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



 
          TRANSATLANTIC TRADE AGENDA: CONFLICT OR COOPERATION?

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                INTERNATIONAL ECONOMIC POLICY AND TRADE

                                 OF THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 29, 1999

                               __________

                           Serial No. 106-78

                               __________

    Printed for the use of the Committee on International Relations


                    U.S. GOVERNMENT PRINTING OFFICE
63-070 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

        Subcommittee on International Economic Policy and Trade

                 ILEANA ROS-LEHTINEN, Florida, Chairman
DONALD A. MANZULLO, Illinois         ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio               PAT DANNER, Missouri
KEVIN BRADY, Texas                   EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California        BRAD SHERMAN, California
JOHN COOKSEY, Louisiana              STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska              WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California         JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
             Mauricio Tamargo, Subcommittee Staff Director
        Jodi Christiansen, Democratic Professional Staff Member
                Yleem Poblete, Professional Staff Member
                      Camila Ruiz, Staff Associate



                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

    Honorable Charles Ludolph, Deputy Assistant Secretary for 
      Europe, International Trade Administration, U.S. Department 
      of Commerce................................................     4
    Honorable E. Bryan Samuel, Deputy Assistant Secretary for 
      Trade Policy, Bureau of Economic and Business Affairs, U.S. 
      Department of State........................................     7
    Willard M. Berry, President, European-American Business 
      Council....................................................    24
    Rick Reinert, President, REHA Enterprises, Inc...............    25
    John Roberts Smaller, President, National Association for the 
      Specialty Food Trade.......................................    26

                                APPENDIX

Prepared statement:

    Chairwoman Ros-Lehtinen......................................    34
    Charles M. Ludolph...........................................    36
    Bryan Samuel.................................................    42
    Willard M. Berry.............................................    48
    rick Reinart.................................................    55
    John P. Roberts..............................................    57




          TRANSATLANTIC TRADE AGENDA: CONFLICT OR COOPERATION?

                              ----------                              


                     WEDNESDAY, SEPTEMBER 29, 1999

                  House of Representatives,
 Subcommittee on International Economic Policy and 
                                             Trade,
                      Committee on International Relations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 11:05 a.m., in 
room 2172, Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen [Chairwoman of the Subcommittee] presiding.
    Ms. Ros-Lehtinen. The Subcommittee will come to order.
    Good morning. The State legislators of my home State of 
Florida are up here for a Federal-State summit. So I will be 
buzzing in and out and trying to be two places at one time and 
doing a fairly bad job of it. So you will excuse me if I am not 
here; and we have got a vote, so maybe we will do our opening 
statements.
    Thank you, Mr. Menendez.
    Given the recent, continuing disputes between the United 
States and the European Union, it would appear that 
transatlantic relations are marred by conflict. Just a few days 
ago, the House considered a resolution on the EU's 
protectionist stance against the U.S. jet engine market and 
``hushkits'' which are in compliance with the ICAO Stage III 
guidelines on noise level standards.
    However, most would agree that focusing solely on these 
disputes would be oversimplifying the relationship.
    The United States and its European partners have long been 
leaders in the global economy and have generally developed and 
maintained a strong common interest in working together to 
strengthen the world trading system. This has become more 
evident in the aftermath of the Cold War with U.S. and EU 
policymakers arguing that the expansion of transatlantic trade 
relations is the vehicle for a general strengthening of ties 
and reinvigorating political and security relationships in the 
form of The New Transatlantic Agenda--a goal we reiterated in 
the Bonn Declaration adopted at the summit in June of this 
year.
    This view is presented alongside data which shows that 
economic relations between the United States and Europe are 
supported by significant trade and investment links.
    Taking goods and services together, the EU and the United 
States are each other's largest single trading partner. Last 
year, trade in goods between the member states of the EU and 
the U.S. increased almost 14 percent for exports and 10 percent 
for imports compared to 1998. Taking only bilateral EU-U.S. 
trade into account, it represents more than 7 percent of the 
total world trade, as compared to 4 percent between the United 
States and Japan.
    By the same token, the two sides remain each other's most 
important source and destination for foreign direct investment, 
with a reported combined stock of over $800 billion U.S. 
dollars. The United States supplied 63 percent of all foreign 
investment in the EU countries and secured 58 percent of the 
EU's total outward investment in 1998.
    This reality, combined with the stated need to strengthen 
an expand overall relations between the United States and its 
European partners, led to the signing of The New Transatlantic 
Agenda in 1995. The agenda contains a wide range of commitments 
in foreign policy, security, and law enforcement. Yet a 
substantial portion of it is dedicated to economic and trade 
issues, drawing from recommendations offered by the business 
sector on both sides through the Transatlantic Business 
Dialogue.
    For this reason, this hearing will not only address 
specific unresolved issues in transatlantic trade relations, 
but it will focus on the potential impact of European actions 
and U.S. counteraction on the global arena--in particular on 
the upcoming WTO negotiations in Seattle, and I will ask, with 
unanimous consent, that my full statement be entered into the 
record, and I would like to now introduce and recognize the 
Ranking Member, Mr. Robert Menendez of New Jersey.
    [The prepared statement of Ms. Ros-Lehtinen follows:]
    Mr. Menendez. Thank you, Madam Chairlady. I appreciate this 
hearing and the opportunity on one of the issues that I am very 
much concerned about, which is the consequences to small 
businesses as a result of some of our efforts to try to bring 
the European Union into compliance.
    Clearly, the European Union is the United States' most 
important ally, one of our most important trading partners. 
According to the Department of Commerce, the United States and 
the EU have the largest two-way trade and investment 
relationship in the world. Like our political relationship with 
the EU, our economic relationship is extremely important to the 
United States, particularly as the world economy becomes an 
increasingly global one.
    For the most part, we work with the EU through the WTO and 
other mechanisms, like the Transatlantic Business Dialogue, to 
break down trade barriers and enhance market access. The 
conclusion of agreements, such as the December 1998 Mutual 
Recognition Agreement, provide transatlantic benefits by 
eliminating the need for duplicative product inspection, 
testing or certification. We need to look at other ways to 
expedite the conclusion of further mutual recognition and 
regulatory reform agreements.
    However, even allies and partners have disputes. Trade 
disputes involving the EU's ban on the importation of certain 
bananas and hormone-treated beef, as well as the EU's 
promulgation of a regulation preventing ``hushkitted'' aircraft 
from flying in the EU, have made front page news. These high-
profile trade disputes unnecessarily damage our normally good 
relationship with the EU, and I am anxious to hear from the 
Administration about their negotiations with the European 
Commission to create an early warning system to head off 
potential trade disputes and hopefully their unintended 
domestic consequences.
    But I would like to take a moment to address the unintended 
domestic consequences of these trade disputes. While I share 
the Administration's goals with regard to bringing the EU into 
compliance on the banana and hormone-treated beef cases, I am, 
however, deeply concerned about the impact of the retaliatory 
tariffs on American businesses, particularly small American 
businesses. By requiring all importers to post bonds equivalent 
to 100 percent tariffs on the value of the imported products on 
the retaliation list, we jeopardize the livelihood of small 
importers throughout the country who may import only one or two 
products, and I have several of these in my own congressional 
district. I know they stretch throughout the country. These are 
relatively small companies that, in fact, only import maybe one 
or two products and when, in fact, EU strikes on one of those 
two products, you leave them virtually decimated in the 
process.
    These small businesses are unable to withstand long-term 
economic losses as a result of the tariffs imposed on the 
products they import. It is extremely difficult for a small 
business, for example, that imports liver pate or bed linens, 
to understand why they are being punished for the EU's 
restriction on the importation of bananas and beef.
    That is why I introduced legislation, H.R. 2106, the Small 
Business Trade Protection Act, which would exempt small 
businesses from the retaliatory tariffs. The bill would limit 
companies to importing 125 percent of what they imported in the 
previous year, so that small companies do not become a conduit 
for circumventing the retaliatory measures.
    It seems that economic retaliation is becoming increasingly 
common, but that we are not taking into account the domestic 
impact of these actions. I hope to hear from our Administration 
witnesses what steps the Administration is taking to help these 
small, impacted businesses and to prevent further harmful trade 
disputes.
    Thank you, Madam Chairlady.
    Ms. Ros-Lehtinen. Thank you very much, Mr. Menendez.
    Mr. Cooksey for an opening statement.
    Mr. Cooksey. I am anxious to hear the statements from the 
people from the State Department. You know, I am concerned 
about the problems that the people in the EU have in overcoming 
their cultural tendency to stay with protectionism, which my 
colleagues have just referred to, and as we are in this period 
of globalization and e-commerce, that is increasing at the 
speed of light. I would hope that the State Department holds 
the line and does not let our people and our businesses suffer 
just because the Europeans cannot overcome their tendency to 
keep their roots implanted in the past, whether it be a 
controlled market or socialistic tendencies or protectionism, 
which certain countries are more guilty of.
    So we are expecting you to hold the line and help bring 
Europe into the 21st century.
    Thank you, Madam Chairman.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Cooksey.
    I would like to just briefly introduce both witnesses and 
then we will recess for two votes. Our first witness is the 
Honorable Charles Ludolph, who is the Deputy Assistant 
Secretary for Europe, Market Access and Compliance, at the 
International Trade Administration. He is responsible for 
developing the Commerce Department's market access, country 
desk trade and investment activities with Europe, counseling 
more than 75,000 U.S. exporters a year and responsible for 
assuring that U.S. businesses are aware of the conditions in 
all European national markets.
     Mr. Ludolph is deeply involved in the Transatlantic 
Business Dialogue in implementation of the U.S.-EU mutual 
recognition agreements. Since 1988, he chairs the U.S. 
Government Committee on Standards Testing and Certification of 
the European Union and also chairs the U.S. Government Trade 
Promotion Committee, and we thank Mr. Ludolph for being with us 
this morning.
    He will be followed by the Honorable E. Bryan Samuel, 
Deputy Assistant Secretary of State for Trade Policy for the 
Bureau of Economic and Business Affairs. Prior to joining the 
Bureau, Mr. Samuel served as Deputy Assistant Secretary for 
Inter-American Affairs as Director of the Department of State's 
office of European Union, OECD and regional affairs and was the 
U.S. Negotiator of The New Transatlantic Agenda. Prior to that, 
Mr. Samuel was Deputy Assistant U.S. Trade Representative for 
North America and has worked extensively on United States-Japan 
trade disputes and on agricultural disputes. He is the 
recipient of numerous awards for excellence in the economic 
field for his accomplishments during his tenure in the Foreign 
Service, and we thank Mr. Samuel for being here with us.
    Our Committee will be out briefly, and we will be right 
back. Thank you.
    [Recess.]
    Mr. Cooksey. [Presiding.] We will resume the meeting. The 
Chairlady will be here shortly.
    Mr. Cooksey. Mr. Ludolph, if you would go ahead with your 
testimony.

 STATEMENT OF THE HONORABLE CHARLES LUDOLPH, DEPUTY ASSISTANT 
SECRETARY FOR EUROPE, INTERNATIONAL TRADE ADMINISTRATION, U.S. 
                     DEPARTMENT OF COMMERCE

    Mr. Ludolph. Thank you, Mr. Chairman. I just want to 
summarize very quickly my remarks. I, first of all, am pleased 
that you have invited us here to discuss the importance of the 
economic partnership we have with the European Union. We 
welcome this Subcommittee's sustained and informed interest on 
maintaining the health and stability of our economic 
relationship between the U.S. and the European Union.
    The Chairperson's opening statement, as well as Mr. 
Menendez's early opening statement, characterized the economic 
stake we have, so I want summarize there, but I did want to 
emphasize that we have a very new situation with the European 
Union in terms of a trade deficit. The U.S. trade deficit with 
the European Union is growing very rapidly, and it is the 
largest that we have had in the history of our relationship and 
is now, based on July figures for 1999, $43 billion. That is 
accumulating on top of a $60 billion cumulative deficit since 
1995. This is a situation that is very, very acute for the 
Administration and for the U.S. Government, and we are paying 
attention very closely to this serious developing situation in 
terms of this new trade deficit.
    It is correct, as has been--we agree entirely with the 
Committee's characterization of the high interdependence 
between the U.S. and the European Union. Economically 6 million 
jobs are created by investment in our respective marketplaces, 
a total of 6 million jobs, 3 million in the United States and 3 
million in the European Union. Therefore, it is very important 
to have a well-managed, large, interdependent relationship, and 
any relationship this large is going to have trade disputes.
    The point and the object of the Administration and the U.S. 
Government is to try to keep and address the trade disputes as 
quickly as possible and to keep them to a minimum and to solve 
them as quickly as possible.
    We must strive to resolve all of these disputes so that our 
rights and interests are maintained and also so that the 
overall, largely trouble-free economic relationship can 
continue to benefit both producers and consumers.
    I am just going to briefly highlight two bilateral issues 
that I think need to be--I would like to draw your attention 
to. First is the issue of biotechnology and trade. The 
Administration is increasingly concerned over the question of 
European Union market access for U.S. agricultural exports 
derived from bioengineering. The United States has long viewed 
the EU's process for approving new agricultural products 
through bioengineering as being too slow and nontransparent. No 
new agro-biotech products have been approved in the EU since 
1998, and this could affect not only the substantial, the 
billions of dollars of worth of exports of agricultural 
products being exported to Europe, but also, in turn, policies 
that will affect the rest of the world and our exports to the 
rest of the world in these products.
    We will work energetically with the new EU's new 
commission, to encourage this new commission to take a fresh 
look at the approval process and labeling issues that they have 
adopted to resolve this immensely important issue. If there is 
a place where we need to avoid disputes and a place where we 
think early warning is important, it is in this area of 
biotechnology. U.S. farmers, U.S. companies in agribusiness 
have invested an enormous amount of time and money in 
developing a position in agribusiness for world exports, and it 
is a very important benefit to both the consumers, as well as 
producers of food, and the enemy is really starvation that we 
are trying to address. So this is a very important area in 
terms of early warning but also in terms of our imminent way to 
avoid trade disputes.
    Let me then just talk 1 more minutes about another issue 
that is very much in front of us, which is in the aerospace 
area. Aerospace is a key sector for U.S. exports, globally and 
certainly with the European Union, and it is a global business. 
You cannot sell an airplane just to Europe or in the United 
States. You have to sell an airplane geared for a global 
market. So we need to have harmonized regulations among all of 
the players, both consumers as well as producers, on safety 
issues.
    One issue that has come to us is the issue of hushkits. The 
Europeans have adopted a regulation on aircraft engine noise 
that ostensibly is aimed at reducing noise, but in fact, 
affects only U.S. producers of hushkitted aircraft and certain 
engine manufacturers.
    This regulation could affect and is affecting since April 
1999 more than $2 billion worth of exports and the asset values 
of U.S. airline companies. We have begun a process to develop 
an international standard that would meet the European and U.S. 
noise requirements that they hope to acquire, but in the 
meantime this regulation they have adopted is affecting U.S. 
exports in a near-term way.
    We are in consultations with the European Commission. We 
think those consultations are constructive. We think that they 
are beginning now to see that they need to withdraw or begin a 
mechanism to withdraw their regulation as we work toward a 
solution in the ICAO. We hope that we will have good news for 
this Committee, as well as for our industry, on this issue at 
least, in the next month in terms of how it is maturing. The 
European Commission and its member states are meeting today on 
this issue, and so we should have some early information that 
we will share with this Committee, if not today, later on this 
week.
    Let me then just quickly go on to the early warning issue 
that you have highlighted in your opening statement. We work 
really closely with the Transatlantic Business Dialogue. It is 
important for governments, the Administration, as well as the 
Congress, to be able to identify early where governments 
believe issues need to be addressed, but we believe that the 
earliest warning we can get are from the players in the 
marketplace, both the Transatlantic Business Dialogue, as well 
as from consumers and importers who are affected at the 
earliest juncture by these regulations or know of drafts that 
will affect them. We have begun in our consultations with these 
civil society dialogues, particularly the Transatlantic 
Business Dialogue, to get them to identify a list of issues 
that they see coming down the road 2, 3, 4, or 5 years down the 
road that may affect U.S. regulators, but will affect them; and 
so we believe that an important part of this process is the 
Transatlantic Business Dialogue and the private sector's being 
able to have a broad and free dialogue with both the Commission 
and the United States on identifying issues.
    Let me just close by saying again, I want to thank the 
Committee for holding these hearings. They are very important 
to us. I want to thank in particular the Committee's interest 
and help in particular that of the Market and Access Compliance 
Unit of the Commerce Department. We have been underfunded in 
past years, and we very much appreciate the interest this 
Committee has shown in our continuing existence.
    In summary, the demands on our relationship are very high. 
Chances for conflicts in telecommunications, in electronic 
commerce, in biotechnology and aerospace are present. The 
relationship, however, is just simply too important to us 
economically for us to allow issues to go on without effective 
solutions that will address trade issues today and over time 
will actually strengthen our bond between our respective 
peoples.
    Thank you, Madam Chairman.
    [The prepared statement of Mr. Ludolph follows:]
    Ms. Ros-Lehtinen. [Presiding.] Thank you very much, and 
before I recognize Mr. Samuel, I would like to recognize Ms. 
Danner if she has any opening statements.
    Ms. Danner.
    Ms. Danner. Madam Chairman, I do not have an opening 
statement, but at the appropriate time I would like to inquire 
of the gentlemen who are before us.
    Ms. Ros-Lehtinen. We thank you so much.
    Mr. Manzullo? Mr. Bereuter.
    Mr. Bereuter. No.
    Ms. Ros-Lehtinen. Mr. Brady?
    Mr. Brady. No questions.
    Ms. Ros-Lehtinen. Thank you.
    Mr. Samuel?

 STATEMENT OF THE HONORABLE E. BRYAN SAMUEL, DEPUTY ASSISTANT 
  SECRETARY FOR TRADE POLICY, BUREAU OF ECONOMIC AND BUSINESS 
               AFFAIRS, U.S. DEPARTMENT OF STATE

    Mr. Samuel. Madam Chairman, thank you very much. Members of 
the Subcommittee, I am pleased to have the opportunity today to 
review our transatlantic trade agenda. If I may, I will just 
briefly summarize my written submission.
    I want to discuss the importance of U.S.-EU relations and 
the need for cooperation with the European Union in the context 
of the new WTO round in the state of play on various trade 
disputes. The European economy now has the promise of renewed 
vigor, and if growth continues, American firms should enjoy 
expanded business and trade opportunities in Europe. Our 
relationship with Europe is guided, first of all, by the New 
Transatlantic Agenda process, which you mentioned, Ms. 
Chairman, in your opening remarks. This ensures that from the 
President to the working level we are in regular contact with 
European counterparts.
    The swearing in of the new European Commission 2 weeks ago 
represents a new start for an institution that has been under 
heavy criticism. The initial signals are quite positive for 
increased cooperation and for progress in resolving our 
differences. We also have a new European parliament with 
expanded powers.
    Last December, the United States and European Union 
unveiled a Transatlantic Economic Partnership Action Plan. This 
plan was designed to reduce regulatory barriers and more fully 
realize the problem of transatlantic trade. Under the TEP, we 
are moving forward on Mutual Recognition Agreements and are 
working to conclude a model framework MRA for services which 
could be followed by agreements in the insurance and 
engineering sectors.
    The United States and European Union have joined in 
creating a stability pact to address regional economic and 
political issues in southeastern Europe. The Administration is 
drafting legislation to extend unilateral trade preferences for 
that region, for the Balkan region; and the EU is moving in a 
similar direction.
    To alert policymakers to issues requiring attention before 
they become intractable disputes, the United States and the EU 
agreed at a summit last June to put in place an early warning 
mechanism. The EU hushkit regulation, which Mr. Ludolph 
addressed, is a good example of the type of issue which could 
have been avoided with early warning. We have made clear the 
need to make rapid progress in pursuing this mechanism.
    Another area of mounting concern is the potential for 
European government subsidies for Airbus' development of the 
superjumbo plane. We are seeking a dialogue with the European 
officials to resolve this issue before it gets ahead of us.
    U.S.-EU cooperation is especially important to achieving 
our goals in the WTO and the upcoming Seattle ministerial. We 
want a market-access-oriented round of negotiations covering 
agriculture, services, and industrial goods and structured to 
achieve a single package of results in 3 years. We need to find 
as much common ground as we can with the Europeans.
    That being said, one of the most important U.S.-EU 
differences as we approach the Round concerns export subsidies 
for agricultural products. We seek their total elimination. We 
and the rest of the WTO membership are less willing. We cannot 
continue to pay the farm policies.
    I now turn to a few WTO cases involving the EU: bananas, 
beef and foreign sales corporations. With respect to bananas, 
we have offered our ideas to the Commission on the WTO 
consistent import regime and sincerely hope the EU will find a 
solution satisfactory to our interest, as well as the interests 
of those in the Caribbean. Regarding beef hormones, the U.S. 
will continue to insist that the EU fully implement the WTO 
ruling and lift its unjustified ban on our beef. On foreign 
sales corporation, the WTO's final report appears to mirror the 
interim report, which gave the United States until October 2000 
to bring our legislation into line with WTO rules. We are 
considering next steps and among those next steps certainly is 
the possibility of an appeal.
    Among the regulatory issues that have become a source of 
transatlantic tensions, biotechnology, as Mr. Ludolph 
mentioned, is particularly visible. Fundamental differences in 
approach continue to divide us and are having a significant 
negative effect on U.S. agricultural exports. I won't go into 
detail now, but simply want to state that we are fully 
committed to maintaining a science-based, rules-based approach 
to trade in biotech products.
    As we grapple with these regulatory issues, I would note 
that as Charles Ludolph said, the Transatlantic Business 
Dialogue has made a valuable contribution in highlighting 
perspectives and areas where improvements to laws and 
regulations ought to take place. Similarly, the Transatlantic 
Consumer Dialogue and the Transatlantic Environmental Dialogue 
are providing us with the perspective of their respective NGO 
communities.
    Take particular note of the role being played by the 
Transatlantic Labor Dialogue in developing support for 
incorporating core labor standards into our trade discussions 
with the European Union. Finally, the Transatlantic Legislative 
Dialogue, with the support of Chairman Gilman, has already 
helped to enhance communication among legislators across the 
Atlantic.
    As you have seen, Madam Chairman, transatlantic cooperation 
continues, albeit not without challenges. Thank you for the 
opportunity to testify today, and I would be pleased to respond 
to any questions.
    [The prepared statement of Mr. Samuel follows:]
    Ms. Ros-Lehtinen. Thank you so much, and we will begin the 
questions with Mr. Menendez.
    Mr. Menendez. Thank you, Madam Chairlady. I appreciate both 
of your testimonies. In the time I have, I want to address 
myself to an issue you have not discussed. I know it maybe 
wasn't formally in your agenda, but it is to many people in the 
country and to many small businesses in the country. Later, in 
a subsequent panel, we will hear from other witnesses, one who 
says, I would argue that under the Constitution, my U.S. 
company has as much right to government protection as Chiquita, 
Dole, and Del Monte, and I believe he is the gentleman who 
comes from Mr. Sanford's district.
    Another witness that I have invited to come will talk about 
how, while we have won our WTO court fight on both bananas and 
beef, we still have not gained market access, and Europe is not 
particularly impressed by the punitive tariff impact on its 
imports, but we are unfortunately creating a crushing blow on 
small businesses, as I cited in my opening statement.
    Mr. Ludolph, the Commerce Department is commerce abroad and 
commerce at home. Can you give me a sense of what this 
Administration is doing about the effect that small businesses, 
most particularly, are having with these high tariffs we are 
imposing on their very limited scope of import activity?
    Mr. Ludolph. First, we take very seriously the effect on 
the U.S. business in both directions, and we have held hearings 
in our process of moving to our retaliation list. We have held 
a series of public hearings to try to get at the effect on the 
U.S. business community and minimize it to the extent possible. 
It is true, however, that many U.S. businesses who import 
products and are related to the European dispute are affected, 
and we hope that is only for a short time.
    We expect to go forward with our negotiations with the 
European Commission on both hormones and bananas. These issues 
are not over as far as we are concerned, and we continue to 
expect to get market access and restore the market for the 
companies under the retaliation.
    On hormones and on bananas, we continue to work on 
solutions with the European Union, and unfortunately, during 
that time period, part of our negotiating strategy or part of 
the reality is that some companies in Europe and in the United 
States who have a stake in trade related to these public 
hearings are affected. Our strategy is to go forward with the 
European Commission and European Union to get market access and 
to restore trade smoothly between the United States and Europe, 
both in hormones and in bananas.
    Mr. Menendez. How do you choose the items that you are 
going to put on the list that affects small businesses in the 
United States? I mean, it is very nice to say we hope that in 
fact it will be for a short period of time; and it is very nice 
to say that it is in the greater good, and we all understand 
about sacrificing the greater good, but what I can't quite 
understand is the rhyme and reason between the selection of the 
items and the relationship between, for example, the things we 
are trying to open up markets in Europe on, whether it be the 
hormone beef, whether it be the hushkits, whether it be the 
whole banana dispute.
    I mean, how is it that we choose products that have 
absolutely nothing to do with that and that, therefore, 
subsequently impose an enormous burden; and what type of 
balancing do you do in terms of choosing these items in the 
context of domestic disruption on these companies?
    I am talking about small companies. You know, the giant 
companies, the very significant companies, they in fact have 
the wherewithal normally, because they already import a variety 
of issues or are diversified in other ways; but these small 
companies, at the end of the day, by the time you are finishing 
your dispute resolution, they may not exist.
    Mr. Ludolph. We are studying the legislation that has, or 
the bill that has been offered by this Committee. We understand 
very much the point that you are making, as well as the impact 
on the small business community. How we choose the products or 
how we go about developing these retaliation lists depends very 
much on how we can maximize the effect within the limits that 
WTO makes available to us, $116 or $190 million worth of trade 
to influence policymaking in key countries that have a big 
stake and have made a political stake in these issues. So we 
are balancing the effect on the U.S. economy, trying to 
minimize the effect directly on the U.S. economy and we are 
trying to maximize the effect within the limits the WTO 
provides on the European economy in order to shift the balance 
of negotiations to making a resolution in favor of the 
interests and rights that we have under a WTO agreement.
    Within that context, you have raised a very important point 
about innocent bystanders in a small business, and we have not 
yet in this Administration taken a position on this, your 
legislation, but it is a very important point, and we are 
looking at it very closely.
    Mr. Menendez. One last point. Let me just simply say, these 
people, they are the lifeblood of America's economy. They are 
the ones who create more employment, and they are also the ones 
who in fact do not have high-paid lobbyists to come here to 
Washington and advocate on their behalf; and that, I think, is 
one of the sad realities of their misfortune. You know, there 
are opportunities for blanket--you know, you could put a 
blanket increase in tariffs. You could go a variety of ways. 
These smaller companies do not have the wherewithal to come 
here to Congress, to lobby the Administration, and in essence, 
they fall between the cracks; and I believe the only lobbyists, 
they are the Members of Congress who represent them here, and I 
really hope the Administration won't wait for the resolution of 
this issue before they come to a conclusion to do something to 
exempt those legitimate small businesses.
    There are safeguards we offered in our legislation, I 
believe that intelligent minds can even create others in which 
they cannot be used as conduits for, circumventing what you 
want to accomplish, but legitimizing at least that which they 
were purchasing, and ensuring that at the end of the day in our 
process to help the big companies that these small businesses 
do not get affected in a way that--in fact, it is not just 
about hurting their businesses. I am talking to you about--I 
have heard from many companies who just simply cannot survive 
if you continue this for a long period of time.
    Thank you, Madam Chair.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Menendez, and we 
echo those worries as well.
    Mr. Cooksey.
    Mr. Cooksey. Thank you, Madam Chairman.
    We have discussed the issue of hushkits previously and in 
other Committees that I am a Member of, or Subcommittee, and I 
have been trying to get an answer, and I think the other people 
are trying to be diplomatic or evasive. I know diplomacy is 
your middle name, but I would really like to get an answer 
about who is causing the problem about hushkits. You can come 
out and say, it is this country or this company, and that will 
be a short answer to my question. If you will do that, fine. 
But if you are still going to be evasive like the other people 
were on this issue, just tell me what companies and what 
countries would benefit from our hushkits not being available 
in that country.
    Mr. Ludolph. I hope I am not evasive, but I don't know if I 
will measure up.
    Let me just start by saying that who is behind hushkits are 
airports in Europe. Airports in Europe are politically now 
becoming very active in pushing for reduced noise. That is 
politically then, and economically--the response to that 
pressure has become the hushkit regulation which is utterly 
useless as far as we can tell and does not respond to the 
concern of airports. So where the pressure is coming from is 
airports.
    The European Commission and the European Parliament are at 
pains now to try to explain to airports that this hushkit 
regulation doesn't really reduce noise; and that is where the 
pressure is coming from, and that is where the political 
problem is. Once you have adopted a regulation that doesn't do 
what it is supposed to do, it is very hard to walk back.
    Who would benefit if the hushkit regulation is sustained 
are a series of companies, in particular Airbus and Rolls 
Royce, and the countries that would benefit, aside from 
essentially all 15 countries, think they would benefit from 
reduced noise, but the countries that would benefit are the 
countries that produce Airbus and Rolls Royce engines.
    Mr. Cooksey. That is a good answer, and that answers my 
question to a great extent. What are the chances of repeal of 
the hushkit regulation as it is currently written by the EU?
    Mr. Ludolph. The chances are less than even money; they are 
less than 50 percent. The repeal issue is being reviewed by the 
member state governments today in Brussels. My supervisor, 
Under Secretary Aaron, has been on the telephone with the 
European Commission, commission representatives, not the 
Commissioner, Ms. de Palacio, but with the European Commission 
staff as well as with the key member States who will be sitting 
on that board today to discuss the repeal issue.
    We believe, and my minister, my under secretary has 
indicated, that we really have no way to go if there is a 
decision not to entertain a mechanism for withdrawal or repeal 
today; and we are waiting with great interest, again, hope with 
some optimism, but with great interest to see what this 
decision is.
    Mr. Cooksey. Thank you. Very good answer.
    Mr. Samuel, a question about the science-based rules on our 
ag products or trade of ag products, and this is similar to the 
question about the hushkits. There are countries that would 
benefit probably more so than others, that are larger ag 
producers.
    Great Britain had a lot of hysteria. What are the other 
countries that have had hysteria on this issue? I mean, I saw 
the newspaper stories, and they were saying that monsters would 
be created by people consuming these genetically engineered 
products, by primarily Monsanto and DuPont, which have been 
good for agriculture, but what other countries are involved 
besides Great Britain?
    Mr. Samuel. The entire issue of food safety has really come 
to the fore in Europe from a number of instances. The first, of 
course, is the mad cow disease problem in Great Britain, and I 
think that has gotten a large part of the British population 
concerned about the government's ability to regulate the safety 
of food. In recent months, we have seen some other examples in 
Belgium where dioxin was somehow introduced into animal feed 
and was then passed on into meat products, meat and poultry 
products. So certainly Belgium has shown these concerns. There 
was the Coca-Cola flap not too long ago.
    Among the countries certainly that have been looking at 
this have been France, Italy, and Great Britain, and I would 
say that is where there has been really--and Belgium--have been 
the largest sort of political reaction and difficulty for those 
governments in dealing with biotech products and convincing 
their people that biotech products are, in fact, safe.
    Other countries we have had a better dialogue, I would say. 
For example, the Netherlands have had a long and very mature 
type of regulation in place on these products, and we found a 
way to deal with that market, but it is the uncertainty in some 
of these other larger markets. Mr. Ludolph mentions Austria as 
another good example.
    Mr. Cooksey. One closing question. If we were in a meeting 
of an EU country this morning and we were members of parliament 
in France, the UK, Italy, and Austria, whatever, one of the 
other countries, what are the charges they would be making 
about the United States? What would they be saying about us 
this morning? What are their major trade issues with us? If you 
could just briefly give me the top three.
    Mr. Samuel. Certainly, I would say, first of all, it would 
be sort of unilateral trade actions which they charge us with, 
and in this area, would be sanctions, on our sanctions policy, 
that they sometimes feel they are affected by that.
    Beyond that, I suppose it would be various subsidy issues 
that would be partly--this is them trying to find a way to 
lambaste us with the same sort of charges which we, I think 
more rightly, make against them, and so they bring up again 
some of our agricultural support policies, and I think that is 
mostly a defensive mode, and similarly, in the Airbus sort of 
trade and aircraft, they bring up defense programs and whether 
or not these are subsidies.
    I would say a third area is certainly State and local 
practices that they feel go beyond the borders to affect them, 
and perhaps you recall there was an issue having to do with the 
State of Massachusetts, proposed restrictions on procurement 
based on trade with Burma, and that again certainly energized a 
number of the member states.
    Mr. Cooksey. I have many more questions. I have more than 
used my time. The chairlady has been more than gracious, and 
thank you for your answers.
    Ms. Ros-Lehtinen. Thank you so much.
    Ms. Danner?
    Ms. Danner. Thank you very much. My question will be 
directed to you, Mr. Ludolph. My colleague just spoke of the 
fact that some of us have heard about hushkits in other 
Committees. Interestingly enough, quite a few of these Members 
of this Committee are on that other Committee which is 
Transportation and Infrastructure, and one of the things we 
learned there was that with regard to the hushkits, the 
decision was not made on noise decibels, but indeed upon 
design, and that the design really reflected only American 
design.
    Would you like to tell us a little bit more about that 
because, you know, the idea that it is simply to reduce noise 
because airports want it, airports don't really know what kind 
of a design is in that hushkit. They only know about noise 
decibels, and yet that is not really what we are talking about.
    Mr. Ludolph. I can't add very much except that this has 
been the most astounding breach of the European Commission's 
regulation for the past 40 years of practice in terms of 
developing aerospace standards. You cannot really design either 
an airport or an air traffic control system because much of 
noise reduction has to do with the operation of the planes, not 
the design of the planes. You can't really run an international 
air traffic control system or design an international aircraft 
based on having a lot of regional or national design 
requirements. It would be a kind of Rube Goldberg type of 
invention that would be flying around. It wouldn't be very safe 
and it wouldn't be very energy efficient, if you tried to put 
all of these design requirements for national requirements in, 
and this is the major problem.
    More than the fact that this little rule is going to affect 
or is affecting $2 billion worth of exports today, which is not 
only affecting but is eliminating $2 billion worth of exports 
today. The major problem is that for 40 years we have had an 
international standard system that has supported the growth of 
air traffic globally. This little rule is the example of a 
major breach in this system that could very well bring the 
system down.
    ICAO could be a thing of the past if this regulation is 
sustained, with the effect that neither the Europeans nor the 
U.S. will have effective noise control in the future because 
Russia and Indonesia and all of these other countries will be 
flying planes and operating them based on national standards 
rather than international standards.
    So this is a very grave problem that needs to be addressed 
in a larger context.
    Ms. Danner. Might we hope--and I think I sense some 
optimism on your part--that with the new commissioners and the 
new parliament that we might have a different approach to this 
problem?
    Mr. Ludolph. We also have had early meetings--again not 
with Ms. de Palacio, who is in charge of this issue, but early 
meetings with the new commission last week, and we do seem to 
have new possibilities. So we are optimistic that this 
commission will be taking a fresh look at the hushkit issue, as 
well as several other irritants, and we expect that this would 
be a very positive outcome.
    Ms. Danner. One last question. You can tell that I 
represent--TWA's largest number of employees live in my 
district, so I am obviously always interested in aviation, but 
I also represent 27 counties, so obviously I have a rural 
constituency as well. My question is, do you or your 
organization, Commerce Department, relate to Barshefsky when 
you all determine what we are going to--and I followup on my 
colleague's question with regard to what we are going to ban in 
our country as they ban our beef. Because in looking through 
this, I find that over half the articles that we are banning 
are meat articles, and we are not really short on meat in this 
country, and then two of them are pates. One is truffles. I 
mean, these are not things that the average American sits down 
daily to eat.
    Why did we not, if you have the knowledge, and obviously I 
need to inquire of her, why did we not address the things that 
we really look for from those countries, wine from France, 
Spanish goods from--pardon me, leather goods, I should say, 
from Spain and from Italy? We really have touched things that 
are not relevant, it seems to me.
    Mr. Ludolph. Let me just say that our theory--and we worked 
very closely through our industry sector advisory Committees 
with the private sector. We have a small business, ISAC, that 
we work closely with in terms of reviewing the impact of these 
retaliations and looking at the overall policy of how to go 
about this. But let me come back to the question of what our 
theory is.
    Our theory is to try to move the negotiations forward. We 
don't see retaliation as the end of the issue. It doesn't serve 
anybody's interest not to be exporting beef to Europe nor to 
stop the import of products coming from Europe. Certainly, that 
is not what the U.S. expects from WTO dispute settlements.
    The theory is to make the pain of retaliation, to visit it 
on the people who are benefiting from the protection. Animal 
growers, animal farmers are the beneficiaries of the protection 
that the Europeans put in place. Beef hormone is a 
protectionist device to protect cattle ranchers in Europe. So 
the theory is, we should then be inflicting pain on meat 
products from Europe, and so that is why we emphasize meat.
    Ms. Danner. So that theory is very relevant if we import a 
lot of meat products from Europe, but if we are not importing a 
great many meat products, it loses its relativity. I think, 
from the light, my time has expired.
    Ms. Ros-Lehtinen. Thank you, Ms. Danner.
    Mr. Manzullo?
    Mr. Manzullo. Thank you. As a cattle producer, you might 
think that my question would be self-serving, but I am not 
going to touch that issue. I want to talk about eggs.
    We received a letter from Malquist Butter and Eggs, a major 
egg producer in our congressional district. The Europeans must 
stay awake 24 hours a day thinking about the various ways that 
they can come up with these nontariff barriers. The latest is 
that they won't allow any U.S. inedible egg products. Not the 
incredible egg but the inedible egg products that are used for 
pet food, et cetera, unless the American manufacturers add 
fishmeal to the caramel coloring as an additional safeguard. 
Yet the Europeans themselves are not required to add fishmeal 
and caramel coloring. This is this is ridiculous.
    My question is, first of all have you heard of this latest 
one?
    Mr. Samuel. No.
    Mr. Ludolph. No, sir.
    Mr. Manzullo. It is not because you are not knowledgeable. 
It is because there are so many of them that come up day after 
day after day. But what I was going to ask was did it fall 
through the early warning system.
    Mr. Samuel. It sure did.
    Mr. Ludolph. You are our early warning, so we appreciate 
the aggressive Committee--I don't know--it may be that U.S. 
really has----
    Mr. Manzullo. I really don't have any further questions to 
ask.
    Mr. Ludolph. If you could give us that material, we would 
like to followup on it.
    Mr. Manzullo. Absolutely. It is a letter that has been 
circulated by Congressman Blunt going to Charlene Barshefsky, 
and of course, we are signing on to it. I was going to ask a 
question on it, but unless you wanted to comment on something 
of which you have knowledge, I will just let somebody else ask 
some more questions.
    Mr. Samuel. We will be happy to followup. Our colleagues at 
the U.S. Department of Agriculture may, in fact, know about it, 
and it is just a lapse on our part.
    Ms. Ros-Lehtinen. Mr. Manzullo is on the cutting edge of 
the Information Age.
    Mr. Bereuter?
    Mr. Bereuter. Thank you, Madam Chairman.
    Thank you for your testimony. I don't have many questions 
for you at this stage. Thank you again for your presentations.
    First of all, I will come back to some things that Ms. 
Danner and Mr. Cooksey have talked about, specifically the 
subject of genetically modified organisms. I think it is 
probably important that you seek the information from our own 
industrial agri-industry sources because the Europeans are 
consuming extraordinary amounts of GMO products already by 
European production. This is a kind of a red herring, but I 
don't think that the European public probably understands that 
this was a subject they might have addressed 10 years ago with 
respect to their own products. This is some ammunition you need 
to have on your belt.
    The second thing I would say is that we need to reaffirm 
the principles related to the sanitary and phytosantary accord 
in the Uruguay Round, the SPS. Unfortunately, European 
consumers do not have an FDA. They, therefore, I think are more 
subject to scare tactics and concerns created by what happened 
in Britain and Belgium.
    I don't know if there is any effort on the part of the EU 
but we really do need to insist on regulations, including 
tariffs and nontariff barriers, that are based upon sound 
science and which are based upon risk assessment. We have a 
capacity, of course, today to measure one part for 4 billion 
and beyond, and the scientists that come before us tell us it 
is scientifically impossible to prove something is safe. You 
can prove it is dangerous, but you cannot prove it is safe. 
Risk assessment needs to be a factor or we cannot stop any 
nontariff barriers that are placed against our products. It is 
just impossible.
    It goes back to the infamous Delaney clause in the United 
States which hounded our own production and consumer sector. I 
hope that we can really get them to focus on what is sound 
science with respect to the products that we hope to export to 
Europe. We need to put teeth into agreements to reiterate that 
sanitary and phytosantary accord was supposedly put in place by 
the Uruguay Round. It was put in place, but whether or not it 
is violated more often than not, I don't know.
    When we listen to Europeans talking to us today, moving to 
another point, including members of the European Parliament, it 
is clear that they are preparing their arguments against the 
agricultural subsidies that we are voting for. We are going to 
provide more financial assistance to the farm sector this year 
than any year since the mid-1980's. We are about to put more in 
there, but it is important that we cause the Europeans to admit 
that there is a distinction between trade-distorting subsidies 
and those that are not trade-distorting.
    Ours are transition payments for the most part, and they 
are increasing the transition payments. What they don't do is 
distort trade. They are not putting us in an advantageous 
position to compete for Third Country markets. Through their 
subsidies, the Europeans have Taken Third country markets from 
us. They will prepare to make a general assessment about what 
we are spending in agriculture versus what they are spending 
and say, ``See, you do it, too.'' The difference is whether or 
not it is trade-distorting or nontrade-distorting. I think that 
needs to be the focus. It is clearly part of their tactics and 
strategy for the next round.
    Let me just say one more point. I think we really have to 
cultivate sound relationships with some of the countries that 
are most affected by these nontariff barriers and the 
subsidization of their export sector. Those countries include 
Australia and New Zealand which are really hurt more than any 
other countries by the trade war that we find ourself in with 
the Europeans in trying to combat their trade-distorting 
subsidies with some of our own. We don't fund them as well, but 
still, it is the Australians and New Zealanders who are really 
most directly affected by this.
    I hope that perhaps you will try to revive or work with 
anything that looks like the Cairns Group that might be 
continuing or reestablished.
    I guess I would ask you one final question as a part of 
this. What do you think we can do to put in place effectively 
the SPS accord in the Seattle Round?
    Thank you, Madam Chairman.
    Mr. Samuel. Just briefly, thank you very much.
    Many of your statements sound just like the talking points 
that were prepared for me. We agree 100 percent on what you are 
saying on biotech and on genetically modified organisms, that 
we have to have a science-based system. The Europeans have to 
adopt a science-based system. We are working in several areas, 
most importantly in the Codex Solimentaries, which is 
identified in the WTO as the body that is responsible for this.
    Europeans have introduced what we consider suspect notions 
of precautionary principles into the work of that Committee.
    Mr. Bereuter. Would you remind my colleagues of where the 
Codex is funded and run?
    Mr. Samuel. Sure. It is run out of the FAO and the 
international organization.
    Mr. Bereuter. When we think about authorizing money for the 
FAO, we might think about the Codex.
    Mr. Samuel. That is right. So that is very much an 
important organization in trying to maintain its principles of 
sound science.
    We are doing work also at the OECD on what are the 
regulatory procedures that different countries have in place 
and how they can be effective. So we agree completely with your 
statements on the need for sound science, and that is the way 
we are promoting it with the Europeans.
    I agree, too, as I mentioned in the earlier question, that 
the Europeans are trying to stretch the plane and incorrectly 
referring to our farm support programs as trade-distorting or 
in any way a violation of the agricultural agreement from the 
WTO. We are watching our amber box limits as we move forward, 
and as you mention, our own export subsidies are minimal 
compared to the Europeans.
    We have been working with the Cairns Group. Secretary 
Glickman was at their last meeting in Buenos Aires. We will 
continue to work with the Cairns Group and would like to and 
have in fact adopted very many similar positions. I note the 
language on export subsidies in the recent APEC declaration 
which was us working with Australia and New Zealand, I think to 
get good language on elimination of export subsidies.
    As far as the SPS agreement itself goes, we think that it 
is a good agreement. It needs to be implemented better. We 
don't want to see it reopened in the new round. We want to keep 
it as it is; and the way to have it done, I think, is to keep 
raising it again and again as a red flag with the Europeans 
when we see examples, such as this egg example that Mr. 
Manzullo mentioned. I think in its use that it is going to be 
proven that it stands up in dispute settlement cases that we 
have already seen on the hormones case. So, again, if it is of 
use we will stick with it.
    Mr. Manzullo. Mr. Brady.
    Mr. Brady. Thank you, Mr. Chairman. I want to continue on 
food safety.
    First, I realized as Mr. Cooksey of Louisiana was talking 
that we might have a perfect example that could reassure the 
Europeans about food safety and the strength of the human body. 
Louisianians have been both eating and marketing boudin for a 
century. It is a sausage that defies genetic identification, 
has a shelf life of 50 years and could be the next scientific 
element just by itself, and every time Texans think we are 
special and smart, we realize that the Cajuns have talked us 
into eating that stuff, and so we are not all that bright.
    You might want to use that example the next time they get 
concerned over there.
    In effect, today, as we know, we have a fresh start in 
Europe. Although optimistic about it, and every time there is 
an opportunity for change, we are not sure that is going to 
occur. Earlier this week I noticed an announcement by David 
Byrne of Ireland, the new EU Commissioner for Health Consumer 
Protection, that in October he will be releasing in effect a 
white paper outlining some of the principles of food safety 
inspection for the future.
    My first question is, what do you anticipate different, or 
are we working with his office to at least identify areas of 
common ground? Second, how do we make the case much better on 
issues such as bananas? The issue isn't bananas; it is the 
integrity of the World Trade Organization, that if we don't 
have a dispute resolution that is timely, where the appeal 
process is clear, that really jeopardizes trade all around the 
world. Bananas are so much important because of that integrity.
    Do we need to be raising the need for changes? Have beef 
and bananas or other disputes identified some areas within the 
appeal process that need to be clarified so that there is more 
timely response? So the first one is, do we anticipate anything 
different with Mr. Bern's report? Second, you know, are we 
contemplating initiating, pushing for changes that could help?
    Mr. Ludolph. Let me just start, Congressman, with the issue 
of food safety. My minister, Mr. Aaron, met with David Bern's 
chef du cabinet on the day that Mr. Byrne was sworn in. Mr. 
Byrne has testified in addition to his comments about putting 
out new food safety regulations that would restore confidence 
among consumers in Europe and is intended to do that. He has 
also stated that he is very dedicated to the issue not only of 
consumer protection but also of sound science. These are very 
important statements that were amplified and expanded in our 
discussions Friday a week ago in Brussels with the his chef du 
cabinet, Mr. Martin Power.
    We have taken two steps here in the U.S. Government with my 
colleague, Mr. Samuel. We have started an outreach campaign on 
GMO's and on food safety dedicated to be addressing a lot of 
the European concerns, and we have suggested to Mr. Byrne that 
a joint government public hearing on the issues of science and 
how science supports agrobiotech issues and biotechnology food 
be held at an early juncture by the Commission, and that idea 
is beginning to be very well received under this new 
Commission. It went nowhere all summer under the hiatus we had 
with the Commission's changes.
    Finally, this January in The Hague, the U.S. Government 
with the U.S. business community are inviting 300 scientists to 
come together in The Hague to address the issue of 
biotechnology in food. We want that conference to be in The 
Hague, particularly because the Netherlands is very supportive 
of what we are looking at in terms of sound science and 
addressing the issue of precautionary principle, and Mr. Byrne 
is also interested in participating in that conference.
    These are changes that we see in the new Commission and a 
new kind of willingness to look at sound science and as it 
supports consumer protection. Their idea, as you point out, is 
to move to bring confidence back to their consumers, and we 
have to make sure, and I think this commissioner now is showing 
that sound science is going to be really the only objective way 
to support that policy.
    Mr. Samuel. On the dispute settlement system of the WTO, 
you are correct that the bananas case, first and foremost, 
showed that there was a glitch in the system. It threatened to 
become what we call an endless loop of litigation where one 
country says, oh, no, it has done exactly what it is supposed 
to do and the other country say, no, and they say, well, take 
us back and start from the beginning on dispute settlement.
    So that was resolved actually through some panels during 
the course of the banana proceeding, we think in our favor, our 
argument, in fact, that the panel that reviews the retaliation 
is reviewing at the same time the implementation and the 
consistency of the implementation.
    We are in the process very much of working in Geneva. Our 
Deputy General Counsel at USTR has taken the lead on this in 
working with counterparts in Geneva to fix this glitch in the 
WTO dispute settlement procedure. We think, first of all, it 
will end the dispute about what the procedures are themselves, 
and so of course not provide an opportunity to string it along; 
but second, we think we can sort of trim some of the time 
schedules. So we have learned now in the course of several 
years since the course of the WTO that some of the 90 days, 
don't need to be 90 days or the 60 days could be a little bit 
less, and so we are working on that, too, and we are optimistic 
that we will finish these consultations and get an agreement by 
the time, if not before, certainly by the time of the Seattle 
ministerial.
    Mr. Brady. That is very important, and Mr. Ludolph, any 
opportunity we get a chance, not only with the Commission, but 
the European Parliament members who are directly elected, who 
in their town hall meetings have to face the issue of food 
safety, my experience with them; and as we had an 
interparliamentary delegation to Texas to look at ag research, 
GMO's, issues such as food safety, I think education, any time 
we get an opportunity to educate members of the European 
Parliament, as well as the Members of the U.S. Congress 
together on this issue, it is worthwhile. I don't see it as an 
artificial trade barrier, but a very real one where we have to 
do a lot of work any chance we get; and I hear from our 
European parliamentary members they want to be involved in 
solving this as well. So just an observation.
    Mr. Manzullo. OK.
    Mr. Burr.
    Mr. Burr. Thank you, Mr. Chairman. I really came to listen 
and not ask questions, but I think Mr. Bereuter stimulated 
something that I want to followup, and it is not so much a 
question as it is a statement.
    Let me suggest to both of you that sound science is an 
important issue. Unfortunately, I don't think, yet, sound 
science trumps politics, and for that reason, I am not too 
confident that sound science will be a dominating or 
determining factor on decisions that are made relative to 
positions on trade.
    I am sort of curious as to how the EU will respond when 
hopefully this Congress addresses the tremendous ag disaster in 
North Carolina this year.
    I think the case will be made that North Carolina can't 
take any more loans. They have to have direct payments. I am 
sure that will create a new, if we are able to do it, crisis in 
the relationship of the ag community and what the U.S. does to 
the ag farmers, because we have, in fact, complained about 
direct payments to farmers in the EU for some time, and clearly 
that is not going to change in the foreseeable future.
    Mr. Bereuter raised the question about health, and I want 
to go specifically to that. He also raised the question of a 
food and drug Administration. One of the attempts for one of 
the mutual recognition agreements dealt with our acceptance of 
European standards for drug approval and device approval, but 
we are in a different situation. I think that we indeed have 
the gold standard of that process, one that I have fought very 
hard to protect.
    The EU is in a different situation because, upon its 
formation, they accepted the standards of all members, a wide, 
varying array of standards that existed, some with a little 
more credibility than others--not to highlight countries, but 
clearly a system that I hope this country does not adopt with 
open arms, a mix of 22 different approval processes that we, in 
turn, turn around and assure the American public, this is all 
safe and effective. I do believe that the most difficult thing 
that we have to deal with in the future is not our trade 
agreements, but it is our ability to harmonize the 
international standards.
    We can have explosive trade, but at some point, we hit a 
wall that is so high because of our inability to harmonize 
those global standards that it will bring trade to a 
standstill.
    I will let either one of you, or both, comment on anything 
that I have referenced.
    Mr. Ludolph. I appreciate and understand very much the 
concerns that this Committee and other Committees have raised 
on the implementation of MRA's and the implications it has for 
harmonization, not only with the European Union that has 
relatively high standards of regulation and enforcement, as 
well as safety to protect their consumers and environment, but 
more importantly with other countries outside the European 
Union that have more difficulty not only developing high 
standards, national standards, but enforcing them.
    I have just come from a meeting of the Transatlantic 
Business Dialogue this morning in which we discussed the 
implementation of the medical device, MRA, and the slow pace, 
the unsatisfactory--from a business community's point of view, 
the slow pace of implementation. Implementation of the MRA and 
medical devices, and for that matter, pharmaceuticals is slow 
because the FDA is holding to its position that they must 
inspect every one of these foreign inspect orates in the 
European Union before we go forward with turning over 
inspections to either conformity assessment bodies or private 
bodies in Europe or with the governments.
    So we expect that instead of a year's delay in developing 
an MRA or implementing an MRA and medical devices that it may 
take as much as another year before the FDA is satisfied that 
medical device enforcement and procedures in Europe meet their 
high standard for delivering safe products here in the United 
States. That is a delay we are prepared to take, and that is a 
delay that will be inconvenient to the constituents and the 
business community for what they hope an MRA is going to 
provide.
    Mr. Burr. Let me note for the record that last year, 
though, there was tremendous pressure on the FDA by our 
negotiators to expedite that mutual recognition agreement, even 
though serious, serious questions remain. So I thank you or 
those who are responsible for allowing the FDA to go through a 
thorough process, because I believe that the speed with which 
they were asked to rubber stamp an agreement would, in fact, 
break the gold standard that many people in the country have 
grown to trust.
    Mr. Ludolph. We very much appreciate the hearing that was 
held last year on this issue, and it brought home a lot of 
issues that had to be addressed by the FDA, as well as the 
trade community.
    Ms. Ros-Lehtinen. [Presiding.] Thank you so much.
    Mr. Crowley.
    Mr. Crowley. Thank you, Madam Chair. This is concerning the 
hushkit issue in terms of the EU. Can you tell me why you think 
that was imposed?
    Mr. Ludolph. I am sorry, why the Europeans----
    Mr. Crowley. Was it purely for noise control or was it 
punitive, in your opinion?
    Mr. Ludolph. Both. It was originally proposed under the 
assumption or under the unexamined assumption that it would 
address noise. It does not address noise. Today I can't really 
persuade you that it has any other effect than protecting or 
disrupting or eliminating certain kinds of technologies that 
only American companies make for the European market.
    So, originally it was proposed as a noise regulation. We 
have brought it to the attention of European Governments that 
this does not address noise at all and has the explicit effect 
of eliminating more than $2 billion worth of trade.
    Mr. Crowley. In other words, you are saying there is no 
discernible difference between a hushkit engine and a fitted 
engine that is already meeting those standards?
    Mr. Ludolph. The hushkits are forbidden under this rule, 
and there are about 1,800 airplanes in the world that would 
benefit from hushkitting. So this would have an effect on them.
    A more expensive way of retrofitting these 1,800 planes is 
to reengine them. Many airlines can't afford to go this more 
expensive way of reengining, and in many technologies, many 
airplanes won't even support reengining with any effect. So all 
of these proposals that the Europeans have come up with in 
terms of design or technologies would really have little more 
effect than taking airlines and aircraft out of the European 
market.
    Mr. Crowley. What steps are you yourself or the 
Administration doing to address the issue?
    Mr. Ludolph. David Aaron, my Under Secretary of Commerce, 
is on daily phone calls because there are key meetings this 
week in Europe on how to go forward. Our policy is to continue 
to work with the FAA and the European Union on about a 14 month 
program in ICAO to develop an alternative noise reduction 
standard. Meanwhile, we have lost $2 billion worth of business 
because the effect of their proposal is to eliminate our 
competitiveness.
    We also, therefore, need a second step. In addition to the 
14-month harmonization of standards, we need the European Union 
to withdraw or to begin a mechanism to withdraw that regulation 
which does not contribute to noise and does not contribute to 
the ICAO process.
    The European Union are deliberating on our proposal for 
withdrawal this week and through the rest of this month and in 
the early part of October. I have already indicated to Mr. 
Cooksey that we will get reports on a regular basis this week 
and next, and we will be sharing that information with your 
Committee.
    Mr. Crowley. We would appreciate that information. Thank 
you.
    [The information referred to follows:]
    Ms. Ros-Lehtinen. Thank you so much for an excellent 
presentation, and as you can see, the issue of hushkits and as 
Mr. Menendez brought out, how all of these tactics of the EU 
impact on domestic small businesses is of great concern to this 
Subcommittee; and we look forward to continuing our 
conversation with both of you and your Departments. Thank you 
so much.
    We would like to introduce our second panel. It leads off 
with Mr. Willard Berry, who serves as the President of the 
European-American Business Council, formerly the European-
American Chamber of Commerce. Prior to joining the Council, Mr. 
Berry led several national and State organizations involved in 
international trade with primary emphasis on export issues. His 
most recent assignment was that of Vice President for 
Congressional Affairs at the national foreign trade council in 
Washington from 1988 to 1992. Mr. Berry's background extends 
beyond his experience as a trade associate executive, and he 
has also served as a university professor for almost 10 years.
    He will be followed by Mr. Rick Reinert, President of REHA 
Enterprises. Mr. Reinert is a constituent of our colleague, Mr. 
Sanford, a Member of the International Relations Committee.
    Our final panelist is Mr. John Roberts, President of the 
National Association for the Specialty Food Trade. Our 
distinguished Ranking Member, Mr. Menendez, will introduce his 
constituent.
    Mr. Menendez?
    Mr. Menendez. Thank you, Madam Chairlady. It is my pleasure 
to welcome John Roberts, who is the President of the National 
Association for the Specialty Food Trade. The NASFT is a not-
for-profit trade association which represents members who work 
with high-value food items, including many small importers. 
Recently, Mr. Roberts was appointed as a member of the U.S. 
Department of Agriculture's Agricultural Policy Advisory 
Committee for Trade and as an advisor to the Foreign 
Agricultural Service. He resides in New Jersey, which is the 
Garden State, and is a graduate of Seton Hall University, and I 
believe he will testify about some of the domestic impacts of 
U.S. retaliatory trade measures, and we appreciate you coming 
from New Jersey today to give us your insights.
    Ms. Ros-Lehtinen. Thank you so much for a most excellent 
witness, and I would like to recognize Mr. Sanford so he may 
introduce his constituent, Mr. Reinert.
    Mr. Sanford. Madam Chairwoman, I would simply like to 
introduce Rick as a hardworking American taxpayer from 
Summerville, South Carolina, and I think that unfortunately if 
what exists right now stays in place, Rick will basically be 
the personification of the terms ``friendly fire.'' We all know 
those movies wherein somebody is caught at the wrong place at 
the wrong time and through no fault of their own they are 
getting fired on.
    Rick isn't getting fired on. He is getting bombed, and if 
something doesn't change, he will truly be a casualty of war. 
This is going to be tragic, given his background, in that he 
served our country honorably in the U.S. military. During his 
service with the army he was stationed in Germany for 3 years.
    When he was there, he found a couple of products that he 
liked. When he returned to the United States, he began 
importing those products. One thing led to another--similar to 
many American success stories, and Rick moved his business from 
his basement to a 6,000-square-foot building. He grew a 
successful business and things were going fine; and then all of 
a sudden a trade war erupted, which brings us here today.
    I would just say that I would beg of you to really listen 
carefully to his story because what has happened to Rick 
undermines the very principle on which trade practices are 
built, and that is, trade law is supposedly about fairness, 
making sure that one country has a fair relationship with 
another country. What is going on with Rick right now makes a 
mockery of the word ``fairness.'' .
    I think it raises a dirty little secret that is happening, 
similar to that of Bob Menendez's constituent: if you happen to 
have the right lobbyist in Washington, to be the subject of 
this problem. In other words, the dirty little secret here is 
the power of money in Washington. For Rick, who can't afford a 
lobbyist in Washington, to be the subject of this unfair trade 
practice, again, makes a mockery of what we are trying to have 
in place with our trade practices. I won't usurp his story, but 
I would ask that you listen to it carefully.
    Ms. Ros-Lehtinen. Thank you so much, Mark and Bob, for 
providing us with such excellent witnesses who are on the front 
lines of this trade war.
    I would like to tell our panelists, as well as our 
Subcommittee Members, that we need to be out of this room, at 
the latest, at 1:05, because there is a 1:30 meeting and they 
need the time to clean up after us, especially me. So if you 
could please limit your time, and I am going to be closely 
monitoring it. Thank you so much.
    Ms. Ros-Lehtinen. Mr. Berry, we will begin with you. We 
will be glad to put all of your statements into the record so 
if you could summarize them that would be great.

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

    Mr. Berry. I will do that. Thank you, Madam Chairperson and 
Members of the Subcommittee, for this opportunity to testify 
and holding what we think is a very important hearing. The 
Chairperson, in her opening statement, and some other witnesses 
have remarked on the substantial character of the trade 
relationship. Today, we are releasing this study. The Members 
of the Subcommittee should have it, which is a State-by-State 
analysis of trade and investment.
    Ms. Ros-Lehtinen. We have all of those. Thank you.
    Mr. Berry. But in the short period of time I have, I would 
like to focus on the quantitative aspects of the relationship, 
pointing to the enormous amount of jobs and that the number of 
jobs, which is 3 million on each side, is doubled when you take 
into account indirect employment.
    When you look at the 12.4 million jobs in the United States 
that are supported by exports from the United States to Europe, 
when you look at the size of the exports, one of the things 
which cannot be reflected in this study because of the way the 
data are produced on a State-by-State basis within the 
government agencies that collect the statistics is how that 
growth has changed over just the last year.
    New EU investment in the U.S. jumped from $26.7 billion in 
1997 to $103 billion in 1998. That is an increase of 385 
percent. At the same time, new U.S. investment in the EU leapt 
from $18.9 billion in 1997 to $54.5 billion in 1998, an 
increase of 288 percent. The total increased investment 
relationship is nearly $900 billion. This is what we must 
comprehend about the relationship.
    Policy should be guided by an awareness of these strong 
phenomenal ties. The factors that underlie this market 
integration process should be better understood. Policies which 
reinforce and support this dynamic should be pursued. These 
developments would not be taking place were there not many 
commonalities between the two markets: a common market-oriented 
approach, shared competitive orientation, shared leadership and 
technological developments, corresponding business practices 
and compatible legal frameworks and commitment to global trade 
rules. These factors and others define substantially 
transatlantic cooperation.
    Policy makers have, to a large extent, focused their 
energies on the disputes and, in the public mind, these 
conflicts define the European-American relationship. There has 
been bilateral cooperation in approaching and managing a number 
of areas: the emerging electronic marketplace, 
telecommunication standards. There has been real progress 
through extensive dialogue on data privacy which 1 or 2 years 
ago was considered a very, very risky issue. There have been 
other advances toward regulatory cooperation, mutual 
recognition and, as some of the witnesses before mentioned, 
early warning.
    For the most part, however, the conflicts have captured the 
attention of policymakers. This is not only unfortunate, but in 
the long run, removes key officials from the real vitality that 
the transatlantic commercial relationship involves.
    Is the focus wrong when the total sanctions on bananas and 
beef, $308 million, is less than three-tenths of 1 percent of 
new EU investment in the U.S. last year?
    There are a number of things that I could say--some 
specifically--about the disputes. Clearly some changes need to 
be made. There has to be more cooperation. We are particularly 
concerned that there hasn't been more cooperation between the 
U.S. and the EU in their approach to the WTO ministerial 
agenda. We are pleased with the early warning. We are pleased 
with a lot of the things that have developed within the 
Transatlantic Business Dialogue.
    I would be very happy to answer any questions. Thank you.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Berry.
    [The prepared statement of Mr. Berry follows:]
    Ms. Ros-Lehtinen. Mr. Reinert.

  STATEMENT OF RICK REINERT, PRESIDENT, REHA ENTERPRISES, INC.

    Mr. Reinert. Thank you, Congressman Sanford, for your kind 
words, Madam Chairman and honorable Members. Let me first start 
off by apologizing to all of you because I am going to use this 
forum to discuss my problem and my company basically.
    I brought with me a banana. This could have been produced 
by Chiquita, Dole or Del Monte. I have also brought our product 
along, which is Ombra Bath. This is our product we distribute 
right across the United States and if you look at the back of 
this product, there are no banana derivatives in this product. 
The shape is not banana like, the smell is not banana like, it 
is not yellow.
    So my question is, why since March 3, 1999, do I have to 
pay 100 percent tariffs on this product? I also would question 
and point out to you that it has already cost me $20,000, and 
this money I believe is mine. It is not the U.S. Government's 
money. This is the money that is collected from honorable 
business basically in the form of profits. Now, I have to give 
to it the U.S. Government because they decide to make this 
punitive trade action on Europe.
    When I first learned about this whole thing it was through 
Time magazine in February 1999. At that time, it was pointed 
out to me by the USTR that the public debate period had closed 
already in November 1998, and the USTR was very surprised that 
I was still importing this product, but I would question them, 
what would they have me do? Would they have me crawl into a 
hole and close my business because they decided my business was 
not worthwhile or my product was not worth having in the United 
States?
    I would also like to ask a pointed question to Ambassador 
Charlene Barshefsky and Ambassador Peter Scher. Put the shoe on 
the other foot. Say, if I had the power to implement these 
tariffs, what would they do in my position? Would they close up 
their business and go home? I am not prepared to do that.
    I believe that this punitive trade action by the USTR is 
having minimal effect on Europe. I would also tell you that 
this is a hit list basically of the banana war and the beef 
war, and every product on these lists----
    Ms. Ros-Lehtinen. What is that list that you are referring 
to, the same?
    Mr. Reinert. The banana war hit list, the final list of 100 
percent tariffs and also the list of the beef war, and I would 
suggest to you that you could multiply that list by three and 
there are three companies out there for each items importing 
these goods, and these are the people you are hurting, U.S. 
citizens and U.S. businesses, and I really question whether 
this was really the effect that was wanted. Would it have not 
been more equitable to put 5, 10, 15, even 20 percent on a 
whole range of European goods, everything coming over?
    I guarantee you change would have been effected 
immediately.
    I can tell you our product is made under the highest labor 
standards in the world. The manufacturers have just received 
ISO 9002 certification. Can Chiquita, Dole and Del Monte say 
the same thing about their labor conditions? I would also like 
to point out that the product that we are protecting here with 
this trade action is not a U.S. grown product. It is a Latin 
American grown product.
    The Constitution, in my opinion, as I always learned, 
protects everyone, regardless of size, political clout, 
financial resources. So I believe I have as much right to 
protection as anyone out there, any business, and I am also 
under the understanding that this country was founded on its 
opposition to unfair taxation. I do also believe that the 
Europeans with their banana regime, it is contravening the 
general agreement of tariff and trade, but I think it is 
immoral to target one company because of the wishes of another.
    In closing, I will tell you I have been making this 
impassioned appeal to you because I am going to tell everybody 
who is willing to listen to me, and I could never in my life 
have believed that at some point I would be in a fight for my 
very survival with the U.S. Government.
    So let me just say this, and I don't want you to take this 
out of context, but when you go back to your offices and your 
constituencies and I go back to Summerville, South Carolina, 
remember that me and everybody on this list are still going to 
be paying these tariffs. I thank you for your time.
    [The prepared statement of Mr. Reinert follows:]
    Ms. Ros-Lehtinen. Thank you very much for excellent 
presentation, and I think that you speak for everyone else on 
that list.
    Mr. Roberts.

     STATEMENT OF JOHN ROBERTS SMALLER, AMERICAN COMPANIES

    Mr. Roberts. Good afternoon, Madam Chair. Thank you, 
Congressman Menendez, for your kind introduction. Thank you all 
for the opportunity to present the views of smaller American 
companies regarding the serious damage they faced from the 
actions taken by our government during the recent trade battle 
with the European Community.
    The National Association for the Specialty Food Trade, 
NASFT, is a not-for-profit trade organization, formed to 
advance the interest of all segments of our industry. Our 
Members' products are high value added food items. Although 
headquartered in New York, the NASFT has a nationwide 
membership of over 2000 specialty food suppliers, including 
manufacturers, producers, distributors and importers, in 
addition to a growing number of specialty retailers, 
restaurants and chefs. Over 90 percent of our member companies 
are U.S. based and are owned and operated by American citizens. 
In particular, I want to emphasize that the typical NASFT 
importer member, like Rick, runs a U.S. based, U.S. owned and 
U.S. operated business and employs Americans in a wide variety 
of professional positions and in both skilled and entry level 
positions.
    I would also like to make clear where the losses occur, 
when a high value added consumer product, like those of our 
Members and like Rick's, is excluded from our economy. Many 
people don't realize that for each dollar lost to the foreign 
exporter, the American economy loses $3. The details of that 
are in my submitted statement. The U.S. economy bears 75 
percent of the loss when these tariffs are put into effect. The 
numbers are there. The people that made these decisions were 
told that.
    The NASFT strongly recommends and supports an aggressive 
U.S. posture in identifying and correcting unfair and unequal 
trading situations. We also expect our government's actions to 
be effective. When retaliation is necessary we should inflict 
maximum damage abroad while causing little or no harm to 
American interests and it can be done.
    The NASFT recommends four steps that we believe the U.S. 
Government must take to stop making U.S. businesses victims of 
U.S. trade policy.
    First, the U.S. must expand its vision, play chess instead 
of checkers in its trade policy and trade actions. Both the 
banana and the beef disputes are examples of ill chosen battles 
and short term thinking. We have won in the World Trade 
Organization our court fight on both bananas and beef, but let 
us face the facts. We still have not gained market access, 
Europe has still not changed its policies, and the U.S. economy 
is still suffering 75 percent of the total damage being done by 
these retaliations.
    My recommendation second is to make trade retaliation 
create opportunities for U.S. companies. The careful selection 
of items is a critical part of ensuring that we do maximum 
damage to our opponents, while avoiding damage to our own 
business and economy. The process we have detailed in our full 
text requires greater finesse and more research than our 
current process. It requires more work. But if we follow it, we 
can turn the tables in our favor when we target the right 
imports.
    Recommendation third, specifically avoid damage to small 
businesses. Small importers frequently concentrate on limited 
product categories. This specialization is a good strategy 
except when it becomes a liability when our government randomly 
selects that category for punitive tariffs unrelated to the 
dispute. The government agencies selecting and imposing the 
tariffs have given no consideration, despite the testimony you 
heard here today, to the impact of their actions on small 
businesses.
    The proposed Small Business Trade Protection Act offered by 
Congressman Menendez would ensure that small U.S. businesses 
engaged in importing would not be wiped out. The bill would 
allow small businesses to know they will be protected and to 
concentrate on business opportunities rather than looking over 
their shoulder at government threats.
    Recommendation fourth, protect America's reputation as a 
safe food source. I ask you, what have we done to our image as 
a safe food supplier by trying to force our way into markets 
with a product, hormone treated beef, clearly unacceptable and 
suspect by European consumers? You can force it onto the shelf, 
you can't force the consumers to eat it without education. 
Scientific evidence besides, you have to deal with their 
emotional feelings.
    What further damage will we do by fighting a similar battle 
for genetically modified foods and seeds? We are deeply 
concerned by these actions that sacrifice our reputation as a 
safe food supply and severely damage our current and future 
chances to grow U.S. food exports.
    In conclusion, we encourage this Subcommittee to recognize 
that the current approach is not working; that a new overall 
approach is necessary; and that short term protection for small 
business, such as a Small Business Trade Protection Act, is 
essential.
    Thank you very much for your attention. I appreciate any 
questions.
    [The prepared statement of Mr. Roberts follows:]
    Ms. Ros-Lehtinen. Thank you so much. Mr. Sanford, if you 
could lead the questions?
    Mr. Sanford. I would just go back to, actually you had 
mentioned Charlene Barshefsky, whose pronunciation I can never 
get right. The unfortunate fact is that from time to time the 
imposition of increased duties, as a result of a Section 301 
unfair trade investigation, may cause serious harm to some 
American businesses or consumers. If I am not mistaken that was 
her letter to you last month.
    Mr. Reinert. Yes.
    Mr. Sanford. Could you tell me or tell the rest of the 
Committee any of the things that you think fall as a 
ramification or it is certainly to me a very callous letter 
saying, well, there may be a few bad things that come your way 
but we kind of need these casualties.
    Mr. Reinert. Her answer, in my opinion, is unacceptable. I 
don't accept that. What am I supposed to say? She tried, it is 
unfortunate it happened, and we are stuck with it. I find 
another means--I am trying to find other means, but the simple 
fact remains this legislation and this policy has left a great 
number of American businesses scrambling for survival, and I 
can't believe that is the intention of our government.
    I was apolitical at first. I have become more political, I 
can guarantee that, but I really don't want anything to do with 
the government. I just want to be left alone. I don't want any 
imposition. I just want to do my job, that is all.
    Mr. Sanford. Given our time, I will yield back, and I may 
come back later for a question but so that everybody can 
question. Go ahead.
    Mr. Burr. [Presiding.] The gentleman's time has expired. 
Mr. Menendez.
    Mr. Menendez. Thank you. Mr. Roberts, I appreciate all of 
your testimonies, and because of the concentration of time we 
have, I would just like to go to the one part of your testimony 
that you glossed over because of time constraints, which is the 
process by which we could have Mr. Reinert and others not be in 
the firing line of these trade retaliatory actions, at least to 
make it more equitable for everybody. Could you give us a sense 
of what your association is advocating in that regard?
    Mr. Roberts. Certainly. It runs along the line of the bill 
that you have submitted and has been posted and basically it 
has a lot of logic. When we fought the battle for nutritional 
labeling exemptions for small companies, Congress was very 
strong on the fact that the 500 employee definition of small 
business was much too large for this exception. So we started 
with lower numbers and wound our way down and settled on 100 
employees as being a good definition of a small business in the 
food industry.
    The second thing we wanted to do was to protect these 
companies from having to pay the punitive tariffs. So what this 
would do is say that any company that is an importer with less 
than 100 employees would be allowed to bring in the same amount 
they brought in last year with no punitive tariffs, and to 
allow for some growth, a 25 percent over that level. That cap 
though, by the way, is a very good safety factor. It means that 
Nestle can't participate because the employee cap doesn't hit, 
even if they had a product that was eligible, and it also means 
that large companies are kept out and large internationals are 
kept out.
    The third thing, which says that you can bring in exactly 
what you brought in last year plus 25 percent, means that you 
cannot become a conduit, a front man for some other company. So 
the rules would still work to prohibit big companies from 
bringing in big amounts and would still be punitive to the 
extent that they are to the Europeans.
    I hope that explains it.
    Mr. Burr. I thank the gentleman. Mr. Cooksey.
    Mr. Cooksey. Mr. Reinert, I am very sympathetic to your 
situation. I am from a small area with a lot of small business 
people, and we actually have a lot of exports from Louisiana, 
too. Is that a bath product?
    Mr. Reinert. Yes, it is HTS code 3307.30.5000. I know that 
by heart.
    Mr. Cooksey. What would it do for a gray headed old man?
    Mr. Reinert. You can try this. This is a herbal bath, 
basically a luxury item, as all these items are I believe on 
the list. They are pretty well luxury items. I don't think 
there is any essential items on there.
    Mr. Cooksey. Some of the women use them probably more.
    Mr. Reinert. Our demographic is basically a woman. We sell 
them right across the country.
    Mr. Cooksey. My comment is that a lot of people come to 
Washington with problems, and too often politicians want to 
respond and they pass some law or the regulators pass the 
regulation in response to pressure from legislators, and a lot 
of them are done with good intention but have unanticipated 
side effects, and I think that is unfortunate. I think that a 
lot of these solutions are better found on a State level or 
working out from businessperson to businessperson, even though 
they are in different nations in different parts of the world.
    I would tell you that the most rapid growing part of the 
economy, that is growing at the speed of light, is e-commerce, 
and one reason it is growing so rapidly is because it is 
unregulated and untaxed. The politicians, this bunch up here, 
have not been able to get into it yet, but when they do, e-
commerce will be bogged down and slowed down and cause 
nightmares for businesswomen and businessmen like yourself. So 
go back home and tell the people in government to get 
government out of your life, and you will be a lot better off, 
and in the meantime we will try to do something to make it 
easier for you to do business.
    I have a lot of confidence in the ability of people to do 
business with each other, no matter what, where they are in 
these global markets in the Information Age. The problem is 
that government moves a lot slower than businesswomen and 
businessmen do.
    Mr. Reinert. Believe me, I have confidence in government, 
too. I believe they are honest people. I believe some of the 
actions they take are misguided, and I think they don't think 
about the ramifications, but I believe Charlene Barshefsky is a 
good person.
    Mr. Cooksey. She really is and I am impressed with her.
    Mr. Reinert. She is loyal and patriotic as I am, but I am 
just trying to find a way to resolve this thing, that is all.
    Mr. Cooksey. Let me tell you one more comment. The good 
news is that as we move into more globalization in this 
technology driven economy, governments and politicians are 
going to become less important and less influential because 
they cannot keep up with e-commerce, and that is good. So there 
is going to be a better future in the next millennium, and we 
will become less important.
    Mr. Burr. I thank the gentleman. The Chair would recognize 
himself.
    Let me just ask if anybody is here from the Department of 
Commerce, would they raise their hand. Your position with them 
is what?
    Ms. Moore. I am with basic industries in the international 
Administration. I am a staff level person.
    Mr. Burr. Your purpose for being here, were you instructed 
by the Department to be here for this panel?
    Ms. Moore. No. I was interested in being here to hear 
testimony.
    Mr. Burr. Let the record show her answer, and I would make 
this point, too, especially our two witnesses here.
    Part of the problem with trade decisions is nobody looks at 
the human face behind them. I am sorry that there is not a line 
of Department of Commerce people here to hear the story both of 
you have to tell, you about your product, you about your 
membership, and Mr. Berry, to some degree, to hear your 
suggestions, because in reading through your testimony I think 
there was some good ones there.
    Let me suggest to you that our government will never be in 
question because of the trade agreement, the health of our 
government because of the trade agreement that we sign or don't 
sign, but there are countries around the world that are 
affected greatly by agreements that they either stand behind or 
run from, and that presents the political problem that comes 
into every situation that we are faced with, whether it is beef 
hormones, whether it is bananas. It is not our political 
problem. It is theirs.
    I agree with all of you that we haven't handled it well. We 
haven't taken time to understand it well. We have retaliated in 
a way that affects people that nobody at the Commerce 
Department knows who they are. I am glad that you were willing 
to come up today and put a face with it. I am only sorry that 
they weren't willing to come here and see that face because it 
might have a long term effect.
    Clearly there is a lot of interest on this Subcommittee. 
There is a lot of interest in Congress that we get it right in 
the future.
    There is also every confidence, as Mr. Cooksey said, that 
electronic commerce bypasses in the future a lot of the human 
mistakes that we make, and whether we like it or not, commerce 
between two parties is going to happen, and whether we are 
willing to be there from a regulatory standpoint at the 
beginning or not.
    On behalf of this Subcommittee, let me thank all three of 
you and assure you that all Members will have an opportunity to 
review your testimony and the questions and the answers that 
were given at this Subcommittee. This hearing is now adjourned.
    [Whereupon, at 1;10 p.m., the Subcommittee was adjourned.]
      
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                            A P P E N D I X

                           September 29, 1999

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