing I was saying is that 
my impression is that it's sort of an emotional issue. And 
that, rather than going at it from a governmental or legalistic 
standpoint, there is an awful lot of personal contact in 
reducing the perceived threat.
    I think you're in a wonderful position. You've done a great 
job. You've got a fabulous company. But, there is that concept 
that you are going to sort of overwhelm the market.
    Mr. Harness. I don't think we've done as good a job on that 
in terms of reducing the public concerns. And I think it's an 
effort that really requires a partnership between us and the 
food companies that bring the food to the consumer with the 
governments themselves; the food companies are doing a lot on 
this. We're doing things. I don't think we've reached the 
public in Europe with all of the right messages in all of the 
right ways yet, but that certainly is a priority for us.
    Mr. Houghton. Good. Thank you.
    Mr. Preiss. I appreciate your statement of support for the 
FSC, Mr. Congressman. I also was heartened by Ambassador 
Barshefsky's earlier testimony where she said that USTR and 
would vigorously defending the FSC at the WTO. My hope, of course, is 
that, ultimately, we will not have a final WTO adjudication of the FSC, 
I hope that the Europeans will come to understand that pursuing this 
challenge at the WTO is not a prudent course of action and, therefore, 
they will ultimately relent. But it is important to know, however, that 
we have our allies on this committee and in Congress generally.
    Thank you.
    Mr. Houghton. Thank you. Mr. Kelley.
    Mr. Kelley. I guess your question, you asked what are we 
doing with the USTR? We are doing a number of things----
    Mr. Houghton. And also on your own.
    Mr. Kelley. Certainly on our own. With regard to the USTR, 
the international standards setting process in 
telecommunications is a complex one. The first thing that we 
have to do is to make sure that everybody understands the 
process and how various companies such as our are able to 
participate in that process. In particular, with respect to the 
ETSI process in Europe, we tried to participate, first, as a 
U.S. company and were told we could not participate because we 
are a U.S. company and ETSI was only available to European 
companies. That is in direct contrast to the standards setting 
bodies in the United States where anyone can participate. So, 
we were forced to open a European subsidiary just to 
participate in that process. The European companies do not have 
to do that to participate in the United States. So, getting 
this kind of process into the USTR is certainly something that 
we are doing.
    Second of all, we're trying to suggest methods to them that 
they can suggest to their European counterparts that can open 
this process and make more open and free, like the U.S. 
process. And we're doing this not only with the USTR, we're 
doing it with the Commerce Department, the State Department, 
the Federal Communications Commission.
    In addition, as I mentioned, we have opened an office in 
Europe. We are participating as much as we are being allowed to 
in the standards setting process over in Europe, and we 
continue to expand these efforts. We're also doing this in Asia 
and South America.
    Mr. Houghton. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Crane. Well, I want to thank our panelists again, 
and apologize to you for the disruptive kind of day it's been, 
and reassure everyone that the official record will remain 
open, Mr. Kelley, for anyone's contribution for two weeks.
    With that, the committee stands adjourned.
    [Whereupon, at 2:10 p.m., the hearing adjourned subject to 
the call of the Chair.]
    [Submissions for the record follows:]
    [GRAPHIC] [TIFF OMITTED] T3650A.081
    
    [GRAPHIC] [TIFF OMITTED] T3650A.082
    
    [GRAPHIC] [TIFF OMITTED] T3650A.083
    
    [GRAPHIC] [TIFF OMITTED] T3650A.084
    
    [GRAPHIC] [TIFF OMITTED] T3650A.085
    
    [GRAPHIC] [TIFF OMITTED] T3650A.086
    
    [GRAPHIC] [TIFF OMITTED] T3650A.174
    
    [GRAPHIC] [TIFF OMITTED] T3650A.087
    
    [GRAPHIC] [TIFF OMITTED] T3650A.088
    
    [GRAPHIC] [TIFF OMITTED] T3650A.089
    
    [GRAPHIC] [TIFF OMITTED] T3650A.090
    
    [GRAPHIC] [TIFF OMITTED] T3650A.091
    
    [GRAPHIC] [TIFF OMITTED] T3650A.092
    
    [GRAPHIC] [TIFF OMITTED] T3650A.093
    
    [GRAPHIC] [TIFF OMITTED] T3650A.094
    
    [GRAPHIC] [TIFF OMITTED] T3650A.095
    
    [GRAPHIC] [TIFF OMITTED] T3650A.096
    
    [GRAPHIC] [TIFF OMITTED] T3650A.097
    
    [GRAPHIC] [TIFF OMITTED] T3650A.098
    
    [GRAPHIC] [TIFF OMITTED] T3650A.099
    
    [GRAPHIC] [TIFF OMITTED] T3650A.100
    
    [GRAPHIC] [TIFF OMITTED] T3650A.101
    
    [GRAPHIC] [TIFF OMITTED] T3650A.102
    
    [GRAPHIC] [TIFF OMITTED] T3650A.103
    
    [GRAPHIC] [TIFF OMITTED] T3650A.104
    
    [GRAPHIC] [TIFF OMITTED] T3650A.105
    
    [GRAPHIC] [TIFF OMITTED] T3650A.106
    
    [GRAPHIC] [TIFF OMITTED] T3650A.107
    
    [GRAPHIC] [TIFF OMITTED] T3650A.108
    
    [GRAPHIC] [TIFF OMITTED] T3650A.109
    
    [GRAPHIC] [TIFF OMITTED] T3650A.110
    
    [GRAPHIC] [TIFF OMITTED] T3650A.111
    
    [GRAPHIC] [TIFF OMITTED] T3650A.112
    
    [GRAPHIC] [TIFF OMITTED] T3650A.113
    
    [GRAPHIC] [TIFF OMITTED] T3650A.114
    
    [GRAPHIC] [TIFF OMITTED] T3650A.115
    
    [GRAPHIC] [TIFF OMITTED] T3650A.116
    
    [GRAPHIC] [TIFF OMITTED] T3650A.117
    
    [GRAPHIC] [TIFF OMITTED] T3650A.118
    
    [GRAPHIC] [TIFF OMITTED] T3650A.119
    
    [GRAPHIC] [TIFF OMITTED] T3650A.120
    
    [GRAPHIC] [TIFF OMITTED] T3650A.121
    
    [GRAPHIC] [TIFF OMITTED] T3650A.122
    
    [GRAPHIC] [TIFF OMITTED] T3650A.123
    
    [GRAPHIC] [TIFF OMITTED] T3650A.124
    
    [GRAPHIC] [TIFF OMITTED] T3650A.125
    
    [GRAPHIC] [TIFF OMITTED] T3650A.126
    
    [GRAPHIC] [TIFF OMITTED] T3650A.127
    
    [GRAPHIC] [TIFF OMITTED] T3650A.128
    
    [GRAPHIC] [TIFF OMITTED] T3650A.129
    
    [GRAPHIC] [TIFF OMITTED] T3650A.130
    
    [GRAPHIC] [TIFF OMITTED] T3650A.131
    
    [GRAPHIC] [TIFF OMITTED] T3650A.132
    
    [GRAPHIC] [TIFF OMITTED] T3650A.133
    
    [GRAPHIC] [TIFF OMITTED] T3650A.134
    
    [GRAPHIC] [TIFF OMITTED] T3650A.135
    
    [GRAPHIC] [TIFF OMITTED] T3650A.136
    
    [GRAPHIC] [TIFF OMITTED] T3650A.137
    
    [GRAPHIC] [TIFF OMITTED] T3650A.138
    
    [GRAPHIC] [TIFF OMITTED] T3650A.139
    
    [GRAPHIC] [TIFF OMITTED] T3650A.140
    
    [GRAPHIC] [TIFF OMITTED] T3650A.141
    
    [GRAPHIC] [TIFF OMITTED] T3650A.142
    
    [GRAPHIC] [TIFF OMITTED] T3650A.143
    
    [GRAPHIC] [TIFF OMITTED] T3650A.144
    
    [GRAPHIC] [TIFF OMITTED] T3650A.145
    
    [GRAPHIC] [TIFF OMITTED] T3650A.146
    
    [GRAPHIC] [TIFF OMITTED] T3650A.147
    
    [GRAPHIC] [TIFF OMITTED] T3650A.148
    
    [GRAPHIC] [TIFF OMITTED] T3650A.149
    
    [GRAPHIC] [TIFF OMITTED] T3650A.150
    
    [GRAPHIC] [TIFF OMITTED] T3650A.151
    
    [GRAPHIC] [TIFF OMITTED] T3650A.152
    
    [GRAPHIC] [TIFF OMITTED] T3650A.153
    
    [GRAPHIC] [TIFF OMITTED] T3650A.154
    
    [GRAPHIC] [TIFF OMITTED] T3650A.155
    
    [GRAPHIC] [TIFF OMITTED] T3650A.156
    
    [GRAPHIC] [TIFF OMITTED] T3650A.157
    
    [GRAPHIC] [TIFF OMITTED] T3650A.158
    
    [GRAPHIC] [TIFF OMITTED] T3650A.159
    
    [GRAPHIC] [TIFF OMITTED] T3650A.160
    
    [GRAPHIC] [TIFF OMITTED] T3650A.161
    
    [GRAPHIC] [TIFF OMITTED] T3650A.162
    
    [GRAPHIC] [TIFF OMITTED] T3650A.163
    
    [GRAPHIC] [TIFF OMITTED] T3650A.164
    
    [GRAPHIC] [TIFF OMITTED] T3650A.165
    
    [GRAPHIC] [TIFF OMITTED] T3650A.166
    
    [GRAPHIC] [TIFF OMITTED] T3650A.167
    
    [GRAPHIC] [TIFF OMITTED] T3650A.168
    
    [GRAPHIC] [TIFF OMITTED] T3650A.169
    
    [GRAPHIC] [TIFF OMITTED] T3650A.170
    
    [GRAPHIC] [TIFF OMITTED] T3650A.171
    
    [GRAPHIC] [TIFF OMITTED] T3650A.172
    
    [GRAPHIC] [TIFF OMITTED] T3650A.173
    
    [GRAPHIC] [TIFF OMITTED] T3650A.174