[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
           THE FUTURE OF OUR ECONOMIC PARTNERSHIP WITH EUROPE
=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                         TUESDAY, JUNE 15, 1999

                               __________

                           Serial No. 106-71

                               __________

    Printed for the use of the Committee on International Relations




                    U.S. GOVERNMENT PRINTING OFFICE
61-707 CC                   WASHINGTON : 2000






                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
                 Francis C. Record, Professional Staff
                     Jill N. Quinn, Staff Associate





                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

The Honorable Stuart Eizenstat, Undersecretary for Economic, 
  Business and Agricultural Affairs, U.S. Department of State....     8
The Honorable David Aaron, Undersecretary for International 
  Trade, U.S. Department of Commerce.............................    12
Mr. Willard Berry, President, European-American Business Council.    36
Mr. Michael Farren, Corporate Vice President for External 
  Affairs, Xerox Corporation.....................................    44
Mr. Bob Robeson, Vice President of Civil Aviation, Aerospace 
  Industries Association.........................................    38
Dr. Paula Stern, President, The Stern Group......................    41
Mr. Stephen Weber, President, Maryland Farm Bureau, American Farm 
  Bureau Federation..............................................    39

                                APPENDIX

Prepared Statement

The Honorable Benjamin A. Gilman, a U.S. Representative in 
  Congress from New York, Chairman, Committee on International 
  Relations......................................................    58
The Honorable Sam Gejdenson, a U.S. Representatives in Congress 
  from Connecticut...............................................    61
Undersecretary Stuart Eizenstat..................................    62
Undersecretary David Aaron.......................................    80
Mr. Willard Berry................................................    95
Mr. Robert E. Robeson............................................   104
Mr. Stephen Weber................................................   112
Dr. Paula Stern..................................................   124
Mr. Michael Farren...............................................   157

Additional material submitted for the record:

Report prepared and submitted by Dr. Paula Stern entitle ``The 
  Transatlantic Business Dialogue: A Paradigm that Delivers''....    60





           THE FUTURE OF OUR ECONOMIC PARTNERSHIP WITH EUROPE

                              ----------                              


                         Tuesday, June 15, 1999

                  House of Representatives,
                      Committee on International Relations,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 10:05 a.m. in Room 
2172, Rayburn House Office Building, Hon. Benjamin A. Gilman 
(Chairman of the Committee) presiding.
    Chairman Gilman. The Committee will come to order. I take 
great pleasure in opening the first in a series of hearings 
that our Committee will hold over the next several months on 
the Transatlantic Relationship and its importance to United 
States economic, political, and security interests.
    With total trade and investment between our Nation and the 
European Union now exceeding $1 trillion, that is with a 
capital T, $1 trillion annually, the EU is already our largest 
trading and investment partner. It is also the world's largest 
single market, and with the creation of the Euro, this market 
should keep on growing for many American firms.
    yet present, our deficit in goods and services with Europe 
is growing faster than with any other region of the world. 
Moreover, trade disputes between us are taking center stage at 
the World Trade Organization and, worse, often occupying too 
much time when the leaders of the two sides come together. 
Perhaps more important, and more corrosive in the long term, 
than the major disputes that are taken up formally are the 
systemic problems that American firms are having getting a fair 
shake from EU institutions on routine standard setting and 
regulatory matters.
    On this side of the Atlantic, we would like to ensure that 
the EU is able to do its fair share in reviving global trade in 
the face of the lingering effects of the Asian financial and 
economic crisis. Unless the EU is able to revive its economy, 
which is going to take major structural reforms, it will 
neither be able to do right by its own people nor play a fully 
responsible role in the world.
    But in the past many of our policymakers have downplayed 
the importance of our trying to manage our political, our 
commercial and trade links with Europe through the EU. They 
have favored emphasizing our strong security relationship with 
Europe anchored in the North Atlantic Treaty Organization.
    This Administration, through the New Transatlantic Agenda 
process, has worked hard to understand the importance of our 
relationship with the EU as an institution, and in shaping our 
relationships with the Member States in significant part 
through the prism of their EU membership.
    Today, as conflict in the Balkans seems to be coming to an 
end, and we hope it will be a peaceful end, and with the 
beginning of the peacekeeping phase of the Kosovo humanitarian 
crisis, we have seen tangible evidence of the continuing 
importance of NATO. Certainly the threats to our common 
interests and values are no less compelling now than at the 
height of the Cold War. The challenges of post war 
reconstruction throughout Southeast Europe will put additional 
strains on our complex relationship.
    We are confident, however, that the Administration 
witnesses before us today will be capable of defending our 
values and our interests with our European partners and with 
our competitors. Ours is truly an indispensable relationship, 
with one quarter of our exports going to Europe and with those 
exports supporting some 1.5 million U.S. jobs. Additional 
efforts are now needed to harmonize our approach to the 
upcoming WTO Ministerial Conference in Seattle and to promote 
new market-opening approaches to the increasingly important 
trade in services across the Atlantic.
    But there are great challenges as well as opportunities in 
this all-important relationship: it is being put to the test as 
never before with the EU's increasing willingness to use 
standards as market access barriers, or in a more benign view 
of their intentions, to permit standards to be used as 
barriers. It may well be, as is sometimes argued, that the 
standards are so constructed to meet local needs, for local 
reasons. But if they are, in fact, clearly intended to slam the 
door on our exports to Europe, we must be prepared, at some 
point, to take effective retaliatory measures. But we need to 
make certain, first, that European policymakers know that they 
are allowing the standards-setting bureaucrats to set up yet 
another trade dispute with the United States.
    The U.S. Department of Commerce estimates that EU standards 
across a wide spectrum of agricultural and high tech products 
act directly as trade barriers on $20 to $40 billion in U.S. 
exports and could affect an additional $150 billion annually of 
our exports. There is increasing concern as well that EU 
legislation or regulations now being developed on key products 
could impede the entry of U.S. products into the EU.
    The ongoing disputes over bananas, beef, and genetically 
modified organisms have prompted the trade experts and the 
policymakers on both sides of the Atlantic to renew the calls 
for an improved ``early warning system''. Before the next 
agricultural or aircraft dispute threatens to disrupt 
Transatlantic relationships, the Congress and the 
Administration need to work even more closely with the incoming 
members of the European Parliament and the European Commission 
to identify emerging trade and investment disputes before 
Brussels or Washington locks in a final position.
    Toward this end, I am pleased to report that the first 
meeting of the Transatlantic Legislators' Dialogue earlier this 
month marked the first attempt to bring legislative and 
executive branch officials from our nation and the EU into the 
same room to define our common problems and to begin finding 
mutually acceptable solutions. I want to acknowledge the 
initiative that Secretary Eizenstat has taken to build ``early 
warning'' into the work of the Transatlantic process.
    However, in our view, the key to effective ``early 
warning'' is sunlight. We simply have to allow the private 
sector businesses, the non-governmental organizations, and 
through the press, the public at large to know more about 
potential policy changes as they are being developed. Neither 
the American or European administrations nor the legislative 
branches, can analyze those potential policy changes as 
effectively as those directly affected by change. The private 
sector will then let the administrations and legislators know 
what changes they need. In all frankness, much more work is 
needed to promote openness in Brussels, in the Commission, in 
the Council, and in the European Parliament.
    We are pleased to see with us this morning the 
Administration official who was most instrumental in bringing 
together the Senior Level Group with the Transatlantic 
Legislators' Dialogue, Undersecretary of State for Economic and 
Business Affairs, and Treasury Deputy Secretary-Designate, 
Stuart Eizenstat, who has done much to resolve ongoing trade 
disputes between our nation and the EU. As a former United 
States Representative to the European Union, while he is a 
leading voice for cooperation and dialogue with our European 
partners, I know that he can also be a very tough negotiator on 
behalf of American interests.
    I look forward to hearing his review of our relationship 
and his suggestions for keeping it on track over the coming 
year.
    Also with us, Undersecretary of Commerce for International 
Trade, David Aaron, is no less experienced a trade negotiator 
and diplomat. His leadership in the International Trade 
Administration at the Commerce Department and at the 
Organization for Economic Cooperation and Development has been 
essential in promoting and protecting our interests in the EU 
and around the world.
    We appreciate the fact that two such high-ranking members 
of our Administration are here today. I know that there is a 
lot of cooperation in the Administration on European affairs, 
but given the enormous stake in getting this relationship 
right, I think it is crucial that every agency in the 
Administration pull together and put our relationship with 
Europe at the top of their list of priorities.
    At this time I would be pleased to recognize our Ranking 
Minority Member, Mr. Gejdenson, for any opening remarks he may 
wish to make.
    [The prepared statement of Mr. Gilman appears in the 
appendix.]
    Mr. Gejdenson. Thank you, Mr. Chairman. There are seldom 
opportunities where the Chairman and I agree to such a large 
extent. I can remember as the European Union was being formed, 
and at that time, the Administration that was in power had 
three people in Brussels. One of my great fears was that they 
would use standards to block American products, and the example 
I used to use, I should go back and dig it out of the hearings, 
was they would add a spar, a piece of metal to the air frame 
and say that Boeing couldn't sell overseas anymore, that it 
would now have to be Airbus until Boeing qualified under their 
less than scientific approach to strengthen the frame of an 
airplane.
    The issue that has affected my State directly, but it is 
symptomatic of what happens, is the hush kit issue. I think 
part of the problem is America's governmental responsibility 
for dealing with these issues is somewhat diffused, and I think 
we need to focus, as we focused on Japan at the beginning of 
this Administration, to focus on Europe. There has been no 
scientific evidence that I know of that has correlated the 
amount of air that goes through a bypass system and the noise 
of a jet engine, and for us to sit down and see this as 
anything else but an attempt to close the European market to 
American products is foolishness.
    Now, I am not here to argue that we need to disengage from 
Europe. Anytime you have a discussion that criticizes one of 
our trading partners some people stand up and say we can't 
isolate them, we can't go back to a protective economy. I am 
not advocating any of those things, but I think this 
Administration has got to send an even tougher message to 
Europeans. Yes, we want to be friends; yes, we like the idea 
that you have a European Union; yes, we are for more 
engagement. But we can't allow them to sector by sector block 
American products, and the hush kit is one of the clearest 
examples. Some of our genetically designed seeds are being 
blocked from many of these countries, and it seems to be not 
based on any scientific evidence but simply based on protecting 
indigenous industries.
    I think that the State Department and the folks in Commerce 
and elsewhere have changed their old attitude. There was a time 
when these kinds of issues were beneath our diplomats, and 
diplomats thought they should just deal with war and peace and 
the larger issues of humanitarian relief. I think we ought to 
do all of those things. I commend the Administration for doing 
a great job in Kosovo, leading the 19 nations of NATO and a 
reluctant Congress, at times, to a successful conclusion.
    But this is what gives American citizens confidence that 
their government is paying attention, and I know you both have 
done great work, but we need to focus on this even more because 
of what it says back home and what it says to the Europeans. If 
the Europeans are successful in coming up with this absolutely 
unscientific attempt to block American jet engines then they 
will have a green light for all the other products they want to 
protect in Europe, and in that case, we better be ready for the 
fight of our lives. This is 333 million of the richest people, 
and access to the old East Bloc countries as their economies 
recover.
    This is going to be tough economic competition. I am not 
frightened. I think the United States is the most powerful 
economic and military force in the world. But we cannot allow 
arbitrary control to keep American products out, and I look 
forward to hearing the testimony.
    Chairman Gilman. Mr. Lantos.
    [The prepared statement of Mr. Gejdenson appears in the 
appendix.]
    Mr. Lantos. Thank you very much, Mr. Chairman. I want to 
commend you for holding this hearing. There are two things I 
would like to say, Mr. Chairman, if I may. First, I want to pay 
public tribute to Undersecretary Eizenstat. He is the 
quintessential, outstanding, extraordinary public servant in 
this city who has demonstrated his commitment to the highest 
quality of public service in a variety of most important 
capacities as our Ambassador to the European Union, in sub-
Cabinet posts in now three departments, and I am just looking 
forward to the next step in his illustrious and most impressive 
career.
    Second, Mr. Chairman, I would like to say a word about 
Europe and European leadership, and I think I am entitled to do 
so as a former European. The great men at the end of the Second 
World War, Adenauer of Germany and Alcide De Gasperi of Italy, 
and Paul Enrespoc of Belgium and Churchill and Jean Monnet of 
France, would be turning in their graves if they would see our 
European friends and allies defining much of their relationship 
with the United States with respect to bananas and beef 
hormones.
    There was a time, still in the memory of some of us, when 
the United States and Europe were bound by great ideas of how 
to transform a devastated and totalitarian continent into a 
prosperous and democratic society. The notion that our vision 
has been so dramatically--their vision--has been so 
dramatically lessened that when we meet with our European 
counterparts all of the great issues that have unified us for 
two generations, the enormous contributions of the United 
States to the fact that Europe today is not a Soviet satellite 
because, had it not been for NATO, Europe would be a Soviet 
satellite, just boggles the mind. I think that in the wake of 
the Kosovo engagement, which of course also would have been a 
failure had it not been for the United States leadership and 
the overwhelming participation of the United States, Europe 
today would be in total disarray, NATO would have disintegrated 
because a two-bit dictator would have triumphed over NATO had 
it not been for the United States and the leadership of this 
Administration.
    So, Mr. Chairman, I take a much less kindly view of our 
European friends and allies than most of my colleagues. Europe 
has benefited from the United States military leadership and 
economic assistance in a historically unique fashion. In two 
world wars we liberated Europe. With the Marshall Plan, we made 
Europe successful and prosperous, and we have been sniped at 
year after year after year with tangential, little selfish 
issues, and I, for one, am sick and tired of it.
    My feeling is that our policy toward Europe will have to be 
one of friendship and cooperation, but also a greater degree of 
assertiveness. Had it not been for the United States, had it 
not been for our military and economic sacrifice and 
leadership, Europe today would not be in the position it is in 
today, and I don't think we should treat the various self-
centered economic policies with the degree of respect that we 
apparently do.
    My feeling is that Europe owes us a great deal, and we owe 
Europe very little. This needs to be stated publicly and 
clearly and without reservation, and I very much hope that our 
two distinguished witnesses will be able to address my 
particular concerns. I am totally disinterested in talking 
about bananas and beef hormones. I want to talk about the 
overall relationship.
    I am interested in talking about the fact that had it not 
been for us, Kosovo would have been a failure. Had it not been 
for us, the Marshall Plan would not have been there and 
European recovery would have taken decades longer, decades 
longer, and would never have been as cohesive as, in fact, it 
was.
    Every time I visit our military cemeteries in Europe I am 
appalled by the incongruity between the vast numbers of 
American young lives which were lost for the sake of Europe and 
the self-centered approach of many European governments and 
opposition parties to our role in the 20th century.
    I thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Lantos.
    Mr. Rohrabacher.
    Mr. Rohrabacher. I would just like to associate myself with 
about half of what Mr. Lantos said in a very big way. Tom 
Lantos is a very articulate spokesman, and he, of course, has a 
deep and abiding interest in American foreign policy and has 
studied the issues for many, many years, and he has my deep 
respect.
    However, I do disagree with him on several points, and of 
course, over the current--our current operations in the 
Balkans, we have a fundamental disagreement. However, the point 
that Mr. Lantos made concerning the overall European 
relationship in the United States, I think, deserves some very 
close attention. I believe that the American people are going 
through a change in their perception as to what our 
relationship should be with Europe, and I think the Balkans 
operation will crystallize many of their thoughts. It is 
something we have to realize, that we are in a new era of 
history, and in the post-Cold War era of history we are not 
going to have the same relationship that we had with Europe. 
The American people will not stand for the same relationship 
that we had with Europe during the Cold War.
    NATO cannot be a situation in which the proportionate share 
of benefits goes to our European allies and a proportionate 
share of costs go to the American people. That just will not be 
agreed to by the American people, and it will reflect itself in 
our elections as they come forward, I believe, in the next 4 
years.
    Stability, I believe what is going on in the Balkans is 
based on trying to provide European stability. Just like as 
they say, it is not the job of the United States military, and 
it is a job of the Europeans to provide their own stability, it 
is not the job of the American taxpayer to provide stability 
for Europe at a great cost of tens of billions of dollars.
    So, in the future--and I agree with Mr. Lantos, we bore 
this burden and we ended up with very little thanks for it and 
I have heard Mr. Lantos in private meetings. I remember when 
our French colleagues came here, and Mr. Lantos asked them 
about why it is that they were so close to the Germans, willing 
to make all sorts of agreements with the Germans, but when it 
came to the Americans, we were always held at arms length and 
treated with such disdain at times. I thought that sentiment--
after we of course had come to Europe twice to save the French 
from the Germans----
    Mr. Lantos. Will my friend yield for a moment?
    Mr. Rohrabacher. Certainly.
    Mr. Lantos. Since he mentioned Germany, may I just tell our 
distinguished witnesses, a short while ago I was in Berlin at a 
meeting where the distinguished Mayor of Berlin was present, 
and I pointed out to him that it would be nice if the 
municipality of Berlin would accommodate our embassy's request 
to reroute some traffic for security reasons because at the 
moment our new embassy location is in a singularly exposed 
place subject to terrorist attack.
    The distinguished Mayor of Berlin reminded me that this is 
a very complex issue because several streets will have to be 
redesigned and traffic rerouted, and I couldn't resist the 
temptation to tell him that the Berlin Airlift was a bit more 
complex logistically and a bit more important historically than 
rerouting traffic on two side streets of Berlin, and he was 
stunned by this revelation.
    Mr. Rohrabacher. Thank you very much.
    Mr. Lantos. I thank my friend for yielding.
    Mr. Rohrabacher. As I say, we have a strong area of 
agreement and some areas of disagreement. But in the future, I 
know that the American people are going to demand that the 
relationship with Europe be mutually beneficial and certainly 
not in a situation where the United States bears the burden any 
longer of the cost that should be rightfully going to 
Europeans, and I yield back the balance of my time.
    Chairman Gilman. Thank you, Mr. Rohrabacher.
    Mr. Hastings.
    Mr. Hastings. Mr. Chairman, I just want to urge a note of 
caution, and ask my colleagues to be mindful of the enormity of 
the contributions that have been made by virtue of all of the 
activity that we did put forward in the Marshall Plan and 
everything else that has been mentioned by Mr. Lantos and Mr. 
Rohrabacher and yourself.
    There are a significant number of structures in Europe, not 
the least of which the one that has generally laid the 
foundation for our activity, at least geographically, has been 
NATO. With the ongoing actions hopefully coming to a positive 
conclusion, it is clear that with the European Union and its 
development, albeit nascent, that too is a formulation of a 
work in progress, and is going to require a considerable amount 
of attention.
    The caution that I urge is with the new isolationist mood 
that seems to be developing, at least inside the United States 
Congress. We need to be mindful at this time in the world of 
our responsibilities to ensure that we are stable and secure in 
the world's economic environment. Toward that end, when 
colleagues do not participate in interparliamentary exchanges--
and Mr. Chairman, no later than last week we had members of the 
Council of Europe here, and seven or eight of our Members saw 
fit to visit with them, and they outnumbered us. When I met 
with the Organization for Security and Cooperation in Europe, 
we had a small delegation from time to time. Annually we do 
have a good delegation, but overall we fail to participate in 
the quarterly meetings of that organization.
    The same could be held for at least three others that are 
critical, and when I am there, as I am sure many of you are, we 
find that the people are begging us to have exchanges with 
them. In Denmark, I talked with people about hormone beef, and 
you get an entirely different view as to whether or not they 
are willing to cooperate. Recently, in Ireland and in London, 
the same exchanges were had and all of the results were 
positive, at least from the standpoint of talk.
    I do believe that the World Trade Organization is where the 
action is going to be for liberalization of trade and that we 
need to be on top of it and stop just playing political games 
and sit down and try to understand not only what the 
Administration is offering, but what we as policymakers are 
able to offer ourselves.
    With that, I part company with my good, good, good friend 
from California. While he does signify that he is not 
interested in bananas and hormone beef, and I too join that we 
don't need a whole lot of explication in that arena, I would 
urge all of us to understand that the European Union and 
Europeans dragged their feet for a long time. A positive sign 
is that they have not seen fit to appeal the decision of the 
WTO with reference to bananas. But what I beg us to do, the 
Administration, and us as policymakers, is not to let this 
matter go on the back burner, because there must be some kind 
of way that we can assist the Caribbean economies in some 
manner while the problems are being worked out at the World 
Trade Organization.
    My final statement, Mr. Chairman, is that the European 
Union held an election last week, and we talk all the time 
about elections and their importance. A hell of a lot of people 
in Europe didn't participate in that, and I urge you to be 
mindful that everybody is not on board with the European Union.
    Thank you very much.
    Chairman Gilman. Thank you, Mr. Hastings.
    Secretary Eizenstat, please proceed, and you may put your 
full statement in the record or summarize, whatever you deem 
appropriate.

  STATEMENT OF STUART EIZENSTAT, UNDERSECRETARY FOR ECONOMIC, 
    BUSINESS, AND AGRICULTURAL AFFAIRS, DEPARTMENT OF STATE

    Mr. Eizenstat. Thank you. I would like to put my full 
statement in the record, and I very much appreciate the 
statements that have been made by you and the other Members. It 
is an honor to be here, also----
    Chairman Gilman. Without objection, your full statement 
will be made part of the record. Please proceed.
    Mr. Eizenstat [continuing]. With my good friend David 
Aaron.
    I want to specifically applaud your leadership, Chairman 
Gilman, in working to improve Transatlantic relations. Your 
commitment to lead, for many years, the U.S. side of the 
Congressional European Parliament Delegations, and I have met 
you on both sides of the Atlantic during those meetings, and 
your initiative recently to form the new Transatlantic 
Legislators' Dialogue is strongly supported by the 
Administration, and much appreciated.
    With the European Union, we share a commitment to the 
promotion of security, prosperity and democracy, not only in 
the Euro-Atlantic area but beyond as well. It is no hyperbole 
to suggest that the relationship between the United States and 
the European Union may be the most important, influential and 
prosperous bilateral relationship of modern times. Two-way 
trade and investment flows, as you indicated, are now some $1 
trillion annually, supporting more than 6 million jobs on both 
sides of the Atlantic.
    One in 12 industrial jobs in the United States is in a 
European-owned factory, and European countries are the biggest 
foreign investors in 41 of our 50 U.S. States.
    We have launched the Transatlantic Economic Partnership 
covering ten broad areas to reduce existing trade barriers, 
improve regulatory cooperation, and establish a bilateral 
dialogue on multilateral trade issues in the WTO. We have 
agreed with the EU that the WTO should begin a new broad-based 
round of trade negotiations following a structure that will 
yield results expeditiously in agricultural service and other 
areas. We have also agreed to seek permanent commitments by WTO 
members not to impose duties on electronic commerce 
transactions, an area where Secretary Aaron has had a 
particular impact.
    There is no more vivid example of our common values and 
goals than in the work we are doing with the EU right now in 
the postconflict reconstruction of Southeastern Europe. As the 
confrontation in Kosovo comes to an end, together we have a big 
job before us. Our joint aim is to build a solid foundation for 
a new era of peace and stability, helping a region that has 
been one of the continent's most violent become, instead, a 
part of the European mainstream. We forged a new stability pact 
for the region, and we believe that just as we have borne the 
lion's share of the military expenditures, it is only right 
that the European Union bear the lion's share of the 
reconstruction, and this is something they themselves have 
indicated they wish to do.
    The 15 member EU is now about to undertake its largest 
enlargement ever. It will be one of the most important 
challenges facing Europe in the 21st Century, and I would say 
to my dear friend, Congressman Lantos, that when he talks about 
great enterprises, this expansion will be a historic 
opportunity to further the peaceful integration of the 
continent if it is done right. The EU plans to spend on its new 
members, between 2000 and 2006, the equivalent in 1999-dollars 
of what we spent on Western Europe through the Marshall Plan. 
It will encourage cooperation, reinforce democracy, and reduce 
nationalistic and ethnic tensions. If in the end it is 
successful, the European Union will be the largest single 
market in the world with over 500 million citizens in an 
economy significantly larger than our own.
    Thirteen countries have applied for EU membership so far, 
and the European Commission is in the middle of negotiations 
with 6 of those 13, and another 5 are going through initial 
screening. The year 2003 is the earliest likely date for 
accession of the first wave of candidates and, frankly, the 
balance of risks are for a later rather than earlier date for 
enlargement. Enlargement should be a net plus for U.S. exports 
of goods and services to help the countries of Eastern and 
Central Europe. Nonetheless, we will ensure that our commercial 
and economic interests are not disadvantaged. We are working 
both with the EU and its candidate states to prevent the 
erection of new barriers to trade as part of the enlargement 
process.
    The main problem concerns the interim period between now 
and ultimate accession, because at accession they will take the 
common external tariff of the European Union, which is 
generally quite low.
    But in the interim, as tariff levels for EU products drop 
to zero in the candidate countries, they remain at higher 
levels for U.S. products, to our disadvantage. We are working 
with the candidate countries to find suitable remedies. We are 
encouraging them to adopt the lower EU tariff schedules as soon 
as possible. Slovenia, for example, has begun to do this.
    The European Commission has agreed with our strategy and 
accession candidates are beginning to respond. Certainly, we 
will be economic competitors, but with our combined strength, 
together we will also be able to set a global agenda supporting 
democracy and open markets. We share, if I may say so, more 
values with Europe than we do with any other region.
    Enlargement of the EU requires the candidate countries to 
conform their laws and practices to EU norms. It would almost 
be like saying that a new State coming into the United States 
has to conform to every page of the code of Federal 
regulations. It is a mammoth job. It requires change, not only 
in the candidate countries, but also on the part of the current 
member states as well.
    The largest step is the reform of the Common Agricultural 
Policy or the CAP. The EU has now agreed to put a ceiling on 
total money expenditures over the next several years, but this 
cannot be done without reforming its agricultural subsidies. 
Almost half of the EU's overall budget, over $50 billion, is 
earmarked for agricultural subsidies. The European Commission's 
modest CAP reforms are inadequate to do the job. They will 
complicate the process of enlargement, and they do not go 
nearly far enough in terms of reducing the distorting effects 
of the CAP on the world trading system. Other countries, 
including developing countries, will continue to be forced to 
pay for European farm inefficiency by losing sales in home and 
third markets.
    Historically, every enlargement of the EU has been preceded 
by a deepening of the level of internal cooperation. They are 
already slow in many cases to respond to a crisis. This will be 
further complicated when they expand to 21 members.
    With the advent of the Amsterdam Treaty on May 1, we are 
witnessing a dramatic shift in power. The European Parliament 
now has a greatly enhanced role in EU decisionmaking and will 
enjoy equal say or co-decision with the Council Ministers on 
more than two-thirds of all EU legislation. The Amsterdam 
Treaty will also result, Mr. Chairman and Members of the 
Committee, in major changes in the way the EU conducts its 
foreign policy.
    A new High Representative for its common foreign security 
policy will give the EU greater visibility on the international 
scene. They have selected NATO Secretary General Javier Solana 
as the first High Representative for their common foreign 
security policy. He has been an extraordinary Secretary General 
of NATO, and we believe he will perform equally well at the EU. 
We look forward to working with him.
    An EU with an effective common foreign and security policy 
would be a power with shared values and strong Transatlantic 
ties with which we could work globally to solve problems. The 
EU has also chosen former Italian Prime Minister Prodi as the 
next President of the European Commission. We have worked well 
with him before, and we have great confidence in him as well.
    We often let the immediacy of our current trade disputes 
blind us to the very real benefits that we both enjoy from 
access to each other's markets, but obviously there is a tough 
road ahead, and yet we can't allow our relationship to be 
defined solely by these disputes. Nevertheless, the EU takes 
actions such as its unilateral hushkits regulation where 
Ambassador Aaron did a fabulous job of at least temporarily 
diverting a problem.
    For its counterproductive response to the previous WTO 
panels on the bananas and beef from exacerbating trade 
tensions, it is for that reason that we have suggested an early 
warning system to identify such problems before they burst into 
full-scale disputes.
    We are indeed facing a tough set of trade disagreements, 
and we continue to hammer home the principle of fair and 
transparent trade rules: the need for the EU to respect 
international commitments and WTO rulings; abiding by 
scientific principles, and not politics; and making health, 
safety, and environmental decisions.
    The need for a clear and rational trading principle may be 
greatest in the area of biotechnology. Within a few years, 
virtually 100 percent of our agricultural commodity exports 
will either be genetically modified or mixed with GMO products, 
and our trade in these products must be based on a framework of 
fair and transparent procedures which address safety on a 
scientific, and not a political basis.
    We have, since 1994, approved some 20 GMO agricultural 
products. Since 1998, Europe has not approved any. There is no 
scientifically based governmental system to approve GMO 
products, and therefore, the European public is susceptible to 
ill-informed scare tactics. The EU approval process for GMOs is 
not transparent, not predictable, not based on scientific 
principles, and all too often susceptible to political 
interference.
    We have been working to break this pattern of 
confrontation, and indeed there are leaders in Europe who 
recognize that an EU regulatory system drawn up in accordance 
with its own international trade obligations would be a boon to 
both business and consumers. We have a new bio-tech working 
group to address GMO issues.
    The same can be said with respect to beef hormones, where 
the European public is subjected to daily scare tactics which 
try to portray the hormone issue as a health and safety issue 
when indeed there is broad scientific evidence that beef 
hormones are completely safe. There is no reason why American 
beef producers should pay the price for internal political 
calculations in Europe inconsistent with WTO principles.
    To conclude, as we look toward the future, our goal is to 
work together to promote our goals of security, prosperity, and 
democracy. Together we can accomplish more than either the U.S. 
or the EU can by acting alone. We want to work more effectively 
to deal with fast-breaking crises, to find ways to manage our 
disagreements before they get out of hand, and to expand areas 
of joint action and cooperation. We are working on just that in 
the hopes that we can articulate a new vision at the June 21 
U.S.-EU Summit in Bonn through a new Bonn declaration. This 
would fit in with our larger goal of using 1999 for a series of 
summits, NATO, OSCE, which Congressman Hastings mentioned, and 
the U.S.-EU Summit to strengthen the abiding European Atlantic 
Partnership which has been so important to maintain stability 
in Europe for the 20th Century and to make sure it does the 
same for the 21st.
    Thank you.
    Chairman Gilman. Thank you, Secretary Eizenstat.
    [The prepared statement of Undersecretary Eizenstat appears 
in the appendix.]
    Chairman Gilman. We will now proceed with Undersecretary 
for International Trade, Department of Commerce, Honorable 
David Aaron. Please proceed. You may put your full statement in 
the record and summarize, whichever you may deem appropriate.

  STATEMENT OF DAVID AARON, UNDERSECRETARY FOR INTERNATIONAL 
                             TRADE

    Mr. Aaron. Thank you very much, Mr. Chairman. I will also 
put my full statement in the record.
    Chairman Gilman. Without objection, the full statement will 
be made part of the record.
    Mr. Aaron. Mr. Chairman, I too would like to thank you for 
your leadership in Transatlantic relations. I am pleased to be 
with you and the Committee this morning to discuss the 
prospects for our economic and commercial partnership for the 
European Union. As you and Secretary Eizenstat have pointed 
out, the U.S.-EU commercial relationship is the largest in the 
world by far. Indeed, if you aggregated all the U.S. businesses 
that are located in Europe, they would constitute the fourth 
largest economy in all of Europe.
    But while our economic relationship remains robust, the 
trade deficit with Europe is cause for concern. In 1998, our 
deficit with Europe reached $27 billion, an increase of $10 
billion over 1997. Historically, our trade balance has been 
balanced. Indeed, in the 20 years up to 1995, the total 
accumulated deficit on the part of the United States was only 
$1 billion, but since then it has become $60 billion. This 
reflects the difference in economic growth between Europe and 
the United States rather than an increase in European trade 
barriers. Indeed, American competitiveness is still quite 
strong because our growth in exports was 6 percent last year 
while European internal growth was only 2 percent. We are doing 
a good job of selling into a depressed and slowly growing 
market.
    However, to shrink the deficit the European Union needs to 
strengthen its economies. It needs to undertake domestic 
reforms. It needs to stimulate employment and domestic 
investment. As with any important economic relationship, 
disputes arise from time to time. Our economies have grown so 
close together that I sometimes regard them as a set of finely 
meshed gears, and even small issues like grains of sand in a 
transmission can cause not only enormous noise but enormous 
damage if they are not fixed.
    Let me briefly address two recent examples of this kind of 
damage in the areas of data protection and hushkits. We have 
been working for over a year to reconcile the very different 
United States and European Union regimes on data protection. 
The European Union has adopted a comprehensive umbrella 
legislation that covers every area of data privacy and tries to 
answer every possible question and meet every contingency. The 
United States, in contrast, relies on a much more flexible set 
of targeted laws and self-regulation backed up by the Federal 
Trade Commission and our consumer protection laws, both at the 
Federal and State level.
    The European Union is now considering under this regime 
whether United States data protection is adequate. We believe 
it is, but if we do not reach an arrangement with the European 
Union all Transatlantic data flows could be halted, with 
catastrophic effects on the economies on both sides of the 
Atlantic. To bridge the gap, we have proposed a set of safe 
harbor principles.
    The companies subscribing to them would be able to keep 
exchanging data with Europe. After lengthy talks we have 
reached agreement on virtually all substantive privacy issues. 
Procedural issues such as enforcement mechanisms, the role that 
the Europeans will play in abiding by the agreement, and 
transition times for U.S. companies to adhere to the safe 
harbors are delaying final agreement. We hope to reach such 
agreement by this fall.
    The European Union has also adopted a ban on hushkits, as 
was mentioned earlier by Mr. Gejdenson. These are essentially 
jet engine mufflers or replacement engines that would be banned 
by the European Union to achieve aircraft noise reduction. 
Interestingly and importantly, this rule would affect only U.S. 
products, to the tune of $1 billion, and it would allow the 
amount of European equipment that is just as noisy or even 
noisier to increase. The regulation would undermine 40 years of 
multilateral cooperation on aircraft noise regulation in the 
ICAO.
    On April 29, the EU council adopted this hush kit 
regulation but postponed its implementation until May of 2000. 
This gives us additional time to resolve our differences with 
the EU on aircraft noise standards and specifically hushkits 
and re-engine aircraft issues and try to work out, through the 
ICAO, an international standard that would further improve 
noise.
    So far however, their response to our proposals has been 
desultory and inadequate. If they do not respond more seriously 
and constructively, this crisis will revive.
    I might also make a passing comment, if I could, on the 
enlargement question that Secretary Eizenstat pointed out and 
the differential in tariffs which has arisen from the process. 
Assistant Secretary of Commerce Patrick Mulloy is now in 
Eastern Europe. He has just held talks in Poland on this very 
important issue and they are making very good progress thus 
far. We are encouraged by this development.
    It has been clear to both the United States and the 
European Union for some time that we have needed better ways of 
identifying and setting issues earlier. In 1996, at Ambassador 
Eizenstat's initiative, we inaugurated a series of initiatives 
to identify priority areas that needed to be addressed and 
provide a mechanism to make progress. This new Transatlantic 
agenda marks, for the first time, an attempt to involve heads 
of government in the resolution of commercial problems.
    At the top are semiannual U.S.-EU summits, one which will 
take place next week in Bonn. They are supplemented by meetings 
of the senior level group chaired by Ambassador Eizenstat, 
senior trade and economic officials on both sides.
    The Transatlantic Economic Partnership was also established 
under the NTA, as were the Transatlantic Business Dialogue, the 
Transatlantic Labor Dialogue, the Transatlantic Consumer 
Dialogue and the Transatlantic Environmental dialogue. We are 
very pleased, Chairman Gilman, that you have taken the 
Transatlantic Legislative dialogue, TLD. We expect the TLD to 
add significantly to the richness of Transatlantic contacts and 
found its inaugural meeting held during last week's senior 
level group to be very productive.
    Now, the U.S.-EU Summit in Bonn, Germany next week will 
allow us once again to demonstrate the staying power of our 
economic relationship. At the summit, President Clinton, EU 
President Santer and German Chancellor Schroeder will announce 
a number of important deliverables. Among them are an expansion 
of the Transatlantic economic partnership and an early warning 
system to address trade issues before they rise to the level of 
trade disputes such as we saw this spring.
    Speaking in Europe last week, Secretary Daley called the 
formation of an early warning system a Doppler radar system for 
tracking trade storms, adding that he has asked me to be his 
long range weatherman on trade. I will work with my EU 
counterparts and with all the Transatlantic bodies, the TAB, 
TLD, TALD and so forth, to follow the summit announcement and 
set forth such a process. I hope to have better luck than most 
weathermen.
    Another issue to be address at the summit is the 
reconstruction of Kosovo. The United States has paid most of 
the costs of the military operation during the conflict, and 
the Europeans have agreed to take the lead in the 
reconstruction efforts for Kosovo. We believe that U.S. 
companies have much to offer and should play a prominent role 
in rebuilding Kosovo. However, historically, a large majority 
of European Union aid is tied, therefore, limiting the ability 
of U.S. companies to obtain contracts. We will make it clear to 
the European Union governments that U.S. companies must be able 
to openly compete in the EU finance reconstruction programs in 
Kosovo. We believe that we have earned it.
    Let me close by emphasizing that the U.S.-EU relationship 
takes a lot of work to maintain, but it is worth it, to the 
U.S. and the EU, and the rest of the world. There is much work 
to be done, but our expanded dialogues and early warning system 
will help keep our relationship on track.
    Thank you, Mr. Chairman.
    [The prepared statement of Undersecretary Aaron appears in 
the appendix.]
    Chairman Gilman. Thank you, Secretary Aaron, for your 
remarks, and Secretary Eizenstat, for your good remarks.
    Let me kick off our questions with the issue of European 
bars to the use of genetically modified organisms or GMOs. Of 
course it is a vital concern to our American agricultural 
community. Secretary Aaron, in your view, should this issue be 
included in the U.S.-EU or G-8 summit discussions in Germany?
    Is that a subject now on the formal agenda of this summit 
meeting, and if it isn't, why not, and what steps could the EU 
take in its food safety policies? Do they have the potential to 
affect not only a large amount of U.S. agricultural exports but 
also a full range of pharmaceuticals and cosmetics exported by 
the U.S.?
    Mr. Aaron. Mr. Chairman, it is going to be on the summit 
agenda. We will be discussing it. It forms part of the report 
which Secretary Eizenstat has supervised and put together for 
the summit discussions. Essential issues here are really 
threefold. First of all, the European process for making 
decisions on genetically modified organisms is not Transparent. 
Second, it does not appear to be based on scientific evidence. 
Third, it is taking place in an atmosphere that can only be 
described as nearly hysterical concerning food safety in the 
European Union.
    I think it is very important to recognize that and develop 
our own strategy, in the context of a situation in the EU 
where, because of the mad cow disease and its very devastating 
effect on the authority and credibility of the scientific and 
official community in Europe, now we have had this recent 
dioxin issue in Belgium.
    What you are getting is a continuing impact on the public 
but to the point that they have become extremely allergic to 
this kind of technology. You have the public press waging a 
campaign, for example, in Britain where they are calling these 
things Frankenstein foods.
    This is totally blown out of proportion, but it is an EU 
problem that we have to somehow address, and what we need to do 
is find a way to help them re-establish the credibility and 
reliability of their system of dealing with advanced bio-
technology. In the Transatlantic Economic Partnership, there is 
a bio-technology working group. It is working on the problem, 
but I think that the political dimensions of this have gotten 
to the point that you have all sorts of protectionist pressures 
now wrapping this cloak of public hysteria around them and 
taking advantage of it. We have got to find a way to cut 
through that, and I hope that the conversations at the summit 
will provide some impetus for us being able to do so.
    Chairman Gilman. Let me address this question to both our 
panelists. When the EU expanded to include Greece in 1981, 
Portugal and Spain in 1986, and Austria, Finland and Sweden in 
1995, it disadvantaged our own commercial interests. What steps 
can we now take to ensure that the process of admitting new 
member nations will not similarly disadvantage our U.S. 
interests? How can our negotiators achieve an appropriate 
measure of parity for our own interests as the United States 
begins another round of accession talks with Poland, Hungary, 
Czech Republic, Cyprus, Estonia, and Slovenia?
    Mr. Eizenstat. There really are two steps. The first is 
that we have already notified all the future accession 
countries that we will seek compensation for the breach of 
their tariff bindings, which will occur as a matter of 
definition when they join the European Union, just as we did 
with Portugal and Spain and Austria and other accession 
countries, and this is not a punitive matter. It is simply a 
matter of a right under the WTO. So that provides our 
interests, our business interests, a right to compensation in 
the form of lower tariffs in other areas.
    Second, we are working very assiduously, even now, to make 
sure that during this transition period between the time that 
negotiations commence and end for the admission of new members 
that we are not disadvantaged, and we are, in fact, 
disadvantaged. The International Trade Commission recently did 
a study showing, for example, in Poland alone, that there could 
be up to $20 billion in lost U.S. exports from the differential 
in that their tariffs are at zero for EU products but they have 
maintained their higher tariffs, their MFN tariffs, for the 
United States.
    So what we have done as a strategy, which the European 
Commission has agreed to, is we have gone to each of those 
countries and we have asked them to reduce immediately, 
certainly as soon as possible, their tariff levels to the 
generally lower EU tariffs that they would take when they 
become members, and that will remove some of the disadvantage 
during this transition period.
    Chairman Gilman. Did you want to comment on that, Secretary 
Aaron?
    Mr. Aaron. No. Just as I indicated in my statement, right 
now we have a team in Eastern Europe discussing with those 
governments this precise point, and the report I received this 
morning on the discussions in Poland was very encouraging.
    Chairman Gilman. Let me ask, Secretary Aaron, under the 
Kyoto Climate Change Treaty, EU nations felt they were 
protected from any new emission reductions that would be 
required by the protocol because of the massive reduction in 
emissions already happening in the UK and Eastern Europe.
    These already recurring reductions created an EU bubble 
protecting other U.S. economies from potentially Draconian 
cuts. We now understand the EU may have miscalculated, and its 
emissions may exceed those allowed by Kyoto. We have reports of 
EU members squabbling about who will make extra cuts, and 
projections that the EU may need to buy emission credits from 
the Russians. We thought that the system the Administration 
designed under Kyoto depended on the U.S. buying those Russian 
credits. Are we now going to face higher prices and competition 
from the EU for those Kyoto emission credits?
    Mr. Aaron. Mr. Chairman, if I might, I would rather defer 
to Ambassador Eizenstat on this.
    Mr. Eizenstat. No. Let me explain our differences with the 
EU with respect to climate change. We have strongly favored the 
most cost effective way of achieving our Kyoto targets, and 
that is by using flexible market mechanisms, in particular, 
trading of emission rights as well as the mechanisms by which 
the developed and developing world can exchange projects, 
transferring technology to developing countries and obtaining 
credits back. We believe that the European Union's attitude in 
adopting ceilings and unadministerable caps on the amount of 
emissions that can be traded will make the whole system less 
cost effective, less capable of achieving objectives in a cost 
effective way; and we strongly, strongly oppose that effort at 
caps.
    In fact, a number of countries will have excess emissions 
to trade. It is certainly possible that the European Union may 
be competing for those emissions, if, in fact, they can't meet 
their targets through domestic means.
    This is something we have always anticipated, and we have 
taken it into account in our cost estimates, but they seem to 
want to reach their targets by high taxes internally. Our 
mechanism is to do so by market mechanisms, which we think is 
much more effective and much less costly and equally effective 
from an environmental standpoint.
    Chairman Gilman. Just one more question. Secretary 
Eizenstat, Committee staff have heard many complaints about the 
processes of the European Commission, specifically that 
projects are often staff-driven without considered policy-level 
input and broad coordination and that our companies are, at 
least on occasion, not permitted to participate in those 
Commission consultative processes that do exist.
    Does the executive branch have any strategy to open a 
Commission up to public view and to public input in a 
nondiscriminatory basis, and what can we do about the fact that 
so many of their proposals are worked up in a Commission so 
that it is difficult or impossible to change them once they are 
proposed, either by way of a green paper or more formally? I 
welcome your comments, Secretary Eizenstat.
    Mr. Eizenstat. As a result of the Amsterdam Treaty, there 
has been a profound change in the balance of power between the 
European Parliament and the executive arm of the European 
Commission. The European Parliament has shown by the dramatic 
action which was taken that led to the resignation of the 
entire Commission, has asserted responsibilities that it had 
not done so before, and it has insisted on more democratization 
and more openness and more accountability by the Commission to 
the only popularly elected body in the European Union, namely, 
the Parliament.
    We expect to see more oversight. We will see more scrutiny 
of new commissioners, as they are named by Mr. Prodi, and I 
think we will see a gradual opening up of the Commission, 
recognizing that as an executive arm there are certain things, 
as our executive branch has, that are kept within that branch.
    What we have urged, also, Mr. Chairman, is that with 
processes like the review of GMOs, that this has to be open to 
a transparent, open, scientifically-based process. The notion 
of keeping approvals for major agricultural products done in a 
way that is not open and which we have no ability to input is 
totally contrary to the way a democratic system should work.
    When the FDA, for example, makes a decision on a particular 
food or drug, they have open hearings. People can introduce 
evidence. Now what happened with the beef hormone issue is a 
precise example of an absolutely atrocious decisionmaking 
process, and that is that after the WTO ruled that the beef 
hormone ban had no basis in science and had to be ended, and 
gave the European Union 15 months to finally make that 
decision, just before the deadline, without any credence given 
to this by the WTO, they started a new risk assessment.
    How did they do it? They chose scientists without our 
knowing who they were. They operated in ways that no one had 
any information about. They came out with a report that was not 
based on any introduction of any evidence by any outside 
parties, and this kind of lack of process, lack of openness, is 
precisely what you are talking about.
    We won't stand for it. It is unacceptable, and that is one 
of the reasons that we have retaliated on the beef issue to the 
tune of $200 million and will keep that on until we get our WTO 
rights won through an open, scientifically based process. We 
suggest a labelling procedure to resolve this, but this is the 
kind of closed process I think you are referring to, Mr. 
Chairman.
    Chairman Gilman. Thank you, Secretary Eizenstat.
    Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman.
    Let me commend Undersecretary Aaron for all the work that 
he has done in this area as well. He has really been one of the 
folks in the Administration who understands the importance of 
this battle and trying to focus our resources as a government 
to making sure that we keep this market access issue fair for 
all parties. I am not looking for advantages necessarily for 
American companies. I just want to make sure they don't get 
shut out in this process.
    I guess my question would be first to Secretary Aaron. We 
went through this great phase in America where we were 
reluctant to go to the metric system, and darn it, we were not 
going to cave in to metric, and along the way we also decided 
we weren't interested in getting involved in the European 
standards-setting. We let them set their standards, we set 
ours.
    Now we are starting to pay some price for that past 
neglect. Is there a way--as we see the problem with the 
Europeans stepping out of the aircraft standard-setting 
organization, the ICAO--is it just unreasonable to assume that 
the Europeans would see any benefit from international or 
American-European standards-setting at this stage while we are 
fighting these individual battles. Are we going to stop the 
Concorde if they stop the American jet engines.
    I think we probably ought to do some more. I think we 
should trigger it, so we don't have to take another action, 
that as soon as they--if they implement in 2000 the hush kit 
issue, that we ought to automatically send the Concorde 
packing, and maybe some other things. But besides these kinds 
of retaliatory responses, is there an avenue that is beneficial 
that both Americans and Europeans say, OK, let's sit down and 
see if we can start a process to build international standards 
as we have in manufacturing with ISO, and can we do this in 
health and safety and all these other areas?
    Americans aren't going to be happy about it either. 
Americans are very, you know, kind of proud of their own 
standard and their own operation, but I think in an 
international world that is rapidly accepting European 
standards as the world standard, America's going to be left 
behind if we don't create a real international standard.
    Mr. Aaron. You make a very good point because I think that 
one of the things that we have found, our general approach to 
standard-setting has been let's let the private sector sort 
this out, and the Europeans have tended to say let's pick a 
standard, and the result of that in many areas of the world has 
been that their standard has been adopted by other governments 
who have a kind of du registe notion of how government and the 
private sector should work together.
    One interesting example of this has been the debate over 
the third generation wireless standard. In other words, what is 
going to be the technology and the standards for your cell 
phones in the future generation, and literally billions of 
dollars have been riding on this. The Europeans have learned to 
create an exclusionary standard that would just be the European 
standard, but we took the position that the private sector 
should solve this.
    Ultimately what happened was that the Transatlantic 
Business Dialogue, this cooperative relationship that exists 
between government and the private sector, came up with a 
compromise. That compromise is now being adopted. Now, I think 
that the real answer to the kinds of process questions that you 
talked about is not just better U.S.-EU coordination, but U.S.-
EU coordination that pulls in the private sector, pulls in all 
the real various actors and gives us an opportunity to open up 
their process and make it much more responsive, and not only to 
public concerns, but also to market forces.
    Mr. Eizenstat. I would like, if I may, to amplify. First of 
all, there are a number of things we have done. Ambassador 
Aaron correctly mentions the work we have done on third 
generation wireless. When I first came to Brussels as 
Ambassador of the EU, we were dealing with the first and second 
generation. We had the same issue of a so-called ESI standard, 
a European standard, potentially being the sole standard, and 
by working in the Administration and the work that Ambassador 
Aaron and the State Department and others have done, we have 
now been able to open up those standards. What we tried to do 
both there and in the hush kit issue is move these to 
international bodies--in the case of wireless, to move them to 
the ITU, and in the case of hushkits, to move them to ICAO, the 
International Civil Aviation Organization--so that we don't 
have a European standard, we have an international standard.
    Next, one of the real pioneering efforts that we have done 
under the new Transatlantic Agenda is the negotiation of mutual 
recognition agreements. We completed seven of those in 1998. 
They will save American industry about $50 billion. They will 
save about $1 billion in trade, over $50 billion in products. 
This is a real savings, and the concept is that you test once 
in each other's market, and you don't have to have duplicative 
tests in terms of standards.
    Finally, is this early warning concept that both Ambassador 
Aaron and I have referred to. The whole concept is to try to 
avoid, Mr. Gejdenson, the development of unilateral standards 
in Europe that preempt the U.S. efforts. If we can nip these in 
the bud before they reach a political level, we can avoid a lot 
of heartache and a lot of tension.
    So we have a very clear strategy of moving as much as we 
can into the international bodies, like ITU and ICAO, of going 
toward MRAs and more and more products, and we hope to finish 
one in marine safety for this summit, which will save even more 
money for U.S. companies, and then to use our early warning 
mechanism.
    Mr. Gejdenson. Thank you.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman. Before 
I get into my questions, let me just say that I was just 
notified that the State Department, one full year after my 
request for documents concerning Afghanistan--and as you know, 
I have made a charge that the Administration has a covert 
policy of supporting the Taliban and requested documents to 
find out whether or not that charge had more substance than 
just the information that I had available to me. Six months 
after Madeline Albright had agreed to provide the documents 
that I requested, a full year after I requested them, 6 months 
after Madeline Albright agreed that she would provide them, at 
last the State Department is going to send over some of the 
documents starting at the end of this week.
    Let me just say, Mr. Secretary, that I would hope that in 
the future there would be a better good faith effort in working 
together with Members of Congress on issues. When we request 
documents like this and make a serious charge, as I did, I 
think that it behooves us not to stonewall or not to drag one's 
feet and just get it over with because my charge may or may not 
be correct, but we certainly deserve to have the documents. We 
are elected by the people to oversee what is going on in the 
State Department. So, with that, let me just thank you and hope 
that we proceed now as the documents get into my possession.
    You stated, Secretary Eizenstat, that the EU should help 
rebuild--to a greater degree the United States should rebuild 
in the Balkans because we bore a lion's share of the fighting. 
How much do you think that will cost us, and what do you think 
the cost is going to be for rebuilding? How much will it cost 
them? How much will it cost us, and how much have we spent so 
far?
    Mr. Eizenstat. Well, first, let me respond to your 
statement. I hope we can act expeditiously on document 
requests, and I am sorry that it has taken so long.
    Second, with respect to the reconstruction, if I may divide 
this into two segments. The first is the disadvantage to the 
front-line countries, Romania, Bulgaria, Macedonia, Albania, 
who have borne the brunt of accepting both refugees and the 
interruption of trade flows from the war. Congress is already 
in its supplemental appropriated sum of moneys for balance 
payment assistance, and we are examining now whether additional 
assistance will be necessary, and if so, how much. We do not 
yet have figures.
    Third, and quite apart from that, and yet it has to be 
integrated in the end, is Kosovo reconstruction. This is 
everything from reconstructing homes that have been destroyed 
by the Serbs, putting roofs on, restoring electricity grids, 
building homes, enabling the refugees to come back.
    There is, Mr. Rohrabacher, an EU-World Bank process that 
will take the lead in assessing costs for reconstruction. We 
will be part of that, but it is clearly understood by the EU 
that they will do the lion's share of both Kosovo 
reconstruction and the Southeast Europe frontline issue. The 
reason that I am not able to give you a figure now is because 
we literally are just within the last 24 to 48 hours getting on 
the ground in Kosovo. We have to assess the extent of the 
damage, and only when that is done will we be able to come up 
with a figure. We obviously know the Congress, and we 
ourselves, need that. We are working very carefully to try to 
construct that.
    Mr. Rohrabacher. What percentage do you think we should 
pay?
    Mr. Eizenstat. We don't at this point want to get into 
percentages. Let me simply say that as the President himself 
said on Memorial Day, we have borne the largest share of the 
burden militarily, and that the overwhelming amount of the 
reconstruction should be done by the Europeans.
    We will be working out percentages in the future. We don't 
have percentages now, but suffice it to say that the EU will 
assume, and wants to assume, the overwhelming share of the 
reconstruction costs. That is, however, to indicate that we 
also do wish to participate in that. We think we have an 
obligation, but it should be a minority share.
    Mr. Rohrabacher. One suggestion is that we should not be 
rebuilding Serbia until perhaps the Serbians have paid for 
their--or at least someone else has paid for their share of the 
damage that they caused in Kosovo. I think it would be kind of 
ironic to have the United States taxpayers end up paying for 
the liberation of Kosovo and at the same time pay for the 
rebuilding of those parts of Kosovo that were destroyed by the 
Serbs themselves. So I would hope that we would use some 
leverage in this rebuilding effort so that we don't end up 
rewarding the Serbs for the type of activities that they 
participated in.
    Mr. Eizenstat. I appreciate very much those sentiments. I 
want to indicate to you that there are existing sanctions on 
Serbia, both the so-called outerwall sanctions and more 
comprehensive sanctions that the U.S. has, and we believe that 
it is premature to phase those sanctions out when we do not 
know the attitude of Milosevic's regime to implementing the 
Kosovo settlement or to engaging constructively in reaching a 
political settlement on Kosovo autonomy. So we will maintain 
those sanctions during this period of time, and we are urging 
our European allies to do the same.
    Mr. Rohrabacher. Thank you.
    Mr. Aaron. Mr. Chairman, if I could just add one point. 
U.S. industry wants to participate in this reconstruction. I 
had over a hundred companies at a meeting last week at the 
Department of Commerce expressing interest in both the 
reconstruction and work in the frontline states as well as in 
Kosovo, but it is very important that even as the Europeans 
assume a greater economic burden for the reconstruction of 
Kosovo that they have to do that in a way that gives our 
companies equal opportunity to show what they can do to be 
effective in that region and not keep us out by tired aid 
programs as they often have in the past. We think we have 
earned the right to be full partners in the reconstruction of 
Kosovo.
    Mr. Rohrabacher. Thank you very much.
    Mr. Cooksey.--[Presiding.] Mr. Lantos.
    Mr. Lantos. Thank you very much, Mr. Chairman. I would like 
to react to some of the issues that have come up and then ask 
you to comment.
    First, I want to say a word on behalf of the Serbs. There 
are powerful democratic forces in Serbia which have been 
suppressed by this dictatorial Milosevic regime, and I think it 
would be singularly ill-advised and unfair for us to take it 
out on the Serb people the acts of their leadership. May I 
remind my colleague from California that at the end of the 
Second World War we led the way in providing vast humanitarian 
aid to Germany, and subsequently, we provided vast economic and 
reconstruction aid to a democratic Germany, even though Hitler 
was overwhelmingly responsible for the unbelievable human and 
material damage that occurred during the Second World War.
    So I think it is extremely important that we do not confuse 
the genuine and legitimate decency of the bulk of the Serbian 
people with this appalling and sickening dictatorial regime. I 
think it is also important for us to realize that in Europe 
there is an end of the--there is a light at the end of the 
tunnel, and the light at the end of the tunnel, of course, is 
the opportunity to join the European Union. This will be the 
most powerful magnet for the Serbian people to get rid of the 
Milosevic regime because, short of doing that, they haven't got 
a ghost of a chance, not only of getting economic aid but of 
joining the European Union.
    If one takes a historic view, gentlemen, of this process, 
the emancipation of Europe since the end of World War II came 
in two parts. The first part came right after the war with 
NATO, the Marshall Plan, and West Europe recovered. Since the 
collapse of the Soviet empire, 1990 broadly speaking, we have 
now seen the emancipation of the second half of Europe. First 
came the Central European countries, three of them now in NATO, 
and now we have reached the Balkans.
    Now, some might argue that mainstreaming the Balkans is an 
oxymoron because if anything cannot be mainstreamed it is the 
Balkans. I don't agree. I think the Balkans can be 
mainstreamed, and I think we have an enormous responsibility in 
doing so, not only for humanitarian reasons. As you pointed 
out, Ambassador Eizenstat, this is not a zero sum game. While 
in the short run we incur expenses, in the long run a 
prosperous stable and democratic group of nations in the 
Balkans will be a tremendous benefit to American industry and 
to American agriculture and to American high tech and to 
American companies in general.
    I would like to ask both of you a couple of questions about 
enlargement. I am delighted to see that following the defeat of 
Meciar, the quasi -fascist leader in Slovakia, Slovakia is now 
in the process of being considered part of enlargement, and I 
hope in time it will be considered for NATO. I am very much 
interested in finding out your comments about the attitude of 
the European Union with respect to both Turkey and Malta as the 
enlargement issue is concerned. It is self-evident that of the 
13 countries that had applied, Bulgaria, Cyprus, Czech 
Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, 
Romania, Slovakia, Slovenia and Turkey, all but these two are 
on track. Some will happen much sooner. Slovenia, Hungary, 
Estonia probably in the first round, Czech Republic. But there 
are some clouds over both Turkey and Malta.
    Since I am of the opinion that when Secretary Albright 
speaks about a Europe free and whole she includes these two 
countries, I think it is important we have your most candid and 
best assessment as to where the European Union is with respect 
to both Turkey and Malta.
    Mr. Eizenstat. Let me respond to your comments, and I think 
you, Mr. Rohrabacher, said it very well, but we all respect the 
enormous vision you have of Europe, and we take very seriously 
all your comments with which we almost always agree.
    With respect to Serbia, we certainly have never attacked 
the Serbian people and we have always tried to make it clear, 
and we continue to make it clear, that our disagreements are 
with Milosevic, not with the people of Serbia. At the same 
time, in terms of the analogy, we did in fact pour aid into 
Germany, but it was a Germany in which Hitler had died and 
which democracy had taken over, and Milosevic remains in power 
and we don't even know, let alone a democracy, whether there 
will be a full implementation of the Kosovo settlement. We 
think that it is important to keep sanctions on to encourage 
the FRY and Serbian governments to do the right things, 
including the full implementation of a political settlement 
with Kosovo.
    Mr. Lantos. I fully agree with that.
    Mr. Eizenstat. Second, with respect to the Balkans, I 
couldn't agree more. I think that the Balkans can and indeed 
must be incorporated into the mainstream of Europe or we will 
face continued conflicts in the 21st Century. What the 
President and Secretary of State, Secretary Daley and others 
have emphasized is the critical importance of making sure that 
we have created, after the conflict, the kind of economic 
conditions which provide them an equity in Europe, and the 
whole process that we will be working on with the European 
Union, with the World Bank and others, is designed to give them 
a stake and to make it clear that they have a future in and are 
not separated from Europe.
    In fact, the studies we have done, Mr. Chairman, indicate 
that there are two ways to go about this. One is to reduce 
intra-Balkan barriers to trade of which there are very few. But 
even more promising is the incorporation of those countries 
into the EU process, not necessarily immediately as members, 
but in terms of trade relationships and trade integration.
    Third, with respect to your question on enlargement, the 
fact is that of the 13 countries that have applied, six are in 
the first wave, Cyprus, the Czech Republic, Estonia, Hungary, 
Poland and Slovenia. Five others are in an initial screening 
stage, Bulgaria, Latvia, Lithuania, Romania and Slovakia. 
Countries can move into different tranches if they show greater 
progress, if Slovakia were, for example, to do so.
    With respect to Turkey, this is an area where we have had 
differences with the European Union for a number of years. 
Turkey actually has the longest standing application for 
membership, going back to the 1960's. Turkey is a European 
country. It wishes to be a secular country. It is important 
that it be given as much opportunity to enter into the European 
Union as other countries. It obviously has to meet the same 
standards, but it ought to be given that opportunity, and we 
have encouraged the European Union to do so, and we hope they 
will.
    Malta has reactivated its application for membership to the 
EU. The EU has not yet made a formal decision on that, but 
again, we think that the more countries that can meet the 
standards of the EU the better, and the safer and more secure 
and more prosperous Europe will be.
    Mr. Lantos. Mr. Chairman, I know my time is up, but may I 
just make one quick observation?
    Mr. Cooksey. Yes.
    Mr. Lantos. And perhaps invite a response. We are talking 
about dividing the cost of immediate assistance and 
reconstruction between the European Union and the United 
States. I am sure this is not an exclusive list, and I 
personally would like to see maximum political pressure applied 
to the European neutrals who have contributed nothing to the 
military effort so that they will contribute all the more to 
the economic efforts, Sweden, Switzerland, Austria, and others. 
I also would like to ask you about the contribution of both the 
wealthy Arab states which are particularly well suited to 
support Kosovo's rebuilding, which is an overwhelmingly Muslim 
area, and the participation of Japan in this effort.
    Mr. Eizenstat. It is an excellent point, Congressman 
Lantos, and let me assure you, we will earnestly seek that, and 
there will be a formula for that. For example, there are likely 
to be several donor conferences, perhaps even one this summer, 
that will be called for purposes of immediate assistance, 
short-term assistance for Kosovo, to help refugee resettlement, 
and perhaps a longer term donor conference that will be held in 
the fall to deal both with longer term needs of Kosovo and the 
needs of the front line countries.
    Now, the precise sequencing and timing is still up in the 
air, but clearly there will be donor conferences, and we will 
do everything possible to see to it that Japan, the European 
neutrals who are not part of the EU and not even part of NATO, 
and Muslim countries participate. Japan has already indicated a 
$200 million contribution for refugee resettlement which we 
think is a good start, and so we think that sharing this burden 
ought to be disbursed as widely as possible. Your point is very 
well taken, and we will very much encourage those countries to 
participate in the donor process.
    Mr. Lantos. Thank you very much.
    Mr. Cooksey. First, I want to tell you how much I 
personally appreciate your being in front of this Committee, 
and I do respect your academic credentials and most importantly 
your experience in this area. Some of my colleagues sometimes 
disagree on policy, but I would hope it is not personality.
    Tracking along Mr. Lantos' line of questioning, I would 
really like to direct this question to you, Secretary Aaron. Is 
it possible, or can there be a formula for this reconstruction 
of Kosovo, and I assume some reconstruction efforts in 
Yugoslavia, so that U.S. companies can have a proportion of the 
contracts equal to the proportion that the American tax payers 
pay for this? Is that possible?
    Mr. Aaron. Well, I think, Mr. Chairman, we would be really 
happy if we just had an open, untied process here. Money for 
relief is growing scarce in the world. There was a donor 
conference just a few weeks ago in Stockholm for the relief 
victims for Hurricane Mitch at which over $6 billion was 
pledged. Now we are going to have donor conferences on 
reconstructing this area. This money has to be spent in the 
most efficient way, and in our view this money should be 
untied. There ought to be fair competition, there ought to be 
transparent rules, and we ought to go at it in the most 
efficient way. Let the market do this, and we will be satisfied 
with the outcome.
    Mr. Cooksey. That is a good answer, a good economic answer, 
and I agree with that.
    Secretary Eizenstat. Yes, sir.
    Mr. Cooksey. The EU's continued heavy subsidies for 
agriculture are, in my opinion, a denial of the realities of 
information technology, biotechnology, and globalization. Do 
you feel like this is a reflection of the personal views of the 
statesmen, the European statesmen, or is it a----
    Mr. Eizenstat. I would like to be very direct on the 
subsidy issue for agriculture, having lived over there for a 
couple of years, as did David a little way down the road.
    First of all, it is important to understand that Germany, 
which was and is the residency country of this 6 month period, 
made a tremendous effort within the last several weeks to have 
a major reduction in what they call the agenda 2000 exercise, 
that is, their next 6 year budget, to substantially reduce 
agricultural export subsidies in the EU and internal price 
supports and break the link between production and prices. 
There are many countries in the EU, if I may say so, I think a 
majority, who would have supported that. But there are a number 
of countries, France being one of them, that latch on to these 
subsidies as something very important.
    Second, and here is where I want to try to be a little bit 
philosophical, as much as we disagree with, and Lord knows we 
do, and we put every effort into eliminating this tremendous 
disadvantage--we think it burdens our farmers, it burdens our 
tax payers, it burdens developing countries--there is a social 
component to those countries which continue to latch on to 
these heavy and, I believe, unsustainable subsidies. I don't 
believe they will be able to sustain them over time. It costs 
too much, $50 billion. They will never be able to do the 
enlargement with this process unless it changes. But there is a 
social component, and that is, they want to keep farmers on the 
farm. They don't want them immigrating into urban areas, and 
this is one of the social aspects that makes it difficult to 
follow the logical economic consequence of the way the world is 
changing.
    I believe, over time, that the economic logic is so 
compelling, the budget costs so overwhelming, and the 
disadvantage to enlargement so compelling, that we will get 
reform in this process. I also hope that the WTO process, as we 
inaugurate the ministerial efforts in November, where one of 
our key priorities, our overall priorities, is reducing these 
subsidies, will be successful in getting the EU to further 
reduce their subsidies.
    Mr. Aaron. Can I make a comment on this as well? When I 
first arrived in Europe 5 years ago, we were in the middle of 
this battle on agriculture in the WTO or in the GATT, and a 
European who supported our position said something to me--``you 
have to understand something, we have been cultivating this 
land for 2,000 years, and when you ask a European to imagine an 
ideal landscape, he doesn't picture a wilderness.''
    So this social point that Stuart just made is a very 
important one, but the irony is the OECD has demonstrated 
conclusively that less than half of the people in the rural 
areas of Europe get their income from agriculture, and those 
that do get less than half their income from agriculture. So 
you really have a decreasing and declining part of this rural 
economy having anything to do with agriculture, and they have 
to find other ways now to support the kind of landscape they 
want to preserve rather than simply supporting these kinds of 
unjustifiable subsidies.
    Mr. Cooksey. Mr. Pomeroy and I are both on the Agricultural 
Committee. I am going to yield any of my time that I might have 
left to him, but I was really struck by your comment, Mr. 
Eizenstat, that you stated almost half, $50.5 billion of the 
EUs 1990 budget, is earmarked for agriculture. That is a 
travesty.
    Mr. Pomeroy.
    Mr. Pomeroy. I thank the Chairman for yielding. Sanctions 
are up on the floor. I have to depart, but there was a point I 
wanted to make directly on this issue. There is a social 
dimension to their incredible subsidy structure for 
agriculture. There is a cultural dimension to their incredible 
food-safety angst, but both serve their economic interests 
against ours, and so as you mentioned earlier, Secretary Aaron, 
it can wrap around a pure protectionism, these social or 
cultural issues. I believe we have to do a much better job of 
establishing cross linkages that make them pay for the social 
and cultural. For example, I know that they are about to take a 
run--and I value Europe. I have lived in Europe. I have an 
affinity for the people there, and they are an extraordinarily 
important partner of ours, economically, and every other way. 
So it is with a fondness that I say this.
    But they are going to come after our insurance marketplace, 
and they will assert that State regulation of insurance is a 
barrier to entry, and I look for that to be raised with vigor 
even next year. I believe that these are the kinds of cross 
linkages we have to establish, cross sectors, so that we place 
maximum pressure on them over the long haul and we make them 
bear proper expense to what they are costing our country, and 
our agriculture in particular, due to these social and cultural 
issues that, quite frankly, can't be really bargained away. I 
mean, they are going to be a long time resolving, working our 
way through those, but in the meantime they ought to be paying 
a hefty price for it.
    Mr. Eizenstat. I think your point is well taken. Let me be 
very brief on this so you can go to the floor. If they want to 
have a farm policy with social implications, they have no basis 
to shift those social costs to us. Let them put in a huge 
direct payment. If they want to spend half their budget on 
direct payments that is their business. What is our business is 
when they do it in a way through export subsidies and very high 
internal subsidies that shift the costs to our taxpayers and to 
our farmers. That is what is unacceptable.
    Mr. Pomeroy. That is precisely correct. We can do better 
than we have done, I believe, in asserting that point.
    Mr. Cooksey. Mr. Menendez.
    Mr. Menendez. Thank you, Mr. Chairman.
    Mr. Secretary and Mr. Ambassador, thank you both for your 
service to our country, and I appreciate your testimony today. 
I want to direct my questions to Secretary Eizenstat, if I may. 
I am with you on your goals of getting the EU to be in 
compliance with us and on some of the issues that we have 
chosen to pursue on banana and hormone treated beef cases.
    However, I have a caveat, and I am wondering whether the 
Administration has thought at all in terms of the impact of the 
retaliatory tariffs on small American businesses. I understand 
the need to do the retaliatory measures, but I am particularly 
concerned about the impact on the small businesses that only 
import two or three items and cannot withstand or survive the 
long-term economic consequences of those retaliatory 
provisions. I am wondering, as we look at what seems to be an 
escalating trend in economic retaliation, are we looking at the 
impact and at any type of a carve out for small business that 
may only have a handful of items that they import and for which 
we, in essence, could crush them by virtue of the retaliatory 
measures versus the larger companies that have a 
diversification and who can better withstand the actions and 
have the ability to deal with some of the retaliatory measures 
and consequences here domestically?
    Mr. Eizenstat. I will respond to that, and I am sure 
Ambassador Aaron will want to supplement it. First of all, in 
all of the disputes that we have, we make every effort to 
negotiate settlements, whether it is bananas or beef or 
hushkits, so that we don't have to retaliate. In every single 
effort, we bend over backwards to avoid having to do 
retaliation, and we do retaliation only when we have no other 
option available. With respect to, for example, beef hormones, 
we have not actually retaliated. We simply requested a damage 
amount, and we hope that the EU will negotiate an acceptable 
regime which will allow market access for our beef.
    Second, when we do retaliate, we go through a very 
exhaustive process, and the interagency 301 process allows for 
public comment. We try to exclude those products which would 
have a disproportionately negative effect on U.S. employment, 
on the U.S. economy, on small businesses that have difficulty 
adjusting, and so those companies have the ability to tell us 
that the retaliation may end up disadvantaging them. That is 
something that we try to take into account when we do our 
retaliation, if and when we have to retaliate.
    So, first, we try to avoid it and we try to get a 
negotiated settlement. That is what we are doing with bananas. 
That is what we are trying to do with beef. Second, there is a 
process for public comment, and those are taken seriously. We 
do try to factor in the impacts on domestic companies and on 
small businesses.
    Mr. Menendez. Just before Ambassador Aaron answers so you 
can include it hopefully in your answer. Many of the companies 
that I have heard from in my district, and that I have spoken 
about with some of my colleagues in the House who face similar 
circumstances did make, either through their associations or 
individually, their testimony known, yet they are still 
suffering under the consequences of the measures and some of 
them, as they speak to me, seem to have not a long lifespan 
left if we continue these measures for any significant amount 
of time. Ambassador.
    Mr. Aaron. Let me just say I think that as Secretary 
Eizenstat has indicated, the retaliation list for the beef 
hormones is still under consideration, and the final list has 
not been solidified. So that the concerns of the small 
companies that may be affected by this, we really need to pull 
to the fore, and I will guarantee you that our participation in 
this and our responsibility for small and medium-sized 
businesses are such that we will take active interest in trying 
to defend the interests of small businesses that might be----
    Mr. Menendez. But there are already a list of items that 
have been listed for the banana case.
    Mr. Aaron. Yes, there are.
    Mr. Menendez. I am speaking to those items already that 
several companies in my own congressional district have come to 
me and said look, we are not large importers of a variety of 
products, we only have a couple, and the couple that we have 
happen to be on the list. So it just seems to me that the bulk 
of what we try to do can be accomplished while creating some 
minor carve out for some of these small, and I underline that 
again, small businesses. Moreover, we can control that they 
don't become an escape hatch to your measures by limiting their 
imports to what they imported the previous year, and I would 
really urge that the Administration consider such a measure.
    Mr. Aaron. You make a very good point, and we will consider 
it. I would just like to say, if I may, Congressman, this is 
not a final list. Even though it is published, it is not a 
final list. We are still taking comments, we are still 
considering comments. So we would be particularly interested in 
knowing which of your companies could be affected.
    Mr. Menendez. That is on beef, but I understand that the 
other one is finalized, and that is the one I am referring to.
    Mr. Aaron. I am hopeful that we are now in the midst of 
negotiations with the EU on what we hope will be a WTO 
consistent regime on bananas. If we can reach it, that would 
obviate the need for retaliation.
    Mr. Menendez. Last, in a somewhat indirect issue, I would 
like to refer again to Secretary Eizenstat. As you know, I and 
the Ranking Democrat of this Committee and other Members have 
pursued, with reference to sanctions, the Administration's 
proposal on Sudan, which I generally support. The question of 
gum arabic. It is a very unique product. It is only produced in 
about two or three places in the entire world. It is an 
emulsifier that particularly is used in certain cases by the 
pharmaceutical industry for drugs here in this country, 
prescription drugs. It is used as a unique product that is not 
substitutable, and it seems to me that what we are doing in 
this particular case, unless we carve out somewhat of an 
exception or give some licensing provisions, is to hand over an 
American industry. Since the imposition of the sanctions the 
price for gum arabic has risen by 40 percent, the French have 
come in and purchased all of the contracts in Chad and the 
other locations. They are going to make a killing.
    They are going to resell it to us. The Sudanese are going 
to get more money, not less, as a result of the sanctions, and 
we will have undermined the very nature of the type of 
consequence that we want to provide.
    As you know, I am more likely than not to be a supporter of 
using sanctions as a way in which to promote peaceful 
diplomacy, but I would like to know what your position is on 
this, and do you not think that this is one case in which, 
because of the uniqueness of the product, we are actually not 
helping our policy; we are hindering it?
    Mr. Eizenstat. First, you have been a very strong and 
effective champion of this issue, and as you remember when you 
talked to me and others last year, we issued two licenses to 
allow limited imports of gum arabic from Sudan. In the first 
case, to allow a shipment that had already been shipped to 
enter the United States, and in the second to permit entry into 
the U.S. of gum arabic which had already been contracted for 
prior to the embargo.
    We are now facing a situation where we have to consider 
this again, and we understand very much the arguments you have 
made. We also have to balance that against the need to maintain 
our pressure on Sudan in response to that country's continued 
unacceptable behavior, and I can assure you that your concerns 
will be taken very seriously. We have not made any decisions. 
It is a very difficult decision, and we will certainly fully 
take into account your concerns as we must the need to maintain 
pressure on Sudan.
    Mr. Menendez. Mr. Chairman, one brief follow-up question, 
and I thank you for your indulgence. Can we agree to this, can 
we agree that the market reality is such that the prices have 
increased by more than 40 percent and that the French are out 
there aggressively taking all of these contracts or all of the 
products?
    Mr. Eizenstat. Factually, the French have made every effort 
to corner the market. They have bought much of the production, 
perhaps all of the production from the Sudan, and it is 
possible too that will require U.S. companies to go through the 
French for this product.
    That appears to be factually the case, but that is one of 
the things we are looking at. We want to verify that and make 
certain that is the case. We also have to look at what 
alternatives, if any, exist in terms of the quality of the gum 
arabic that is available from Chad and other countries. So 
there are a lot of factors to take into account, but you are 
quite right, the French appear to be making an effort, we have 
to determine how successful, to corner the market.
    Mr. Menendez. Last, is it my understanding that there is 
nothing under the sanctions regime as it relates to the Sudan 
that would prohibit a United States company from buying the 
French product of the gum arabic?
    Mr. Eizenstat. At this point, I think that is correct.
    Mr. Menendez. Thank you.
    Mr. Cooksey. Mr. Burr.
    Mr. Burr. Secretary Aaron, let me move to one thing. Is 
there a structure for this early warning system? Is that a 
formalized plan?
    Mr. Aaron. There has not yet been created a formal body to 
do this job. That really lies in the future.
    Mr. Burr. But structurally you know how it should operate 
now?
    Mr. Aaron. What has been established are a set of 
principles, and really, the senior level group, and I would 
like Secretary Eizenstat to comment on this, they created a 
process by which these issues can come forward.
    Mr. Burr. Let me ask you this, under that concept that both 
of you see, what signals would go off now as it relates to 
agriculture and the EU changing from where they currently are? 
Would buzzers go off under this early warning system right now?
    Mr. Aaron. That is already a red light that is sort of 
flashing both in terms of subsidies and all of that. So that is 
well understood. What this process would do would be to 
identify, let's say there is some new regulation that is 
proposed that would be harmful to trade, or there is a new 
initiative on standards or something of that, something that we 
hadn't already known about.
    Mr. Burr. We believed that when the EU got back together 
that they were going to reverse themselves on some of their 
agricultural subsidies. They came consequently out of that 
meeting and actually gave in a little bit more to additional 
subsidies, and I am asking under this proposal of an early 
warning system, would we have seen that coming? Would we have 
seen, in fact, not them coming to us but them going farther 
away from what we wanted?
    Mr. Aaron. In this particular situation, I think we are 
talking about sort of two different classes of objects here. As 
far as this agricultural thing is concerned, I don't think the 
Europeans themselves knew how they were going to come out of 
the room when they were trying to do this Agenda 2000 deal on 
agriculture. Once they came out we knew about it immediately. 
It is certainly on our list before the WTO and for the 
negotiations that we believe have to take place now on 
agriculture.
    I think what the early warning system is going to look like 
is, you know, different bodies inside the European Union, 
different Committees in the European Parliament, different 
national laws that may be contemplated or procedures that all 
of the sudden are put into place that blind side us, that have 
an impact. It is really those things that are kind of below the 
level of vision than something big like this agricultural thing 
that nonetheless start out as a cloud no bigger than a man's 
hand but then become an enormous storm. It is really that kind 
of thing that this early warning system is going to be focused 
on.
    Mr. Eizenstat. If I may, Congressman, just to reinforce 
what Ambassador Aaron said. First of all, it will work under 
the auspices of the senior level group. Second, a perfect 
example of how the early warning system could have worked if it 
had been in place is with respect to the hushkits issue that 
Ambassador Aaron worked on and that Congressman Gejdenson 
mentioned. The reason for that is that this came up through one 
part of the European Commission without other parts, 
particularly the trade and U.S. relations part, even knowing 
about it. If we had the early warning system in place, it would 
have alerted others within the EU that this was going to cause 
a real friction point with the United States
    So it is those kinds of issues, getting them before they 
bubble up and become formal decisions, that we want to try to 
nip in the bud.
    Mr. Burr. Secretary Eizenstat, let me ask you about the 
mutual recognition agreement. There was a lot of controversy as 
to whether the Food and Drug Administration would accept the 
European standards. Where are we on that agreement or 
disagreement now?
    Mr. Eizenstat. It is a good question. First, Congressman, 
we reached agreement in about seven industrial sectors on 
mutual recognition, and in the industrial areas it is much 
easier to simply have one test where we accept each other's 
test. We were not able to do that in the pharmaceutical area, 
in part because our FDA was unwilling to accept the tests from 
certain of the European Union countries, not believing they 
came up to our level. So we have established best laboratory 
practices for pharmaceuticals where we will try to identify 
labs in Europe where, over time, the FDA will have such 
confidence, and then we can move to a more formal MRA 
structure. So we are not there yet.
    We also had an issue, which you have taken an interest in, 
and that is, we call it the SRM ban. This was with respect to a 
type of pharmaceutical. It would have prevented the use in 
pharmaceuticals and in other products, particularly in 
pharmaceuticals, of certain bone marrow from cattle, and if it 
had been put in place, it would have banned large amounts of 
our pharmaceutical exports. Fortunately, we have been able to 
postpone that. We are trying to work through our Transatlantic 
Business Dialogue and other processes to come to an agreement 
on how to handle those. So I would say, frankly, 
pharmaceuticals have lagged behind other products in terms of 
MRAs, and we are really now just looking at good lab practices.
    Mr. Burr. Let me ask you just in conclusion, we have just 
had a case of the inspection program on food safety where I 
think we have made the decision not to accept Belgium eggs. Let 
me ask you to comment, if you would, relative to their 
inspection standard there. Did they catch it? Did we catch it? 
Who saw the problem first, and what does that say about their 
inspection process?
    Mr. Eizenstat. It was not initially captured through, but 
then it subsequently was by their own processes, both within 
Belgium and then within the EU. They had a similar situation 
with some of our hormone-free beef where they found traces of, 
they said, of hormones, and just within the last 24 hours they 
have now said that they are prepared to lift that ban, given 
certain assurances that we have had.
    Following the Belgian government's announcement in late May 
that elevated dioxin levels had been detected in animal feed 
and poultry products as a result of dioxin contamination of 
fat, our Department of Agriculture and our FDA took the action 
to minimize any risk of importing it. So the Belgian government 
did find the initial levels that led us to act. We announced on 
June 3 that we would hold all poultry and pork products from 
the European Union countries pending certification that the 
products are not contaminated.
    Then on June 4, our FDA instructed food inspectors to 
request documentation that Belgian processed food products 
containing eggs, and Belgian, French, and Dutch animal feed 
products were not from contaminated sources.
    More recently, on June 11, the FDA revised its earlier 
action to require the inspectors to detain eggs and egg-
containing products from Belgium, as well as certain animal 
feed products. These detained products can't be released until 
the importer provides lab test results indicating that the 
products are not contaminated.
    So we have taken these as a precaution. Both agencies are 
continuing to review the records of European products imported 
since January to determine if there are any additional measures 
that are needed, and we are working closely with Belgian 
officials to identify the extent of the possible contamination.
    Mr. Burr. I thank our witnesses. I would yield back, Mr. 
Chairman.
    Mr. Cooksey. Mr. Faleomavaega.
    Mr. Faleomavaega. Thank you, Mr. Chairman.
    Gentlemen, I do want to echo the sentiments expressed 
earlier by the gentleman from New Jersey to thank you for the 
tremendous services that you are rendering for our country in 
the positions of leadership that you currently hold within the 
State Department. I have a couple of questions.
    It is my recollection that it costs approximately $250,000 
to $300,000 to put these hushkits in these commercial airlines, 
as I understand, required by Federal law, and I am somewhat 
amused by the fact that now the Europeans are putting a little 
pressure on us that they think that these hushkits are not 
necessary as far as they are concerned.
    Of course, it is an environmental issue in our country, and 
I am curious the fact that the irony of this issue of hushkits 
is that it is not required on military aircrafts. If you ever 
have a chance to go to Andrews Air Force Base, and a lot of 
these residential areas near that area, because these jet air 
crafts don't have hushkits, I just wanted to get a comment from 
you, if we see somewhat of a contradictory policy here.
    We required hushkits for our commercial airlines, but not 
for military aircrafts, and yet they probably do more damage or 
some of the environmental problems that we are concerned with, 
and we are making this requirement to commercial airlines in 
Europe, and they are balking at us. Can you see how we are 
going to settle this problem in an international arena of 
arbitration?
    Mr. Aaron. Basically, what has happened is this. At the 
ICAO we agreed on new noise standards, and we allowed companies 
and airlines to come to their own solution as to how we reach 
these new what are called stage three noise standards. Now, one 
of the ways to do that for older airplanes that made more noise 
was to put hushkits on them. The other is to re-engine the 
aircraft. A third way is to just buy a new aircraft that has 
been designed to be quieter.
    What the Europeans basically said was even though these 
aircrafts are going to meet the new noise standards we don't 
want them, we don't want that, we want new airplanes. Why do 
they want new airplanes? Because they know 50 percent of all 
the new airplanes that are bought in the world are bought from 
Airbus, as opposed to 100 percent of the hushkits which are 
bought from the United States. I mean, it doesn't take a genius 
to know exactly what was behind this from a trade and 
protectionism point of view.
    Now, as to the issue of military aircraft. They have been 
set aside under ICAO, I think, for some time, and it is true, 
it is as true in Europe for their military aircraft as it is 
for ours.
    Mr. Faleomavaega. Mr. Secretary, both of you can answer 
this. You had indicated earlier about the process of how we may 
go about financing the reconstruction of Kosovo, but I have not 
heard anything about Belgrade. I think we have done more damage 
to Belgrade. Given the current negotiations, I am just curious, 
has there been any discussion about the reconstruction effort 
in Belgrade if and whenever at that point it should arise?
    Mr. Eizenstat. Well, Mr. Milosevic brought about the damage 
to Belgrade by his own policies.
    With respect to any reconstruction, a democratic-tolerant 
Serbia would certainly be an important part of the whole 
reconstruction effort, but that is a Serbia we do not have, 
under Milosevic and we don't think that they are entitled to 
reconstruction assistance when he continues, not even--we don't 
even know if he will fully implement the Kosovo settlement.
    Mr. Faleomavaega. So it is basically the policy of the 
Administration, as long as Milosevic is in power, we cannot 
count on any assistance from our nation as far as any 
reconstruction of Belgrade in terms of the damage that we have 
done?
    Mr. Eizenstat. As long as he maintains his current posture, 
and we will have to see over time how Serbia changes, but he is 
an indicted war criminal, and that has to be taken into 
account. He is heading that government. So it certainly would 
make it very difficult for us to provide assistance to that 
government. Now, in terms of basic human needs, that is 
something that we will have to look at over a longer term. But 
certainly, in terms of reconstruction, to someone who is an 
indicted war criminal, that would not be part of our policy.
    Mr. Faleomavaega. You have basically discussed about the 
economic wonders in terms of our dealings with Western Europe, 
but where are we now with Eastern Europe, the 15 new Eastern 
European nations that have now become part of the free world? 
Are these struggling, or are we having a lot of help from the 
Western European nations?
    Mr. Manzullo.--[Presiding.] We are running pretty late, and 
I really would like to get the next panel up here, if you 
wouldn't mind.
    Mr. Faleomavaega. Mr. Chairman, I have been here very 
patiently, and other Members have gone way beyond the five 
minutes.
    Mr. Manzullo. If you could answer the question.
    Mr. Eizenstat. I will be glad to. First, Congressman, the 
European Union, between now and 2006, will be putting in the 
equivalent of about $80 billion to those countries. That will 
be, in 1999 dollars, equivalent to what the U.S. spent on the 
Marshall Plan. So there will be a massive effort by the 
European Union to bring these countries up in their economic 
development.
    Second, almost all have strong, functioning, sustainable 
democracies which are tolerant. A number of the countries have 
settled their ethnic disputes, for example, the ethnic 
Hungarians. The attraction of European Union membership is an 
important magnet to encourage democracy, tolerance, and free 
markets.
    In terms of their economy, while some are still struggling, 
like for example Bulgaria and Romania, many are doing quite 
well. Poland, for example, has done remarkably well when one 
considers how close it is to Russia, and the difficulties 
Russia has had economically. Through very good economic 
management, Poland has avoided the sort of Asian and Russian 
contagion problem, and countries like the Czech Republic and 
Hungary and Poland and many others are doing fairly well and 
have avoided problems, but they have a long way to go. They are 
still well below per capita income levels of the 15 EU 
countries, and it will take many years and much effort for them 
to come up to those EU levels.
    Mr. Aaron. Let me make one point, too. It is important to 
recognize that our interests in that area are fundamentally 
strategic and political, because if you look at the economic 
picture what our trade relationship, for example, to Eastern 
Europe is in Russia and all of the former Soviet Union, if you 
put it all together, is not as big as our trading relationship 
to the five countries of Central America, countries that for 
the most part we neglect in a lot of our policy considerations. 
So from an economic standpoint we have to realize that as 
important as these countries may be to us politically and 
strategically, we have to focus sometimes on our own backyard.
    Mr. Eizenstat. Although Ambassador Aaron is right, the EU 
is naturally going to be the biggest trading partner, it is 
important to realize that we are the largest investment partner 
in terms of the amount of investment. We tend, in Poland and 
many of the countries in central Europe, to be larger than any 
other single European country in terms of actual investment.
    Mr. Faleomavaega. Thank you, gentlemen.
    Mr. Manzullo. I don't have any questions. Congressman 
Faleomavaega, if you had a burning question, I would be glad to 
yield.
    Mr. Faleomavaega. I do have one burning question, Mr. 
Chairman.
    Mr. Manzullo. Please go ahead.
    Mr. Faleomavaega. I am sorry. Thank you, Mr. Chairman.
    Gentlemen, we have come to the point now in looking at what 
we have done in our efforts, and clearly this ethnic cleansing, 
the atrocities committed by the Milosevic regime, I call it 
atrocities because these are not acts of war. They are murders 
and rapes, abuses, tortures. We know this because of the 
tremendous conscience that European nations have gotten to bear 
after the Nazi regime advanced by Hitler and the Arianism and 
all of that sort and coming out about ethnic cleansing, and my 
question about it--2 million people were murdered in Cambodia 
by Pol Pot, they have got their problems in Rwanda and in 
Africa.
    My only question is that because NATO has been the basis of 
stabilization in Europe, do you, gentlemen, see also the need 
that we should create NATOs in Asia, in Africa, in the Western 
Hemisphere? Because the United Nations is totally unable to 
perform the mission that NATO is currently having to do in 
Yugoslavia.
    Mr. Eizenstat. I think it is important that the countries 
of some of these regions, like the African countries in the 
OAU, develop the operational capacity to stop slaughters which 
have occurred as in Burundi and Rwanda. We can't make the 
perfect enemy the good and suggest that because we have been 
able to be successful in Kosovo that somehow we are to blame 
for not stopping similar atrocities in Cambodia or in Africa. 
It is important for those countries to organize themselves as 
the European countries and the U.S. have done in NATO, to take 
action on their own, and if that had been done and if there had 
been more affirmative action that could help.
    Now, there have been efforts, for example, Nigeria is 
playing a very constructive role in terms of its efforts for 
peacekeeping through Ecolas process in Western Africa. Those 
kinds of processes are very important and can play a very 
important role. The U.N. does have a role to play, and I think 
that it is important that it be a more efficient and effective 
role to intervene earlier when these kinds of mass slaughters 
have occurred. We have had too much of that in the 20th 
century, and I hope that we have learned the lessons as we 
enter into a new millennium that we need more effective 
mechanisms to intervene earlier to prevent this kind of 
slaughter wherever it occurs.
    Mr. Faleomavaega. Thank you, Mr. Chairman. Thank you, 
gentlemen.
    Mr. Burr. Mr. Chairman, would the Chairman be willing to 
yield for one or two questions, since we will be leaving for a 
series of votes?
    Mr. Manzullo. Let me give this direction. As soon as you 
are done with that we have to vote. I would like to recess for 
about 20 minutes and instruct the staff to set up the tables so 
as soon as we get back we can start in again.
    Mr. Eizenstat. Mr. Chairman, may we be excused at that 
point?
    Mr. Manzullo. Absolutely. You are excused. Undersecretary 
Aaron, I think I missed you three times in my office, even once 
last week. This is the fifth time I have stood you up, but I 
agree with you in principle on 99.9 percent of everything. So 
forgive me.
    Mr. Burr, you have a question? Was that the second bell or 
first bell?
    Mr. Burr. That was the first bell of a series of two votes 
so we may be longer than 20 minutes.
    Mr. Manzullo. You can go to the second bell, and then I 
will hammer you down.
    Mr. Burr. Let me ask you, Secretary Eizenstat, what is the 
likelihood, short term, that the agriculture subsidy policies 
in the EU will change? First part of the question. Second part 
is, as they look at the addition of new countries, Czech 
Republic, others, who have a significant need in their own 
agricultural population, what is going to be the pressure there 
to extend subsidies upon their entry?
    Mr. Eizenstat. I would say, frankly, in terms of short-term 
change, they had their chance a couple of months ago when the 
German presidency tried their best to push through some real 
reductions in subsidies. They failed. So I would think, 
frankly, in the short term their chances are nil. However, I 
think in the medium term, over the next 3 to 5 years, they are 
much better for the following reasons, one of which you have 
clearly alluded to, but I would like to mention both.
    The first is on enlargement. It is not economically 
sustainable for the EU to bring in Poland, for example, which 
is a huge agricultural country, almost a third of the people 
are employed on the farm in Poland and some of the other 
countries of Central Europe. Under the current structure of 
subsidies, it would so bust the budget and their own budget 
caps that they put in just a couple of months ago that there is 
simply no way to do it without in a marked way revising their 
common agricultural policy. They simply can't afford the 
enlargement.
    So they will have a collision between incorporating these 
countries in say 2002, 2003, or 2004 and a budget that simply 
won't be able to sustain it.
    Second, I do believe that the WTO talks, which will 
commence in Seattle, give us the vehicle, the external vehicle, 
for the EU to make the changes they have to make internally to 
accommodate the enlargement. Just as happened in the Uruguay 
round, although they were insufficient, we cut export subsidies 
by about 20 percent. There were some more modest changes in 
internal subsidies. I believe that the WTO talks will lead to 
further reductions in subsidies, and this indeed is one of our 
very, very top priorities as we go into the WTO ministerial.
    So I hope the combination of the WTO talks and the 
pressures of enlargement will begin to reduce substantially and 
radically what I think are very trade distorting, very 
expensive subsidies.
    Mr. Burr. I thank you and yield back.
    Mr. Manzullo. We want to thank Undersecretary Eizenstat and 
Undersecretary Aaron for coming to the meeting today. We will 
get together some time in the future on it, and this Committee 
will be recessed for about 25 minutes.
    [Recess.]
    Mr. Manzullo. We are going to reconvene the second panel. 
Mr. Berry, since you are the first one here, you will have the 
opportunity to be the first one to speak. Bill Berry is the 
President of the European-American Business Council located 
here in Washington, where he has led the Council in a variety 
of positions concerning international trade, investment and 
finance issues. Before joining the Council in 1992, he led 
several national and State organizations involved in 
international trade.
    Bob Robeson is Vice President of Civil Aviation of the 
Aerospace Industries Association of America. It is the trade 
association representing leading U.S. manufacturers of 
aerospace equipment. Prior to joining the AIA in 1998, he held 
a number of positions in government, including Senior Economist 
for European Community Affairs in the Department of Commerce.
    Steve Weber is current President of the Maryland Farm 
Bureau, and a graduate of the University of Baltimore with a 
Bachelor of Science degree in Business Management. He has 
served as President to the Maryland Roadside Market Association 
and sat on the Baltimore County Development Commission.
    Mr. Manzullo. Mr. Berry, you are first up.
    What I would like to do is try to limit the testimony of 
each of the witnesses to 5 minutes. If you want to read, that 
is fine. I prefer that you paraphrase as long as your 
presentation is something with which you feel comfortable. 
Please.

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

    Mr. Berry. Thank you, Mr. Chairman. I will try to summarize 
my comments. I appreciate the opportunity to testify, and the 
fact that these hearings have been organized. The council which 
I represent is a Transatlantic organization of companies which 
works with officials on both sides of the Atlantic to secure a 
more open trade and investment climate. Everyone knows about 
the remarkable aspects of the EU-U.S. trade and investment 
relationship, so I won't go into them.
    But any relationship of this size will always have its 
share of disputes, and the relationship between the United 
States and Europe is no exception. Although we cannot head off 
all trade disputes, we can address some of the systemic issues 
that continually cause problems. Many of the trade problems 
between the U.S. and the EU have been intractable because they 
involve issues unrelated to business and the two sides have 
policy priorities which are different.
    Where disputes are caused by different views of, say, food 
safety, or for that matter on protection of the environment or 
aid to developing countries, it is often difficult to find an 
economic solution. The classic confrontational approach of 
trade negotiators and the threat of trade sanctions are often 
not the best way to handle such problems. Instead, the U.S. and 
EU should continue to improve their dialogue on divisive issues 
in hopes of finding common ground.
    With regard to food safety, both industry and governments 
need to redouble their efforts to educate consumers. It is 
incumbent on European governments to fix their regulatory 
processes to ensure consumer protection and restore confidence 
in the system at the same time. If the U.S. and EU governments 
truly want to serve the economic interests of their 
constituents, they will focus on advancing the Transatlantic 
Economic Partnership and the Transatlantic Business Dialogue 
and supporting multilateral trade liberalization under the WTO.
    We are very encouraged by the development of an early 
warning system to deal with these disputes. We congratulate the 
leadership of this Committee in organizing the Transatlantic 
Legislators Dialogue. We support early warning. Unfortunately, 
our experience is that most of the most difficult problems we 
face on the agenda are really not new.
    Mr. Berry. With regard to beef hormones, this is an issue 
which raises many systemic problems which have been plaguing 
the relationship. Despite losing a WTO case, and an appeal, the 
EU has refused to lift the ban. By ordering yet another risk 
assessment the EU has tried to find some basis for the ban 
despite overwhelming scientific evidence showing that U.S. beef 
products are safe. This approach not only perpetuates this 
dispute but also adds to the consumer confidence problem in 
Europe by suggesting there is a substantial health risk where 
none exists. A more constructive approach is needed.
    Our recommendations on biotechnology follow previous 
witnesses. It is a big problem. We do feel that there is need 
for timely, predictable and science-based regulatory processes, 
and in this area we think the recommendations of the 
Transatlantic Business dialogue should be followed.
    With regard to bananas, the EU must make meaningful changes 
to its banana regime to conform to WTO rules. The privacy area 
is one which is, although there are still some problems there, 
we think the dialogue has been very constructive, and we look 
for some solution which Secretary Aaron said would take place 
in the fall.
    The Transatlantic Economic Partnership I mentioned is very 
important, and we think it should be given the highest 
priority, although it has been slow of late.
    In sanctions, we think this is an example where dialogue 
and how leaders facing an extraordinarily difficult issue have 
really managed to postpone a crisis. We think the 1998 
agreement on expropriated property and secondary boycotts has 
defused much of the Transatlantic controversy. We would like to 
see some changes in the Helms-Burton law. We support the Lugar-
Crane bill, and we also think the Congress should oppose 
efforts by State and local governments to enact sanctions 
measures and maintain their own role in the conduct of foreign 
policy.
    Finally, I would like to say that a very high item on the 
agenda is the WTO negotiations. We think this is important for 
our companies. It is important for the relationship, and I 
think it is important for maintaining a competitive position in 
a globalizing economy.
    Thank you very much.
    Mr. Manzullo. Thank you, Mr. Berry.
    [The prepared statement of Mr. Berry appears in the 
appendix.]
    Mr. Manzullo. Mr. Robeson.
    Mr. Robeson. Thank you, Mr. Chairman. Before giving you my 
remarks, I would just like to mention that our President, John 
Douglas, is in Paris and has been having meetings on the 
subject of hushkits, which is the focus of my testimony, and as 
a result of those discussions there have been some minor 
changes to the testimony which I brought and gave to your 
staff. So that will be given to you, but no substantive 
conclusions are different from what is contained in the 
testimony.
    Mr. Manzullo. Any additional materials without objection 
will be made a part of our record.

STATEMENT OF MR. BOB ROBESON, VICE PRESIDENT OF CIVIL AVIATION, 
                AEROSPACE INDUSTRIES ASSOCIATION

    Mr. Robeson. Thank you. I appreciate that.
    Our fundamental problems with the EU non-addition rule 
really point to some bigger issues in terms of how rulemaking 
is conducted in the European Union. With respect to the non-
addition rule, the first problem is that it is a design-related 
rule, which is to say it imposes design criteria rather than 
performance criteria, and that is quite different from the way 
we normally design and certificate airplanes. We certificate 
that the airplane can meet certain performance regulations, 
and, in fact, noise regulations are in place both in the United 
States and Europe which govern this, and we certify to those 
requirements, and they are based on testing which shows that 
the airplane meets those requirements. So our view is that the 
regulation has no scientific basis.
    Unfortunately, whether by design or by mere happenstance, 
the rule has been constructed in such a way as to only affect 
U.S. producers of these products, as was pointed out in earlier 
testimony. One of our members estimates that the effect is in 
the neighborhood of $1 billion if the rule goes into effect in 
April of next year. There are other AIA companies and other 
producers in the States who are not members of AIA whose 
products will also be affected, and that means that the 
absolute number probably kicks up well above that, to say 
nothing of what this rule does to the residual value of 
aircraft currently operating in the United States, but which 
could not find a market either in Europe or to countries on the 
littoral that would be flying into Europe if they are re-
engined or reconfigured to meet stage three requirements.
    So we find that the regulation, as it was drafted, has a 
discriminatory effect upon U.S. producers as well as operators. 
But more fundamentally than that, what the rule really means to 
us is it calls into question the way in which these kinds of 
regulations are agreed in internal fora, and that is really the 
most important point of this testimony. The hushkits are legal 
under ICAO requirements ascurrently constructed. We are looking 
at products which may have a production life of something like 
20 years and a follow-on life in operation of something like 
another 30 or 40 years per airplane. So it is conceivable, like 
a DC-9 designed and produced in the 1960's is still operating 
today 30 years later.
    If you arbitrarily change these requirements unilaterally 
to carve out a third of the world market it throws all of our 
calculations in terms of investment into a cocked hat. So it is 
very important to keep this in ICAO where there is an 
international consensus and we don't have a Balkanization, it 
seems an apt term these days, a Balkanization of environmental 
requirements as they apply to the vehicle. It is not only noise 
that is at issue. ICAO is also responsible for setting 
requirements governing aircraft emissions, and it is very 
important that the EU does not set a precedent which will take 
us away from ICAO as the venue for setting those consensus 
standards.
    So we have asked that the Administration do two things. 
One, pull the EU back into ICAO to address the issue of 
aircraft noise and see whether we can come up with a new 
standard, a so-called stage four standard.
    The second thing is we have written to the U.S. Trade 
Representative, Ambassador Barshefsky, asking that they self-
initiate an investigation to determine whether or not the hush 
kit rule is consistent with EU obligations under the relevant 
international agreements. The Air Transport Association has 
made a similar request. The General Aviation Manufacturers 
Association is also preparing an identical request, and we 
would urge the Congress to support us in their conversations 
with the Administration to open such an investigation.
    Mr. Manzullo. Thank you.
    [The prepared statement of Mr. Robeson appears in the 
appendix.]
    Mr. Manzullo. Mr. Weber.

 STATEMENT OF STEPHEN WEBER, PRESIDENT, MARYLAND FARM BUREAU, 
                AMERICAN FARM BUREAU FEDERATION

    Mr. Weber. Good afternoon, Mr. Chairman and Members of the 
Committee.
    Mr. Manzullo. Could you put the microphone directly in 
front of you.
    Mr. Weber. Good afternoon, Mr. Chairman, Members of the 
Committee. I am Stephen Weber, President of the Maryland Farm 
Bureau, and a third generation food and vegetable grower from 
Baltimore County. The American Farm Bureau represents more than 
4.8 million member families that produce every type of farm 
commodity grown in America.
    The European Union is the second largest market for U.S. 
agricultural exports, comprising 16 percent of U.S. 
agricultural export trade. However, EU trade policies and 
agriculture support programs inhibit U.S. export growth and 
potential to this region. The resignation of the European 
Commission and the uncertainty that lingers as most of the 
commissioners serve in caretaker roles until their replacements 
are named late this summer casts serious doubt on resolution of 
several outstanding agricultural trade problems in our 
bilateral trading relationship. Increased diplomatic efforts by 
U.S. officials and Congress must be undertaken to ensure that 
EC officials do not use disarray in their political system to 
delay progress on important agricultural trade issues.
    There are a number of significant trade problems in the 
U.S.-EU agricultural trading relationship which I will touch on 
briefly. As you know, the United States and European Union have 
been enrolled in a lengthy dispute regarding the European 
Union's compliance with the WTO ruling on bananas and beef. 
Even though retaliation is now in effect on bananas, the EU 
officials continue to put forth reform options that are not 
consistent with WTO trade rules. The United States should adopt 
a carousel approach for retaliation on bananas wherein the list 
of targeted EU products is rotated periodically to ensure that 
specific concessions are suspended for all member countries.
    Regarding the beef case, it is critically important that 
the Administration adhere to the timeline to retaliate against 
EU imports for noncompliance of the WTO ruling on beef. 
According to that timeline, the Administration has committed to 
suspension of concessions no later than mid-July, following a 
ruling by the arbitral panel on damages. As with the banana 
case, the United States should adopt a carousel retaliation 
approach with beef. Specifically, the carousel list should 
target the largest EU member states as first up for retaliation 
in this exercise.
    The Administration and Congress should also be mindful that 
the EU is likely to alter its already heavy subsidization of 
agricultural products to mitigate the effects of prohibitive 
duties to be levied on their agricultural imports in the United 
States. If this occurs, the prohibitive duty should be adjusted 
to eliminate the offsetting increase in subsidy levels by the 
EU.
    One of the most contentious trade irritants in the U.S.-EU 
trading relationship is the EC approval process for genetically 
modified organisms. Significant delays and a lack of 
transparency in the EC regulatory approval process for GMOs had 
a substantial impact on U.S. export of soybeans and corn to the 
EU.
    The EU's regulatory process for GMOs is a nontariff trade 
barrier that disregards scientific findings regarding the 
safety of bioengineered products. Moreover, EC regulations 
concerning labelling of GMO products do not provide meaningful 
information to consumers who lack empirical and scientific 
basis for labelling and lack procedures to ensure enforcement 
on a nondiscriminatory basis.
    U.S. negotiators should place the issue of biotechnology 
high on the agenda of emerging issues to be addressed in the 
upcoming negotiations on agriculture in the WTO.
    EU import trade policies and agricultural support programs 
have significantly impacted the ability of U.S. agricultural 
producers to export to the EU. Further reform of the EU's 
agricultural support policies, aggressive enforcement of EU 
implementation of WTO rulings, and international obligations of 
market access for bioengineered items are areas that should be 
addressed in order to foster growth in U.S. agricultural 
exports to the EU.
    Thank you for this opportunity to testify on behalf of U.S. 
agriculture.
    Mr. Manzullo. Thank you very much.
    [The prepared statement of Mr. Weber appears in the 
appendix.]
    Mr. Manzullo. Our next witness, Dr. Paula Stern, is 
President of the Stern Group, an economic analysis and trade 
advisory firm in Washington, formerly a chairwoman of the U.S. 
Trade Commission, International Trade Commission. She advises 
businesses on trade issues. It is a pleasure to have you here 
this afternoon, Dr. Stern.
    Dr. Stern. Thank you very much. It is a privilege to be 
here. I am mindful of the time and wish to request that my full 
statement be entered in the record.
    Mr. Manzullo. All statements will be entered into the 
record.
    Dr. Stern. Also to request while you are being so 
affirmative that the statement that I prepared on the 
Transatlantic Business dialogue, which staff of your Committee 
noted had not been made part of any congressional record, be 
included as well.
    Mr. Manzullo. We shall do that.
    [The information referred to appears in the appendix.]

    STATEMENT OF Dr. PAULA STERN, PRESIDENT, THE STERN GROUP

    Dr. Stern. Thank you very much. My task today, I believe, 
is to stand at 20,000 feet and look down on the U.S.-European 
partnership. I guess that is appropriate since that is how we 
won the war in Kosovo. In the post-Kosovo conflagration, my 
view is that debalkanizing the Balkans will be the most 
prominent project in U.S. economic partnership with Europe.
    There are, of course, important points that are being made 
by my fellow panelists that deal with issues that have 
preoccupied our negotiators and our leaders in both Europe and 
the United States, and I do not want to suggest that talking 
about the future in Southeastern Europe minimizes the 
importance of some of the ongoing issues. However, I do believe 
that at the end of this war it is an opportunity for us to 
crystallize our thinking, see where we have been in the last 50 
years.
    After all, we have just had the NATO 50th anniversary here, 
and really, I think that the last 80 days in Southeastern 
Europe have given us an opportunity now to stand back and say, 
well, ``where are we going to go for the next 50 years and what 
is the nature of the U.S.-EU partnership going forward? How do 
we expand and extend some of the lessons that we have learned 
from the Marshall Plan, for example, to apply them going 
forward to those countries that had been behind the Iron 
Curtain for the last 50 years?''
    Today most people believe that the world is globalizing, 
not balkanizing, but in fact, our world is not as globalized as 
it had been in the 19th century when trade flowed freely. 
Deterioration in the Balkans, which ushered in the First World 
War, in effect balkanized the rest of Europe, and the wounds 
never healed. The Iron Curtain added an ideological divide 
between the capitalist and Communist world. The Curtain has 
gone now, but many of the divisions remain as the legacy of the 
20th century balkanization.
    Today our job is to break down those barriers to ethnic, 
national, and regional cooperation to, in effect, debalkanize 
the world, including the Balkans itself.
    Security partnerships, such as NATO; economic and political 
developments, such as the Stability Pact which was mentioned 
here today, which is being planned for the region of 
Southeastern Europe; as well as cooperation in trade through 
the WTO, through bilateral negotiations, are all means to this 
end: to, in effect, debalkanize. Guided by the wisdom of 
history, we can achieve these needs by negotiating correctly, 
administering skillfully, and understanding some fundamental 
political truths.
    The EU, as we had heard from Ambassadors Eizenstat and 
Aaron today, are taking the lead now in establishing a 
Stability Pact for the Balkans. The United States seems to be 
willing, at this point, to see the EU take the lead, mindful of 
the fact that the U.S. was responsible for the lion's share of 
the military sorties and for humanitarian aid up until now.
    But certainly, the EU and the World Bank and others who are 
going to be helping have their work cut out for them. What we 
have learned from the Marshall Plan, I think, is really the 
most important thing that I would like to bring to this 
Committee's attention. I have developed at some length, points 
that I think are worthy of further time and discussion. I am 
mindful that the clock has already indicated that we have a 
yellow light here, but let me just underline that the Marshall 
Plan was not about just giving money.
    There was a key point to the Marshall Plan and that was 
that the recipients who received that money were required to 
cooperate amongst themselves, and that is a critical matter. It 
relates to the political processes which we will have to be 
pushing in these countries. Simply pushing money into these 
countries will not achieve the goals that we have. It is clear 
that Europe--Western Europe--at the end of World War II was in 
just as desperate straits, perhaps even more desperate straits, 
and experienced greater levels of destruction than Southeastern 
Europe has today. In three short years, the Marshall Plan 
played a major role in turning Western Europe around to what in 
effect was an economic miracle.
    Also, political institutions in Western Europe at that time 
were not much better than they are in Southeastern Europe. The 
divisions between the countries were deep; Communist parties 
were strong. Governments in all the countries were weak, and 
many only stayed in power for a few months at a time. This 
economic and political recovery in World War II was not 
necessarily preordained. It took a lot of hard intellectual 
thinking in advance and a lot of bargaining, and it took the 
participation of those countries and regions as well as the 
help from the U.S. coming from abroad.
    The Marshall Plan is relevant today because it had this 
very key point, and mindful that Chairman Gilman has just come 
in, let me just underline that point, and that is that those 
who look at the Marshall Plan tend to overlook this point, and 
it is that there are important non-financial, self-help, 
multinational planning components which distinguish the 
Marshall Plan from other aid efforts overseas which came later. 
These non-financial elements need to be stressed because the 
Marshall Plan was not only or even principally a transfer of 
resources, it was a program which helped, indeed required 
Europe to mobilize its own resources.
    Now, I would like to also just close and invite any 
questions, if there are, about my comments that are in this 
testimony, as well on the bilateral relationship between the 
U.S. and the EU, and particularly the nature of the 
transatlantic economic partnership which will be the subject of 
the EU-U.S. Summit that is coming up at the end of this month. 
There is one area in particular, competition policy or 
antitrust policy, which has generated I think more heat than 
light amongst our negotiators. As the Co-Chair of the Attorney 
General's International Competition Policy Advisory Committee 
that is making recommendations to the Administration at the end 
of this year regarding how to enhance collaboration and 
coordination of our anti-trust policies with that of the rest 
of the world, it has become very clear to me that the U.S. and 
the EU are in effect harmonizing and converging as we speak.
    This is happening in the oversight of mergers area. It is 
happening in cooperation tackling hard-core cartels, and there 
are other areas where there is much bureaucratic cooperation, 
but there needs to be a complete review of how we will operate 
going forward into the next 50 years.
    So the competition policy piece is an area I would like to 
alert you to because it has not been given a great deal of 
reveiw and needs to be looked at as the U.S. and the EU plan 
for going to the World Trade Organization talks in November.
    I would also like to point out that there is a discussion 
in my written testimony on Europe's macroeconomic 
underachievement, the fact that it has not been growing. In 
fact, this a flip side to the question that the Chairman asked 
earlier today about the European-U.S. trade imbalance. That, 
too, is discussed in there. Finally, I would like to underline 
the importance in all of this of the Transatlantic Business 
Dialogue, which has been a force over the last 4 or 5 years for 
making sure that pragmatic, business-like thinking is helping 
to shape the thinking of our government negotiators as they 
talk on all of these topics.
    Mr. Manzullo. Thank you, Dr. Stern. I look forward to 
reading the totality of your testimony.
    [The prepared statement of Dr. Stern appears in the 
appendix.]
    Mr. Manzullo. You said there are documents in addition to 
what we have? There is something revised?
    Dr. Stern. It is a manuscript written in November 1998 
which I know your staff has, and I will certainly make sure 
that the other authorities have it.
    Mr. Manzullo. What is that entitled?
    Dr. Stern. It is called, the Transatlantic Business 
Dialogue, A Paradigm That Delivers.
    Mr. Manzullo. Appreciate that very much. Look forward to 
reading that.
    Dr. Stern. Thank you.
    Mr. Manzullo. Our next guest is J. Michael Farren, who is 
Vice President of External Affairs for Xerox Corporation. Mr. 
Farren, you are probably wondering why you are testifying last, 
and I had people testify in the order that they came from the 
break. Otherwise, you would have been second.

   STATEMENT OF MICHAEL FARREN, CORPORATE VICE PRESIDENT FOR 
              EXTERNAL AFFAIRS, XEROX CORPORATION

    Mr. Farren. All the better being last. Thank you, Mr. 
Chairman. I have a statement which I will submit and try to 
summarize it in my verbal comments. I am here, of course, in my 
capacity as the U.S. Working Chair of the Transatlantic 
Business Dialogue, something that Paula Stern just referenced 
and has been involved in as well for a number of years.
    In that context, I would particularly like to note Chairman 
Gilman's reference to the Transatlantic Legislative Dialogue. 
It is something that the Business Dialogue hopes to be able to 
develop a close working relationship with, and we think a great 
deal can be accomplished on both sides of the Atlantic by using 
both as tools to strengthen the relationship.
    The Transatlantic Business Dialogue was established in 
1995. Its goal is to increase Transatlantic trade and 
investment and essentially to make sure that the governments 
don't get in the way of that sound investment. This year the 
TABD is chaired by Richard Thoman, who is President, and Chief 
Executive Officer of Xerox Corporation, and Jerome Monod, the 
Chairman of the supervisory board of Suez Lyonnaise des Eaux.
    We think 1999 is going to be a unique year for the TABD. It 
has done a great deal of work over the last 4 years. We think 
some of that can be particularly fruitful, given the fact that 
the World Trade Organization has its ministerial coming up in 
Seattle in November. The Transatlantic Economic Partnership 
negotiations continue to move ahead, and frankly, the fact that 
there is a new European Parliament and new Commission coming in 
also makes it timely to push some of these issues.
    The Transatlantic trade relationship, as Chairman Gilman 
noted in his opening statement, is the world's largest economic 
partnership, and it is important to note from the point of view 
of the business community we see that partnership as 
strengthening. Certainly the high profile disputes such as 
bananas, beef, genetically modified foods, which were discussed 
extensively during the course of this morning's hearing draws a 
lot of possibilities, but in trade terms that really amounts to 
less than half a percent of the total trade. So the vast 
majority of trade is, in fact, proceeding without dispute and 
continuing to grow.
    The TABD, we think in the last 4 years, has played a strong 
role in that. We have played a role as an early warning system 
on disputes, and we think that we have made a real contribution 
on some of the issues, in fact, that were discussed extensively 
this morning, such as third generation wireless, the airplane 
hushkits, personal data protection on electronic commerce.
    On May 10, the TABD had its mid-year meeting. Over 200 
industry and government participants came to Washington to 
really assess our priorities coming out of the Charlotte 
conference and also look ahead to the Berlin conference this 
coming fall on what the CEOs ought to be focusing on.
    I would like to go through the five working groups and some 
of the key issues that are being addressed. Regulatory and 
standards is working group one. Specifically, the TABD has 
pressed both governments to implement a pilot project on the 
approval process for biotechnology products, again to increase 
transparency, one of the issues that was referenced by both 
Undersecretary Aaron and Undersecretary Eizenstat.
    The issue of third generation wireless standards, again, it 
was the TABD that served as the forum for the private sector 
agreement that led to what we think will be a long-term 
solution for that. Aircraft hushkits: The TABD was one of the 
first forums where that issue was raised.
    Metric labelling: The TABD worked very closely with the 
European Commission to delay that directive for 10 years, and 
also, the reforms of the 1990 Fastener Quality Act which was 
just passed by Congress and signed by the President, I think as 
recently as last week, which we think will resolve some of the 
Transatlantic issues on fasteners.
    Working group two is business facilitation. This year we 
are focusing on an international standard for accountancy 
procedures and also customs coordination. We think standards 
for international accountancy is a critical issue that will 
have broad implications globally.
    Working group three focuses on the World Trade Organization 
and global issues. We are looking at the array of issues that 
will come up at the ministerial in establishing priorities for 
the two business communities that we hope will be pursued by 
the U.S. Government and the Commission. Those include issues 
related to services and intellectual property. We are also 
concerned with China's accession of the WTO, and have strongly 
endorsed that. We would also like to see the ministerial serve 
as a means of pushing ahead on the information technology 
agreement part two. We also see the ministerial as an 
opportunity to move ahead on something that Paula Stern 
referenced, which is examining international competition policy 
more broadly, and its implications for world trade.
    I would also like to see the WTO and the U.S. and the EU 
look at dispute settlements, particularly and especially 
Undersecretary Aaron's reference to an early warning process.
    Working group five is electronic commerce, and this is 
looking at the overall framework on how electronic commerce 
will change the nature of global markets and trade.
    Finally, working group four is small- and medium-sized 
enterprises. Since 1995, we have tried very hard to make sure 
that small- and medium-sized enterprises had a real voice in 
the Business Dialogue and also had a higher profile in 
policymaking with both the U.S. Government and the Commission.
    In conclusion, we think that the TABD has a unique role 
going out in the future as part of an early warning system. We 
also think that through the WTO ministerial and the TEP the 
business community can help set some of the priorities to deal 
with the critical issues before they become a matter of 
Transatlantic dispute.
    Thank you very much.
    Mr. Manzullo. Thank you.
    [The prepared statement of Mr. Farren appears in the 
appendix.]
    Mr. Manzullo. Mr. Cooksey.
    Mr. Cooksey. Thank you, Mr. Chairman. I have five 
questions, and I will address the questions to each one of you.
    Dr. Stern, my question to you is what specific steps can 
the U.S. and EU put in place to increase transparency in the 
regulatory process?
    Mr. Farren, can early warning mechanisms be put in place to 
address emerging trade issues before they become full-blown 
crises?
    Mr. Berry, how can Commission working groups and advisory 
committees be modified or changed to permit greater 
transparency?
    Mr. Robeson, what role can and should the Congress and the 
European Parliament play through Transatlantic Legislators' 
Dialogue? You might contribute to that question, too, Mr. 
Weber.
    So, Dr. Stern, what specific steps can the U.S. and the EU 
put in place to increase transparency in the regulatory 
process?
    Dr. Stern. I can see from your questions to several of us 
that transparency is of concern to you. As you know from 
hearing the testimony earlier today, the question of 
transparency, particularly with regard to science-based or lack 
of science-based risk analyses has been the most troublesome 
source of many of our disputes in the last several years. You 
have heard that in the context of the hormone-treated beef, you 
have heard it in the context of the hushkits, and it is this 
question of how to measure risk with products and how to 
approve standards that will be acceptable.
    We have to be mindful of the fact that Europe has a 
different regulatory process than does the United States. But 
there has been a lot of experience that the U.S. has had, 
particularly with regard to the FDA, which has given confidence 
to the American consumer. That same type of science-based 
approach and vetting that provides opportunity for all 
interested parties to be heard also is undertaken at the 
Department of Agriculture.
    So I think that transparency is simply a means to enhance a 
political buy-in of the consuming public for any one product, 
agricultural or industrial. I don't pretend to be able to say 
what type of hearing process will make the most sense in the 
European context, simply because bureaucratically it is 
different from ours.
    Mr. Cooksey. Well, I agree with you about using scientific 
methods. I am a physician and was trained in the scientific 
method, and we have got groups in this country, trial lawyers 
for example, who throw scientific process or method to the 
wind, and we have certain regulatory agencies that do the same 
thing. It is a problem, and I agree, but that would certainly 
be a step, if we get the Europeans to do it and got everyone in 
this country to do it we would be better off. So maybe that is 
part of the solution.
    Mr. Farren, can early warning mechanisms be put in place to 
address emerging trade issues before they become full-blown 
crises? This is the Doppler system we referred to in the early 
testimony.
    Mr. Farren. I think it is definitely well worth the effort 
to have, on both sides of the Atlantic, government officials 
trying to get actively engaged in issues before they become a 
matter of controversy. I think, to a degree, the Business 
Dialogue already provides a private sector analog to which 
can--what can be done which is regular meetings, full 
engagement of the stake holders, and public policy issues and 
the ability to raise them to the highest levels at an earlier 
stage than they would normally bubble up, relying on the 
traditional process in place.
    I think there are a couple of problems that were referenced 
this morning. One is that individual DGs within the European 
Commission do tend to act independently, have their own 
individual constituencies, their own regulatory authority, and 
they don't necessarily come together with a broader, more 
holistic view of what impacts they will be having 
transatlantically.
    The Parliament also has procedures that tend to push things 
out without adequate hearings. I think the change in the 
Parliament, the change in the Commission may make things happen 
in Europe a little bit differently.
    I think generally there is inadequate consultation on many 
of the public policy initiatives to the extent that the private 
sector can get engaged in that, and there is more Transatlantic 
discussion that will be helpful. I think another problem which 
is one of the reasons why the European Commission was so 
interested in developing the Business Dialogue, constituencies 
within Europe and European constituencies are really 
inadequately developed. They still tend to take a nationalistic 
approach.
    Mr. Cooksey. By constituencies you mean, for example, 
manufacturers across the EU or farmers across the EU or----
    Mr. Farren. I think farmers, the CAP may have brought them 
together more effectively. I will let me colleagues speak to 
that, but certainly the business constituencies. I was 
Undersecretary for Trade during the Bush Administration and it 
was very difficult, and I knew from my colleagues on the 
European side, it was very difficult for them to come up with a 
non-nationalistic approach to particular issues because they 
tended to hear from business--from the perspective of German 
business, French business, UK business, not European business-
at-large, and I think that was one of their motivations in 
looking favorably on the Transatlantic Business Dialogue. It 
helped get their own side of the issue organized.
    Mr. Cooksey. Do you feel that business-to-business, EU 
businesses as to American businesses, could move through this 
process more expeditiously, for example, than politicians?
    Mr. Farren. Depending on what your definition of 
politicians is. As policymakers, I think the business community 
can be very effective at raising concerns with particular 
issues to a higher level than they would normally get. Many of 
the issues we have talked about over the course of this hearing 
were known at lower levels, and in a Commerce Department 
parlance an office manager undoubtedly would have been very 
involved in some of these issues, perhaps months or years ago.
    It takes an awful long time for it to get to the 
undersecretary or minister level, and I think the business 
community, through the Business Dialogue, has helped do that 
because we have minister-level participation, and they hear 
about issues much more directly from constituencies that have a 
vital interest in seeing them corrected before they become a 
matter of dispute.
    Mr. Cooksey. Thank you. Mr. Berry.
    Mr. Berry. Thank you. Mike touched a little bit on this, 
but you know, there are some dramatic changes going on in 
Europe, and I think we can expect some improvements in 
transparency as a result. If you followed what Mr. Proti is 
doing in terms of selecting and organizing a new Commission, he 
has authority to do this which is new under the Treaty of 
Amsterdam, which became effective the first of May. He is not 
only making sure that he organizes this group as a team, he 
will have someone within his office who will basically 
coordinate activities among the members of the Commission which 
will be a new thing and which I think will work or mitigate 
against the kind of secrecy and competition which characterized 
some of the activities within the Commission before.
    The other thing that is significant is under the Treaty of 
Amsterdam the Parliament is given new powers, so they are not a 
rubber stamp exclusively, they cannot initiate legislation but 
they can amend legislation. They can veto legislation. So you 
can imagine that there will be a lot more give and take and a 
lot more discussion about policies as they advance.
    Not just that, but something that Mike was saying which is 
not as strictly institutional is that in the business arena you 
have seen movements. The way business groups were organized is 
they were organizations of organizations, so frequently you did 
not have direct input from specific companies. It was filtered 
through national organizations, and if you look at something 
like the electronic commerce area or the third generation 
wireless, is that these organizations are transforming so you 
don't just have delegates from organizations within the member 
states but you now have direct participation, and I think that 
is going to affect the transparency a lot and put issues on the 
table in a way that they directly represent interests and the 
specific things that are involved in a decision.
    Mr. Cooksey. Quite frankly, I feel that as we move into 
this--and we are there--but as we move very rapidly into this 
era of globalization and information technology, the countries 
and the companies that fail to make those moves in an 
expeditious manner are going to cease to be players, much less 
stakeholders, and so if they're not dragged into the 21st 
century, they will cease to be factors in this.
    Mr. Berry. This process has been underway for some time. 
One of the first major things that happened in the 
Transatlantic Business Dialogue was the information technology 
agreement which was strongly supported by businesses in Europe 
and in the U.S., and after this happened, the European 
Commission said, well, oh no, oh, there are lots of businesses 
that object to it, and in fact, there weren't, so we had to 
tell the Commissioner, one of the people who was involved in 
this, that essentially this was not a business issue.
    It was a revenue issue. They didn't want to change these 
tariffs because of the revenue they would lose, and that is 
really what it was, and that is how the business community 
regarded it. So these things change just because of more 
communication and more direct participation.
    Mr. Cooksey. It is really the politicians that were 
lagging, it sounds like.
    Mr. Robeson, Mr. Weber, my question, what role can and 
should Congress and the European Parliament play through the 
Transatlantic Legislators' Dialogue?
    Mr. Robeson. That is a pretty good question. I just came 
back from a week in Rome meeting with European and U.S. 
aviation regulators, and I came to the conclusion that travel 
is what we do when we go abroad in order to gain a deeper 
misunderstanding of someone's culture.
    What brings that to mind is a discussion in the hush kit 
context after the Congress got a little excited and drafted and 
passed a proposal to ban the Concorde with over 400 votes in 
the House. One of our European interlocutors from one of the EU 
member countries called AIA's president John Douglass up and 
said how in the world--what are you thinking of to get that 
kind of response pulled up. Mr. Douglass said that if you think 
that I have the power to get 400 people on the Hill to vote one 
way, then I need to have my salary doubled and my staff 
expanded.
    So the point is that anything that you and the EU 
Parliament can do to get together to improve the understanding 
of the legislative cultures would be a tremendous help. The 
Europeans on their part are irritated at us with the Fastener 
Quality Act. It was very important to get those changes made. 
There is a kind of two-way street here of what is affecting 
people, so that is important.
    But the key, the real key, is also the transparency. It is 
critical. You know, one of the problems with the early warning 
system is this, when I see something that has hushkits 
emblazoned on it, I know right away that it affects my 
constituents. When I see something that says metric labelling 
or I see something that says electromagnetic compatibility or 
disposal of electronic waste, you know, the people I am relying 
on to tell me that is out there and could affect my 
constituents, they don't see airplane stamped on it. They see, 
you know, radios, and so there has to be some way to identify 
all of these issues just as the fasteners affected the 
aerospace industry, and frankly when it was first passed, shame 
on us because we didn't pay enough attention ourselves.
    So a key element in assisting you will be for us to work 
together also with our legislators, to let you know what we are 
finding out so that you can put that in your database and get 
calibrated a little bit when you talk to the Europeans.
    Mr. Cooksey. I am leaving in two weeks to participate in 
one of these dialogues. I agree with you, and I think it needs 
to be done.
    Mr. Weber, did you want to add to that?
    Mr. Weber. Of course, we support efforts----
    Mr. Manzullo. Mr. Weber, if you could put the microphone 
closer to you.
    Mr. Weber. Certainly. We support efforts to increase 
communication on bilateral trade issues. The culture thing that 
was mentioned this morning, we have a culture here in this 
country, too, with our farmers. I guess I am reminded of a 
visit I had last year from a Swiss medical student. He was 
interning at Johns Hopkins. He came into our--we are Weber's 
Farm and he was there at Weber and he wanted to take--we have 
little Weber's Farm shirts, and he wanted to send home a shirt 
to his dad who operated a 14 acre, 7 cow dairy farm in the 
Swiss Alps, totally subsidized, of course, and there is this 
huge cultural difference here.
    We have a culture here, too, and, of course, ours is to 
move to free markets, a market-oriented economy. It has been 
very, very painful, American agriculture, as you know. So there 
is this tremendous culture gap between what we are trying to do 
and what they are trying to do.
    I would note that on the Transatlantic Economic 
Partnership, agriculture was really not involved in any 
meaningful way. There was no dialogue established on 
agricultural trade issues. The TEP attempts to address 
agricultural problems, seting up minimal provisions to look at 
food safety and biotech issues. Neither are expected to resolve 
our complex problems. In fact, the biotech project for 
approvals has not been implemented, and the EU has stopped 
biotech approvals all together.
    We would hope that Congress and the Administration would 
review the TEP with a view to establishing an agricultural 
dialogue or placing agricultural reps on existing dialogues and 
pressuring the EU to implement the biotech approval pilot 
project.
    Thank you.
    Mr. Cooksey. Thank you. Your testimony is quite good, and 
Dr. Stern, I am looking forward to reading your document. Are 
you a professor or former professor?
    Mr. Manzullo. A former trial lawyer.
    Dr. Stern. No, I am not a lawyer. I have a Ph.D. in 
international relations, and I do occupy a university chair in 
international business. So I like to combine business issues 
with public policy. Perhaps my comments also reflect a certain 
academic bent, too.
    Mr. Cooksey. I am still a clinical professor and enjoy the 
academic part of it, but this has been a great discussion. I 
have to run to another meeting.
    Dr. Stern. Thank you.
    Mr. Manzullo. Thank you, Doctor. I have just an 
observation, and then a couple of questions. Let me make a 
statement that perhaps some of you may disagree with. One of 
you will agree wholeheartedly.
    The group of electorate who is the most informed on 
international trade are farmers. I have a background in cattle 
myself, not a big operation, but I did that for years when I 
practiced trial law, Doctor, in northern Illinois. If you would 
just take a look at any of the weekly farm journals that come 
out, half of it, if not more, deals with international trade. 
It is written in such a fashion with charts and colors, lots of 
white space, so that many farmers who did not have the 
opportunity to earn a college degree, as you did Mr. Weber, can 
read this to understand fully the intricacies of international 
trade. The Farm Bureau has done an exemplary job of educating 
its members.
    I have never seen such a group of people who have a grasp 
of what is a very complicated issue. The reason the Farm Bureau 
has succeeded is the same reason that most corporations have 
failed miserably. Most corporations in this country, with a few 
exceptions, have not shown the link between job retention and 
international trade. Their goal is to come to Washington to 
hire lobbyists to influence Members of Congress about trade 
issues, and it is not working. It is going in the opposite 
direction.
    My suggestion is to copy, for example, what some of the 
companies like J.I. Case and Caterpillar are doing. Case just 
put out a little tool kit with a video and charts to each of 
its employees showing the absolute necessity for Fast Track. If 
we are to get Fast Track through, if we are to get China's 
accession to the WTO, it has got to come from the employees and 
not from the CEOs. It is an observation, but it is a valid one. 
I have every right to make that because I am a Member of 
Congress, and I am also one of the most ardent free traders. 
The business community has failed miserably. Now, how do you 
turn that around?
    When I was first elected back in 1992 some sage said if you 
are in favor of NAFTA vote for it very quietly and say nothing. 
I became very upset with that because Members of Congress have 
an obligation to formulate public policy. We went back to the 
airport in Rockford, Illinois, which had just opened a huge 
hangar, and brought in about 25 companies which would benefit 
directly as a result of the North American Free Trade 
Agreement. It was headlines in the major newspaper, there were 
color pictures, and when people could actually see the products 
that they made were the beneficiaries of a decrease in tariffs 
they changed their mind about international trade.
    To exacerbate the problem are some of the restrictions that 
are proposed in the Cox Report. Chris Cox is a dear friend of 
mine. But I had breakfast this morning with Anson Chan, who is 
the head of the civil service in Hong Kong, and she gave her 
version as to what would happen if Hong Kong were placed as a 
Tier III country along with mainland China, and the absolute 
total devastation that would have on the exports of our 
computers.
    So I am not very optimistic with this Congress or any 
Congress in the future. We have had several situations where we 
have been involved in helping our companies achieve at least 
equal treatment overseas only to have the labor unions come out 
against us in order to beat us over the head. Over the past 
6\1/2\ years, I am so totally frustrated.
    A good example was a colleague of mine, and the CEO of a 
company came into his office to lobby for Fast Track. That 
company has over 20,000 employees who are constituents in this 
Member's district. The Member told the CEO that if you can't 
convince your own employees that their jobs depend upon 
enhanced international trade, then how can you convince me when 
you are not even my constituent?
    So I just want to just throw that out because I know 
companies are doing all kinds of things, but I would just urge 
you to take the lead that the Farm Bureau has made on it. 
Illinois, 47 percent of our raw fibers and unprocessed grain 
are exported. This is immense. That is half of the farming 
economy. The congressional district that I represent, which 
runs from the Mississippi River across the top of the State of 
Illinois, we have the No. 1 dairy county, the No. 1 cattle-
producing county. We have a Hormel plant that ships two 
containers every other week of boned pork to Japan, a direct 
beneficiary of the General Agreement on Trades and Tariffs 
Agreement. What we try to do in our congressional district is 
to microeconomize everything.
    I don't believe in macroeconomics. I just don't listen to 
people who believe in macroeconomics, because until it impacts 
me and the people I represent, I am not interested in it. Every 
other Member of Congress is the same. Until it impacts your 
industry, you are not interested in something.
    So I didn't mean this to be any type of a lecture, but the 
frustration level is very intense. In fact, I am missing a 
meeting now on whipping Members as to where they stand on 
normal trade status with China. Be that as it may, I just want 
to let you know that there are resources available, and Dr. 
Stern, you probably know this better than anybody, through the 
Department of Commerce and the various international trade 
agencies where you can take a particular sector of the country 
and find out the extent of the exports to do a microanalysis.
    In fact, I have urged Washington representatives so many 
times that I am blue in the face, if you want to convince 
Members of Congress as to the importance of these international 
agreements, simply do a microanalysis of each congressional 
district, and then you go back home and you talk to the people 
and you say, look, this is extremely important.
    You had a comment on that, Dr. Stern?
    Dr. Stern. Yes. My experience with just this last point is 
that during the Uruguay Round discussions or even prior when we 
were trying to see the final stages of the multilateral trade 
negotiations, I did an assignment where we gathered data which 
was not being gathered at the Department of Commerce, or 
anywhere in the Administration at that time on a state-by-state 
basis, of each state's leading exports. That was back in the 
late 1980's, but now that data is on tap at the Department of 
Commerce. It is extremely important. As you know, it was used 
in the NAFTA debate and was also generated in the debate on the 
final Uruguay Round legislation that launched the WTO.
    I appreciate your frustrations. I completely agree with you 
that the agriculture sector has traditionally been in the lead 
pushing open markets overseas through multilateral trade 
negotiations. If you go back and look at the history going back 
to the Kennedy Round, no president has been given congressional 
authority to negotiate without the very firm leadership of 
agriculture. That has been a very key thing.
    Labor had, in the past, also been a supporter of 
multilateral trade negotiations liberalization. That shifted 
and it consequently makes, I am sure, many of the bigger 
business CEO's who may come and visit you, still of their 
workers who benefit, as you said, either by producing goods 
exported overseas or just by being more efficient in producing 
in the U.S. by virtue of the fact that they are importing 
components which may be useful in enhancing their efficiency.
    The question of how you convince the country that trade is 
good is, yes, tied to jobs, but I think overall, given the fact 
that we have become such a major exporter and importer in this 
country and that we need markets open at home, as well as 
overseas, to enhance world trade and enhance economic growth, 
that we have to make the standard of living argument.
    We have to say, look, this is better for you both as a 
producer of goods, be they industrial or agricultural, but it 
makes it better for you as a consumer and for the livelihood of 
your family, that you do have this trade, that you do have 
these products, that it is keeping prices down, that we don't 
have inflation in this economy, and quite frankly, we couldn't 
be growing as fast as we are right now if we didn't have 
imports coming in. We would have an inflationary pressure.
    I know you don't want to talk about macroeconomics as you 
said, but this is a macroeconomic phenomenon. To be able to 
grow at four percent and to be having unemployment rates as low 
as we are without pushing up against inflation, is because we 
have got imports coming in that are helping to keep prices 
down. That is a trade argument, but it is a macroeconomic 
argument, too.
    Mr. Manzullo. Did anyone else want to comment? Mr. Robeson?
    Mr. Robeson. Yes. It is a pretty interesting observation, 
and if you look at our industry you can see how complex it gets 
pretty quickly.
    We in the civil side of our business, including space and 
whatnot, we rely on exports for about two-thirds of our sales. 
So we not only like access to foreign markets; without them, 
our overheads would be so high we couldn't survive. So when we 
are dealing with our unions, you know, they are in the Boeing 
plant and they see Malaysia or whomever they see on the tail of 
that airplane, you don't need a degree in rocket science to 
know where that bird is going, but the people who don't see it 
are the suppliers. The small- and medium-sized enterprises, all 
they know is they ship to Boeing and they don't know where that 
thing is going. It ultimately gets exported, but they don't see 
it. So one question is how you get down to all of these 
enormous supplier bases and explain to them the importance of 
open markets to their livelihood.
    The other issue is dealing with the large unions. If you 
take a look at hushkits, for example, we have the IAM and the 
UAW on board with us because they understand how important it 
is to a number of their locals, and they are writing to the 
Administration with the same positions we have.
    But a contrary phenomena is in the case of foreign repair 
stations where we are at polar opposites with the IAM on that 
issue. Now, we think that they are not only wrong as a matter 
of public policy, but they are also wrong in terms of what it 
will do to their constituents. So the question is why are they 
taking that position. Do they really believe substantively they 
are right, or is there a political agenda, or what is going on? 
So dealing with our employees from a company point of view is a 
very complicated issue, but you are right. That is where--you 
know, when you get a letter or correspondence from everybody at 
the plant up in East Hartford or something, Mr. Gejdenson will 
sit up and say, ``whoa, this matters'', and we as an industry 
are working that issue. We are identifying where all the plants 
are of our membership. We are putting together a macro picture 
of that, which then goes right down to the microlevel, and we 
can go into an office of a Congressman and say there is the 
plant there, here is what the effect on jobs is going to be, 
and we can tell you why we are taking the positions we are 
taking on these kinds of issues.
    Mr. Manzullo. There are companies such as Caterpillar that 
identified their subcontractors. I know they have been working 
to identify the subs. A lot of their subcontractors have no 
idea where their products are going, absolutely no idea 
whatsoever. We try to stay in contact. We have about 300 
exporters that we have identified in our congressional district 
out of about 1,600 manufacturing facilities of one size or the 
other, and it is a very long process. In fact, the little guys 
are the ones that think they are being hurt most by imports to 
this country when, in fact, they need to realize, through a 
process of education, that they are the beneficiaries.
    Mr. Farren, did you have any comment to the statement that 
I had made?
    Mr. Farren. I think the problem goes beyond the willingness 
or capacity of business particularly big business to educate 
their work force. I think the point you just made on the subs 
is absolutely on target. There is also a reason why agriculture 
tends to have a greater sensitivity to exports, and that is 
because the U.S. Government for decades has done an awful lot 
to increase their awareness sensitivity, and, frankly, getting 
all range of farmers engaged in export, the U.S. has never had 
a similar program, particularly with small- and medium-sized 
firms. I mean, you can point to them, but their scale is just 
totally different.
    When I was Undersecretary of Commerce, our commercial 
operation, for example in Tokyo,--and this was at the height of 
the U.S.-Japan trade issues and also back at the time when 
automotive, high tech was under enormous pressure, there was a 
push to export, we were pressing the Japanese to open up their 
markets--our entire export program in Japan was funded to the 
tune of $6 million. The agricultural program for export in 
Japan--this is a country that in large measure was closed to 
agricultural imports up until that period of time. The 
Agriculture Department spent $60 million. The assistance to 
processed food products exceeded the entire amount, and I am 
not talking about subsidies. I am just talking about putting on 
information, doing trade analysis, helping people come into a 
country and actually finding someone to deal with, just 
basically commercial activity.
    The level of support to food processors was greater than 
all industrial products. So we are now reaping essentially what 
we have invested in for decades in the sense of heightening an 
awareness on trade within the industrial community, and I 
agree, it goes back to suppliers and employers. It also goes to 
business leaders to get out there and carry the message, but 
also to public policymakers.
    This morning, in fact, I was at a meeting with Chairman 
Gilman where a group of high tech firms came in and briefed a 
small number of Congressman on the current status of the high-
tech industry in the U.S. and how it has changed, and in fact, 
a report was just released.
    We provided everyone with a copy. I will use the State of 
Illinois as an example. We are trying to get out the word, 
which is little known I think even within the business 
community, that, for example, the State of Illinois is the No. 
3 State in terms of high-tech exports----
    Mr. Manzullo. Do you have extra report?
    Mr. Farren.--Of $16 million, and 50 percent of all the 
exports out of Illinois are high-tech products, but a total of 
$16 billion, with 207,000 people employed in Illinois.
    Mr. Farren. We absolutely have to get the message out. I 
think there is plenty of explanation to go around beyond the 
business community, to business, to Government, to how we have 
invested, how we have got accountants and lawyers. If you are a 
small business firm, just as an example, and you are trying to 
export to a foreign country, try to find a local lawyer in a 
small town who really has any sophistication or expertise, try 
to get a bank that can really help you do it.
    We have never generated the infrastructure that other 
countries have. Germany, Austria, any number of European 
countries made enormous effort to get small- and medium-sized 
firms engaged, and that gave them an awareness of exports that 
the U.S. never developed, and we are now paying the 
consequences for it.
    Mr. Manzullo. I just introduced a bill that would 
reauthorize the ITA, TDA, and OPIC with an increase in the 
budget. I usually vote against anything that has an increase in 
it, but look at the fact that the French will spend six to 
seven times that amount. In fact, my Small Business Export 
Subcommittee held a hearing 4 weeks ago dealing with 
reauthorization of OPIC. A lady testified from outside of 
Madison, Wisconsin who is the CEO of a firm that makes little 
boats which have weed-eating machines on the end and they put 
them in the lagoons and lakes. They are extremely efficient 
because in many areas of the world the ecosystems are so 
fragile that you can't introduce any chemicals.
    Well, a Canadian firm found out that she was in the process 
of trying to tie up some sales in Thailand, so the Government 
of Canada gave a weed-eating boat to the King of Thailand as a 
gift, just like that. They probably bought it from the company, 
just said here is a gift, see if you like it, we can give you a 
deal on as many more as you want. That really brings into stark 
reality the problems that we have with export promotion in this 
country.
    Mr. Berry, do you have a comment? Then I had a question I 
wanted to ask all of you on what I had said. If not, I can move 
into the question.
    Mr. Berry. I agree with you on the fact that there is not 
enough understanding, and particularly about jobs. When I 
started this job, just on the bilateral relationship, there was 
no information whatsoever on Europe. So we have a book that we 
put out every year which shows how many jobs in each State are 
dependent either upon exports to Europe--and Europe is, in most 
States, the No. 1 or No. 2 export market--and then we show all 
of the categories, the sectors, or on the investment, direct 
investment from Europe. So it is enormously important, but it 
is something that people don't appreciate.
    Mr. Manzullo. I was over in Florence about 6 weeks ago with 
the Transatlantic Policy Network, TPN, and was talking to an MP 
from Germany about the beef hormone issue. He said, you know, 
as far as he was concerned it really didn't make that much 
difference, but the people in Europe are so dead set against 
U.S. beef that has the growth hormone plug. He said this issue 
is absolute total political fire.
    I notice the vote in today's paper. The socialists lost 
control of the European Union to the Christian Democrats in 
very light turnout. The Christian Democrat Party, the EPP, 
emerged as the largest single group of representatives and said 
the heaviest Socialist losses were registered in the UK, where 
the ruling Labor Party lost half its 60 seats despite polls 
indicating that as many as 70 percent of British voters support 
the national administration led by Prime Minister Tony Blair.
    Labor Minister Margaret Beck, who had appointed Blair to 
run the party's Euro-election campaign, blamed the low turnout 
on public perceptions that the EU is too remote from their 
everyday concerns and, quote, Europe must be reformed to make 
it more relevant to its people, end of quote, she declared. 
Sort of the thought that many Americans have to export and the 
small person manufacturing has to export.
    I would like anybody who wants to give his or her opinion 
as to whether or not you think the change from the Socialist to 
the EPP in the European Parliament is going to have any 
significance.
    Mr. Berry. In terms of policy, I am not exactly sure what 
the significance is going to be. I know the EPP, I think has 
probably 2--about 240 seats. That is what I heard last night. 
The Socialists are down to about 180 from about 216. But within 
the Conservative or the Right group that now holds power there 
are a lot of divisions, and it isn't clear that there is any 
programmatic consensus among those people. So we will see where 
it has to go from, you know--I mean, what kinds of consensus 
they can develop on these policies.
    Mr. Manzullo. Dr. Stern, did you have a comment on that?
    Dr. Stern. Only that the Parliament, of course, is 
increasing in influence, but their influence relative to the 
other government apparatus is not equivalent to that which 
Congress is equipped--equal check and balance--with the 
executive branch and the judiciary. Over there I think you 
still have a situation where the European Commission will be 
dominant and----
    Mr. Manzullo. Except now the European Parliament appoints 
the European Commission.
    Dr. Stern. That has certainly proved to have been a very 
powerful affect. However, we still have the same Commission 
sitting there as we speak and it will probably be there until 
next fall at the earliest.
    Mr. Manzullo. We met with Proti.
    Dr. Stern. Yes.
    Mr. Manzullo. Apparently he is a breath of fresh air to the 
entire process over there. Anybody else want to comment on that 
change in European Parliament?
    Mr. Berry. One other thing about the Parliament is that 
they didn't spend any money on the elections. So there wasn't--
at least in the UK--I mean, there wasn't very much resources 
really put in, and apparently the new way they had this list 
and that also----
    Mr. Manzullo. Proportional voting in England?
    Mr. Berry. Yes. That also tended to discourage turnout 
because people didn't have any particular candidate they could 
promote, they had to promote, and it was linked to a whole 
list.
    Mr. Manzullo. We want to thank you for coming this morning 
and making it all through the afternoon. If there are any 
additional comments that you want to make the record will 
remain open for a week, and again, thank you for coming here 
and sharing you thoughts and views with us.
    This meeting is adjourned.
    [Whereupon, at 1:50 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             June 15, 1999

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